Court of Appeal backs claimants in Dyson supply chain litigation

In a significant recent decision, the Court of Appeal in Limbu and Others -v- Dyson Technology Ltd and Others [2024] EWCA Civ 1564, permitted 24 migrant workers from Nepal and Bangladesh to proceed with claims against Dyson in the English courts. The decision is notable as the serious allegations at the heart of the claim are said to have taken place exclusively in Malaysia and were not carried out by Dyson itself but by its Malaysian based third party suppliers.  

The potential implications for UK headquartered companies with global supply chains are substantial. 

Background to the Case

The Claimant group allege that they were subjected to conditions of forced labour, exploitative and abusive living and working conditions, and, in some instances, detention, torture and beating. This was alleged to have taken place in the course of their work for Malaysian third parties in Dyson’s supply chain. They argue that Dyson’s UK-based entities, which oversee supply chain policies and labour standards, bear responsibility for these violations.

Initially, the High Court ruled that Malaysia was the proper jurisdiction for the claims to be heard. It highlighted that Malaysian Law would govern the dispute and that Malaysia was where the alleged underlying mistreatment took place. It therefore concluded Malaysia was the forum that had “the most real and substantial connection” to the dispute. The High Court also found there was no real risk that the Claimants would not be able to obtain legal representation and necessary NGO funding to pursue their claims in Malaysia.

The Court of Appeal’s Decision

Following an appeal by the Claimant group, the Court of Appeal overturned the High Court’s decision, identifying a number of errors in its reasoning. These errors included the High Court’s finding that Malaysia was the “centre of gravity” for the case. It determined that, whilst the underlying mistreatment of the Claimants was alleged to have taken place in Malaysia, the real dispute between the parties concerned the control and oversight exercised by the English Dyson entities. In particular, the Court of Appeal considered the likely focus of any trial would be on the promulgation, implementation and enforcement by Dyson’s UK entities of its mandatory policies and standards concerning the working and living conditions of workers in its overseas supply chains. It held that:

"The allegation of breach by Dyson UK in failing to take steps to see that the policies were implemented in Malaysia, and failing to respond adequately to what was or ought to have been known about the abuse, which is at the heart of the allegations of breach for both the negligence and other tort claims, is an allegation of a failure occurring amongst the management in England and is alleged to have occurred in England […] The unjust enrichment of [the Dyson UK entities] ultimately took effect in England at their centre of trading, and the proprietary remedies claimed are of property rights over profits and products located in this country.”

Implications for UK-Based International Companies

This decision has far-reaching implications for corporate accountability and governance:

1. Broadened Scope of Liability: Multinational companies may face legal challenges in their home jurisdictions for abuses occurring within their supply chains abroad. Businesses must ensure rigorous enforcement with their own policies and standards not only at headquarters but throughout global operations. That is especially the case where they exercise a large degree of control over third parties based overseas.

2. Increased Due Diligence Requirements: Companies are under heightened pressure to implement and monitor robust labour policies, ensuring third-party suppliers adhere to international and local labour laws.

3. Reputational and Financial Risks: Cases like Limbu expose businesses to reputational damage and potential financial losses, emphasising the importance of ethical supply chain practices.

4. Encouragement of Legal Accountability: The Court’s willingness to hear cases involving overseas labour violations could encourage more victims of mistreatment to pursue claims against English controlled companies with global supply chains.

Conclusion

The Limbu case is a landmark decision and a warning to UK based companies with global operations.  It highlights the risks of inadequate supply chain oversight and underscores that ensuring compliance with labour standards and policies throughout the supply chain is not just a moral imperative but a legal necessity. A failure to implement and enforce these standards could open the door to victims of mistreatment overseas bringing reputationally and financially damaging claims in England.

For any further information on this topic or ESG disputes generally, please contact Simon Boschat or Oliver Hart.