Could private equity funds be liable for human rights breaches by a portfolio company? A recent decision by the UK Supreme Court increases the likelihood of this outcome. This blog looks at the judgment in Vedanta Resources PLC and anor. v Lungowe and others  UKSC 20, considers what it means in practice for private equity funds and provides some practical tips on how to manage human rights related risk.
Vedanta involved claims brought by Zambian farmers against a UK mining company and its Zambian subsidiary in relation to environmental damage (for detailed analysis, please see our blog on HL Regulation). Prior to the case it was thought that a duty of care was only owed by a parent company for the acts of its subsidiaries in certain, limited, circumstances.
The Supreme Court rejected such limitations and found that the test for parent company liability is no different to that which applies where A owes a duty to C for the actions of B. Such circumstances will include: where, in published materials, a parent holds itself out as exercising a degree of supervision and control of its subsidiaries, even if it does not in fact do so; and, where a parent company takes active steps, by training, supervision and enforcement, to see that a group policy is implemented by subsidiaries.
What does the judgment mean for PE funds?
What should PE funds do in practice?