The High Court has recently delivered a judgment in the ongoing litigation regarding the collapse of the Fundão Dam in Brazil, which is the biggest class action in the English courts.

We wrote previously about the significant Court of Appeal judgment in the same matter, summarising the background to the case.

To briefly recap, in November 2015, the Fundão Dam in Brazil collapsed, causing Brazil’s biggest environmental disaster. Around 40 million cubic metres of waste was released, which destroyed many villages, killed 19 people, and had a widespread impact as it flowed through the River Doce into the Atlantic Ocean more than 400 miles away. The claimants are around 732,000 in number and include individuals (some of whom are part of the indigenous Krenak community, for whom the river plays a unique part in their spiritual traditions), corporates, churches and faith-based institutes, municipalities and utility companies.

The Brazilian owner / operator of the Dam, Samarco, is a 50/50 joint venture between two Brazilian companies, Vale SA (“Vale”) and BHP Billiton Brasil Ltda (“BHP Brazil”).

BHP Brazil is a subsidiary within the BHP group, with “BHP England” (BHP Group (UK)) and “BHP Australia” (BHP Group Ltd) at the head of the group, and the respondents to claims brought in the English courts (as discussed further in our previous update).

The present note concerns the judgment arising out of the claims that BHP England and BHP Australia (the “Respondents”) brought against Vale pursuant to Part 20 of the Civil Procedure Rules (the “Part 20 claim”), seeking declaratory relief and a contribution to any sums that the Respondents might eventually be found liable to pay to the claimants, and Vale’s challenge in response. This Part 20 claim was issued a couple of months after the long-awaited decision of the UK Supreme Court, in which the claimants were successful in establishing that England is the appropriate forum for them to continue their group litigation against the Respondents (as parent company of BHP Brazil).

Vale argued (among other things) that:

• There is no serious issue to be tried in respect of the Part 20 claims; and
• This jurisdiction is not the appropriate forum for the Part 20 claims.

Each aspect is considered in turn below.

There was a serious issue to be tried

It is well-established that to succeed, the claimant must establish that there is a substantial question of fact or law or both to be tried in relation to the foreign defendant. The Court cited Altimo Holdings v Kyrgyz Mobil Tel Limited [2011] UK PC 7 at [71] for this proposition. There must be a realistic prospect that BHP will succeed (ie a more than merely arguable case).

The Court held that there clearly was a serious issue to be tried, discussing three main points:

• Whether there was accrued liability on Vale’s part to pay a contribution to the Respondents under Brazilian law: Expert evidence as to Brazilian law on this point was given, with the main disagreement being whether any cause of action could arise (allowing the Respondents to seek a declaration and / or reimbursement against Vale) before liability was established by a court order, and payment was made by the Respondents to claimants.  Arguments on this point should be subject to challenge through submissions and cross-examination at trial (at [56]).
• The argument that Vale is not liable for the same loss or damage because the claimants’ claims are time-barred and/or have been settled: There were a “number of permutations to consider” in respect of several limitation issues and the Court did not have the evidence to resolve those issues.  Nonetheless, those issues were not suitable for summary disposal and there was a serious issue to be tried (see [77]).
• Vale’s case that the majority of the municipalities pursuing claims against the Respondents have concluded settlement agreements in which they released Vale from any claims (the same was true for many individuals but it could not be confirmed how many of those individuals were claimants in these proceedings):  The Court did not have full evidence as to each claimant and the terms of all of the settlements, or evidence as to whether the Brazilian courts had determined whether the settlements would be valid.  This issue would require substantial evidence of fact and law and it was clear there was a serious issue to be tried (see [78] – [80]).

Jurisdiction not the appropriate forum for the claims

In this respect, the claimant must satisfy the Court that in all the circumstances, this jurisdiction is clearly or distinctly the appropriate forum for the trial of the dispute, and that in all the circumstances the Court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction.

England was found to be the appropriate forum for hearing the Part 20 claims.  The class action proceedings against the Respondents and the significant overlap between those and the Part 20 claims meant that there was a “real and substantial” connection to the English jurisdiction.  The fact that there were no ongoing proceedings in Brazil yet left England as the only forum in which a single trial of the claims and the Part 20 claims is available and is therefore the most suitable forum for trying the Part 20 claims (at [100]). An aspect to watch out for, and that will raise some challenging issues in the future, is how the dispute resolution clause in the joint venture agreement between Vale and BHP Brazil co-exists and interacts with the Part 20 claims in England.

Significance

In many respects, this outcome is not surprising, given the recent trend in the English High Court of establishing jurisdiction to hear complex multi-jurisdictional cases concerning environmental disasters, and the English courts’ willingness to consider imposing liability on overseas subsidiaries of UK parent companies. See previous updates on this topic here and here.

While this decision in and of itself is not a major verdict, the broader proceedings that it sits within are hugely significant (set to be the biggest class action in English history) and worth paying close attention to.  Those substantive proceedings are currently on path to trial and sit alongside some other fairly recent decisions that illustrate a few key points:

• UK-based parent companies can be held liable by UK courts for the actions of their overseas subsidiaries. See for instance:
  • Vedanta Resources PLC & anor v Lungowe & ors [2019] UKSC 20: the Supreme Court held that it was arguable that that the Zambian claimants could succeed against Vedanta, the UK based parent company of the operator of a mine, that the claimants alleged repeatedly discharged toxic matter into local waterways causing harm. The case was later settled.
  • Okpabi and ors v Royal Dutch Shell Plc (“RDS”) and anor: in which the Supreme Court held that there were real issues to be tried regarding a claim by Nigerian citizens against a UK-based parent company of a Nigerian petroleum company, allegedly responsible for oil leaks from pipelines that it operated.
• Similarly, a break in the supply chain (or involvement of a third party) will not necessarily excuse a UK-based company from a common law duty of care to an overseas claimant if the harm is reasonably foreseeable:
  • Hamida Begum (on behalf of MD Khalil Mollah) v Maran (UK) Limited [2021] EWCA Civ 326: The Court of Appeal refused to strike out the claim on the basis that the claimant (on behalf of her late husband who died in a shipbreaking accident in Bangladesh), had an arguable claim. This would be an exception to the usual rule that A will not be liable for harm done to C that is caused by third party, B, unless A is responsible for, or has created the danger that B has exploited, which caused harm to C. This might be an “unusual” extension of an existing category of cases but not an entirely new basis of tortious liability. The case is expected to proceed to a substantive hearing (date as yet unknown). You can read Enyo’s update on this case here and view a related webinar here.
• There is a sustained focus on the activities of corporates and their ESG impacts, and a willingness to pursue them for any alleged breaches of their obligations (especially regarding duty of care in the context of human rights).

If you would like to know more about any of the cases discussed in this article, please get in touch with your usual Enyo contact.