Supply chain liability: Court of Appeal allows claims against UK companies for alleged forced labour by Malaysian supplier to be heard in English courts

In Limbu & Ors v Dyson Technology Ltd & Ors [2024] EWCA Civ 1564, the Court of Appeal overturned the High Court’s decision and unanimously held that England was the appropriate forum to determine tort claims against Dyson related to alleged forced labour practices of a Malaysian supplier.

This case forms part of a growing number of claims brought against UK companies for alleged human rights harms caused by third parties in the corporate group or value chain, such as subsidiaries or suppliers. It further highlights the risk of litigation in the English courts against UK domiciled companies in relation to liability arising out of their international supply chains.

Background

The claimants were migrant workers who alleged that they were subject to forced labour and exploitative and abusive working and living conditions whilst working at the Malaysian factories ATA and Jabco, which manufactured components for the Dyson Group.

The defendants were three companies in the Dyson Group, of which two were domiciled in the UK (D1 and D2; together, Dyson UK), and the third domiciled in Malaysia (D3, or Dyson Malaysia). While the Malaysian entity had contracted with the factories, the UK-based entities were responsible for the promulgation and oversight of the Dyson group’s supply chain policies and standards.

The claimants alleged that the defendants owed them a duty of care because they “exert[ed] a high degree of control over the manufacturing operations and working conditions” at the factories. Further, they argued that the defendants were responsible for promulgating and implementing certain mandatory policies and standards concerning the working and living conditions of workers in the Dyson group’s supply chain, and for implementing these policies and standards through “training, supervision (including regular audits) and enforcement”.

In addition, the claimants argued that the defendants knew of the high risk of forced labour in Malaysian manufacturing from public sources; that they must have known of the practices through implementation of their audit and monitoring policies; and that Dyson UK were specifically told of the mistreatment.

The claimants argued that the defendants were: (i) liable for negligence; (ii) jointly liable with the factories and the Royal Malaysian Police for the torts of false imprisonment, intimidation and assault; and (iii) liable for restitution of unjust enrichment at the expense of the claimants.

The High Court previously upheld the defendants’ challenge to the jurisdiction of the English courts and agreed that the appropriate forum was Malaysia. The claimants appealed.

The relevant test for jurisdiction

When assessing whether England is the appropriate jurisdiction to hear a claim, the English courts apply the two-part test set out in the Spiliada case. First, they identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice. In determining the appropriateness of the forum, the court looks at connecting factors to determine with which forum the action has the most real and substantial connection. Second, even if the foreign court is the more appropriate forum, the courts will consider if there is a real risk that the claimant will not be able to obtain substantial justice in the appropriate foreign jurisdiction such that justice requires the trial to take place in England. This is an exercise of discretion by the Court and the Court of Appeal will only interfere with the evaluative judgments if the judge made and error of principle or was plainly wrong.

In relation to the negligence claim, the Court referred to the English Supreme Court decision of Okpabi & Ors v Royal Dutch Shell Plc & Anor [2021] UKSC 3 (see our earlier article here) which described four “non-exhaustive” routes by way of which an English parent company may establish a duty of care for harms caused by a foreign subsidiary. These are known as the four “Vedanta routes”, referring to Vedanta Resources PLC & Anor v Lungowe & Ors [2019] UKSC 20 (see here):

1. Where the English parent takes over the management or joint management of the relevant activity of the subsidiary;
2. Where the parent provides defective advice or promulgates defective group-wide safety or environmental policies which were implemented as of course by the subsidiary;
3. Where the parent promulgates group-wide safety or environmental policies and takes active steps to ensure their implementation by the subsidiary; and
4. Where the parent holds itself out in published materials as exercising a particular degree of supervision and control over the subsidiary, whether or not it in fact does so.

In the present case, the claimants relied on routes 2, 3 and 4 above, and described the breach as consisting of (a) defects in the policies which allegedly contained systemic errors preventing their purported objective being carried out, and (b) alleged failure by the defendants to take steps to ensure implementation and enforcement of the policies.

Court of Appeal’s decision

Assessment of the High Court’s analysis

Details of the High Court’s decision are set out in our earlier post. In summary, the High Court concluded that Malaysia was the appropriate forum to hear the claims based on a number of connecting factors. The judge considered that the “centre of gravity” in the case was Malaysia, including because this was where the primary underlying treatment complained about took place. The High Court also found that there was no real risk of the claimants being unable to access justice in Malaysia, noting that the defendants had offered undertakings to pay costs towards the claimants giving evidence in the Malaysian proceedings, and towards interpretation and expert fees.

The Court of Appeal found that the judge had made several errors of principle:

1. The judge failed to have regard to the key connecting factor that Dyson UK are domiciled in England and had been served here as of right.
2. The judge failed to take account of the fact that the claim against the UK defendants was the “primary claim”, and that the defendants’ defence would be coordinated and conducted from England by the employees and officers of Dyson UK. The Court stated that “[t]he reality is that Dyson UK is the principal protagonist and Dyson Malaysia a more minor and ancillary defendant”.
3. The judge was wrong to rely on the undertakings by the defendants to find that there was no real risk of the claimants being unable to obtain justice in Malaysia. In particular, the undertakings were unprecedented and, as a mechanism aimed at ensuring that “impoverished claimants are thereby enabled to meet disbursements”, suffered from several practical flaws.
4. The judge did not take account of the fact that the claimants’ inability to attend a trial in person in Malaysia would present a real risk of injustice to the claimants, irrespective of the option to give evidence by remote hearing.

Evaluation of the appropriate forum

The Court of Appeal identified various connecting factors which led to its finding that England “is clearly and distinctly [the] more appropriate” forum for the claims:

Funding: The defendants had accepted that, to pursue the claims in Malaysia, there were certain disbursements which the claimants would have to fund beyond the lawyers acting on their behalf. It was uncontentious that, even with the undertakings in place, the claimants could not afford to incur these disbursements themselves.

Domicile and management of Dyson UK: The Court of Appeal considered Dyson UK to be the principal defendants in the matter, as they were at the centre of management control for the Dyson group.

Practical convenience: The Court found that the majority of the relevant documents will be those “relevant to the central issue of responsibility for the alleged abuse in the supply chain”. These documents will “predominantly be located at Dyson UK” given that this is “where the policies were devised and promulgated and where the alleged failures to implement them will have taken place”. The Court added that this will also include “documents relevant to what Dyson UK knew and how it responded”. Although the claimants were not situated in either England or Malaysia, they would be able to give evidence and attend proceedings in person in England, noting that five of the claimants could face deportation if they testified in Malaysia. The witnesses for Dyson UK were largely based in England.

Coordination and conduct of the litigation in London: The fact that the litigation would be conducted by Dyson UK in London on behalf of all the defendants, including Dyson Malaysia, was another connecting factor and “a matter of practical convenience”.

Key Takeaways

While claims for alleged human rights harms caused by third parties are increasing, judgments to date have often related to a preliminary stage – such as jurisdictional challenges - or claims have settled before obtaining a decision on the merits. There is accordingly little existing legal precedent which indicates the key factors which would determine the kind of conduct that would lead to liability in similar scenarios.

However, throughout the judgment, the Court of Appeal emphasised the primacy of the claim against Dyson UK, based on the fact that group policies were promulgated, implemented and overseen from the UK. This is particularly relevant to other UK-based global groups, which apply a similar approach, including with reference to international frameworks such as the UN Guiding Principles on Business and Human Rights.

These claims are also brought against the wider background of legislative developments around mandatory human rights and environmental due diligence (mHREDD), which impose duties on in-scope companies (including certain UK companies) to identify, prevent, mitigate and, where relevant, remediate adverse human rights impacts in their global operations and supply chains. Examples include the EU Corporate Sustainability Due Diligence Directive (CS3D), which came into effect in July 2024 but which the EU has since proposed to amend in its Omnibus package, as well as other EU- and domestic-level laws.

With thanks to Mahika Gogi for her assistance in preparing this post.