A new tort in the common law world. Corporations in Canada can be liable for aiding and abetting violations of customary international law.

 

Eritrea is a new country, having only been in existence since 1993. It is also a very poor country, ranking 164th out of the world’s 194 states. 80% of its population are engaged in subsistence agriculture. Eritrea’s major source of foreign currency is its Bisha mine at Asmara. Construction began in 2008 and by 2013 gold exports amounted to US$143m, almost all derived from the Bisha mine. The mine is owned by the Bisha Mining Share Company (BMSC) in which a Bermudan subsidiary of a Canadian mining company, Nevsun, holds a 60% share.

However, all that glitters is not gold. Eritrea has a national service programme requiring its adult citizens to serve in the military for 18 months. In 2002 this was extended to an indefinite period of service. Conscripts in the national service programme (NSP) have provided the labour for the Bisha mine. Three Eritrean refugees, Gize Yebeyo Araya, Kesete Tekle Fshazion, and Mihretab Yemane Tekle, brought an action against Nevsun in the courts of British Columbia. They allege that they were conscripted into the NSP and then forced to provide labour to two for profit construction companies, Segen and Mereb, the latter allegedly owned by members of the Eritrean military. They allege that Nevsun and/or its Eritrean subsidiary, BMSC, engaged Segen and Mereb for the construction of the Bisha Mine.

As well as framing their claims under domestic tort law, the plaintiffs also brought the action against Nevsun for violations of customary international law (CIL) as incorporated into the law of Canada, for: the use of forced labour; torture; slavery; cruel, inhuman or degrading treatment; and crimes against humanity. Nevsun mounted a jurisdictional challenge to the claims on three grounds: forum non conveniens; Act of State; denial of the existence of a cause of action based on CIL.

At first instance, Abrioux J dismissed the application to stay proceedings on grounds of forum non conveniens finding that Nevsun had not established that Eritrea was the more appropriate forum. He also dismissed the Act of State application and decided that the CIL claims were not bound to fail and should proceed to trial. The case then proceeded to the Court of Appeal of British Colombia  which upheld the decision on forum non conveniens, decided that in the light of the UK Supreme Court’s decision in Belhaj v Straw [2017] UKSC 3; [2017] A.C. 964. the Act of State doctrine would not bar the claims against Nevsun and that there was enough plausibility to the existence of a cause of action base on CIL to allow those claims to proceed.

In January 2019 the Canadian Supreme Court heard Nevsun’s appeal on the Act of  State and CILissues. It has now decided (1) 7-2 that the Act of State doctrine does not form part of the law of Canada and (2) 5-4 that a cause of action based on CIL exists. The trial judge will now have to decide whether Nevsun breached customary international law and—if it did—how it should be held responsible.

So is Canada the new frontier for claims against transnational corporations of the sort that we have seen in the US under the Alien Tort Statute? And if Canada, why not the UK? Maybe, but some unanswered questions remain. The claim is against the parent corporation, but the mine was operated by a subsidiary? How is the parent corporation implicated in the alleged aiding and abetting of the Eritrean State’s violations of CIL? What is the mens rea of this new tort – knowing assistance or purposive assistance? What is the applicable statute of limitations for such a tort?

In the meantime, a useful corrective to the excitement that this decision will inevitably provoke may be found by looking at the 2009 decision of Judge Shira Schiendlin in the South African Apartheid claims brought under the Alien Tort Statute in New York.  The basis of the claim was aiding and abetting  by foreign corporations of violations of CIL by the apartheid regime in South Africa in the 1980s. The mens rea of the tort was knowing assistance. Companies who had supplied military vehicles to the regime which were used to suppress civilian protests, and companies who had supplied IT systems which were then used in the denationalisation of South African citizens could potentially be liable, but not banks who had provided finance to the South African government. Merely doing business in the apartheid state was not enough to constitute aiding and abetting. To supply a violator of the law of nations with funds, even funds that could not have been obtained but for those loans, was not sufficiently connected to the primary violation.

Sounds a bit like the relationship of Nevsun and the Bermudan subsidiary to the Bisha mine project.

 

[1] Araya v Nevsun Resources Ltd  2016 BCSC 1856

[2] Araya v. Nevsun Resources Ltd., 2017 BCCA 401

England v Spain grudge match. Appeal against registration of ‘Prestige’ judgment against London Club likely to be heard in December 2020.

 

Following the break up of ‘The Prestige’, Spain brought proceedings for compensation for the resulting pollution against various defendants, including the owner’s P&I Club. The Club got its response in early by obtaining an arbitration award against Spain which declared that, as a result of the “pay to be paid” clause in the policy the Club had no liability to Spain. The arbitrator’s jurisdiction was challenged unsuccessfully in the English Courts and the award was converted into a judgment. London SS Mutual v Kingdom of Spain, [2015] EWCA Civ 333; [2015] 2 Lloyd’s Rep. 33

In 2016 the Spanish Supreme Court held that the owners and their club were liable for the damage caused and in execution proceedings in La Coruna the court held that the club would liable in respect of the claims up to a global limit of liability in the sum of approximately €855 million. Spain has obtained an order in England registering the Spanish judgment to enable its enforcement here in England. The Club have appealed against that order, principally on the ground that, under art 34.3 of the Brussels Regulation the judgment is irreconcilable with the previous decisions of the English courts converting the award into a judgment.

In a Case Management Conference before Teare J [2020] EWHC 142 (Comm) it was ordered that the trial be after 1 December 2020. It is estimated that it will last 5-6 days. Disclosure has been ordered of documents held by Spain which relate to the alleged refusal of the Spanish Courts  to allow the master to participate in an underwater investigation of the strength of the vessel’s hull and to disclose the results of the investigation (so that there was a breach of the master’s right to equality of arms and to be able to prepare a defence) or whether the results were disclosed to the master in sufficient time to allow him to prepare his defence.

The Club were also given permission to adduce evidence of a naval architect on the question whether the results of the underwater inspections enabled conclusions to be drawn as to the strength of the hull and if so what those conclusions were. On both issues the Club is to provide its evidence first.

UK withdraws accession to 2005 Hague Convention on Choice of Court.

As expected, 31 Jan 2020 saw the following

 

31-01-2020
With reference to depositary notification Choice of Court No. 01/2019, dated 2 January 2019, regarding the accession to the Convention by the United Kingdom, and with reference to depositary notifications Choice of Court No. 03/2019, dated 29 March 2019, Choice of Court No. 04/2019, dated 12 April 2019, and Choice of Court No. 07/2019, dated 31 October 2019, regarding the suspended accession of the United Kingdom to the Convention, the depositary communicates that the Instrument of Accession, Note Verbale and Declarations were withdrawn by the United Kingdom on 31 January 2020.

 

In the meantime the UK keeps riding along in the Convention due to the EU’s accession.

Don’t worry, another UK accession will probably be along later in the year as the UK approaches ‘third party state’ day (TPS day) on 31 December 2020 – possibly to be followed by another ‘withdrawal’ in the event that the UK and the EU conclude an agreement on judgments and jurisdiction before the end of the implementation period.

Parent company duties of care. Hearing date set for Okpabi appeal to Supreme Court.

I have been informed by Leigh Day, acting on behalf of the appellants, that their appeal will be heard by the UK Supreme Court on 23 June 2020

These observations of Lord Briggs in Lungowe v Vedanta [61] may prove to be significant in the forthcoming appeal.

“[I]t seems to me that the parent may incur the relevant responsibility [for the
tort of a subsidiary] to third parties if, in published materials, it holds itself out as exercising that degree of supervision and control of its subsidiaries, even if it does not in
fact do so.   In such circumstances its very omission may constitute the
abdication of a responsibility which it has publicly undertaken.”

Asymmetric jurisdiction clauses — financiers can indeed breathe freely

Most people think of an exclusive jurisdiction clause as a clause requiring all disputes to be heard in one forum, whoever raises them. But this is over-simplified. A jurisdiction clause may also be asymmetrically exclusive, allowing one party to sue in any court it can sweet-talk into taking the case but limiting the other to suing in a single jurisdiction. Financiers love these clauses, which protect them from litigation in uncongenial courts while at the same time preserving maximum freedom to pursue the borrower wherever he has assets or the courts have creditor-friendly judges.

There is no doubt that these clauses are enforceable as a matter of English law, but do they count as exclusive jurisdiction clauses? The point matters because of Art.31 of Brussels I Recast. This says that where two courts in the EU are hearing the same dispute, the second seised must give way, unless there is an exclusive jurisdiction clause in its favour (Art.31.2). Will an asymmetric clause do to invoke the exception? A resounding Yes came from Jacobs J yesterday in Etihad Airways PJSC v Flother [2019] EWHC 3107 (Comm).

Etihad had in happier times agreed to prop up the ailing airline Berlinair to the tune of several hundred million dollars, though in the event without success (it collapsed definitively in 2017). The agreement contained an asymmetrical jurisdiction clause requiring Berlinair to sue only in England but allowing Etihad to sue anywhere.

Berlinair’s German liquidator sued Etihad in Germany for allegedly failing to come up with the promised rescue monies. Etihad in turn sued the liquidator in London for what was effectively a declaration of non-liability; the liquidator sought to stay the action on the basis that the German courts were first seised; Etihad retorted that their action was protected by Art.31.2.

Having decided that the liquidator’s proceedings were covered by the exclusive jurisdiction clause and had been brought contrary to it, Jacobs J had no doubt, in common with Cranston J in Commerzbank AG v Liquimar Tankers Management Inc [2017] EWHC 161 (Comm) , that they were indeed protected by Art.31.2. Any other solution, he said, would lead to anomalous results and greatly limit the effect of the reforms to the original Brussels I introduced by the revised Art.31. And, in the view of this blog, he was right to decide the way he did. In any case, it gives the law a useful degree of certainty: from now on, only a decision of the CJEU or a peculiarly contrary one by the Court of Appeal is likely to be able to upset the accepted position.

Anti-suit injunction against owners’ third party proceedings against charterers and sub-charterers in Singapore.

 

The Chang Hang Guang Rong [2019] EWHC 2284 (Comm)  is an interesting, recent anti-suit injunction decision by Andrew Burrows QC, soon to become a Judge of the Supreme Court. Cargo claims arising out of the issue of switch bills were brought against the vessel’s owners in the Singapore High Court. Owners sought to pass these on to Clearlake, the charterer, and to Gunvor the sub charterers, through third party proceedings analogous to CPR Part 20 procedure in England. Both parties obtained anti-suit injunctions (ASI) from the High Court in London on the basis of an exclusive jurisdiction clause in the charter with Clearlake and in the bill of lading issued to Gunvor as shipper, although Gunvor denied being a party thereto.

Owners responded by amending their claims in the Singapore High Court, deleting all their contractual claims against Gunvor and relying on tort claims for misrepresentation, and deleting all their contractual claims against Clearlake, save for claims under a Letter of Indemnity, which contained a non-exclusive London High Court jurisdiction clause. Andrew Burrows QC held that there were two grounds for granting an ASI. First the foreign proceedings constituted a breach of the jurisdiction clause in the contract between the parties. An ASI would be granted unless there were strong reasons not to. Second, the foreign proceedings were otherwise vexatious and oppressive. The court would have to be satisfied that England was clearly the more appropriate forum for trial of the action. The ASI in respect of the proceedings against Clearlake fell within the first category and was maintained. Although the LOI provided for London arbitration for small claims this inconsistency was of no consequence as the claims here were not small.

The injunction was also maintained as regards Owners’ claims against Gunvor, now reframed solely as tort claims, which fell within the second category. The bringing of such claims was vexatious and oppressive, in that it circumvented the normal way of passing claims down a charter chain by leap-frogging Clearlake. Owners had manipulated their third party claims to avoid the exclusive jurisdiction clause in the charter. Clearlake, not Gunvor, dealt directly with the owners and the alleged misrepresentation was directly provided to them by Clearlake. There was a very good reason, so as to avoid forum-fragmentation on the same issues, to have all third party proceedings heard in the same jurisdiction (ie England). There was no obvious prejudice to owners in having all the third party proceedings heard in England rather than Singapore. It was not necessary to decide a further issue of whether Clearlake could restrain the tortious claims against Gunvor

Brussels I Recast — not as long-arm as you feared

It’s not often that what is essentially a family law case causes commercial lawyers to sigh with relief, but one suspects this may be true of yesterday’s decision of Lavender J in Gray v Hurley [2019] EWHC 1972 (QB).

Under Art.4 of Brussels I Recast, readers will recall that a UK-domiciled defendant has a prima facie right not to be sued anywhere in the EU except in the UK, unless one of the exceptions in the Regulation applies. But what if he finds himself sued in some court outside the EU? Does Art.4 extend to give him a further right not to be sued anywhere in the world except here, and thereby justify the issue by the English courts of an anti-suit injunction to stop the foreign proceedings in their tracks?

In Gray, a supposedly beautiful extra-marital relationship broke up in tears, as is so often the way with such things. There was a good deal of wealth in a number of places to argue about. She being domiciled in England and he resident here, she sued him in the English courts. Meanwhile he sued her in New Zealand, where he had close connections. Having finally established the jurisdiction of the English courts to hear her case, she asked for an anti-suit injunction to stop the New Zealand proceedings, arguing that this was necessary to vindicate her Art.4 right to be sued here, and only here — and for good measure that her human right (to protection of her possessions) would be infringed unless the order went.

Lavender J was having none of it. Art.4 of Brussels I gave her no right analogous to that derived from an exclusive English jurisdiction clause that entitled her to the courts’ intervention in the absence of strong reasons to the contrary; and being sued abroad in respect of one’s assets in an action that had no guarantee of success could not be said to be an attack on one’s possessions sufficient to engage the pretensions of A1P1 of the European Convention on Human Rights. It followed that, like any other litigant, if she wanted an anti-suit injunction she had to show that England was clearly most appropriate forum and that there was no countervailing justification for him suing in New Zealand — which she could not.

With respect this seems absolutely right. For one thing there is something odd about the idea of EU law justifying the granting of a peculiarly common-law remedy that fills most EU private international lawyers with horror, and indeed is banned entirely by EU law in the case of EU courts. Admittedly this has not stopped the English courts so holding in respect of the exclusive jurisdiction over employment contracts in what is now Art.22.1 (see Petter v EMC Europe [2015] EWCA Civ 828); but that case is itself controversial, and it is good to see its spread curbed.

More to the point, however, if this claim had succeeded, the effects on comity would have been considerable. Courts in countries outside the EU would not have been gratified to see the English courts issuing anti-suit injunctions almost as a matter of course telling litigants not to proceed there in commercial claims against English-based defendants for no better reason than that the EU, an organisation they were not a member of and owed no allegiance to , disapproved of the proceedings being brought there.

As we said before, we suspect much gentle relief in the commercial legal community, which can now be allowed to get on with business as usual.

Brandt v Liverpool implied contract falls outside art. 25 of Brussels Regulation (Recast).

 

In Pan Ocean Co. Ltd v China-Base Group Co. Ltd & Anor [2019] EWHC 982 (Comm) (16 April 2019) Christopher Hancock QC (Sitting as a Judge of the High Court) has held that an implied contract arising out of the conduct of the parties at the port of discharge did not fall within art.25 of the Brussels Regulation (Recast) 2012.

A cif contract was concluded between Gunvor and China-Base, loadport to be any port in Indonesia, Malaysia, or the Philippines with delivery in China.  A bill of lading was issued recording the loading of about 36,360 mt of light cycle oil and gas oil at Zhoushan, China and Taichung, Taiwan. Pan Ocean, the demise charterer of the vessel voyage chartered the vessel to Clearlake shipping a company said to be associated with Gunvor. The charterparty provided for English law and Jurisdiction. Pan Ocean issued bills of lading which accurately reflected the loadports and nature of the cargo and the vessel then loaded further cargo of gasoil in the Philippines. No bills of lading were issued for this cargo but in accordance with Clearlake’s instructions, it is said that an agent of Pan Ocean issued switch bills of lading falsely naming the loadport for the entire cargo as Subic Bay, Philippines and mis-describing the entire cargo as light cycle oil. The Vessel discharged the cargo into bonded shore tanks in Nansha, China. China-Base/Beihai neither presented any bills of lading nor gave any letter of indemnity to Pan Ocean or their agents. The cargo was impounded by the Chinese authorities on grounds of customs irregularities.

The buyers arrested the vessel in Singapore claiming damages for alleged misrepresentations in the cargo documentation. The demise charterers sought an anti-suit injunction in the English High Court to prevent the buyers proceeding with their claim in Singapore and claimed that the English court had exclusive jurisdiction over their claim under art. 25(1) of the Brussels Regulation (Recast) which provides

  1. If the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. The agreement conferring jurisdiction shall be either:

(a) in writing or evidenced in writing;

(b) in a form which accords with practices which the parties have established between themselves; or

(c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.”

The demise charterers argued that an implied contract had come into existence between themselves and the buyers at the discharge port on the terms of the bill of lading. The Judge addressed this issue on the assumption that there was an implied contract between the parties. He held that although the bill of lading which would constitute the terms of the putative implied contract was in writing, the agreement itself had to be in writing in accordance with Art 25(1)(a) ““The agreement conferring jurisdiction shall be … (a) in writing or evidenced in writing”).” This was not the case where the agreement contended for was an implied contract based on the actions of the parties in taking delivery of the cargo at the port of discharge.

Had it been established that the English court had exclusive jurisdiction, the court, applying the approach laid down in Ecobank v. Tanoh [2016] 1 WLR 2231. would not have granted an interim anti-suit injunction. The application for an injunction had neither been sought promptly, nor before the proceedings were too far advanced. Over 9 months had passed since the warrant of arrest in Singapore was served, with several hearings in Singapore during that period.

From Borstal boys to Parent Companies. Tort liability for the acts of third parties.

 

2017 saw three ‘anchor defendant’ cases before the High Court involving tort claims against a UK parent corporation in respect of the activities of its overseas subsidiary. The claimants sought leave to serve the subsidiary out of the jurisdiction under the ‘necessary and proper party’ gateway for service out of the jurisdiction in paragraph 3.1 of Practice Direction 6B in the Civil Procedure Rules (“CPR”). In two cases, AAA v Unilever and Okpabi v Shell, leave was refused but was granted in the third case, Vedanta Resources PLC and another v Lungowe. The key issue was whether there was a triable issue against the UK parent corporation. Lungowe involved alleged pollution from toxic emissions from a copper mine in Zambia owned by a Zambian company, KCM, whose ultimate parent company is Vedanta Resources Ltd which is incorporated and domiciled in the UK.

The Supreme Court, [2019] UKSC 20, in which Lord Briggs gave the lead judgment, has upheld the findings at first instance and in the Court of Appeal that there was a triable issue as regards Vedanta on the basis of a plausible case that its involvement in the activities of KCM gave rise to a duty of care to those affected by those activities.

There were four issues before the Supreme Court on which the claimants succeeded on 1,2, and 4 but not on 3.

(1) whether it is an abuse of EU law to rely on article 4 of the Recast Brussels Regulation for jurisdiction over Vedanta as anchor defendant so as to make KCM a “necessary or proper party”.

The EU case law suggests that the abuse of law doctrine is limited to situations where EU law is invoked collusively to subvert other EU provisions. In light of the decision in Owusu v Jackson (C-281/02) [2005] QB 801 (CJEU), arguments based on forum conveniens cannot justify derogating from the primary rule of jurisdiction in article 4.1 The concern about the wide effect of article 4.1 in this case is best addressed under the domestic law on the “necessary or proper party” gateway.

(2) whether the claimants’ pleaded case and supporting evidence disclose no real triable issue against Vedanta

The assertion that the negligence claim against Vedanta raises a novel and controversial legal issue was misplaced, as the liability of parent companies in relation to the activities of their subsidiaries is not, in itself, a distinct category of negligence unsuited to summary determination. The relevant principles for determining whether A owes a duty of care to C in respect of the harmful activities of B are not novel and can be traced back to the decision of the House of Lords in Dorset Yacht Co Ltd v Home Office [1970] AC 1004, the case involving Home Office responsibility for damage caused by absconding borstal boys when they boarded a yacht and collided with the plaintiff’s yacht. The duty  would arise from a sufficiently high level of supervision and control of the activities  at the mine with sufficient knowledge of the propensity of those activities to cause toxic escapes into the surrounding watercourses. This was a question for Zambian law, which it was agreed followed English tort law, but the question what that level actually was is a pure question of fact. On the facts, there was sufficient material identified by the judge in support of the view that the claimants’ case was arguable and the judge made no error of law in assessing this issue, so his decision on the negligence claim must stand.

The Judge had identified the following evidence as establishing that there was an arguable case that Vedanta owed a duty of care. There was part of the published material, namely a report entitled “Embedding Sustainability” which stressed that the oversight of all Vedanta’s subsidiaries rested with the board of Vedanta itself, and which made particular reference to problems with discharges into water and to the particular problems arising at the Mine. There was the management services agreement between Vedanta and KCM , and a witness statement of Mr Kakengela.

Lord Briggs stated[61]:

“For my part, if conducting the analysis afresh, I might have been less persuaded than were either the judge or the Court of Appeal by the management services agreement between the appellants, or by the evidence of Mr Kakengela. But I regard the published materials in which Vedanta may fairly be said to have asserted its own assumption of responsibility for the maintenance of proper standards of environmental control over the activities of its subsidiaries, and in particular the operations at the Mine, and not merely to have laid down but also implemented those Page 23 standards by training, monitoring and enforcement, as sufficient on their own to show that it is well arguable that a sufficient level of intervention by Vedanta in the conduct of operations at the Mine may be demonstrable at trial, after full disclosure of the relevant internal documents of Vedanta and KCM, and of communications passing between them.”

(3) whether England is the proper place in which to bring the claims;

The domestic law ‘proper place’ test requires a search is for a single jurisdiction in which the claims against all defendants may most suitably be tried. The courts have treated the risk of irreconcilable judgments as a decisive factor in favour of England as the proper place for the claim against the non-EU defendant as well. The judge in this case applied that approach but that was a legal error in circumstances where Vedanta had by the time of the hearing offered to submit to the Zambian jurisdiction, so that the whole case could be tried there. The risk of irreconcilable judgments would be the result of the claimants’ choice to exercise their article 4 right, rather than because Zambia is not an available forum for all the claims. The risk of irreconcilable judgments was still a relevant factor but was no longer a trump card such that the judge made an error of principle in regarding it as decisive. Looking at the relevant connecting factors in the round, Zambia would plainly have been the proper place for this litigation as a whole, provided substantial justice was available to the parties in Zambia

(4) if Zambia would otherwise be the proper place, whether there was a real risk that the claimants would not obtain access to substantial justice in the Zambian jurisdiction.

Even if the court concludes that a foreign jurisdiction is the apparently the proper place, the court may still permit service of English proceedings on the foreign defendant if cogent evidence shows that there is a real risk that substantial justice would not be obtainable in that foreign jurisdiction. In this case, the judge identified two “access to justice” issues in Zambia First, the practicable impossibility of funding such group claims where the claimants are all in extreme poverty, because they could not obtain legal aid and because conditional fee agreements (CFAs) are unlawful in Zambia. Secondly, the absence within Zambia of sufficiently substantial and suitably experienced legal teams to enable effective litigation of this size and complexity, in particular against a well-resourced opponent like KCM.

The claims will now proceed against the parent company and its Zambian subsidiary in the English High Court.