The Supreme Court decisions in Vedanta Resources PLC & Anr v Lungowe & Ors (2019) and Okpabi & Ors v Royal Dutch Shell & Ors (2021) demonstrated that the English courts are increasingly willing to consider claims that UK domiciled parent companies bear responsibility for the operations of their foreign subsidiaries. Município De Mariana & Ors v BHP Group (UK) Limited & Anr, a group action involving two of the world's biggest mining companies arising out of Brazil's worst ever environmental disaster, furthers that trend. Despite the many jurisdictional and procedural complexities involved from the outset, the case provides encouraging indications of the English courts' receptiveness to unprecedented large-scale ESG group actions, regardless of the redress available in the jurisdiction in which the breach occurred. In this article, we take a brief look at the background to the claims, and the decisions so far.
On 5 November 2015 the Fundāo Dam in South East Brazil collapsed, releasing over 40 million cubic metres of toxic mining waste into the Doce River, resulting in the loss of 19 lives and the destruction of entire villages. The Brazilian public prosecutor estimated the cost of remediation and compensation at a minimum of £25 billion. The catastrophe is considered Brazil's worst ever environmental disaster.
The dam was owned and operated by Samarco Mineração SA ("Samarco"), a Brazilian joint venture company owned in equal shares by Vale SA ("Vale") and BHP Billiton Brasil Ltda ("BHP Brazil"). BHP Brazil is a subsidiary within the BHP Group, which is headed by an Australian and English company operating as a single economic entity under a dual-listed company structure (together, "BHP").
In the aftermath of the disaster, numerous claims were brought before the Brazilian courts against various defendants, and an extensive compensation and remediation programme was established by Samarco, Vale and BHP Brazil. However, dissatisfied with the scope and extent of redress available in Brazil, in 2018 a group action was commenced before the English High Court against BHP, which now comprises over 720,000 individuals, over 1,600 businesses, 78 churches and faith-based institutions, 46 municipalities, 7 utility companies and over 9,500 members of the indigenous and Quilombola communities.
BHP's attempt to strike out the English group action
In 2020, BHP was initially successful in its attempts to strike out the English group action. Commenting that claims such as this, involving considerable numbers of parties and issues, inevitably place a greater burden on the court than unitary actions, thus bringing considerations of allocation of court resources and procedural practicalities more strongly into play, Mr Justice Turner held that the action represented an abuse of process. Noting the difficulties created by the progress of parallel Brazilian proceedings, he considered that if the English claim proceeded, it would prove "irredeemably unmanageable" for the English courts and would be "akin to trying to build a house of cards in a wind tunnel."
However, in July 2022 the Court of Appeal reinstated the case, holding that the fact that a properly advanced claim may be said to be unmanageable would not, of itself, make it an abuse of process. In any event, the Court of Appeal disagreed with Mr Justice Turner's conclusion that the proceedings were "irredeemably unmanageable", observing that such a conclusion could not be reached safely at such an early stage of proceedings and in fact, contrary to the judge's finding, the degree of overlap with the Brazilian proceedings was relatively limited.
As to BHP's contention that the English proceedings were "pointless and wasteful" as the claimants could obtain full redress in Brazil, the Court of Appeal emphasised the need for caution when considering a strike out on such grounds. It noted that a claimant's right of access to justice in respect of properly arguable claims is a core constitutional right inherent in the rule of law. Indeed, it will be a rare case in which the court can say that there is no legitimate advantage in pursuing a defendant merely because there exists a claim for the same loss against another person, especially when advanced on a different basis of liability. It would only be appropriate to strike out for abuse on such grounds where it was clear and obvious that was the case, and in this case it was not.
The recently released details of applications for permission to appeal to the Supreme Court indicate that BHP's application to appeal the Court of Appeal's decision has been refused on the grounds that it did not raise an arguable point of law. The claim will therefore proceed to trial when it will become the largest ever group action before the English courts, increasing the spotlight on ESG claims.
BHP's counterclaim against Vale
In the meantime, in December 2022, BHP issued a counterclaim against Vale, seeking declaratory relief and a contribution to any sums BHP might be found liable to pay to the claimants. Vale challenged the English courts' jurisdiction, contending that there was no serious issue to be tried because, under Brazilian law, BHP had no right to seek a contribution from it unless and until BHP was found to be liable. Vale also contended that, in any event, the relevant claims were either time barred or extinguished as a result of settlement agreements entered into or judgments handed down in Brazil in favour of Vale. Vale also argued that Brazil was the more appropriate forum to hear the counterclaim, because Vale was already a party to litigation in Brazil concerning the same event and the relevant claims under Brazilian law had been brought by Brazilian claimants against a Brazilian entity concerning losses sustained in Brazil.
Mrs Justice O'Farrell rejected Vale's application. There was a clear dispute between the parties' experts on contribution under Brazilian law, and so the question was not suitable for determination on a summary basis and should, instead, be subject to scrutiny and challenge through cross-examination and submissions at trial. Similarly, the issues on limitation and the effect of settlement were not suitable for summary disposal. The judge also accepted BHP's argument that it would be proportionate and more efficient for the counterclaim to proceed before the English courts, given the substantial overlap between it and the existing English group action.
The English courts' willingness to determine this group action should provide encouragement for claimants seeking to bring proceedings against English parent companies for environmental damage incurred in other jurisdictions, even in circumstances where related proceedings in those other jurisdictions are ongoing. The developments to date suggest that, rather than deferring to the jurisdiction in which the harm was suffered, the English courts are increasingly willing to hear unprecedented and complex group action claims and to hold organisations accountable for potential ESG breaches, including those of their (in)directly owned overseas subsidiaries and joint ventures.
A preliminary issues trial is listed for October 2024, and is keenly anticipated. It will no doubt be fascinating to see how the High Court deals with the unprecedented scale of the claims and how key liability issues are determined. There is the potential for the case to represent a defining moment for the English courts' handling of ESG multi-jurisdictional group actions.