23 Nov 2022

Mass environmental tort claim may be heard in the UK

The Court of Appeal's Samarco decision continues the trend of UK courts opening their doors to cross-border ESG litigation, writes Suzanne Spears

Farm flooded by water from the Doce River, due to the collapse of the Fundão dam

Overturning a High Court ruling, the Court of Appeal in Municipio de Mariana v BHP Group plc and BHP Group Ltd [2022] EWCA Civ 951 held that the difficulty of litigating claims in the UK should not deny claimants access to justice.

Devastation 

In November 2015, the Fundão tailings dam collapsed, killing 19 people as well as destroying villages and polluting the Rio Doce River.  The dam was owned and operated by Samarco, a Brazilian company jointly owned by Vale and BHP Brazil. The claimants include 200,000 individuals and 530 businesses, while the defendants are BHP England and BHP Australia.  

Jurisdiction over BHP arises from its UK domicile under the Brussels Recast, which still applies under the EU-UK Withdrawal Agreement, while jurisdiction over BHP Australia is established via its UK offices.  

Prior to the UK damages claims, which total circa £5bn, multiple claims were filed against other defendants in Brazil, including one for 155bn reals (£21.3bn). Meanwhile Samarco, Vale and BHP Brazil established a compensation/remediation programme via Renova, a Brazilian private foundation. 

In 2020, the High Court struck out the UK claims as an abuse of process. Mr Justice Turner found that they would be “irredeemably unmanageable”, deeming the proceedings to be “futile and wasteful”.

Not an abuse of process

The Court of Appeal found that the claims were not an abuse of process.  It noted that the Judge was influenced by what he considered to be complications arising from parallel proceedings in Brazil, and what he described as an “acute” risk of “unremitting cross-contamination” of proceedings.  Undertaking the “scrupulous analysis” that it considered the Judge should have undertaken, the Court of Appeal found that the facts did not support his findings.

According to the Court of Appeal, the risk of unmanageability - or as the Judge put it, “utter chaos” - due to the Brazilian proceedings is not clear and obvious.  Although “down the line” some individual claims may need reviewing, that does not make them unmanageable.  The Court found that there was no proper basis for the Judge’s finding that the proceedings were abusive on the basis of irredeemable manageability.

The Court also found that the Judge wrongly relied on forum non conveniens factors.  The risk of inconsistent judgments, “challenge of language” and translation costs, needs to apply Brazilian law. The unlikelihood of claimants or witnesses being permitted to give evidence remotely from Brazil (as a matter of Brazilian law) and the burden placed on English courts were not grounds for establishing an abuse of court.  Under the Brussels Recast, a member state’s courts have no power to decline jurisdiction over a defendant domiciled and sued in that member state by reference to foreign proceedings or other difficulties.  Moreover, the Court of Appeal had “considerable doubts as to whether proceedings can ever truly be said to be ‘unmanageable’”, noting that the claimants had provided the Court with “clear illustrations of case management options.” 

The Judge had also characterised the claims as abusive for being pointless and wasteful, which the Court of Appeal rejected, noting it was unclear on the evidence that the claimants could benefit from proceedings in Brazil or otherwise obtain full redress there.  The Court did not wish to discourage claimants from engaging with whatever opportunities existed in Brazil.  However, it did not consider Brazilian remedies so obviously adequate that it would be pointless and wasteful to pursue proceedings in the UK.  The Court held that, given the realistic prospect of success, the UK claims would not be struck out.   

Stays unnecessary 

The Court of Appeal also found that the High Court had erroneously found that the cases should be stayed.  

With respect to BHP Group Plc, the Judge had originally decided that claims should be stayed under Article 34 of the Brussels Recast, which 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.  However, the Court of Appeal found that the Brazilian proceedings did not create the risk of irreconcilable judgments and no such risk existed such that the court would have been obliged to stay the English proceedings under Article 34. 

According to the Court of Appeal, the Judge was wrong to stay proceedings in the case of BHP Group Ltd on the basis of forum non conveniens. Under the test set out in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460, the defendant must satisfy the court that another jurisdiction is manifestly more appropriate for trying the dispute.  If the court is satisfied, the claimant must show that circumstances exist requiring that a stay should nevertheless be granted.

The Court of Appeal found that there was a real risk of no available route in Brazil for the claimants to pursue their claim, and that even if a process was available, a real risk existed that the claimants could not obtain substantial justice in Brazil.  The Court noted that the Judge had erroneously taken into account the redress potentially available to other parties in Brazil in discounting the evidence that there were insuperable obstacles to the claimants pursuing a claim against BHP Australia in Brazil, and also in suggesting that the claimants were required to “test the water” in Brazil first before bringing their claims in the UK.

The Court concluded that claims against the English entity should not be stayed on the grounds of irreconcilable judgments and those against the Australian entity should not be stayed under the doctrine of forum non convenient.

Comment

For UK-based parent companies with overseas subsidiaries, the Samarco decision offers important lessons about increased risk. By continuing the trend of UK courts opening their doors to cross-border ESG litigation, it follows jurisdictional rulings by the Supreme Court – for example, Jalla v Royal Dutch Shell Plc [2020] EWHC 459 and Vedanta Resources PLC and another v Lungowe and others [2019] UKSC 20.  

A key factor in these rulings was that the claimants could not obtain substantial justice against multinational corporations and their local subsidiaries in foreign countries. Accordingly, for defendants to appear willing to provide remedies is an insufficient solution; substantial justice requires that effective remedies are available to the claimants.   

Similarly, the Samarco decision increases the liability risk to UK-based companies for the conduct of their foreign subsidiaries. It is also simply insufficient to issue sustainability reports and claim to engage in sustainability due diligence; the objective must be to prevent or mitigate human rights and environmental harms.

Risks to multinationals

The Samarco decision further illustrates the risk to UK-based companies associated with applying foreign law in cross-border disputes. Lax environmental regulation and enforcement is not a location advantage.  Instead, it poses litigation, reputation and financial risks to multinationals which fail to meet international standards of conduct.

Suzanne Spears is founder and principal of Paxus
 

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