U.K.-based Multi-national Corporations at Risk from Large-scale Industrial Disease Actions.

• Author: McConnell, Alison

South African claimants may sue an English parent corporation in the U.K. for injuries alleged to be the fault of a South African sub

FOLLOWING a 2000 decision in the House of Lords, U.K.-based multi-national corporations could see themselves exposed to large-scale industrial disease claims in their home courts as a result of the actions of their overseas subsidiaries. The House of Lords decision in Lubbe and Others v. Cape Plc(1) established the rights of some 4,000 South African claimants to have their industrial disease claims heard in the English courts.

Although this decision could spell the beginning of a new litigious era for multinational companies, one should not become prematurely alarmed. The decision that the claims should be heard in England was based on arguments as to jurisdiction rather than any finding on the liability of parent companies for the activities of their subsidiaries. Implementing and policing world-wide health and safety policies, however, may become the norm as the English courts stray from traditional principles and allow employees from overseas subsidiaries to commence their claims in the United Kingdom.

HOW DID EXPOSURE ARISE?

In Lubbe, the action was commenced on behalf of five claimants who lived or worked either in or near asbestos mines or factories in South Africa. Cape Plc, a U.K.-based multi-national, owned a number of subsidiary companies in South Africa engaged in the mining and processing of asbestos and the sale of asbestos-related products. The claimants, who had developed asbestosis and fatal lung cancers, alleged that Cape had failed, as a parent company, to take appropriate steps to adopt safe working practices and procedures throughout its subsidiary companies.

The claimants allege breach of duty of care because: (1) Cape was a parent company exercising control over the operations of its foreign subsidiaries, and (2) Cape had direct knowledge that those operations involved risk to the health of workers and those living near its factories.

In English law, if individuals can establish that another party owes them a duty of care, that the duty of care has been breached and that subsequent damage has occurred, then it is likely that their claims will succeed. In order for a duty of care to be established, however, there must be a sufficient "proximate relationship" between claimants and those who are deemed to owe the duty.

There is little problem in establishing this proximate relationship between a domestic company and its U.K. employees. The difficulties arise in trying to establish liability of a U.K. parent company for overseas employees through the actions of the foreign subsidiary.

The claimants in Lubbe commenced their action in England and argued that Cape was vicariously liable for a breach of duty of care by its South African subsidiary --that the U.K. parent company, Cape, could be held legally responsible for the actions of the subsidiary. In response, Cape argued that the alleged duty of care and breach of the duty arose in South Africa and was therefore subject to South African law.

In the first instance, the High Court (Queen's Bench Division) agreed with Cape and stayed the action on the basis that South Africa was an alternative available forum that was clearly and distinctly more appropriate.(2) The Court of Appeal, however, lifted the stay, allowing the proceedings to go ahead once more. The Court of Appeal decided on the basis that the parent company was directly, not vicariously, liable for the breach of duty...