JURISDICTION ON TRIAL FOR MULTINATIONALSPosted On: Apr. 27, 1997 12:00 AM CST
LONDON-U.K. companies with multinational operations are closely watching the outcome of several court cases that could make it easier for foreign employees and U.K. citizens working overseas to sue their employers in the holding companies' home territory.
In order for such an employee to claim that there is jurisdiction to sue a multinational in U.K. courts because the holding company is located there, that plaintiff must prove that the holding company exerted a degree of control over the unit where the worker was employed or was negligent in some way.
Britain's highest court, the House of Lords, is reviewing a landmark 1996 Appeal Court ruling that a former employee of a Namibian-based subsidiary of mining group RTZ Corp. P.L.C. can sue the company in England on a conditional-fee basis, even though Namibia had been held to be the most appropriate forum. Conditional fees are the U.K. equivalent of contingency fees.
The employee alleges that he was stricken with laryngeal cancer as a result of substances he was exposed to while working at the mine.
Previously, the appellate court ruled that the issue of legal funding was irrelevant to the question of jurisdiction. The plaintiff, who lives in Scotland, had claimed that he would be unable to obtain any form of legal funding in Namibia.
The plaintiff's lawyers, London based Leigh, Day & Co., then entered into a conditional-fee arrangement with him, resulting in the Court of Appeal decision last year to allow the trial to be held in England. The Court of Appeal ruled that in a choice between a more appropriate jurisdiction where the plaintiff cannot sue because he is financially unable to do so, and a less appropriate one where he can, the latter may be chosen.
Last week the Law Lords heard two appeals, one by RTZ to halt the English proceedings and one by the plaintiff to allow him to fight his case in England using government-funded Legal Aid.
In a separate case involving South African workers, a British-based chemical company this month agreed to an out-of-court settlement with 20 South African workers claiming to be poisoned by mercury at the company's plant in Cato Ridge Natal.
The 9.4 million rand ($2.1 million) settlement, which covers damages and legal costs, comes months before a London High Court trial scheduled for October. The claimants, three of whom have died, began legal proceedings in the London High Court in October 1994. They had secured government-funded Legal Aid to pursue their claims in the U.K. courts despite attempts by the company to have the case transferred to South Africa.
Thor Chemicals SA (Pty.) Ltd., a multinational company with headquarters in Margate, Kent, transferred its mercury operations to Cato Ridge, South Africa, in 1987 from a plant in Margate.
According to the plaintiffs' lawyer, Richard Meeran of Leigh Day & Co., the Margate plant "was criticized continually by the U.K. Health & Safety Executive for bad working practices and overexposure of U.K. workers to mercury" throughout the 1980s.
Meanwhile, the Cato Ridge operation "relied substantially on casual, untrained and unskilled labor," said Mr. Meeran.
The claimants, supported by the South African Department of Manpower, which oversees all employment issues, alleged that the poisoning of the South African workers was the "direct result of precisely the same defects as had been identified and brought to Thor's attention earlier on in Margate by the HSE," according to a statement from Leigh Day.
Thor Chemicals agreed to the global settlement "for commercial reasons," said Rebecca Agnew, assistant lawyer with London based law firm Beachcroft Stanleys.
As the claimants were on Legal Aid, Thor Chemicals would not have been able to recover its legal costs even if it had won the case, Ms. Agnew pointed out.
Meanwhile, the company's insurance will not cover the settlement, Ms. Agnew confirmed.
Under South African law, employees are not allowed to sue their South African employer. Nominal damages can be claimed under a statutory compensation system, according to Ms. Agnew. Thor Chemicals Holdings Ltd., is the holding company of Thor Chemicals, and as such has no employees and no employers' liability insurance to cover the claims, Ms. Agnew said.
The plaintiffs' lawyer hailed the case as a victory for workers in developing countries.
"Multinationals should be required to operate to the same standards applicable in their own countries," said Mr. Meeran, "If they exploit less stringent standards in developing countries and injure people in the process, then they should be accountable. I hope this case will send out a warning signal to other multinationals operating in South Africa and elsewhere around the globe," he said.
Mr. Meeran claimed that the case is an example of a growing number of successful attempts by foreign workers around the globe to make multinational companies accountable for their working conditions in overseas subsidiaries.
There have been similar cases against U.S.- and Australian-based multinational companies, he said.
Mr. Meeran also is pursuing legal action against British-based multinational Cape P.L.C. of Middlesex, England, on behalf of South African asbestos mine workers suing for asbestos-related health problems. Mr. Meeran would not comment on the ongoing case.
David MacIntosh, partner of London law firm Davies Arnold Cooper, pointed out that the RTZ case is quite different than the Thor and Cape cases.
The Thor Chemicals settlement and appellate court ruling "does not set a precedent," Mr. MacIntosh said. There are "considerable distinctions and differences" between the factual backgrounds of the Thor case and the RTZ case, he said., adding that RTZ can defend its case on several issues, including jurisdiction.
In the RTZ case, Edward Connelly claims he developed laryngeal cancer at the age of 37 after working at the Rossing Uranium mine in Namibia between 1977 and 1982. The mine was operated by Rossing Uranium Ltd., an RTZ subsidiary. The plaintiff argues that the parent company was responsible for the formulation of health and safety policy, regulation and monitoring of health and safety at Rossing, both from its London headquarters and through senior health and safety managers at Rossing.
Mr. MacIntosh, who is also defending Cape P.L.C., noted that RTZ had an excellent health and safety record and that the company can argue that the cancer was not caused by working conditions.
However, he agreed that the ruling on forum could have wide implications for multinationals, and he noted that several "forum cases were being drummed up" by plaintiffs lawyers.
Ms. Agnew of Beachcroft Stanleys also warned that the House of Lords ruling "could be groundbreaking" and would mean that companies would have to review their liabilities and insurance arrangements.
Mr. Meeran said that several lawyers had recently contacted him to discuss the implications of the cases for multinational liabilities.