The Supreme Court confirmed that the test for whether a parent company owes a duty of care in relation to those harmed by the acts or omissions of its subsidiaries is whether the parent must be taken to have assumed responsibility for the relevant activities of the subsidiary.

Departing from the approach taken by the Court of Appeal which applied the three stage test set out in Caparo Industries v Dickman [2] to determine whether a duty should arise in a 'novel' circumstance, Lord Briggs found that this question does not give rise to any novel or controversial issues of law [3]: the English law of torts was accustomed to assessing whether a duty of care should be owed by one party to another for the loss-causing acts of a third party.  

The test was simply whether there was an arguable case that VR had "undertaken a sufficiently close intervention into the operation of the Mine to attract the requisite duty of care". [4] More generally, "..everything depends on the extent to which, and the way in which, the parent availed itself of the opportunity to take over, intervene in, control, supervise or advise the management of the relevant operations (including land use) of the subsidiary". [5] A duty could arise through the imposition of group wide policies which themselves contained a systemic error leading to loss being suffered, the taking of active steps through training or enforcement to implement such policies, directly assuming control for the relevant aspect of the subsidiary's affairs or publicly representing that it has done so. [6]

The most noteworthy aspect of the Supreme Court's judgment is the reversal of the decisions of both Courts below on the question of whether England was the proper place for the trial of the claims. It had previously been thought that, if claimants pursued an "anchor defendant" as of right in England [7], the risk of inconsistent judgments, if the foreign subsidiary were sued elsewhere, would lead almost inevitably to the conclusion that England was the proper place for related claims.

Lord Briggs steps away from the view that the risk of inconsistent judgments should typically lead to England being the proper place, particularly in cases where (as in this case) the English anchor defendant had agreed to submit to the jurisdiction of the courts in which the foreign subsidiary is incorporated (and/or the damage occurred). In that scenario claimants have a choice as to whether to press ahead in England and take the risk of inconsistent judgments or remove that risk by having all claims determined together in the foreign forum. If they choose to take the risk then the courts should not feel obliged to try to protect them from it. [8] Now, therefore, where another forum (1) appears to be more closely connected with the case than England, (2) and is a forum in which the claims may be tried together, and (3) is a forum in which the claimants would obtain substantial justice [9], (which Lord Briggs held in this case the Zambian courts would not), the English courts will not accept jurisdiction to try the claims against the foreign subsidiary. 

The upshot is that the question of whether England is the proper place to try claims is likely to assume a much greater significance when similar cases arise in future. This may prove to be a potent means of balancing the competing policy considerations of discouraging the tactical invocation of the English jurisdiction over foreign defendants in relation to alleged wrongs committed abroad, with the equally powerful consideration that English jurisdiction should not be refused to parties who legitimately seek to make use of it. If defendants indicate that they instead submit to the jurisdiction of a foreign court, that may mean that claimants will have to choose between having both claims tried together abroad, or proceeding with only one claim in England.

Strikingly, 6 pages of the 38 page judgment were devoted to criticism of the way the jurisdictional question had been dealt with by the parties. [10] There is an inherent tension, as we have previously noted in connection with Unilever, between a test based predominantly on operational control (which is by its nature a matter on which detailed evidence will be required at trial) and the fact that these questions arise in an interim application, at an early stage in proceedings (before disclosure and without the benefit of testimony from live witnesses). 

Litigants unsurprisingly turn applications such as this into mini-trials, with immense quantities of documentary evidence, witness statements and expert reports in support of their respective positions. Lord Briggs warns against this. He expects both litigants and trial judges to ensure that jurisdictional hearings do not routinely become expensive and time consuming mini-trials.

This may be easier said than done, given the subtle nature of the factual enquiry into the nature and extent of the influence exerted by the parent over the affairs of the subsidiary. The answer is likely in most cases to be for the trial judge to take the pleaded case against the English anchor defendant at face value for the purpose of assessing whether there is a serious issue to be tried, provided there is some prima facie evidence in support of the facts alleged. Laing J adopted a similar approach at first instance in Unilever, and such an approach finds some support in the speech of Lord Briggs. [11]

The Supreme Court has brought a degree of clarity to a difficult area. There is nothing legally peculiar in the relationship between parent and subsidiary companies for the purposes of deciding whether a duty of care exists. The relevant test is the influence or control exerted by parent over subsidiary.

However, many will be disappointed that, for all the clarity brought to the questions which arose on appeal in Vedanta, practical difficulties remain:

• Multinational corporations face continuing uncertainty as to whether they will be found to owe a duty of care in respect of the tortious acts of their subsidiaries:
  • Although the Supreme Court rejected the proposition that a duty would not arise when all the parent company had done was to create a group wide policy framework, uncertainty remains as to how much control or influence is 'enough' to found a duty of care. 
  • Ensuring competent, autonomous and empowered local management of foreign subsidiaries, who are themselves responsible for implementing group policy frameworks, is probably the best approach.
• When litigation does arise, parties' legal teams and trial judges must find a way of heeding Lord Briggs' warnings as to proportionality in conducting jurisdictional challenges:
  • Trial judges (through a combination of proactive case management and potential cost sanctions) must find a way of imposing discipline on the parties.
  • Parties will have to resist the temptation to deploy an "all in" approach to supportive evidence, and adduce only what is required to establish their prima facie case.

A trial, if it happens, of the claims against KCM and VR, should result in further useful guidance on the duty of care issue.