Briefly about relevant substantive law
In Europe, a recent breakthrough came with the Chandler case (Chandler v. Cape (2012) EWCA Civ. 525), decided by the English Supreme Court.
The case concerned a worker, Mr. Chandler, who for years had been exposed to asbestos at his workplace and ended up becoming ill. Mr. Chandler sued the parent company, claiming damages, alleging that it had been the parent company’s responsibility to ensure a safe working environment in the factory, owned by the subsidiary. The court agreed and awarded damages to Mr. Chandler.
The reasoning in the case is highly interesting.(1) For an analysis, see Rott and Ulfbeck, Supply Chain Liability of Multinational Corporations, ERPL 3-2015 (414-436), p. 431 ff. Thus, the court found that a parent company could be held liable for wrongs of the subsidiary in situations where: a) the parent and the subsidiary are in the same business, b) the parent company has superior knowledge, c) the parent knew or ought to have known that the subsidiary’s work system was unsafe, d) the employee had relied on the parent company using its superior knowledge for the employee’s protection.
The case did not involve foreign direct liability, since both the parent company and the subsidiary were based in the UK. However, it cannot really be ruled out that the above requirements could also be fulfilled in a foreign direct liability case, where damage has been caused in the developing world.(2) This was pointed out at an early stage in A. Sanger “Crossing the corporate veil: The duty of care owed by a parent company to the employee of its subsidiary”, CLJ (2012), 478, at p. 481. Moreover, the Chandler case has already been relied on as the leading case in several pending foreign direct liability cases.(3) See further below. The Chandler case has also been relied on in the Bodo litigation and in the KIK case which is now pending in Germany. One of the reasons why the case has become central is that, even if according to private international law rules a case must be decided on the basis of the local law applicable in a jurisdiction in the developing world, this law will, for historical reasons going back to colonial times, often be based on English law.
Whereas Chandler concerned workers’ injuries, several cases pending today concern environmental liability, raising the question of to what extent the criteria set out in Chandler can be regarded as also being applicable in an environmental law case, and if so, how. This is uncertain. (4) It is not the purpose of this article to analyse further the substantive law aspects of the case, rather it is the procedural aspect that is in focus.
As will be shown in the following, it seems that this uncertainty at the substantial level also spills over, to some extent, into the procedural level, when it needs to be decided where there is jurisdiction for claims relating to foreign direct liability cases. There are two basic questions: 1) to what extent can the parent company be sued in its home state when the case concerns the possible tort liability of the parent company for wrongs committed by a subsidiary in the third world?, and 2) to what extent can the subsidiary be sued together with the parent company in the home state of the parent company?