UK court’s decision on BHP dam collapse a ‘significant landmark in mass action litigation’

The High Court found that BHP knew or should have known that “internal drainage of the dam was inadequate to prevent saturation” and was “directly and/or indirectly responsible for the activity of Samarco in owning and operating” the dam. BHP has already paid out billions of pounds in compensation as the result of the collapse and has signalled that it intends to appeal the decision.

The decision, unless successfully appealed by BHP, will progress a claim on behalf of 620,000 alleged victims, seeking up to £36 billion (approx. US$47.3bn) in compensation and proceed to trial.

Jacqueline Harris, an expert in commercial litigation, said: “Despite the disaster happening almost 9,000km away, the claimants were entitled to bring the action in the High Court in London because, at the time, BHP UK and BHP Australia operated as a dual listed company with one of those listings being on the London Stock Exchange.” “The court’s role was to determine liability under Brazilian law, not English law. To allow them to do so, it heard from experts on Brazilian law. The English Court then determined the facts of the case and applied Brazilian law as they understood it from this expert evidence,” she said. “Although the case provides little by way of insight into the law of England and Wales, it is still a significant landmark in mass action litigation.” BHP UK and BHP Australia were sued as the parent company of BHP Brasil Ltd. BHP Brasil owned 50% of Samarco, which owned and operated the Mariana dam. Samarco’s governance structure ensured that BHP’s “interests were always represented” and Samarco was “subservient to the will of BHP”, according to the court.

“BHP and Vale membership of the committees and sub-committees established by the Samarco Board ensured that BHP, through BHP Iron Ore and the Iron Ore Brazil team, were involved in the activities of Samarco at every level, from strategic decisions and dividend shares to detailed operational matters,” the court said in its decision.

BHP was also found to have assumed responsibility for “risk assessment, control, mitigation and management within the BHP Group and specifically within Samarco”, alongside exercising “control over Samarco’s activities, including its short and long-term strategy, investments, production, financial and technical risk assessment and management through the audit process, funding arrangements and the payment of dividends”.

Katie Hancock, an expert in environmental litigation, said “The case is a prime example of how a parent company’s listing in England could result in claims being brought against it for the actions of its subsidiaries.”

“There were concerns that size of this claim and the number of claimants may not be suitable for the English court system, but proponents of mass claims are expected to point to this case as a procedural success which may encourage new claims to be brought,” she said. “The judgment is one of a number currently going through the courts which look to establish parent company liability for the actions of their subsidiaries.”

BHP was held to be directly and indirectly responsible for the polluting activity, being the storage of iron ore tailings. There were “obvious signs of contractive, saturated tailings and numerous incidents and seepage and cracking” prior to the collapse.

Harris said: “Although establishing control in the context of the Brazilian civil code, the judgment is significant in discussing the considerations it considered relevant to establishing that control. This included BHP’s involvement in operational management activities and the setting of corporate objectives for Samarco.” “The claimant’s success in this action is a significant marker. It will undoubtedly encourage the further use of London as a forum in which to sue parent companies for the actions of their subsidiaries,” she said.

“Pending outcome of any appeal process, the result of the subsequent damages trial will be watched keenly to understand the extent of compensation the court is willing to award.”