By: Isabelle Jefferies, Junior Research Associate, PILPG-NL
If you are someone who likes avocados, who lives in Britain, and who shops at either Tesco, Sainsbury’s, or Lidl, you have probably bought avocados linked to serious allegations of human rights violations. These allegations have resulted in a civil lawsuit that is currently underway before the British High Court in London. The defendant in this case is a British agricultural company that imports avocados from a subsidiary in Kenya, and supplies them to leading British supermarkets.
This blog post will briefly introduce the relationship between these companies, and the allegations made against them, before discussing the legal framework relevant to the lawsuit.
Kakuzi and Camellia: Supplying British Supermarkets with Avocados
Kakuzi is an agricultural company that cultivates, processes and markets various products, including avocados. It is the Kenyan subsidiary of Camellia, a British registered company and a global agricultural giant. Until recently, Kakuzi was a prominent avocado supplier to British supermarkets, namely Tesco, Sainsbury’s, and Lidl. However, in October 2020, the company faced public outrage following claims of human rights abuses. As a result, the supermarkets stopped purchasing products from Camellia.
Seventy-nine Kenyans, including former Kakuzi employees, began legal proceedings in the High Court of London against Camellia in October 2020. They allege that, between 2009 and 2020, Kakuzi systematically violated their human rights. In particular, they claim that security guards, employed to protect the plantations, killed one man, and subjected others to rape, violent attacks, and false imprisonment, among other forms of serious mistreatment.
There have been unsuccessful attempts to hold Kakuzi accountable for the alleged human rights violations in Kenya. Notably, in 2018, the United Nations Working Group on Business and Human Rights visited Kakuzi’s plantations. In 2019, it submitted a report to the Human Rights Council, in which it encouraged Kakuzi to complement the police investigation into the allegations by conducting its own investigations. Furthermore, it called on Kakuzi to strengthen the training and oversight mechanisms of its security guards. In spite of the report, accusations of fresh violations by Kakuzi’s security guards have since been reported. According to the Kenyan Human Rights Commission, Kakuzi has evaded accountability for too long, due to its economic, political and legal influence in Kenya. As a result, victims are now seeking redress in British courts.
English Law on Parent Company Liability for the Acts of its Subsidiaries
As a common law system, there is no statute governing parent company liability for the wrongful acts of its subsidiaries, such as human rights violations, in English law.
For a parent company to be held responsible for harm caused by its subsidiary, it must be established that it owes a duty of care to the victims. Generally, English law does not impose a duty to prevent third parties causing damage to another, unless the test found in Caparo v. Dickman (1990) is satisfied. This test establishes that a duty of care will be imposed on a defendant whenever it can be shown that the harm to the claimant was foreseeable, that there was a relationship of proximity between the claimant and the defendant, and that it is fair, just, and reasonable to impose a duty of care.
Furthermore, the jurisprudence of English courts has explicitly recognized the liability of parent companies for the tortious acts of its subsidiaries, under certain circumstances. Chandler v. Cape (2012), decided on appeal, was a landmark case in this regard. The Court of Appeal established that a company will have duty of care towards the employees of its subsidiary if certain criteria, reflecting the proximity and reasonableness limbs of the Caparo test, are met. Namely, the parent company and its subsidiary have similar businesses, the parent company knew, or ought to have known, that the system of work of its subsidiary was unsafe, and lastly, the parent company knew, or ought to have foreseen, that its subsidiary or its employees would rely on this knowledge for the protection of the employees (para. 80). Having said that, the court did stress that parent companies have separate legal personalities from their subsidiaries (para. 67), so unless the previous criteria is met, the parent company will not have a duty of care for the harm caused by its subsidiaries.
Although the Chandler case represents a step towards holding parent companies accountable for harm caused by its subsidiaries, it is limited in scope. In fact, it only offers a legal basis for a claim against a parent company for claimants who are employees of the subsidiary. Others who may have suffered harm as a result of the subsidiary do not have any means of redress under this precedent. In other words, in the Camellia lawsuit, those claimants who are not employees, or former employees of Kakuzi, have no basis for their claims.
Yet, in Lungowe v. Vedanta Resources (2017), the Court of Appeal acknowledged that a duty of care could be owed by a parent company for the harm caused to all persons “affected by the operation of a subsidiary.” (para.88) This approach would enable those claimants in the Camellia lawsuit who are not employees, or former employees of Kakuzi, to argue a case against Camellia nevertheless. The case reached the Supreme Court in 2019, and it was emphasized that the criteria set out in the Chandler case is not strict. In fact, the existence of a parent company’s duty of care in relation to the harm caused by its subsidiary depends more generally on the extent to which the parent company took over, intervened in, supervised, or advised the management of the relevant operations of the subsidiary (para. 49). In essence, the parent company’s duty of care is contingent on the extent to which it exercises control over its subsidiary. There are many models of management and control used by multinational corporations (para. 51), so this pragmatic approach, that looks at the reality of the relationship between the parent company and its subsidiary, is warranted. According to the firm representing the Kenyan claimants, there is clear evidence that Camellia tightly supervises and controls Kakuzi, and Camellia’s managers also manage Kakuzi. As a result, it seems that the claims against Camellia would satisfy the test set out in Lungowe, and that it would be held responsible for the human rights violations committed by Kakuzi’s security guards.
However, in Okpabi v. Shell (2018), the Court of Appeal did not follow this pragmatic approach. The majority held that a parent company owes a duty of care for the actions of its subsidiaries only where it controls, or shares control of, the material operations of the company. This is a stricter approach, whereby the parent company does not owe a duty of care when it merely issues mandatory policies and standards applicable to its subsidiaries in order to ensure conformity with particular standards (para. 89). In fact, the claimants would need to show that Camellia assumed responsibility for, or controled the day-to-day operations of Kakuzi (para. 205). On the basis of the evidence that is publicly available, it is hard to determine whether the claimants would meet this standard. However, it is safe to say that this test sets out a higher standard of control that Camellia must have over Kakuzi, compared to the test set out by the Supreme Court in Lungowe. As a result, under the former test, the responsibility of Camellia for the harm caused by Kakuzi would be harder to attribute. Having said that, the case is currently being appealed in the Supreme Court, so this approach may be overruled, and substituted with the more pragmatic approach taken in Lungowe.
Conclusion
The law surrounding the liability of parent companies in relation to harm caused by their subsidiaries is vital for the vindication of rights of victims of corporate abuses. However, at the moment, this area of law is filled with many uncertainties, so it is hard to determine whether Camellia will ultimately be held liable for the alleged human rights violations committed by its Kenyan subsidiary, Kakuzi. The approach adopted by English courts in the upcoming months will have extensive implications for victims from all around the world, whose final attempt to seek redress lies in the hands of the judges of English courts.