High Court strikes out claims against BHP as an abuse of process in light of parallel claims in Brazil

The English High Court has struck out the claims of over 200,000 claimants against two companies in the BHP Group (domiciled in England and Australia respectively) arising out of the collapse of the Fundão Dam in Brazil in 2015. Mr Justice Turner struck out the claims as an abuse of process in light of concurrent proceedings and compensation schemes in Brazil. Turner J concluded that allowing the actions to progress simultaneously in the English and Brazilian courts would “foist upon the English courts the largest white elephant in the history of group actions”. In the alternative, he would have stayed the proceedings under the “related actions” provisions of the recast Brussels Regulation or the common law doctrine of “forum non conveniens”: Municipio de Mariana v BHP Group plc [2020] EWHC 2930 (TCC).

This case is part of a trend of so-called class action tourism in the English courts (including the notable cases involving Unilever, Vedanta, and Shell), where group claims are brought in the English courts against an English domiciled entity in a multinational group in respect of alleged wrongdoing by its foreign subsidiary. This judgment makes it clear that the English courts will not lightly permit actions to proceed against parent companies in respect of acts of their foreign subsidiaries where there is a concurrent claim in the foreign jurisdiction which relates to the same issues and involves many of the same claimants who are seeking the same compensation for the same alleged damages.

However, as Turner J acknowledged, this case is unique in a number of respects and can be distinguished from other class action tourism cases which have come before the English courts. For instance, the presence of active concurrent proceedings and compensation schemes in Brazil was a key factor underlying the judge’s decision, particularly in circumstances where the defendants in the English proceedings were amenable to suit in Brazil and had agreed to submit to the jurisdiction of the Brazilian courts if such claims were to be advanced. It was also important that, in contrast to the findings in Vedanta, the claimants’ evidence was found to fall far short of establishing that they would not be able to obtain access to substantial justice in Brazil. The claimants in this case had access to multiple existing routes of redress in Brazil and many had already received compensation in Brazil. Further, legal aid was available in Brazil and there were no costs implications of seeking redress through the compensation scheme, whereas the claimants had agreed to pay their English solicitors a success fee of up to 30% out of any damages recovered in the English proceedings.

English domiciled companies should continue to take steps pro-actively to manage the risks of such claims, particularly given that, in light of its unique facts, this judgment may have limited implications for future cases. The claimants have also indicated that they are likely to seek to appeal this decision.

We also note that the Supreme Court judgment in the case of Okpabi v Royal Dutch Shell is awaited (see this blog post on the Court of Appeal decision), and it is hoped that this judgment will provide further clarification and guidance in this area.

Background

A large group of 202,600 claimants (the vast majority of whom are individuals, but also a small percentage of corporates, Municipalities and other institutions) brought proceedings in the English High Court against two BHP entities, namely (1) BHP Group Plc ("BHP Plc") (domiciled in England) and BHP Group Limited ("BHP Ltd") (domiciled in Australia), alleging that the defendants are liable to compensate them for losses sustained as a result of the collapse of the Fundão Dam in Brazil in 2015.

Samarco Mineração SA ("Samarco"), a Brazilian mining company, was the owner and operator of the dam, and is a joint venture between Vale SA (“Vale”) and BHP Billiton Brasil LTDA ("BHP Brasil"). A large number of Brazilian proceedings (to which neither of the defendants are party – albeit that they could have been joined under the relevant Brazilian rules, and each had agreed that it would submit to the jurisdiction of the Brazilian courts if such claims were brought) relating to the dam collapse were commenced prior to the English proceedings (and remain underway) against these Brazilian companies. The claims were commenced against the defendants in the English court on the basis that the defendants are allegedly liable to the claimants as “indirect polluters or otherwise”, given that, as the judgment records, BHP Ltd is the ultimate owner of BHP Brasil, and BHP Plc is linked with BHP Ltd in a dual listed company arrangement which provides for a unified management structure.

The claimants argued that they were not getting adequate and/or timely redress in Brazil and thus sought to bring claims in England. The defendants contended that the remedies available in Brazil, arising under the compensation schemes and/or proceedings in Brazil, provide a satisfactory means of redress, which render the claimants’ involvement in litigation in England “pointless”. The defendants applied to:

• Strike out or stay the claims as an abuse of the process of the court;
• Stay the claims against BHP Plc pursuant to Article 34 of the Recast Brussels Regulation due to the existence of related proceedings in Brazil;
• Stay the claims against BHP Ltd on the grounds of the common law principle of forum non conveniens; and/or
• In the alternative, stay both claims on case management grounds.

Decision

Following an eight-day hearing in July 2020, Turner J struck out the claims against the defendants as an abuse of process. In the alternative, he held that, had he not struck out the claims, he would have stayed the proceedings as regards BHP Plc under Article 34 of the Recast Regulation and as regards BHP Ltd on the grounds of forum non conveniens at common law.

Abuse of process

Turner J struck out the claims on the basis that the proceedings “amounted to a clear abuse of process”. The legal starting point was that an abuse of process is 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”.

The judge’s decision was driven by the following key factors:

• An acute risk of irreconcilable decisions between the courts of England and Brazil if the English proceedings were permitted to continue (for example the alleged status of BHP Brasil as an indirect polluter is yet to be determined in the Brazil proceedings, and the status of BHP Brasil would also need to be determined in any English proceedings to determine the existence of any duty of care).
• Turner J was of the view that the concurrent proceedings would lead to “utter chaos” in both jurisdictions and any English proceedings would be “undermined, made redundant, or transmogrified by developments in Brazil”, given that the English proceedings and the Brazil proceedings relate to the same subject matter and involve many of the same claimants seeking identical remedies in England and Brazil concurrently.
• A large proportion of the claimants “are taking (or have taken or have reserved their rights to take) steps to achieve compensation in Brazil for the same losses as those in respect of which they wish to establish a right to damages against the Defendants in England” and whilst the Claimants conceded that they must give credit for compensation already received, all but one had not relinquished their right to pursue further any claims they may have in Brazil. This would give to considerable practical difficulties.
• There would be wasted time, cost, and duplication of effort involved in advancing the same case simultaneously in two jurisdictions.
• It was evident that the claimants had access to multiple existing routes of redress in Brazil (ie the proper place that these claims should be brought and are indeed brought). Turner J rejected the claimants’ suggestion that the various Brazilian routes to compensation are “effectively broken or stalled”, given that there was evidence that many of the claimants have already received compensation in Brazil and are now effectively seeking to have a “second bite of the cherry in England”.
• Further, the judge held that regardless of any alleged problems facing the claimants to obtain redress in Brazil, these will not be alleviated by opening up parallel proceedings in England, given that (i) English proceedings would be expensive and unmanageable, and (ii) the fact that the claimants had agreed to pay their English solicitors a success fee of up to 30% out of any damages received in the English proceedings. In contrast, legal aid is available in Brazil and there are no cost implications of seeking redress the Brazilian compensation scheme.

Although strictly unnecessary to do so since he had struck out the claims based on the abuse of process ground, the judge went on to consider the alternative grounds.

Stay under Recast Regulation or common law

Turner J held that he would have stayed the claims against BHP Plc pursuant to Article 34 of the Recast Regulation, in view of the related proceedings pending before another court. The judge held that there was a very close degree of “relatedness” between the English and Brazilian proceedings and that the English proceedings would need to be stayed for the proper administration of justice (for similar reasons which grounded the finding on abuse of process above).

Turner J also held that he would have stayed the claims against BHP Ltd on the grounds of the common law principle of forum non conveniens for similar reasons. In particular, the judge rejected the claimants’ submission that substantial justice could not be achieved in Brazil and held that the claimants’ evidence fell far short of establishing that impecuniosity would be a major factor in stifling legitimate claims in Brazil, particularly where the majority of successful claimants in English proceedings would be obliged to pay 30% of their winnings to their solicitors.

Stay on case management grounds

A stay on case management grounds can only be granted in rare and compelling circumstances. The judge considered that the same reasons he gave in arriving at the conclusion that the English proceedings were an abuse of process would have been adequate to ground a case management stay, but if his findings on abuse of process were wrong, a free-standing decision to impose a stay on case management grounds would probably be unsustainable.