BHP Embroiled in $47B Class Action Over Brazil Dam Collapse

Almost nine years after a devastating dam collapse at a Brazilian iron ore mine, BHP Group Ltd. is set to defend allegations at a London trial that it is “cynically and doggedly” trying to avoid its liability to pay billions in compensation to the communities hit hardest.

The collapse of Fundão Dam at an iron ore joint venture between Vale SA and BHP is at the heart of one of the largest UK class actions of its kind starting Monday. More than 620,000 Brazilians are seeking around £36 billion ($46.9 billion) in a case that’ll test how far English courts are willing to punish firms over environmental disasters that happened thousands of miles away.

The 2015 collapse unleashed a torrent of mine waste that destroyed entire villages, polluted hundreds of kilometers of river and killed 19 people in the Minas Gerais and Espirito Santo states.

BHP “has devoted very substantial resources to placing obstacles in the way of the claimants’ English claims,” lawyers alleged court filings prepared for the trial.

Over the 12 week trial at London’s High Court lawyers for BHP will argue that the firm can’t be held responsible as the Samarco Mineracao venture is an independent entity, BHP didn’t know the dam was compromised and it complied with all local rules.

BHP made “huge effort” to remediate the effect of the collapse and compensate those affected, the company’s lawyers said in filings.

The prospect of high profile litigation has added a sense of urgency to settlement talks and BHP Vale are close to finalizing one with Brazilian authorities in a deal estimated to be worth about $30 billion. An accord would impact the size and scope of the UK litigation.

An agreement is expected as soon as the end of the month or early November, Itau BBA analysts reported after a meeting with Vale management earlier this month. BHP said Monday that negotiations are still underway.

The UK suit duplicates efforts in Brazil as BHP works with authorities to finalize “a fair and comprehensive compensation” process, a BHP spokesperson said in an emailed statement. The claim, “if successful would see up to 30% of any compensation awarded to an individual claimant diverted to the class action lawyers and funders associated with the case.”

Negotiations in Brazil for an enhanced package of measures “implicitly recognize that a great deal more remains to be done,” lawyers for the claimants said in their filing.

The case has meandered through the English courts for six years, with different judges taking opposing views about whether the case can go ahead. Ultimately, appeal judges in 2022 paved the way for a full trial.

“The time has come for BHP to be confronted in court about its involvement in the Mariana dam collapse,” Tom Goodhead, a lawyer at Pogust Goodhead representing the claimants, said ahead of the trial.

Pogust Goodhead received £450 million from hedge fund Gramercy in a litigation funding deal last year to fight cases including the one against BHP.

The class action specialist firm also secured about £60 million worth of insurance to help pay for BHP’s legal costs if BHP wins, Goodhead said.

The case is the world’s largest case of its kind with total about 620,000 claimants, 46 Brazilian municipalities, more than 1,500 businesses and faith-based institutions, according to the firm.

While the size and scale of the case is remarkable, these cases are hard to win and take years to resolve. Last year Shell Plc won a ruling at the UK Supreme Court over one of the largest oil spills off the coast of Nigeria as the judges rejected arguments that the oil giant could still be held responsible for the 2011 disaster.

The BHP trial will also have significant implications as it tests the extent to which multinational companies can be held responsible for such incidents in English courts. A win for the claimants could trigger similar lawsuits, according to Tom Cummins, a London-based lawyer at Ashurst.

“There is no shortage of claimant law firms and litigation funders ready to support claims raising environmental and social issues,” he said.