The impacts on corporate accountability and supply chain ethics.

The UK Court of Appeal’s ruling in Kumar Limbu & Others v Dyson Technology Limited & Others [2024] EWCA Civ 1564 focused on the ongoing debate about corporate responsibility for supply chain practices. The case involved allegations of forced labour and abuse in Dyson’s Malaysian supply chain, with workers claiming Dyson, as a UK-based company, should be held accountable for the conditions in its suppliers’ factories.

Key takeaways from the case

It was first decided by the High Court that Malaysia was the correct forum for the case. However, the Court of Appeal overturned the High Court’s decision, ruling that it should be heard under England’s jurisdiction. The court cited several reasons for this, including Dyson UK’s role in setting supply chain policies and concerns about access to justice in Malaysia for the claimants. This ruling reflects a broader trend of legal actions that hold companies accountable for human rights violations within their global supply chains. The trial is now due to be heard in the UK, no date has been set yet.

Broader implications for businesses

The Limbu ruling marks a significant shift in how courts view the responsibility of parent companies for supply chain abuses. This case has important consequences for businesses:

1. Legal risk management: The decision emphasises that companies with ties to the UK may face legal challenges in UK courts, even for activities that occur abroad. Businesses need to prepare for such challenges by managing supply chain risks effectively.

2. Due diligence and oversight: Companies must guarantee thorough due diligence to maintain ethical standards in their supply chains. Failure to do so could lead to legal risks and damage to reputation.

3. Supply chain transparency: With growing pressure from consumers, investors, and regulators, companies are expected to be transparent about the conditions under which their products are made. Ignoring this can lead to public and legal backlash.

4. Access to justice: The Court of Appeal’s focus on access to justice for claimants highlights the need for companies to ensure that their supply chains do not hinder workers’ ability to seek legal recourse, especially when pursuing claims in foreign jurisdictions.

Broader impact on corporate governance

The Limbu decision is a considerable step in a broader push to hold multinational corporations accountable for human rights abuses within their supply chains. As similar cases continue to surface, companies will be increasingly compelled to take initiative-taking measures to align with both national and international standards concerning labour rights and environmental sustainability.

This case serves as a stark reminder to corporations that they can no longer ignore the ethical and legal consequences of their global operations. With growing scrutiny on corporate behaviour, businesses must be ready to confront the social and legal ramifications of their supply chain activities. Failing to do so could result in costly legal battles and severe reputational harm.

Is your business prepared for the legal risks of supply chain practices? Contact Marija Sukyte on 01494 788990 or marija.sukyte@blasermills.co.uk to discuss.