Release of the white elephant? Court of Appeal opens the door to £5bn multi-jurisdictional group litigation

In 2015, the Fundão Dam in southeast Brazil collapsed, triggering the release of a flood of mining waste that destroyed villages, killed 19 people and polluted 400 miles of waterways. This resulted in widespread socio-economic damage, with an estimated cost of remediation and compensation of at least R$155 billion (around £26 billion at today's exchange rate). 

The dam was owned and operated by Samarco Mineração SA (Samarco), a joint venture between two of the world's largest mining companies, Vale and BHP.  Following the disaster, claims have been brought against these entities in the US, Australian and Brazilian courts.  The defendants have set up an entity, the Renova Foundation, to implement remedial programmes to deal with the environmental impact as well as compensate individuals and small businesses.  However, in 2018, dissatisfied with the redress available, over 200,000 Brazilian claimants initiated proceedings in England and Wales, seeking compensation of £5 billion from BHP Group PLC, a UK company (BHP UK) and BHP Group Limited, an Australian company (BHP Australia), the ultimate parent companies of the BHP entity that owned Samarco along with Vale.

At first instance, the High Court allowed four applications by the defendants to strike out or stay the claims on the basis that they were, inter alia, "a clear abuse of process". In reaching that conclusion, Turner J found that the English proceedings would give rise to an acute risk of irreconcilable decisions between the English and Brazilian courts, and that there were multiple existing routes of redress in Brazil. He noted that, if the claimants were allowed to progress their English and Brazilian claims simultaneously, it would "foist upon the English courts the largest white elephant in the history of group actions".

The defendants applied to strike out or stay the claims on four bases:

1. The claims were an abuse of process and should therefore be struck out under CPR 3.4(2)(b); they were pointless, wasteful and duplicative of the collective and individual proceedings in Brazil and the work of the Renova Foundation.
   
   
2. The claim against BHP UK should be stayed under Article 34 of the Recast Brussels Regulation on the grounds that there were pending proceedings in Brazil giving rise to a risk of irreconcilable judgments.
   
   
3. The claims against BHP Australia should be stayed on the grounds of forum non conveniens on the basis that Brazil was clearly and distinctly the more available and appropriate forum for trial of the dispute.
   
   
4. Alternatively, the claims should be stayed on case management grounds. As part of its case management powers under s49(3) Senior Court's Act 1981 and CPR 3.1(2)(f), the court has a discretion to order a stay to await the outcome of foreign proceedings.

The Court of Appeal allowed the claimants' appeal and dismissed each of the defendants' four applications to strike out/stay the claims detailed above, finding that the first instance judgment was "flawed in a number of respects and wrong". 

Abuse of process

In overturning the High Court's judgment, the Court of Appeal provided useful guidance on when a claim will amount to an abuse of process:

1. Manageability: Turner J had found that the claims were "irredeemably unmanageable”, would have led to "utter chaos", and that the task facing the managing judge in England would be like "trying to build a house of cards in a wind tunnel". However, the Court of Appeal found that his conclusions on manageability were unsustainable and that no such conclusion could be reached safely at such an early stage.  The Court of Appeal held that the proper time to consider the manageability of the claims is at the case management stage.
   
   
2. Improper considerations for abuse of process analysis: The Court of Appeal found that Turner J had erred in elements of his analysis of whether there had been an abuse of process. In particular, it found that: (i) a risk of irreconcilable judgments and other forum non conveniens factors should not form part of the abuse of process analysis; and (ii) even if a claim is "unmanageable", that does not, of itself, make it an abuse of process; and (iii) in considering a group application such as this, the position of each claimant or group of claimants should be considered individually, and not as an "indivisible group".
   
   
3. "Pointless and wasteful" analysis: Whilst a properly arguable claim may in principle be abusive if it is (clearly and obviously) pointless and wasteful, these claims were not so. In reaching this conclusion, the Court of Appeal noted that the defendants were not parties to any proceedings in Brazil (save for a few limited instances) nor were they being sued by any of the claimants there.  The Court of Appeal considered that there was a realistic prospect of a trial in England yielding a "real and legitimate advantage for the claimants such as to outweigh the disadvantages for the parties in terms of expense and the wider public interest in terms of court resources".  The Court of Appeal was also sceptical about the efficacy of the Renova Foundation in providing redress.

Article 34 of Brussels Recast

The Court of Appeal found that Turner J had erred in determining that a stay would be necessary for the proper administration of justice. Contrary to the conclusions of Turner J, it found there was relatively limited overlap between the English and Brazilian proceedings and also noted the potential for significant delay if a stay were granted.

Forum non conveniens

The Court of Appeal applied the two-stage Spiliada test, namely (i) were the Brazilian proceedings clearly and distinctly a more appropriate forum for the case to be tried; and (ii) if so, the court should grant a stay unless there was cogent evidence that the claimants would not obtain justice in Brazil. The Court of Appeal held that (ii) was not met: the claimants had shown that the R$I55bn class action being brought in Brazil was the only available alternative route for the claimants (if the claim against BHP Australia was not heard in England), and that there was a real risk that they would not obtain substantial justice through this route.   

Case management stay  

Whilst the court has a discretion to order a stay to await the outcome of foreign proceedings as part of its case management powers, it will only exercise it in rare and compelling circumstances. The Court of Appeal found that, for the reasons given when addressing the abuse of process and Article 34 applications, a stay was not in the interests of justice in this case.

This is an important decision in the context of multi-jurisdictional collective actions brought in the English courts, particularly in respect of environmental disasters. A string of cases in recent years, including Vedanta and Okpabi, have already demonstrated the English courts' willingness to allow novel and ambitious claims against UK-domiciled parent companies for events involving their foreign subsidiaries to overcome early procedural hurdles in England in certain circumstances. (We discuss parent company liability claims in the 2021 edition of our DR Yearbook.) UK-domiciled companies with overseas operations should therefore continue to keep under close review group-wide policies and procedures, and consider their potential liability arising through the operations of their overseas subsidiaries.  This is particularly so because we expect high-profile claims such as Municipio de Mariana to embolden UK claimant law firms to bring more ambitious transnational litigation claims, likely with the support of litigation funders. 

The Court of Appeal's decision in Municipio de Mariana is of particular interest because it shows that the English courts may be willing, in some circumstances, to accept that they have jurisdiction to hear transnational litigation cases even where there are related proceedings and remediation programmes on foot in the foreign jurisdiction where the events in question took place.  However, the question of whether parallel proceedings and/or a remediation programme in another jurisdiction should result in a stay of English proceedings is highly fact-specific, and there may well be other cases in which those alternative redress routes are sufficient to warrant a stay: the court will scrutinise closely whether the foreign proceedings/programmes do in fact provide adequate alternative routes of redress for the claimants. 

It is also important to remember that, as with both Vedanta and Okpabi, the Municipia de Mariana decision was in the context of an early procedural application, rather than a substantive trial.  Accordingly, the English court has not yet fully considered, with the benefit of the extensive evidence that would be available at trial, questions of liability in relation to one of these novel parent company liability claims. Further, although some recent claims have overcome procedural hurdles, other high-profile transnational environmental claims prefaced on alleged parent company liability have struggled to overcome procedural and logistical challenges. (We wrote about two of these claims, Jalla and Okpabi, in our recent article on large-scale group litigation.)  Therefore, it should not be assumed that cases like Vedanta, Okpabi and Municipia de Mariana will necessarily herald significant changes to established English legal principles.