A recent Court of Appeal judgment (Hamida Begum v Maran (UK) Limited  EWCA Civ 326 ("Maran")) may have significant ramifications for the scope of corporate risk faced by UK companies conducting business overseas.
Despite the Court of Appeal's doubts as to the arguments advanced by the Claimant as to duty of care, it refused to strike the claim out, ruling that the novel allegations as to the Defendant's alleged duty of care were sufficiently substantial to be heard.
This judgment is one of a number of recent cases in which the English Courts have permitted ambitious claims in negligence to proceed in this jurisdiction. While the ultimate prospects of success of such claims at trial is by no means certain and this is a rapidly developing area of the law, Maran is another example of the growing litigation risk (and associated costs) faced by UK domiciled defendants for alleged harms connected with their global "value chains".
Maran concerned a UK domiciled shipping agent ("the Defendant") which, acting on behalf of the owner of a defunct oil-tanker ("the Vessel") that had reached the end of its working life, sold the Vessel to a third party intermediary ("the Buyer"). Under the terms of sale, the Buyer was required by the contract for sale to find a breaking yard to dispose of the ship 'in safe conditions'. Ultimately the ship was broken on the notoriously dangerous beaches of Chattogram in Bangladesh. While working on the Vessel a shipbreaker (and the deceased husband of the Claimant), fell to his death. The Defendant did not know the identity or location of the breaking yard, having left its identification to the Buyer. The Claimant sued the Defendant shipping agent in England in negligence, and did not sue the Buyer, the owner of the Vessel, the breaking yard or her husband's employer – none of which were domiciled in the UK or therefore automatically subject to the jurisdiction of the English Courts. The Court of Appeal decided that while the Claimant's case on negligence faced "formidable hurdles", nevertheless the allegation that the Defendant owed the Claimant a duty of care was more than "fanciful", and the claim should not be struck out.
The Court of Appeal's decision in Maran expressly reflected guidance given recently by the Supreme Court in the so-called "parent company liability" cases of Vedanta Resources Plc v Lungowe  UKSC 20 and HRH Emere Okpabi v Royal Dutch Shell  UKSC 3, which also involved novel allegations that UK-domiciled parent companies owed a duty of care to claimants overseas who alleged they had been harmed by the operations of the parents' foreign subsidiaries. The Supreme Court made clear in its judgments in both these cases that liability in negligence is not confined to the parent/subsidiary relationship, and Maran is a very good example of how it can be alleged in other, even more novel, "value chain" contexts. Moreover, the Court of Appeal in Maran paid close attention to the Supreme Court's comments in Okpabi which made it clear that lower Courts should only look behind a claimant's pleadings in limited circumstances when considering whether or not to strike out a claim; and that because Maran involved "an unusual argument in a rapidly-developing area of law, it would also be wrong in principle to strike it out at this stage". Through these claims we are seeing an obvious willingness by the English Courts to contemplate a broader scope of corporate liability, and a policy-based approach towards testing the extent of corporate accountability in the UK for alleged harms connected to global operations and value chains.
The Maran decision chimes with regulatory and policy developments globally, in particular in relation to "supply chain" (or, in current parlance, "value chain") due diligence. Globally, we are seeing pressure for mandatory human rights, environmental and governance due diligence ("mHRDD") regimes to be implemented. These regimes are directed towards holding businesses accountable for human rights and environmental impacts further down their "supply chain" or "value chain", usually in emerging markets. These regimes work by requiring businesses to (i) carry out supply chain or value chain due diligence and (ii) identify and assess human rights infringements and/or environmental risks flowing from their operations.
While the UK has introduced due diligence requirements for forest risk commodities and anti-trafficking legislation via the Modern Slavery Act, it has not introduced (or announced) its own comprehensive mHRDD regime which would otherwise seek to address the type of issues raised by Maran. Nevertheless, certain international regimes, notably that currently under consideration by the EU, contemplate transnational effect which may well have substantial ramifications for UK-domiciled business. Moreover, if "value chain" negligence claims become more common in this jurisdiction, there may be increased pressure on the UK government to introduce its own mHRDD regime and/or for UK businesses to develop their own voluntary human rights due diligence processes as a way of mitigating this type of litigation and global regulatory risk.
For more on the development of the EU's proposed mHRDD regime, please refer to our recent briefing on the subject.