Clifford Chance

The landmark trial against mining giant BHP will determine liability for the 2015 collapse of a dam in Brazil and will be heard over 12 weeks in the English Court

Considered to be the largest group claim by claimant size ever issued in the English Courts, October marked the start of the trial of Municipio de Mariana & Ors v BHP Group. This is the first stage trial on liability which is scheduled to be heard before Mrs Justice O'Farrell in the Technology & Construction Court over a 12-week period. The Claimants have asserted that that the value of the claim could be up to £36 billion.

The case presents a range of unique issues, from the size of the claimant pool (comprised of over 600,000 parties including individuals from the Brazilian communities allegedly affected by the collapse) down to the remedies sought: we set out below the background and highlight various points of interest.

Background

The claimants seek compensation for alleged losses arising from the collapse of the Fundão dam, near Mariana in eastern Brazil, on 5 November 2015. The dam was owned and operated by Samarco Mineracao SA ("Samarco"), a 50-50 joint venture of BHP Brasilia and Vale SA. BHP Australia is the ultimate parent company of BHP Brasilia.

The claims have been brought jointly and severally against BHP UK and BHP Australia ("BHP"), who at all material times operated together as a single economic entity under a dual-listed company structure.

The claims against BHP are brought under various heads of liability, including:

• A strict liability claim under Brazilian environmental law alleging BHP is liable due to its ownership, control, failure to supervise, funding, and/or benefiting from the damaging activities;
• A fault-based claim under the Brazilian civil code alleging negligence by BHP in ignoring risks and failing to act; and
• A claim under Brazilian corporate law provisions alleging that BHP is liable as a controlling shareholder for permitting risky activities.

BHP rejects the claims that it is liable as a shareholder and denies any knowledge that the dam's stability was compromised or that its senior staff approved matters which caused the collapse. Furthermore, it argues that the Directors of Samarco (the JV that owned and operated the dam) were repeatedly assured that the dam was well controlled.

Mechanics of the claim

The claim is notable in that it does not follow the usual routes of group litigation: it is not being pursued by way of a CPR 19.8 representative action (i.e. whereby one claimant issues the claim as the representative for a larger class), nor is it being managed by way of a CPR 19.22 Group Litigation Order (which governs the management of claims that give rise to common or related issues of fact or law). Instead, the claim was filed as a CPR Part 7 action by over 600,000 Brazilian claimants comprised of different groups of people including, among others, individuals, municipalities, businesses, and churches.

The claimants are being funded in part via a US$552.5 million loan by the US-based investment manager Gramercy Funds Management.

Brazilian settlement negotiations

Since the outset of proceedings, BHP have maintained that the proceedings in England are duplicative of ongoing reparation efforts and legal proceedings in Brazil. BHP has said that nearly US$8 billion has already been paid to those affected by the collapse of the Fundão dam, with around US$1.7 billion going to claimants involved in the English case.

Furthermore, BHP recently announced that it has reached a full and final settlement (worth R$31.7 billion (approximately US$7.9 billion)) in Brazil regarding various liabilities arising from the collapse of the Fundão dam (subject to approval by the Brazilian Supreme Court). Significantly, the agreement provides, among other things: (i) a new compensation and indemnification system to provide compensation to eligible people in the affected regions; (ii) specific payments to affected groups including fisherman and farmers, indigenous people and traditional communities; and (iii) the allocation of compensation for various programs for the benefit of people, communities and the environment.

Although BHP has stated that this settlement does not resolve the English proceedings (nor the associated group actions in Australia and the Netherlands), it remains to be seen whether this will impact the overall value of the claim (which will be determined at a second stage trial on quantum, if the claimants are successful in establishing BHP's liability).

What impact might the case have on multinational companies with operations abroad?

In recent years, multiple cases have been brought in the English Courts against English-incorporated parent companies for alleged human rights or environmental impacts committed abroad. These cases (such as Vedanta Resources Plc and Konkola Copper Mines Plc v Lungowe and Ors [2019] UKSC 20) have typically been brought under English law, using tort law - through alleged negligence - as a hook to allege liability.

In contrast, the present claim is governed by Brazilian law and therefore will not involve the determination of liability as a matter of English law, so it remains to be seen what impact any judgment may have on the English legal landscape. That being said, the claim clearly demonstrates the ability of the English High Court to successfully manage exceptionally large group litigations to trial, and their willingness to accept jurisdiction over claims concerning alleged harm suffered outside of the jurisdiction.

We are closely following the case and will publish a further post with updates on any key issues arising from the trial in due course.