UK companies with operations overseas will be aware of a recent trend of English courts being open to consider claims of alleged violations of business and human rights (BHR) abroad. In the most recent BHR case of Municipio de Mariana v BHP Group Plc, the High Court appears to have set some limits on its willingness to entertain such claims, particularly where proceedings have already been commenced in an overseas jurisdiction.
Taking into account a number of factors, including the allocation of the court’s resources and procedural practicability, Turner J came to the conclusion that it would be a waste of time, cost, and effort for the same case to be heard simultaneously in Brazil and England, finding that it would be “expensive, almost interminable, unfocussed, unpredictable and unmanageable”.
On 5 November 2015, the collapse of the Fundão dam in Minas Gerais, Brazil caused serious flooding which devastated villages in the vicinity and led to the death of 19 people. The failure of the dam also released 60 million cubic metres of toxic waste into water streams, causing water pollution and extensive loss of marine wildlife, which was felt as far away as the southern Atlantic Ocean.
The disaster sparked legal action worldwide. A large number of proceedings were brought, both by individuals and as class actions, many of which are still ongoing. Claims have been brought by individuals directly impacted by the disaster, and investors and shareholders in BHP. In Brazil, one of the class actions reached a settlement involving the creation of a foundation to mitigate the consequences of the collapse of the dam and to compensate injured parties. Another class action seeking damages of R$155 billion (£2.1 billion) has been stayed since January 2017. In the United States, a class action filed in the US District Court of the Southern District of New York, brought by purchasers of American depository receipts of BHP, settled for US$50 million in August 2018. In Australia, a class action brought on behalf of BHP shareholders, relating to losses linked to BHP’s alleged failure to make adequate disclosure regarding the risk of the dam collapsing and its environmental consequences, has not concluded yet.
In November 2018, over 200,000 Brazilian claimants comprised of individuals, businesses, and municipal governments initiated proceedings in the UK, making it the largest group action ever filed at an English court. The claim was brought against BHP Group Plc (BHP Plc), a UK company, and BHP Group Limited (BHP Ltd), an Australian company, which is linked with BHP Plc in a dual listed arrangement and is the ultimate owner of BHP Brazil.
The question considered in these English proceedings was whether, as a matter of Brazilian law, the defendants were liable to the claimants in respect of the consequences of the failure of the dam. In short, the defendants contended that the English proceedings were “pointless” given that the available remedies arising from various ongoing Brazilian proceedings provide satisfactory means of redress. Accordingly, earlier this year, the defendants made an application to the High Court for an order that the English proceedings should be stayed or struck out based on the following grounds:
- The claims were an abuse of the process of the court.
- The claims against BHP Plc should be stayed by the application of Article 34 of the Recast Brussels Regulation (Article 34 argument).
- The claims against BHP Ltd should be stayed because England was a forum non conveniens.
- Alternatively, both claims should be stayed on case management grounds.
On 9 November 2020, Turner J handed down his judgment as to whether to strike out the group action brought in the UK. His reasoning was largely focused on the defendants’ abuse of process argument. He addressed the other grounds in obiter.
Abuse of process
In deciding whether the group litigation should be struck out, Turner J principally considered the impact of group action on the court’s resources, as well as the procedural practicability of facilitating such action.
The ongoing claims in Brazil were an important factor. Many of the claimants who were party to the English proceedings were seeking identical remedies in Brazil; over 150,000 of them had already received compensation by way of settlement resulting from various group actions or had brought their own private individual proceedings. Turner J also found that the risk of irreconcilable judgments was both real and acute.
Furthermore, given that the primary language for almost all the claimants and witnesses was Portuguese, it would not only significantly lengthen the proceedings, but also incur considerable costs to involve translators (not to mention potential translation errors). The English court would also need to apply Brazilian law, with which it lacks familiarity, and would require experts. Other case management issues included the need for claimants and witnesses to travel to the UK.
In conclusion, Turner J was satisfied that the claimants’ group action amounted to an abuse of process of the court, noting that the claimants’ tactic to bring closely related damages claims in two jurisdictions “if unchecked, would foist upon the English courts the largest white elephant in the history of group actions”. He also did not think that staying the claims pending the resolution of certain Brazilian settlements was suitable. Therefore, Turner J found that the only proper procedural consequence was to strike out the claims.
Despite reaching a conclusive decision, Turner J went on to consider the other grounds.
Article 34 argument
Although the UK has formally left the EU, the Recast Brussels Regulation (Regulation) continues to apply during the transition period under the EU-UK Withdrawal Agreement.
Article 4 of the Regulation provides that individuals should only be sued in their member state of domicile. The rationale is to provide both protection to EU domiciled parties and certainty to a given claimant. Article 34 of the Regulation, however, provides an exception to this general principle, which relates to parallel proceedings in an EU member state and non-member state.
In relation to the claims against BHP Plc, a UK company, Turner J determined that, had he not struck out the claims, he would have considered it appropriate to stay the proceedings. Turner J noted that the Brazilian proceedings were at a significantly more advanced stage as opposed to the English proceedings subsequently commenced, thus concluding that a stay would have been necessary for the proper administration of justice.
Forum non conveniens
Forum non conveniens is the common law doctrine that allows a court to dismiss a civil action (even though the court has jurisdiction over the case and the parties) where a more convenient alternative forum exists in which to try the action.
Turner J found that, as the tort took place in Brazil, the natural forum of the case was Brazil and the governing law of the tort was Brazilian law. Referencing a point emphasised by the UK Supreme Court in Vedanta Resources PLC and another v Lungowe and others, Turner J also noted that it was significant that both defendants had offered to submit themselves to the Brazilian jurisdiction, which reduces the risk of irreconcilable judgments against each defendant.
Furthermore, Turner J was satisfied that the claimants could obtain substantial justice in Brazil as its courts would have jurisdiction to try an action brought against BHP Plc and BHP Ltd. This was one of the claimants’ primary arguments. Commencing English proceedings would also not guarantee a faster outcome than the Brazilian proceedings.
Therefore, had Turner J not found an abuse of process against the claimants, he would have refused jurisdiction in respect of the claims brought against BHP Ltd on forum non conveniens grounds.
The judgment is far from the result expected by the victims of the collapse of the dam. But by no means should it be interpreted as the English courts taking a turn from Vedanta and positioning themselves against BHR. The High Court did not rule out the possibility of any claim for an alleged BHR violation perpetrated overseas to be heard before the English courts. In fact, it was only after being satisfied that there were parallel proceedings in Brazil, that Brazil was a more suitable forum, and that the claims had real prospects of achieving substantive justice in Brazil, that Turner J determined the group action should be struck out. The importance of this judgment is to set out a limitation to the possibility of pursuing BHR claims in England connected to events overseas. Where a case is well underway in the jurisdiction of the alleged violation and there are good reasons to believe the claimants will have a fair shot at achieving substantive justice, the English courts would be unwilling to open the floodgates to accepting jurisdiction.
Based on the wording of the judgment, this consideration does not seem to be limited to BHR claims, but to any claim. Had the circumstances of this case been different (for example, had the High Court found that there was no possibility of achieving substantive justice in Brazil), the court may have been more willing to accept jurisdiction. UK companies should continue to remain vigilant to the possibility of BHR violations taking place overseas and to the benefits of conducting BHR due diligence. The decision also shows that taking early and thoughtful action as soon as a violation takes place (such as by offering suitable grievance mechanisms) may be an alternative to avoid fighting multiple claims around the world.
Watch this space
The UK Supreme Court decision in the Okpabi v Shell case is still pending. That decision will no doubt provide greater clarity relating to the common law duty of care a UK domiciled parent company owes to injured parties based on a failure to carry out its oversight function over its overseas subsidiaries.