Home to roost: understanding corporate liability in mining 

More than half of the country’s coal mines are managed by pro-Russian separatist militia.

Credit: DmyTo/Shutterstock.

All of these cases, says Aidan Thomson, a partner at Bryan Cave Leighton Paisner, are about determining whether the UK - or Canadian - courts should consider issues that centre on events that happen in other countries, and by claimants that live overseas.

Generally speaking, at least in the UK, a court will not decide on a case that has nothing to do with the UK. Therefore, these cases depend on having what is called an ‘anchor defendant’ in the UK, which is often the parent company.

“These aren’t cases trying to breach the corporate veil, trying to make the parent company liable for things the subsidiary has done wrong, such as breaches of duty by the subsidiary - but to determine that the parent company themselves has breached its duty to the people living overseas - that is really what these cases hinge on,” explains Thomson.

More than half of the country’s coal mines are managed by pro-Russian separatist militia. Credit: DmyTo/Shutterstock.

In the ongoing Vedanta Resources cases, the company has appealed to the Supreme Court to prevent the case being heard in the UK, saying it should be heard in Zambia instead.

Last year, the court of appeal upheld a high court ruling that the Zambian claimants had a legal right to bring their claim against a British company, citing the companies “opaque finances” as a reason the claimants may not be granted justice in Zambia.

The court’s decision is expected in April, which could set a precedent for ‘duty of care’ owed by a UK parent company to the communities affected by a foreign subsidiary.

“It is a pivotal moment,” says Nicole Bigby, partner and general counsel at Bryan Cave Leighton Paisner. “You have a fairly unique situation where the Supreme Courts of two legal systems are considering, not only whether it is right to determine if a particular country is an appropriate forum, but also looking to explore in what circumstances these parent companies might potentially owe duties of care to these individuals or communities or groups of plaintiffs.”

Until now, she says, there has not been clarity, with the Court of Appeal in the UK approaching these cases in different ways. It has given judgement in three cases and only in one - the Vedanta Resources case - did it find the parent company owed direct duty of care, meaning the case can be heard in London. In the others cases, it said there was no obvious duty of care owed by the parent company to the people living abroad locally.

However, this inconsistency has effectively given the plaintiff bar the opportunity to bring these actions and claimants, which often can’t find appropriate legal recourse in their own countries, to the UK and other countries.

In the UK, the Supreme Court is expected to offer some official guidance on their position in regards to these types of cases. However, it may not definitively deal with the litigation risk for mining companies, Bigby warns.

“It is important to look at this as part of a broad range of other parameters of potential liability. In the mining sector, dispute resolution infrastructure has been built as an adjunct or in parallel to the judiciary system, for example, there is now a mining sector ombudsman that has jurisdiction around conduct of Canadian mining outside of Canada,” she adds.

“If you start to examine this broader landscape, it looks like a much more nuanced and richer picture, so mining companies need to understand it in order to navigate it and manage their litigation risk.”

Companies should be aware of not just the risk of this kind of litigation, but others as well. For example, a mining company may become involved in or the subject of a ‘specific instance’ process setting out a complaint to a National Contact Point in any of the OECD countries, concerning a failure of a company to comply with the recommendations set out in OECD Guidelines for Multinational Enterprises on Responsible Business Conduct.

Furthermore, an additional interesting dynamic has evolved, says Bigby, after the tailings dam failure at Vale’s Brumadinho mine.

Following the disaster, a range of institutional investors took coordinated action to press for a response by mining companies and the sector concerning the appropriate safety management of tailings dams. The International Council on Mining and Metals (ICMM) then acted to coordinate a response from its governing council of 27-member CEOs, committing to the establishment of an independent panel of experts to develop an international standard for tailings facilities for its member companies.

“Therefore, you have many sources of potential governance and accountability, built around ensuring responsibility for mining companies for their operations and business relationships, beyond traditional judgements that might be convened or governed by the courts and legislative frameworks,” explains Bigby

Mining companies need to understand and canvass the landscape to make sure their legal and risk management systems align, as well as to anticipate new developments.

“If you’re a mining company on a large global scale operating in an integrated way, what does that mean for you?” she says.

To protect themselves from this kind of litigation, parent companies need to make sure that if the question of parent liability is ever asked at a future date, the factual matrix doesn’t support there being any duty of care by the company to their subsidiary or other possible claimants, says Thompson.

“The parent company could, for example, put things in place to make sure it is as distant as possible from the decisions being taken on the ground, so if there was a problem there would be no obvious case against the parent company,” he explains.

But how easy is that to do?

“Well, changing the way a big company operates is not easy, but it is possible,” Thompson adds. “However, the problem is, while this might sound like a great way to avoid risk of these particular claims, you then run into a totally separate set of problems.”

Bigby explains that in this instance, while the parent company may have insulated itself from legal liability, it doesn’t mean it has quarantined itself from all of the other potential sources of social accountability and other parallel forms of grievance or accountability already mentioned.

“They might pull potential legal liability risk back for one thing, but leave themselves exposed in relation to something else, such as social responsibility, which may result in financial harm, delay, disruption, lost management time, and costs to the company, a fall in share prices, disclosure obligations, lack of funding or access to debt, investor pressure - all of these potential sources of risk need to be looked at in a holistic way,” says Bigby.

Thomson says the UK Supreme Court guidance will be pivotal in understanding the true risk presented by these cases.

“If the Supreme Court decides that actually a duty of care can be owed by a parent company in a wide set of circumstances, then these cases can become more common,” he explains. “Alternatively, it might give a judgement that makes it very difficult to show a duty of care exists, in which case, the threat of these cases begins to cede - in this country anyway.”

Either way, mining companies need to be anticipating and following this debate and monitoring where these legal trends are going, but also seriously considering all other forms of accountability, liability and transparency expectations.

Surveys of mining companies suggest social licence to operate is already a major concern and if companies are dual listed they are subject to doubling of certain laws in some cases, so it is important to be informed - and to operate responsibly from the top down.

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