Mariana v BHP may expand scope of environmental group litigation

The much-anticipated Court of Appeal decision on a claim resulting from Brazil's worst environmental disaster could herald a new era for group litigation against multinationals in the English courts.

In April 2022, the Court of Appeal in Municipio de Mariana-v-BHP, heard the appeal of some 200,000 Brazilian claimants seeking permission to bring group litigation against BHP Billiton in the English courts for approximately £5bn in damages.  The claim arises from the 2015 Fundão dam collapse, which has been heralded as Brazil's worst environmental disaster.  Judgment is now reserved and anticipated later this year.

The Supreme Court's landmark decisions in Vedanta and Okpabi paved the way for foreign litigants to bring claims against English domiciled parent companies in the English courts in relation to environmental damage caused by operations elsewhere.  What sets BHP apart is that there is already ongoing litigation in Brazil and an established compensation scheme for victims of the dam collapse.  The Court of Appeal must therefore decide whether English proceedings would be duplicative and an abuse of process, or whether the claimants should be given access to justice in the English courts.  

Bringing group litigation against parent companies – the key criteria

In order to obtain permission from the English courts to bring claims, foreign claimants must have grounds to establish jurisdiction over the English domiciled parent company (as anchor defendant) and the foreign subsidiary (as a necessary or proper party).  Applicants must show there is a real and triable case to be heard, i.e., on the facts (without substantive disclosure), harm took place due to the activities of the subsidiary and the parent company owed a duty to the claimants because it had control over its subsidiary's activities. 

Vedanta and Okpabi concerned UK domiciled parent companies and subsidiaries located in Zambia and Nigeria respectively.  The Zambian citizens' claims against Vedanta and its subsidiary, Konkola Copper Mines plc (KCM), concerned the alleged pollution of the area surrounding KCM's copper mining operations.  In Okpabi, the claims against Royal Dutch Shell and its subsidiary, The Shell Petroleum Development Company of Nigeria Limited (SPDC), involved allegations of widespread pollution causing widespread damage, which impacted local communities, their health and the local environment.  

In both Vedanta and Okpabi, the Supreme Court held there were real prospects of establishing control or assumption of responsibility for environmental policies at a group level.  In Vedanta, the court was also concerned the claimants could not access justice in Zambia (particularly, because of extreme poverty and legal aid being unavailable or illegal; as well as the lack of experienced lawyers to bring this scale of litigation against a well-resourced defendant).  In Okpabi, the court focused on the "real" and "triable issues", namely that there was damage, SPDC was responsible and there was a good, arguable case that RDS controlled its activities.  

However, unlike in Vedanta and Okpabi, litigation has already been brought in Brazil in relation to the dam collapse and a compensation scheme (Renova) established.  By contrast, Zambia and Nigeria do not have such established group litigation mechanisms, and there were real concerns about access to justice for the claimants in both jurisdictions.  

Will BHP herald another shift in the courts' approach to permitting group litigation?

The application in the English courts to bring proceedings against BHP was initially brought against the English and Australian joint parent companies of the BHP Group: BHP plc and BHP Ltd respectively.  The allegations against BHP are brought by reference to Brazilian law, including: strict liability as "indirect" polluters, fault-based liability and liability as controlling shareholders of Samarco, the joint venture owned 50/50 by BHP Brazil (the Brazil-based subsidiary of BHP) and Vale (one of the largest global mining companies).

The High Court originally struck out the application as an abuse of process, deciding that the claimants had access to an adequate compensation process in Brazil and the risk of irreconcilable judgments was too high.  Furthermore, the court was not convinced that English proceedings would progress faster than those already afoot in Brazil.  Notwithstanding Vedanta and access to justice, the High Court held that consideration must be given to the case as a whole and whether it would lead to a disproportionate use of resources and/or become unwieldy litigation.

In 2021, the Court of Appeal granted permission to appeal , recognising the exceptional complexity and importance of the BHP case.  The court reiterated the importance of access to justice for the victims of the dam disaster and considered that the High Court appellate judge (who refused permission to appeal before the Court of Appeal granted it) had "mistakenly prevented numerous claimants, who had made no claims in Brazil, from suing in England".   

In April 2022, the appeal was heard, and the Court of Appeal considered whether the application to bring group claims against BHP should be granted.  The claimants argued that the High Court had been wrong to strike out "arguable" claims and deny access to justice due to the "unmanageability and burdensome nature of the proceedings".  BHP disagreed and argued that litigation in the English courts could not provide a tangible benefit to the claimants which outweighed the disadvantages of such litigation proceeding in this jurisdiction.

BHP asserted that redress is already available through the Renova compensation scheme in Brazil (supervised by the Brazilian federal court) which had already paid compensation to around 100,000 of the claimants and whose guarantors are Vale and BHP Brazil.  There is also ongoing group litigation/ other claims being litigated in Brazil.  

The claimants contended that the Renova scheme does not preclude court proceedings and is effectively a mediation scheme with optional redress.  In addition, only Samarco (not BHP Brazil, Vale, BHP plc and/or ltd) is contributing the scheme.  Furthermore, there were concerns over Samarco's ability to meet its liabilities due to it undergoing re-structuring.  The claimants argued there was therefore a risk that some claimants may not receive adequate redress and there was no certainty regarding the funding of the Renova scheme.  

Whether the Court of Appeal will permit the group claims against BHP in the English courts, notwithstanding litigation elsewhere regarding the same subject matter and the Renova scheme, remains to be seen.  Certainly, the court will have to grapple with the prospect of substantial litigation, how certain claims might be carved out of future English proceedings, if they are already afoot in Brazil and/or giving due consideration to claimants who have not yet sought compensation.  However, if the claims are allowed to proceed (in whatever guise), this is a significant case and may herald another shift by the courts.  

In an increasingly environmental damage redress focused era, we can only expect more group litigation against multinationals to be brought in the English courts.  The Court of Appeal's decision in BHP is therefore hotly awaited and may ultimately reach the Supreme Court.  

This article was first published in Insurance Day on 18 May 2022.