Fundão Dam Disaster Litigation struck out

In Municipio de Mariana v BHP Group Plc and BHP Group Ltd [2020] EWHC 2930 (TCC), the High Court struck out a huge group action relating to the collapse of the Fundão Dam in Brazil as an abuse of the court’s process. The court also held that, had the action not be struck out, it would have been stayed on jurisdictional grounds.

The claim, which involved over 200,000 claimants, is thought to be one of the biggest ever brought in England and Wales. In this blog post, Spencer Turner considers the decision.

The judgment provides a comprehensive summary of the relevant case law involving abuse of process, Article 34 of the Recast Brussels Regulation and forum non conveniens. Turner J’s conclusions will no doubt be of interest to practitioners and parties involved in group litigation and cross-border disputes.

Background

In November 2015, the Fundão Dam, located in the south eastern Brazilian State of Minas Gerais, collapsed. The impacts of the collapse were catastrophic; 43 million cubic metres of mine tailings were released into the Doce River, water supplies for hundreds of thousands of people were polluted, villages and wildlife were decimated, and 19 people were killed. It was the biggest environmental disaster ever in Brazil. Litigation inevitably followed.

Proceedings were brought in the High Court by over 200,000 individual, corporate, and institutional claimants contending that the defendants were liable to compensate them for losses sustained as a result of the disaster.

The owner of the dam was, and is, a company called Samarco Mineração SA, a Brazilian mining company. Samarco is essentially a non-operated equal joint venture between Vale SA and BHP Billiton Brasil. None of these companies were parties to the English proceedings. The first defendant in these proceedings, BHP Group Plc, is a company incorporated in England. The second defendant, BHP Group Limited, is a company incorporated in Australia who is the ultimate owner of BHP Brasil.

The Brazilian Proceedings

Proceedings were launched in Brazil within four weeks of the dam collapse. At the hearing Turner J was provided with expert evidence from both parties focused on the progress of the Brazilian proceedings to date and the likely progress of those proceedings in the future:

  • Under Brazilian law any claimant can bring their claim as an individual to be resolved by the court in the usual way. The alternative is to take part in a CPA, which is the Brazilian mechanism for facilitating group litigation. Both options had already been pursued by claimants in Brazil.
  • CPA proceedings can be resolved by way of settlement, a decision of the court or a combination of the two. Unlike GLO proceedings, a claimant in Brazil does not need to commence proceedings and be identified on a register before the proceedings are concluded.
  • A CPA was launched four weeks after the dam collapse. This CPA came to be known at the ‘20bn CPA’ because the fund to be established was expected to be in the region of 20 billion Brazilian reals. The proceedings were to be managed by Judge Mario in the 12th Federal Court of the State of Minas Gerais. The 20bn CPA was settled and Samarco, BHP Brasil and Vale SA agreed to an arrangement which involved creating a new entity known as the Renova foundation (‘Renova’). Renova was intended to mitigate the consequences of the incident and provide compensation to individuals and small businesses which suffered loss as a result of the dam collapse.
  • A second CPA was then initiated in May 2016 by the Federal Prosecutor’s Office in Brazil, claiming that the environmental damages which was intended to have been covered by the 20bn CPA was greater than that which has been allowed under the settlement terms of the 20bn CPA. The new CPA came to be known at the 155bn CPA (for obvious reasons) and has been stayed since January 2017.
  • Renova continues to pay out to impacted parties and nearly half of the claimants in the English proceedings had already received payments from Renova. Turner J pointed out there were legitimate serious criticisms as to the speed and fairness of the operation of Renova, not just in Brazil but also from other international sources.
  • The defendants’ case in the English proceedings was that for all of the 200,000 or so claimants, the combination of available remedies provided a satisfactory means of redress which meant that the claimants’ involvement in the English proceedings was pointless.

The English Proceedings

The claimants brought a claim in the High Court initially against six defendants, which ultimately was reduced to the two defendants in the current proceedings. The claimants’ generic case was set out in a ‘Master Particulars of Claimant’ and particulars of each individual were pleaded in ‘Additional Particulars of Claim’. The defendants applied to the court to strike out or stay the proceedings on four grounds:

  • The claims should be struck out or stayed as an abuse of process of the court;
  • The claims against BHP Plc should be stayed by the application of Article 34 of Recast;
  • The claims against BHP Ltd should be stayed because England is forum non conveniens; and/or
  • Both claims should be stayed on case management grounds.

Abuse of Process

Turner J dealt with the defendants’ abuse of process argument first and he provided a helpful summary of the development of the law with respect to striking out a claim as an abuse of process. His observations can be distilled down to the following points:

  • The court has an inherent power to prevent the misuse of its procedure in a way that would be manifestly unfair to a party before it or would bring the administration of justice into disrepute. There is no fixed category of case which limit the courts discretion to use this power (see: Lord Diplock in Hunter v Chief Constable of the West Midlands Police [1982] AC 529).
  • Lord Bingham provided a working definition of abuse of process in Her Majesty’s Attorney General v Barker [2000] 1 FLR 759 as ‘a use of the court process for a purpose or in a way which is significantly different from the ordinary and proper use of the court process’.
  • Less reticence has been shown by the court in finding an abuse of process where a claimant has already taken the opportunity bring their claim in other proceedings (see: Henderson v Henderson (1843) 3 Hare 100). Turner J saw no reason why Henderson considerations should not be relevant in circumstances in which a claimant seeks to run two related actions in two different jurisdictions.
  • Turner J also considered that the impact of group actions on the court’s resources as well as the procedural practicability of managing such claims was likely to come more strongly into play when considering the application to strike out.

Turner J pointed to issues created by concurrent proceedings in England and Brazil if the English proceedings were allowed to move forward. He was satisfied that there was an acute risk of inconsistent judgments and gave the example of the alleged status of BHP Brasil as an indirect polluter. One of the issues in the 155bn CPA is whether BHP Brasil should be jointly liable with Vale SA for the whole of the funding. The question remains unresolved in Brazil. Both sides of the English proceedings accepted that whether or not BHP Brasil was an indirect polluter would fall to be determined as a preliminary issue if the English proceedings were allowed to continue. Turner J said that the wasted time, cost and effort in advancing the same case (that BHP Brasil was an indirect polluter) simultaneously in both jurisdictions would be considerable and could give rise to incompatible findings.

By early 2019, at least 154,766 claimants in the English proceedings had disclosed that they had received money from Renova or had brought their own private proceedings. Those claimants had not relinquished their rights to pursue any further claims that they might have in Brazil. Turner J characterised the situation as one which would be in a constant state of flux given the parallel proceedings. He said that there would be a serious risk that the lead cases in the English proceedings could be undermined, made redundant or transmogrified by the developments in Brazil. He described the task facing whoever managed the English proceedings as akin to ‘building a house of cards in a wind tunnel’.

Turner J further rejected the claimants’ submission that relinquishing the right to bring proceedings in Brazil could be a satisfactory solution. There was a broader problem of jurisdictional cross-contamination because so many claimants had already received some level of damages in Brazil. The court also considered that the risk of claimants dropping out of the English proceedings, nothing that contact with some 37,000 claimants had already been lost, would could render the proceedings unmanageable.

Turner J was particularly excoriating of the claimants’ submission that the burden on the court’s resources in managing these claims was something which should be disregarded in the court’s consideration of the application to strike out:

Little more was predicted than the need for the formation of a GLO and the determination of a preliminary issue relating to the existence of the defendants’ alleged status as indirect polluters and the selection of lead cases. Beyond that, I was airily assured that, particularly if I were to be appointed to be the managing judge, any difficulties would be readily surmountable. I was as flattered as I was unconvinced. Robust case management is a tool not a magic wand.

Moreover, the court identified that the lengthening of the of the proceedings caused by language difficulties, the risk of translation errors and the expense in transporting witnesses to England all served to render the English proceedings irredeemably unmanageable. The argument that the claimants would not, or at least were unlikely to, get full redress in Brazil was also rejected. Turner J pointed out that a significant number of the claimants in Brazil had already received compensation, that further proceedings in England would make matter worse for all of the claimants concerned and that the Brazilian court was doing its utmost to progress the process of compensating the victims. In short, none of the concerns of the claimants were likely to be significantly obviated by allowing proceedings to continue in England.

Turner J’s conclusion was that the proceedings did amount to an abuse of process and in another vivid turn of phrase said that:

In particular, the claimants’ tactical decision to progress closely related damages claims in the Brazilian and English jurisdictions simultaneously is an initiative the consequences of which, if unchecked, would foist upon the English courts the largest white elephant in the history of group actions.

The judge then went on to consider the remaining ground which, whilst strictly obiter, provide some interesting comments on the operation of Article 34 of Recast and forum non conveniens.

Article 34

The general rule under Recast is that individuals should only be sued in their member state of domicile (Art 4). Article 34 acts, in effect, as an exception to the general rule and permits a discretionary stay in favour of related proceedings in a third state. The questions for the court to answer in order to determine the application in respect of Article 34 were six-fold:

  • Are the English proceedings related to the 155bn CPA? 
  • Is the 155bn CPA pending in Brazil?
  • Is it expedient to hear and determine the 155bn CPA and the claim against these two defendants together to avoid the risk of irreconcilable judgments resulting from separate proceedings?
  • Would a Brazilian judgment in the 155bn CPA be capable of recognition and enforcement in England?
  • Is the stay necessary for the proper administration of justice?
  • Ought the court to exercise its discretion in favour of a stay?

Turner J noted that Article 30 of Recast, which deals with two different actions in member states, as opposed to a member state and a third-party state, had almost identical wording to Article 34. It was clear on a reading of Article 30 that the concept of ‘relatedness’ was inextricably bound up with the risk of irreconcilable judgments and therefore required no further or separate consideration on the first question.

On the second question, there was no doubt that the Brazilian court had been seised of the 155bn CPA and that it remained pending.

On the third question, Turner J started with Sarrio S.A. v Kuwait Investment Authority [1999] 1 AC 32 which sets out the proper approach to assessing the risk of irreconcilable judgments. In Sarrio Lord Saville concluded that:

…I am of the view that there should be a broad common-sense approach to the question whether the actions in question are related, bearing in mind the objective of the article, applying the simple wide test set out in article 22 and refraining from an over-sophisticated analysis of the matter.

Turner J noted that he had already referred, in his judgment on abuse of process, to the fact that the question of BHP Brasil’s status as an indirect polluter was sufficient to demonstrate the risk of irreconcilable judgments.  He went on to give a further non-exhaustive list of areas in which potentially irreconcilable judgements could be liable to arise, including: what health consequences could be attributed to the pollution, what heads of damages are permissible, what geographical areas were affected and what is the appropriate quantum of damages in any individual case.

The claimants’ sought to advance the case that there would be no judgment arising from the outstanding disputes under the 155bn CPA and invited the court to treat Judge Mario’s role as one akin to an arbitrator in the Brazilian proceedings. The judge rejected this argument and said that, in the event that agreement was not reached on the 155bn CPA, Judge Mario would have to give a judgment and therefore if the claims were to proceed there would be a risk of irreconcilable judgments.

Turner J also spent time focused on what was meant by “expedient to hear and determine the related actions together” in Article 34. There are two schools of thought. One requires there to be a practical procedural means by which the two actions could be tried together. The other requires only that it be established that such a solution would be theoretically desirable regardless as to whether it could actually be achieved.

In PJSC Commercial Bank Privatbank v Kolomoisky [2019] EWCA Civ 1780 the Court of Appeal said that:

…The word “expedient” is more akin to “desirable”…that the actions “should” be heard together, than to “practicable” or “possible”, that the actions “can” be heard together

Kolomoisky was referred to with approval by the Court of Appeal in EuroEco Fuels (Poland) Ltd v Szczecin and Swinoujscie Seaports Authority [2019] 4 WLR 156 [at 45], but the Court nevertheless held that “the question is whether it is expedient that the two actions be “heard and determined” (not just “heard”) together.” Turner J concluded that had the Court of Appeal intended to depart from the approach in Kolomoisky, it would have expressly said so. He therefore treated Kolomoisky as representing binding authority on the issue. Turner J concluded that he was satisfied that “whatever theoretical procedural hurdles may lie in the path of those seeking to have these claims against these defendants consolidated with the claims in the 155bn CPA in Brazil, it remains expedient to hear and determine the related actions together.”

On the fourth question, Turner J found that the issue was a conceptual one and he was not required to determine whether, in fact, the Brazilian court would give such a judgment in the future. Rather, he found no reason why any judgment in favour of the claimants in Brazil would not be capable of recognition and enforcement in England and, therefore, the requirement was fulfilled.

As to whether a stay was necessary for the proper administration of justice, Turner J took guidance from Recital 24:

When taking into account the proper administration of justice, the court of the Member State concerned should assess all the circumstances of the case before it. Such circumstances may include connections between the facts of the case and the parties and the third State concerned, the stage to which the proceedings in the third State have progressed by the time proceedings are initiated in the court of the Member State and whether or not the court of the third State can be expected to give a judgment within a reasonable time.

He also considered that, provided the jurisdictional prerequisites has been satisfied, the court was able to consider forum non conveniens factors in its assessment of the proper administration of justice criterion under Article 34. Support for that conclusion was found in chapter 11 of “The Brussels I Regulation Recast” Dickinson and Lein, Oxford Legal Research Library (2015) at 11.78.

One of the claimants’ central points in response to this issue was that the claims in England could not be consolidated with the 155bn CPA in Brazil. Turner J had already pointed out that the practical availability of consolidation is not, or itself, a pre-requisite to the application of Article 34 but he did consider that it was a factor which would weigh heavily against the application of the Article in the proper administration of justice criterion.

However, in this case, the claimants made clear to the judge that they were not interested in trying to consolidate their claims against the two defendants with the 155bn CPA for the central reason that there would be the hurdle of having to prove that the two defendants were liable as indirect polluters. Turner J therefore found that, whilst unavailability of consolidation was generally a very strong factor against the exercise of a discretion to stay, it was not always determinative. In this case there were sufficient countervailing factors, namely:

  • There was a real risk of inconsistent judgments if the matter proceeded in England.
  • The Brazilian proceedings were considerably more advanced than the English proceedings.
  • The Brazilian courts and legal teams were immersed in the matter.

In answering the sixth and final question, the judge concluded that he would consider a stay to have been the appropriate default conclusion had he not struck the matter out, or if his judgment on the strike out was successfully appealed. He said that:

Any stay, at least in broad terms, would be defined so as to expire when the 155bn CPA had been concluded. Of course, it would remain open to the claimant to return to the court at any time to seek to persuade it to allow the proceedings to continue in the event that any of the other grounds under Article 24(2) could be made out.

Forum Non Conveniens

Turner J’s final consideration was forum non conveniens. Whilst BHP Plc was precluded by Recast, as interpreted in Owusu, from deploying freestanding arguments that Brazil was the more convenient jurisdiction to run the claim, BHP Ltd as an Australian domiciled country was not prevented from doing so.

The starting point is thee two stage test in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460:

  • At stage one, the court’s task is to analyse whether the foreign forum is an available forum that is clearly or distinctly more appropriate for any trial of the dispute (i.e. the ‘natural’ forum). This typically requires analysis of the competing connecting factors as between England and the foreign forum. The burden of persuasion is on the applicant.
  • If, following the first stage, it is established that the foreign forum is the natural forum, then the court will grant a stay subject to the second stage. At this second stage, the claimant may seek to establish that “there are circumstances by reason of which justice requires that a stay should nevertheless not be granted. In this enquiry, the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors with other jurisdictions. One such factor can be the fact, if established objectively by cogent evidence, that the plaintiff will not obtain justice in the foreign jurisdiction”. The claimant bears the burden on stage two.

In a previous hearing stage one was effectively conceded by the claimants and it was clear why; the tort took place in Brazil, the governing law would be Brazilian, the English courts would be less accessible for the majority of parties and witnesses and the judge in Brazil would have detailed knowledge of Brazilian law and procedure.

However, an issue arose in the context of Article 4 of Recast in that a claimant may take advantage of the fact that a co-defendant or the party relying upon forum non conveniens is unable to escape the jurisdictional consequences of Article 4 of Recast. Lord Briggs in Vedanta suggested that the solution was [at 40 and expanded on at 66-84]:

…where the anchor defendant is prepared to submit to the jurisdiction of the domicile of the foreign defendant in a case where, as here, the foreign jurisdiction would plainly be the proper place, leaving aside the risk of irreconcilable judgments.

In this case both of the defendants offered to submit them to the jurisdiction of Brazil which Turner J considered attenuated the issue and meant that the first stage of Spiliada was made out.

As to the second stage, Turner J considered that the claimants’ evidence fell short of establishing the substantial justice could not be done in Brazil. He was not convinced that proceedings in England would be more promptly concluded than proceedings would in Brazil and little weight was placed on the additional challenges of bringing claims against the two defendants in Brazil because the claimants did not intend to do that. Legal aid was also available in Brazil to support private claims and there was no cost implication of seeking redress through Renova. Turner J contrasted this to the position in England where the majority of the claimants had agreed success fees of 30%.

The conclusion was therefore that, even if the court had found against the defendants on the abuse of process argument, jurisdiction would still have been declined on forum non conveniens grounds against BHP Ltd.

Turner J’s final conclusions were:

  • The claims against both defendants were to be struck out as an abuse of process.
  • If the finding of abuse was wrong, the claim against BHP Plc would be stayed by the application of Article 34 of Recast.
  • If the finding of abuse was wrong, the claim against BHP Ltd would be stayed on the grounds of forum non conveniens.
  • Any free-standing decision to impose a stay on case management grounds would probably be unsustainable.

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