English court strikes out claims against BHP for Brazilian dam collapse

Proceedings launched following devastation caused by dam collapse

On 5 November 2015, the Fundão tailings dam at an iron ore mine near Mariana, Brazil, gave way, resulting in flooding that killed 19 people, destroyed downstream villages and spread pollutants along watercourses and into the Atlantic Ocean. 

A group of some 202,600 claimants, ranging from individuals to businesses, churches and utility companies, commenced proceedings in the English High Court in relation to losses sustained in the disaster. The defendants were BHP Group Plc, an English public company, and BHP Group Limited, an Australian entity. BHP Group Limited is the ultimate owner of Brazilian entity BHP Billiton Brasil LTDA ('BHP Brazil'). BHP Brazil was one half of the joint venture that owned the owner and operator of the dam, Samarco Mineração S.A. ('Samarco').

The issue arose because of the existence of parallel proceedings in Brazil. Those proceedings take the form of a series of group actions, including one for 155bn Brazilian reals (£21.3bn), and numerous individual lawsuits. The Brazilian litigation has already resulted in the creation of the Renova foundation ('Renova'), whose role is to mitigate the environmental consequences of the disaster and pay compensation to its victims. It was acknowledged that a significant number of the claimants in the English proceedings had already received compensation through Renova or through settlement of individual litigation.

English proceedings an abuse of process

BHP's central argument in the application was that the English claims should be struck out as an abuse of the process of the court. The judge, Mr Justice Turner, agreed.

Pointing to the formulation laid down by Lord Bingham in Her Majesty’s Attorney General v Barker [2000] 1 F.L.R. 759, Turner J held that the hallmark of abuse of process is the use of the courts for a purpose or in a way which is "significantly different from the ordinary and proper use of the court process". He explained that the courts must be reluctant to strike out first-time litigation as an abuse of process, since to do so would be to deny a claimant access to the courts. However, the courts may show "lessreticence" where a claimant has already had the opportunity to bring his or her claim in other proceedings, whether or not he or she actually did so (the so-called ‘rule in Henderson v Henderson’). 

The judge’s decision that the claims against BHP were an abuse of process rested, for a number of reasons, on the existence of the proceedings in Brazil. One consequence of the Brazilian claims proceeding in parallel to the English claims was that "the risk of irreconcilable judgments [was] both real and acute". Of particular importance was whether BHP Brazil would be held to owe the claimants the Brazilian equivalent of a duty of care in the Brazilian proceedings. It was acknowledged that whether or not such a duty was owed by BHP Brazil would be a key step in proving that a similar duty was owed by BHP Group Plc and BHP Group Limited, the defendants in the English proceedings. Turner J found that whether a duty was owed by BHP Brazil would have to be determined as a preliminary issue in the English proceedings and this meant the risk of irreconcilable judgments was very high. 

Relatedly, the overlap in claimants between the Brazilian and English proceedings meant that there was such a high risk of “cross-contamination of issues” that, were the English claims allowed to proceed, managing those claims alongside the Brazilian proceedings would be "akin to trying to build a house of cards in a wind tunnel”. The judges in both England and Brazil would find themselves constantly buffeted by each others’ findings on causation, the right to damages and the quantum of those damages in respect of the same claimants. This meant that “the utility of the selection of lead cases [for the purpose of the English litigation] would be seriously imperilled by the risk that the issues to which they were directed would, as the litigation progressed, be undermined, made redundant or transmogrified by developments in Brazil”.

The other major consequence of parallel Brazilian and English proceedings was what Turner J considered would be insurmountable case management issues. Among the problems identified by the judge were:

• The fact that the claimants’ solicitors had already lost touch with 37,000 of their clients and the on-going risk of claimants dropping out of the English proceedings.
• The "grossly disparate" interests of the claimants, which meant that the 'sample' of lead claimants would have to be far higher than in any group litigation to date.
• The fact that almost all of the claimants and witnesses spoke Portuguese as their first or only language, which meant that the costs of translations and interpreters would be enormous.
• The difficulty the English court would face in applying Brazilian law to the claims in circumstances where, for the jurisdiction hearing alone, over 600 pages of conflicting expert evidence had been produced on the subject.
• The fact that under Brazilian law it would not be possible for claimants and witnesses to give evidence remotely from Brazil; nor would an English judge be allowed to sit in Brazil (despite the claimants apparently having been told that the English proceedings would take place in a hotel in the vicinity of the dam). As a result, the costs relating to travel and accommodation were likely to be vast.
• The fact that legal aid was available to claimants in Brazil through Renova, whereas in the English proceedings the solicitors were charging a 30 per cent success fee. While this was a permissible arrangement, the judge felt that there was no need for the claimants to forfeit such a large proportion of their damages in circumstances where they did not need to do so in Brazil.

The claimants had argued that these issues could be resolved by reliance on "appropriate procedures to deal with the claims proportionately", but the judge observed that they had made no concrete suggestions as to what these procedures would look like. Had they made such suggestions, Turner J believed that they "would have fared badly under scrutiny" – but it was not an option "to avoid such scrutiny through silence".

Against the assertion that the English proceedings were an abuse of process, the claimants had argued that: (i) they were unable to obtain timely redress through Renova in Brazil; and (ii) procedural hurdles made it impossible for them to sue the English and Australian BHP entities in Brazil. The first argument was undermined by the fact that a high number of claimants had already received compensation in Brazil. The judge also pointed to a number of innovative measures being tested by the Brazilian courts as a means of compensating the victims of the disaster as swiftly and fairly as possible. The second argument was dismissed by the judge on the basis that the claimants had shown no interest in, or intention of, suing the English and Australian BHP entities in Brazil. This was unsurprising, given that it would be easier to demonstrate a duty of care on the part of BHP Brazil, making that entity the obvious defendant in Brazilian proceedings.

The consequence was that the English proceedings were held to be an abuse of process. Turner J decided to strike the claims out rather than merely staying them, on the basis that the issues identified would not be alleviated over time, even if significant progress were made in Brazil.

The question of abuse of process being so decided, the other grounds on which BHP had sought to stay proceedings became extraneous. However, the judge did set out his reasoning on these points.

Article 34 of the Brussels Recast Regulation

In the case of BHP Group Plc, the English entity, it was argued that the claims should be stayed under Article 34 of the Brussels Recast Regulation. The judge agreed.

The Brussels Recast Regulation continues to apply to the United Kingdom as though it were a member state of the European Union, under the transitional arrangements provided for under the Withdrawal Agreement.

Article 4 sets out the prima facie position that defendants should be sued in the member state in which they are domiciled. However, Article 34 gives the court jurisdiction to stay proceedings brought against a defendant in the jurisdiction of its domicile where there arises a risk of irreconcilable judgments between the courts of a member and non-member state of the EU.

In this case, the jurisdiction of domicile was the United Kingdom and it was the proceedings in Brazil that gave rise to the risk of irreconcilable judgments. For the reasons explained above (among others), the risk was found to exist, such that the court would have been obliged to stay the English proceedings under Article 34. 

Turner J distinguished this case from the recent judgment in Jalla v Royal Dutch Shell Plc [2020] EWHC 459. In that case, claims had been brought against a Nigerian-domiciled entity and an English-domiciled entity in relation to losses caused by pollution from an oil spill in Nigeria. The English entity applied for the English proceedings to be stayed under Article 34 on the grounds that there were parallel proceedings afoot in Nigeria, but the High Court in that case refused to grant a stay. Among the differences, according to Turner J, were that in Jalla: (i) there was no suggestion that the English claims would be unmanageable from the case management perspective, (ii) the Nigerian proceedings would not consider or determine factors relevant to the liability of the English entity (whereas the Brazilian proceedings in this case would determine the liability of BHP Brazil, which was relevant to the potential liability of its parent entities); (iii) the English defedant in Jalla had not agreed to submit to the jurisdiction of Nigeria (whereas BHP Group Plc had agreed to submit to the jurisdiction of Brazil); and (iv) there was no overlap between the claims in England and the claims in Nigeria.

Forum non conveniens

In the case of BHP Group Ltd, the Australian entity, it was argued that the case should be stayed on the basis of the doctrine of forum non conveniens. (The English entity was precluded from relying on this argument by the applicability of the Brussels Recast Regulation.)

The test for forum non conveniens is as set out in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460. First, the court must ask whether the foreign forum is clearly or distinctly more appropriate for the trial of the dispute. If it is found to be so, the court must then ask whether there are circumstances by reason of which justice requires that a stay should not be granted.

The first stage of the test was found to be satisfied in this case: Brazil was a more appropriate forum, particularly given that both BHP entities had agreed to submit to that jurisdiction. On the second stage, it was held that the claimants were able to obtain substantive justice in Brazil. The result was that, had the claims not been struck out as an abuse of process, the claims against the Australian entity would have been stayed under the doctrine of forum non conveniens.

Comment

Following unsuccessful jurisdictional challenges in two other relatively recent major business and human rights cases – Jalla and Vedanta Resources PLC and another v Lungowe and others [2019] UKSC 20 – it might have been expected that the court would follow the same pattern in Municipio de Mariana v BHP. However, Turner J’s decision to strike out the proceedings against BHP reinforces the principle that there are circumstances where the English courts will not adjudicate claims which are better brought elsewhere. Here, it was held to be manifestly unfair to BHP to be forced to engage in litigation that conferred no advantage to the claimants beyond that conferred by the proceedings in Brazil. 

A key factor in the decision appears to be the judge’s view that the claimants would be able to obtain justice via their claims before the Brazilian courts. That was evidenced by the fact that a number of parties in Brazil had already obtained compensation through the Renova programme. This gives companies facing these sorts of issues some degree of comfort that if they settle litigation in the jurisdiction in which the issues arose on terms which seek to provide compensation to those who have suffered harm, an English court will be less likely to allow them to be subjected to further litigation in this jurisdiction.