Dyson settlement extends supply chain liability uncertainty

Katie Hancock and Emilie Jones of Pinsent Masons were commenting after Dyson and lawyers for the workers confirmed the settlement of the case in a recent statement.

Migrant workers from Nepal and Bangladesh had claimed that they were the subject of human rights abuses in the factories, which were part of Dyson’s supply chain until 2021. They argued that Dyson was legally responsible for these practices, which allegedly included unlawful wage deductions, physical abuse and false imprisonment.

The English courts accepted jurisdiction to hear the dispute despite its strong connection to Malaysia, given factors including greater access to funding for the claimants and higher quality legal service if the claims proceeded here. An attempt by Dyson to appeal this acceptance of jurisdiction to the UK Supreme Court failed, with the Supreme Court refusing permission for the appeal. 

The settlement has been reached without any admission of liability, and the amount of any settlement sum is not known. 

"This resolution was reached in recognition of the expenses of litigation and the benefits of settlement,” the parties said in their joint statement. “[Dyson] deny and have always denied all liability in respect of the claimants, who were employed by a third-party supplier, at factories in Malaysia which were owned and operated by ATA Industrial (M) Sdn Bhd and its related entities. This settlement is not an admission of liability on the part of [Dyson]."

The trial of the case, which had been due to take place in 2027, was highly anticipated given its potential implications for the liability of other UK businesses in relation to the activities of their overseas suppliers, whether for human rights issues or other harms, such as environmental harms, for example. 

There is an ongoing trend of the English courts being willing to accept jurisdiction over claims against UK companies which arise out of the operations of overseas businesses. Most of these cases are brought against UK-headquartered parent companies, in relation to the activities of their overseas subsidiaries. The vast majority of these cases have not proceeded to trial, either because they have settled or because they have not yet reached the trial stage. There are a number of these claims currently proceeding through the courts. 

Hancock and Jones said the Dyson case was highly anticipated for a number of reasons.

First, they said, it would have been a rare case on these issues to proceed to trial. There have been very few final findings on these issues, with the recent BHP v Mariana judgment standing out as a notable exception. The case could therefore have offered more clarity on when a UK company may be found liable for activities of an overseas entity in these types of cases, according to Hancock and Jones.

Second, the claim related to activities of a company which merely formed part of Dyson's supply chain, rather than being one of its subsidiaries. It therefore raised important, novel questions for businesses with complex overseas supply chains about the potential for them to face liability in respect of environmental, sustainability and governance failings on the part of businesses within those supply chains, Hancock and Jones said. 

Third, the liability issues would likely have been decided by the English court applying Malaysian law. Hancock and Jones said it is typical for claims in this area to be decided under the laws of other jurisdictions. A decision under Malaysian law in particular, on whether, or the circumstances in which, a company in the position of Dyson might be found to have assumed a duty of care to claimants such as those in this case, could have been particularly enlightening because there are significant synergies between Malaysian law and English common law, they added. 

Katie Hancock said: "There is particular uncertainty about potential liability for suppliers that do not form part of the defendant company's corporate group, as in this case. While there are a number of other cases in this area before the courts, most involve claims against parent companies for the acts of their subsidiaries. The supply chain issues are more novel."

Emilie Jones said: "As the published statement about the settlement of this dispute alludes to, claims of this nature can be costly to defend and raise a number of challenges for businesses – regardless of their merits. Litigation of this type often involves, for example, the potential for extensive disclosure of documents, and the need to manage PR." 

Hancock added that the case highlights how important it is for businesses to undertake appropriate supply chain due diligence and management programmes.

"These programmes should be designed and implemented with the benefit of specialist, holistic legal and consultancy advice to ensure that all relevant risks – which include, but are not limited to, litigation risks – are properly taken into consideration,” Hancock said. “While the Dyson settlement is unlikely to open the floodgates for claims given the ongoing legal uncertainty in this area, it may embolden some claimant organisations and firms, and having effective measures in place can reduce the risk of a company being seen as a ‘target’ by claimants."