Supermarket and retailer litigation risk: Claimants using novel Value Chain Liability concepts to target household names


Value chains are under the spotlight with the increase in so-called value chain liability claims in the UK: businesses operating in high-risk sectors need to carefully take stock of their potential exposure to this type of litigation risk.  The retail sector (most notably larger retailers and supermarkets) needs to pay particular attention to these developments, given the size of their value chains and public profiles (and therefore the breadth of their potential legal and reputational exposure).  

In this article we briefly summarise the basic premise of a value chain liability claim, explain why the UK's supermarket and retail sector should be concerned, and suggest where these legal developments may ultimately lead. 

What is Value Chain Liability?

There is a global movement to make businesses accountable for human rights and environmental impacts both up and down their value chain, often in emerging markets where transparency can be lacking.  In the UK, this has primarily been driven by (i) public pressure campaigns on businesses and (ii) transnational tort litigation brought by claimant law firms although, in Europe, this is also being driven by the European Commission with its Corporate Sustainability Reporting Directive ("CSRD") and proposed Corporate Sustainability Due Diligence Directive ("CS3D"). 

What is a "value chain"?

A value chain means the activities related to the production of goods/provision of services by a company. This includes the development and distribution of the product or the service. It also includes the related activities of established upstream and downstream business relationships.  Including downstream activities distinguishes the "value chain" from the more familiar concept of "supply chain" which is focused on upstream business relationships.

In recent years the UK Supreme Court has allowed ambitious transnational tort claims to overcome early procedural hurdles and gain traction in this jurisdiction (see Vedanta Resources Plc v Lungowe [2019] UKSC 20 ("Vedanta"), HRH Okpabi v Royal Dutch Shell Plc [2021] UKSC 3 ("Okpabi"), Begum v Maran (UK) Limited [2021] EWCA Civ 326 ("Maran"), and Joyisa & Ors v British American Tobacco Plc & Ors [2021] EWHC 1742 (QB) ("Josiya")).  To be very clear, none of these claims have reached trial and so there is uncertainty about how the law will continue to develop in this area.  However, sectors with particular human rights risk or environmental risk in their value chains need to give attention to this movement as it has the potential to lead to unexpected litigation risk well outside the traditional parameters of tortious liability.  Further, and as we explain below, the mere fact that an accusation has been made may be highly detrimental to a business, irrespective of the legal merits of a claim. 


How does a value chain liability claim work?

Value chain liability claims are premised on the idea that a UK-domiciled claimant should be liable (via the tort of negligence) for harm caused by a third-party to a foreign-domiciled defendant in a foreign jurisdiction, to which the defendant is somehow (often remotely) linked.  In two key cases brought in the UK, Maran and Josiya, it was argued that a UK-domiciled defendant which had no direct relationship with a (harm-causing) third party, should nevertheless be liable for the harm caused by that third-party because it had a duty of care to protect the claimant(s) from harm.  In the two claims, the claimant(s) alleged that the duty of care was either informed by traditional tortious principles (e.g. the familiar foreseeability, policy and proximity test) or through the nascent "creation of danger" exception (which provides for a defendant to be liable to a claimant if (i) it created a source of "danger", (ii) it was reasonably foreseeable that a third party would interfere with the danger (thereby sparking off the danger) and (iii) this danger caused harm to the claimant.  In both claims, at a preliminary procedural hearing, it was held that the claimants met the low "arguable case" standard required to resist a strike out/summary judgment (or jurisdictional challenge) and that the claim was capable of progressing to trial.  For a detailed summary of the status of the law in this area, please refer our briefing on the Maran claim.


As we noted above, it should not be overlooked that value chain liability claims are still highly speculative and ambitious but given some recent procedural victories, they continue to be brought by claimant law firms.  Most value chain liability claims that have received public attention relate to events that occurred in foreign countries, and often in circumstances where the harm was caused as a result of criminal acts by a third-party.  When bringing value chain liability claims, claimant law firms tend to target businesses that either have particular risk profiles (e.g. businesses in the mining & extractives, agriculture or fashion sectors, all sectors where human rights risk is known to have the potential to exist along the value chain) or businesses with particular vulnerability to negative publicity in order to attempt to extract an early settlement.  This means that even though the law around value chain liability may be uncertain, the fact that an allegation has been made against a business may prove to be reputationally detrimental. 

Value Chain Liability outside of the UK

Outside of the UK, we are seeing mandatory human rights, environmental and governance due diligence regimes being implemented, directed towards holding businesses accountable for human rights and environmental impacts in their value chain, usually in emerging markets.  These regimes work by requiring businesses to (i) carry out value chain due diligence (ii) identify, assess and act against human rights infringements and/or environmental risks flowing from their operations and (iii) provide a way for claimants to seek compensation from businesses that did not directly cause them harm.  While there have been calls for the UK to introduce its own sustainability due diligence regime, no such regime currently exists beyond the relatively narrow Modern Slavery Act (which requires some assessment of labour practices within the supply chain). In practice many UK businesses with significant operations in European countries will be captured by the sustainability due diligence regime that is being introduced within the EU under CS3D. Equally importantly, UK entities may need to report their value chain sustainability impacts under CSRD, exposing them to public scrutiny and potential legal action. For more on the CS3D, see our recent briefing; for more on reporting under CSRD, see our recent briefing

Why should supermarkets and large retailers be concerned?

There are several reasons why supermarkets and large retailers may become targets for claimant law firms, not least of which is the fact that they often have ample resources to compensate alleged victims of poor human rights practices or remedy environmental damage. Indeed, there are several well-known examples of claims that have already been brought against retailers (see our summary, below, of claims brought in the UK, France and Canada).  Beyond purely financial considerations, (i) they have extensive value chains, (ii) they are well-known to the public and are therefore vulnerable to negative publicity and (iii) they tend to make public statements about their level of value chain control and oversight.   

This latter point is important to keep in mind as value chain liability claims often refer to statements made by the defendants relating to the control of, or knowledge of, aspects of their value chain, as these statements may point to a heightened level of proximity and foreseeability as between the defendant and the harm caused to the claimant.  These sorts of statements are commonplace in the retail sector as many retailers, such as supermarkets, do make voluntary human rights disclosures and may expressly state that they conduct human rights impact assessments, or that their policy is to require suppliers to remediate harm caused by negative human rights impacts, often using these to tout their environmental and social credentials. 

Public statements / voluntary disclosures about control and oversight are important to claimant law firms because it makes it easier for them to plead that a defendant had a heightened level of proximity and foreseeability (and therefore, a duty of care to the claimant), even in circumstances where the alleged harm occurred in a different country.  Public statements about value chain audits or standards (even if it is perceived to only be PR "fluff") can have very real consequences if a business is targeted by a claimant law firm as these statements may very well find their way into the claimant's pleadings.  For the purpose of a value chain liability claim, any of these factors may be used by a claimant to allege that a supermarket or retailer had a measure of "control" or "oversight" over its supply chain which may, in turn, allegedly give rise to a duty of care.  These are certainly not the only factors that may be used, but they have particular relevance to supermarkets and large retailers. 

Examples of Value Chain claims brought against supermarkets


Following the tragic Rana Plaza factory collapse in Bangladesh in 2013, a group of Bangladeshi claimants brought a claim in Canada against the supermarket Loblaws, and a social auditor used by Loblaws. Many of the workers killed and injured in the collapse made garments for a subsidiary of Loblaws. The claim was premised on the idea that Loblaws assumed responsibility for ensuring that the factory was safe as it used the social auditor to inspect the factory as part of Loblaws' Supplier Code of Conduct, which covered workplace health and safety standards. The claim was dismissed on the grounds that (i) the claim was time-barred in Bangladesh and (ii) under Bangladeshi law, Loblaws (and the social auditor) could not owe a duty of care to the victims of the collapse. 

United Kingdom

In the UK, a claim has recently been issued  against Tesco (and a social auditor) relating to alleged forced labour practices at a garment factory in Thailand. The claimants assert that the factory workers (i) worked in inhumane conditions, (ii) making clothing for a subsidiary of Tesco, and (iii) that both Tesco and the social auditor conducted audits of the factories which failed to identify the issues at the factory and/or failed to remediate issues uncovered at the factory. In comments made to the media, Tesco denied that there is an arguable claim against it, and has also indicated that it intends to challenge the jurisdiction of the UK courts to hear the claim. 


In France, a claim has been issued  by Brazilian and Columbian indigenous groups against the Casino Group, a supermarket chain (with South American subsidiaries) relating to its supply chain practices in South America.  The claim is premised on France's Duty of Vigilance Law, a sustainability due diligence regime, and asserts that (contrary to Casino's beef sourcing policy) a subsidiary of Casino sourced beef from slaughterhouses that are involved in deforestation in Brazil and Columbia. 

Mitigation Strategies

In light of these risks, it would be tempting to conclude that supermarkets and other large retailers are better off not enquiring too closely into practices at other levels of their value chain. Tempting, but wrong. A court will not be sympathetic to defendants who have wilfully turned a blind eye to practices of which, in the court's view, it should have been aware. A more constructive response would be for supermarkets and retailers to address their known legal risk in the value chain.

From a contractual perspective, the primary focus should be on the codes of conduct and supply chain principles which large retailers habitually impose on their suppliers. These standard form documents may benefit from a fresh look in light of changes to the customer's risk profile, as well as a dose of realism. Are these codes and principles identifying the right risks and prescribing realistic and practical measures to ensure compliance? Policy, as ever, needs to be backed up by practice. If retailers expect to hold suppliers to promises they have made in the due diligence process, audit rights in contractual documentation should be carefully scrutinised and customised, if necessary, rather than being regarded as boilerplate.

Caution also needs to be exercised when making public statements about supply chain standards and sustainable and ethical practices, because as explained above, these may be exploited.  That said, it is almost certainly unrealistic for large retailers to effectively take a vow of silence on these issues for fear of encouraging litigation – particularly against a background of both increased reporting requirements and growing customer awareness of ethical issues, leading to heightened expectations of "good citizenship" from businesses.  The answer, once again, lies in having robust processes for ensuring that public statements can be backed up by properly audited information and policies which are actually enforced in practice (rather than merely appended to the contract as an afterthought).

What is clear is that supermarkets and major retailers will need to confront these new litigation strategies and be prepared to address novel allegations relating to their value chains going forward. They must also be clear-sighted and prepared about the reputational risk that attends such claims. They should certainly give careful consideration to any public statements they make about value chain oversight or control, including any certifications schemes or auditing schemes which they may endorse or use. This "good hygiene" is important to maintain in order to avoid unforeseen litigation risk. For more on this, please see our recent article on refreshing human rights corporate policies and procedures.

Finally, it should not be overlooked that regulators are also taking a look into the sector, using their existing powers, and this may have an impact on the relationship between UK retailers and their value chains. In the UK, the Competition and Markets Authority (in common with regulators in other jurisdictions) has begun to dig deeper into consumer-facing claims to eco-friendliness and ethical business practices, calling into question whether businesses are making misleading claims about the sustainability of their products. This may result in higher scrutiny over value chains, as businesses look to tighten value chain control in response to heightened regulatory pressure. 

Where this might lead

Properly focused and managed, supply chain controls offer a win for retailers, who can make these claims more credibly and promote best practices in their businesses, as well as for the individuals at in the value chain who might experience infringements to their human rights. As noted at the outset to this article, it is not clear where the courts will land on value chain liability claims if and when one does eventually reach trial.  Conventional legal theory strongly suggests that in many of these claims, the claimants will fail to demonstrate that the defendant did, in fact, owe a duty of care to a claimant. However this is not a certain outcome. Further, it is not known whether the UK Government will introduce a corporate sustainability due diligence regime which, irrespective of the views the courts may reach, may introduce a value chain liability-style legal obligation (as is being done in Europe) paving the way for claims to be brought against UK supermarkets and retailers (in the same way that is being done in France against Casino). We expect that novel claims will continue to arise and NGOs are also increasingly active in holding corporates to account for failing to police their supply chain adequately.

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