Posts Tagged CSR

Four seasons v Brownlie: establishing jurisdiction on the basis of indirect damage.

Sometimes I post a little late. Rarely outrageously overdue. Yet Four Seasons Holdings Inc v Brownlie [2017] UKSC 80 needs to be reported on the blog for it is rather important, firstly, with respect to the topical interest in pursuing holding companies for actions (or lack fo them) committed by affiliated companies. And secondly, for jurisdiction in tort, to what degree jurisdiction on the basis of injury sustained abroad, can qualify as lasting damage in the UK. Findings on the latter issue were obiter therefore they need to be treated with caution.

All five judges issued a judgment, with a 3 to 2 majority eventually holding (again: obiter) that jurisdiction in tort in England against non-England based defendants, can go ahead on the basis of indirect damage – albeit in such cases it might still falter on forum non conveniens grounds.

Sumption J, outvoted on the indirect damage issue, wrote the most lengthy judgment.

I tweeted the ruling mid December. Students of international law will of course appreciate the personal background to the case, particularly if you have ever had the chance to be taught by prof Sir Ian Brownlie – Philippe Sands’ obituary is here.

Sir Ian died in a car ­accident while on holiday with his family in Egypt. His wife was also injured. She brought proceedings seeking: (i) damages for her own personal injuries, (ii) damages under the Law Reform (Miscellaneous Provisions) Act 1934 as Sir Ian’s executrix, and (iii) damages for her bereavement and loss of dependency under the Fatal Accidents Act 1976.

The First Defendant, Four Seasons Holdings Inc (“Holdings”), is the holding company of the Four Seasons hotel group. It is incorporated in British Columbia. The Second Defendant, Nova Park SAE (“Nova Park”) is an Egyptian company which was identified by Lady Brownlie’s solicitors as the owner of the hotel building. The case falls outside the Brussels I Recast Regulation therefore. However reference to Brussels and particularly of course to Rome II is made in the various judgments, for even though the English Courts do not decide jurisdiction on the basis of Brussels, they do have to apply Rome I or II if the suit qualifies as one in contract cq tort.

The Court of Appeal [[2015] EWCA Civ 665] had held that the jurisdictional gateways were not satisfied. There was no contract with Four Seasons Holdings, and given that Holdings was not the owner, there could be no claim in tort for vicarious liability.

David Hart QC has excellent (much more swift) analysis here and I am happy largely to refer. A few points of additional interest.

On the issue of suing holding companies, Sumption J writing at 14 ff dismisses service out of jurisdiction for there is no reasonable possibility of a claim succeeding: at 15:

‘there is no realistic prospect that Lady Brownlie will establish that she contracted with Holdings, or that Holdings will be held vicariously liable for the negligence of the driver of the excursion vehicle.’ That is because (at 14) it is entirely clear ‘that Holdings is a nontrading holding company. It neither owns nor operates the Cairo hotel, which has at all material times been owned by Nova Park, a company with no corporate relationship to any Four Seasons company. A Dutch subsidiary of Holdings called Four Seasons Cairo (Nile Plaza) BV entered into an agreement with Nova Park to operate the hotel on behalf of Nova Park, although at the material times the actual operator was an Egyptian subsidiary of Holdings, FS Cairo (Nile Plaza) LLC, which assumed the contractual obligations of the operator by assignment. Other subsidiaries of Holdings supplied advice and specific services such as sales, marketing, central reservations and procurement, and licensed the use by Nova Park of the Four Seasons Trade Mark’.

Judgment in Brownlie preceded the current cases referred to it on the subject of CSR and jurisdiction (see my previous postings on that, most recently Unilever). Yet it is clear that plaintiffs have to show much more than a corporate bloodline between mother companies and affiliated undertakings, for suits to have any chance of success.

The case could have ended here for all five judges agree on this point. Yet aware of the relevance of direction, discussion was continued obiter on the topic of suing in tort. Firstly it was clear that if a claim in tort could be brought in the English courts, it would be subject to Egyptian law per Article 4(1) Rome II. In the Court of Appeal, Arden LJ had taken analogy with that Article (and the whole Regulation)’s rejection of indirect damage as relevant for deciding lex causae. And of course Rome II’s stance on this point is influenced by the CJEU’s case-law going in the same direction, but then for jurisdiction, in Marinari and the like. Sumption J cites Canadian authority (Stephen Pittel has reference to it here) and is critical of too much emphasis put on a connection between jurisdiction and applicable law, for determining jurisdiction.

Big big pat on his back; readers of the blog know (see eg here) I am not at all enthused by too much analogy between jurisdiction and applicable law).

Sumption at 22

It is undoubtedly convenient for the country of the forum to correspond with that of the proper law. It is also true that both jurisdiction and choice of law can broadly be said to depend on how closely the dispute is connected with a particular country. But there is no necessary connection between the two. The Practice Direction contemplates a wide variety of connecting factors, of which the proper law is only one and that one is relevant only to contractual liabilities. For the purpose of identifying the proper law, “damage” is limited to direct damage because article 4 of Rome II says so in terms. It does this because there can be only one proper law, and the formulation of a common rule for all EU member states necessarily requires a more or less mechanical technique for identifying it. By comparison, indirect damage may be suffered in more than one country and jurisdiction in both English and EU law may subsist in more than one country.

Lady Hale is even more to the point at 49: ‘Applicable law and jurisdiction are two different matters. There is no necessary coincidence between the country with jurisdiction and the country whose law is applicable.

Yet for the case at hand ultimately Sumption J does curtail the relevance of indirect damage: at 23:

There is, however, a more fundamental reason for concluding that in the present context “damage” means direct damage. It concerns the nature of the duty broken in a personal injury action and the character of the damage recoverable for the breach. There is a fundamental difference between the damage done to an interest protected by the law, and facts which are merely evidence of the financial value of that damage. Except in limited and carefully circumscribed cases, the law of tort does not protect pecuniary interests as such. It is in general concerned with non-pecuniary interests, such as bodily integrity, physical property and reputation which are inherently entitled to its protection.

At 29 ff follows Sumption’s engagement with relevant CJEU authority, leading him eventually to reject indirect damage as a basis for jurisdiction. That same authority is also discussed by Lady Hale and more succinctly by the others, however they prefer to take the English law on this point in a different direction, particularly taking the CPR (the relevant English civil procedure rules) use of the word ‘damage’ at face value, meaning including indirect damage: residual English PIL therefore not determined by CJEU authority.

As noted in my introduction, even if jurisdiction can be established on the basis of indirect damage in England, forum non conveniens may still scupper jurisdiction eventually.

Geert.

 

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Unilever. Court of Appeal summarily dismisses CSR jurisdiction against mother company, confirming High Court’s approach. Lex causae for proximity again left undiscussed.

The Court of Appeal in [2018] EWCA Civ 1532 has confirmed the High Court’s approach in [2017] EWHC 371 (QB) AAA et al v Unilever and Unilever Tea Kenya ltd, holding that there is no good arguable case (the civil law notion of fumus boni iuris comes closes, as Bobek AG notes in Feniks) against Unilever, which could then be used to anchor the case in the English jurisdiction.

Pro memoria: jurisdiction against Unilever is clear, following Article 4 Brussels I Recast. That Regulation’s anchor mechanism however is not engaged for Article 7(1) does not apply against non-EU based defendants. It is residual English private international law that governs this issue.

Appellants appeal in relation to the High Court’s ruling that neither Unilever nor UTKL (the Kenyan subsidiary) owed the appellants a duty of care. Unilever has put in a respondent’s notice to argue that the judge should have found that there was no duty of care owed by Unilever on the additional ground that, contrary to her view, there was no proximity between Unilever and the appellants in respect of the damage suffered by them, according to the guidance in Chandler v Cape Plc. Unilever and UTKL also sought to challenge that part of the judgment in which the judge held that, if viable claims in tort existed against Unilever (as anchor defendant) and UTKL, England is the appropriate place for trial of those claims. Unilever also cross-appealed in relation to a previous case management decision by the judge, by which she declined an application by Unilever that the claim against it should be stayed on case management grounds, until after a trial had taken place in Kenya of the appellants claims against UTKL.

The legal analysis by Sales LJ takes a mere five paragraphs (para 35 onwards). Most of the judgment is taken up by an (equally succinct) overview of risk management policies within the group.

At 35 Sales LJ notes ‘Having set out the relevant factual background in relation to the proximity issue (i.e. whether the appellants have any properly arguable case against Unilever in the light of Chandler v Cape Plc and related authorities), the legal analysis can proceed much more shortly. It is common ground that principles of English law govern this part of the case.

– the ‘common ground’ presumably being lex loci incorporationis.

This is an interesting part of the judgment for I find it by no means certain that English law should govern this part of the case. In one of my chapters for professor Vinuales’ en Dr Lees’ forthcoming OUP book on comparative environmental law, I expand on that point.

The long and the short of the argument is that Unilever did not intervene in the affairs of its subsidiary in a more intensive way than a third party would have done. Reference at 37 is made to the contrasting examples given by Sir Geoffrey Vos in Okpabi, ‘One can imagine … circumstances where the necessary proximity could be established, even absent the kind of specific facts that existed in Vedanta … Such a case might include the situation, for example, where a parent required its subsidiaries or franchisees to manufacture or fabricate a product in a particular way, and actively enforced that requirement, which turned out to be harmful to health. One might suggest a food product that injured many, but was created according to a prescriptive recipe provided by the parent. …’

and, at 38, to the raison d’être of mother /daughter structures,

“… it would be surprising if a parent company were to go to the trouble of establishing a network of overseas subsidiaries with their own management structures it if intended itself to assume responsibility for the operations of each of those subsidiaries. The corporate structure itself tends to militate against the requisite proximity …

– subject evidently to proof of the opposite in the facts at issue (a test seemingly not met here).

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

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Arica Victims v Boliden Mineral. Lex causae and export of toxic waste.

‘Reading’ Arica Victims v Boliden Mineral (I have a copy of the case, but not yet a link to ECLI or other database; however there’s a good uncommented summary of the judgment here] leaves me frustrated simply for my lack of understanding of Swedish. Luckily Matilda Hellstorm at Lindahl has good review here (including a hyperlink to her earlier posting which alerted me to the case in 2017).

Boliden Mineral exported toxic waste to Chile in the ’80s, prior to either Basel or EU or OECD restraints (or indeed bans) kicking in. A first issue for consideration was determination of lex causae. Rome II does not apply ratione temporis (it only applies to tortious events occurring after its date of entry into force) – residual Swedish private international law applies, which determined lex causae as lex loci damni. The Court found this to include statute of limitation. This would have been 10 years under Swedish law, and a more generous (in Matilda’s report undefined) period under Chilean law. Statute of limitation therefore following lex causae – not lex fori.

Despite this being good for claimants, the case nevertheless failed. The Swedish court found against liability (for the reasons listed in Matilda’s report). (With a small exception seemingly relating to negligence in seeing waste being uncovered). Proof of causality seems to have been the biggest factor in not finding liability.

Leave to appeal has been applied for.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 8.

 

 

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Chevron /Ecuador: Ontario Court of Appeal emphasises third parties in piercing the corporate veil issues.

In Chevron Corp v Yaiguaje, the Canadian Supreme Court as I reported at the time confirmed the country’s flexible approach to the jurisdictional stage of recognition and enforcement actions. Following that ruling both parties files for summary judgment, evidently advocating a different outcome.

The Ontario Court of Appeal have now held in 2018 ONCA 472 Yaiguaje v. Chevron Corporation that there are stringent requirements for piercing the corporate veil (i.e. by execution on Chevron Canada’s shares and assets to satisfy the Ecuadorian judgment) and that these are not met in casu.

Of particular note is Hourigan JA’s argument at 61 that ‘the appellants’ proposed interpretation of the [Canadian Corporation’s] Act would also have a significant policy impact on how corporations carry on business in Canada. Corporations have stakeholders. Creditors, shareholders, and employees, among others, rely on the corporate separateness doctrine that is long-established in our jurisprudence and that is a deliberate policy choice made in the [Act]. Those stakeholders have a reasonable expectation that when they do business with a Canadian corporation, they need only consider the liabilities of that corporation and not the liabilities of some related corporation.’ (emphasis added by me, GAVC)

Blake, Cassels and Graydon have further review here. Note that the issue is one of a specific technical nature: it only relates to veil piercing once the recognition and enforcement of a foreign ruling is sought.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 8.

 

 

 

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Jesner v Arab Bank. Scotus does not play ball on corporate culpability under international law.

For background to this week’s SCOTUS ruling in  Jesner v Arab Bank see my earlier posting. Bastian Brunk has early reflection here, with good summary of the Court’s majority (as well as dissenting) opinion.

Human rights litigation under ATS is not dead. Yet it is clear it is not going to be routine, either. I find the judgment not surprising. While one could certainly from a political point of view bemoan that ATS is not providing the avenue to hold corporate excess to account,  SCOTUS have a point when

  • they emphasise the foreign policy intentions of the ATS when it was originally drafted. Hence the need not to ignore the same foreign policy implications 2 centuries on. Hence also my stance on JASTA.
  • they highlight the continuing de lega lata situation on corporate culpability under international law: the default position remains that corporations are not subjects of public international law. Yes there are hard-core exceptions – and these may be further developing. And yes, plenty over the past 20 years have tried to  change that status quo. Finally the Court could have flagged more of those attempts that raise serious doubt over the position. However it is hardly the role of the US Supreme Court single-handedly to force the hand of the league of nations.
  • separation of powers in the US, too, demands Congress intervene should it want the Statute’s causes of action to be broadened.

All in all a ruling very much in Montesquieu’s spirit. Students of public international law in particular should read the judgment with care: there is plenty in there to chew over.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 8, Heading 8.2.

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Human rights, CSR: Court of Appeal confirms lack of jurisdiction in Okpabi.

Update 16 May 2018 Vedanta have been given permission to appeal to the Supreme Court.

Update 7 March For a great supplement simply refer to Penelope Bergkamp’s post in which she discusses the wider issues of parent liablity v veil piercing etc.

The Court of Appeal, referring powerfully ia to VTB, has confirmed (albeit with dissenting opinion) lack of the English courts jurisdiction in [2018] EWCA Civ 191 Okpabi et al v Shell. I reviewed the High Court’s decision in same here. Plenty of the High Court’s considerations. e.g. (pro inspiratio) joinder under Brussels I Recast, and the optionally distributive lex causae rule under Article 7 Rome II, do not feature in the Court of Appeal’s approach.

The crucial take-away from the judgment is that the English courts do not believe that headquarter instructed mandatory compliance, equates control. This runs along the lines of Scheindlin USDJ’s approach in Apartheid.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

 

 

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Court of Appeal confirms jurisdiction in Lungowe v Vedanta and Konkola.

 

I reviewed the High Court’s decision in Lungowe here. In [2017] EWCA Civ 1528 the Court of Appeal has now confirmed jurisdiction against the non-UK based defendants on largely the same, if slightly more structured and expanded arguments as the High Court.  (Per Owusu, jurisdiction against the UK-based defendant is undeniable; the non-UK defendants need to be joined on the basis of residual English conflicts law).

Ekaterina Aristova has analysis of Simon LJ’s leading judgment here – I am happy to refer. Of particular note is the much more reserved approach of the Court of Appeal on the merits issue of the claim. As I noted in my review of Okpabi v Shell at the High Court, in that case Fraser J looked in serious detail into the issue of merits: not, I believe, justified at the jurisdictional stage. Appeal against Fraser J’s finding will be heard by the Court of Appeal.

Geert.

European private international law, second ed. 2016, Chapter 8, Headings 8.3.1.1., 8.3.2

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