Businesses with overseas subsidiaries may now carry higher contingent liabilities

BVWire–UKIssue #24-2
March 16, 2021

The English courts have expanded the risk for larger global organisations to account for unlawful ethics breaches their overseas subsidiaries committed. BVWire—UK notes that these heavily reported recent judgements indicate that liability could also be found to apply to valuations conducted for private equity holdings and their portfolio companies.

Two precedential decisions: The significant cases began with the Supreme Court ruling in Vedanta Resources PLC and another v Lungowe and others [2019] UKSC 20. Following the Vedanta ruling, the Supreme Court also granted permission to appeal the case against Royal Dutch Shell [Okpabi and others (Appellants) v Royal Dutch Shell Plc and another (Respondents)]. The Vedanta decision allowed a claim 1,826 Zambian villagers brought in relation to damages allegedly resulting from pollution emanating from a copper mine Konkola Copper Mines Plc (KCM), Vedanta’s subsidiary, owned.

Both decisions mark “a departure from recent Court of Appeal rulings on the issue of parent company liability, marks a shift in the attitude towards parent company liability by the courts,” according to an analysis by the law firm Travers Smith LLP.

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