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Commentary: Parent companies soon to be unable to claim immunity from subsidiaries’ liabilities

"Why parent companies may soon be unable to claim immunity from their subsidiary's liabilities", 23 Jun 2019

The corporate veil — the hallowed legal concept that separates the personality and liabilities of a parent company from that of its subsidiaries — is coming under attack as courts around the world struggle with the ever-extending reach of multinational organizations.

While Canadian courts and others have been gnawing away at the edges of the veil in recent years, the U.K. Supreme Court recently struck what may be the most telling blow so far when it allowed 1,800 Zambian villagers to continue with a lawsuit against U.K.-based mining company Vedanta Resources Plc over alleged pollution emanating from the Nchanga copper mine owned and operated by Konkola Copper Mines, Vedanta’s Zambian subsidiary.

Although traditional corporate law protected Vedanta from the liabilities of KCM, the court ruled in April that the parent had intervened in the management of the mine to such an extent that it may have attracted a “duty of care” to the villagers...

As evidence of the “high level of control and direction” exercised by Vedanta, the court pointed to public statements in which the company lauded its group-wide environmental controls and sustainability standards, and its implementation of these controls and standards throughout the corporate group.

“There is an increasing belief on the part of policymakers that we need to take a new, harder look at the legal concepts that govern multinationals and families of corporations,” said Julie Rosenthal, a lawyer at Goodmans LLP in Toronto. “And this is a belief that is being reflected in the jurisprudence.”...

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