August 18, 2022
August 18, 2022

A comment for the legal community on the BHP appeal decision

Once labelled “the largest white elephant in the history of group actions”, the Court of Appeal in Municipio de Mariana & Ors v BHP Group plc and BHP Group Ltd [2022] EWCA Civ 95 (Judgment) affirmed the jurisdiction of the English courts to hear the claims of some 202,600 claimants in Brazil in respect of the collapse of the Fundão Dam.  

Background of the Mariana dam disaster

On 5 November 2015, the Fundão Dam in eastern Brazil collapsed, causing Brazil’s worst ever environmental disaster (the Collapse). The dam stored iron ore tailings and was operated as a joint venture between two Brazilian companies, Vale SA (Vale) and BHP Billiton Brasil Ltda (BHP Brazil), through a jointly owned (50/50) vehicle, Samarco SA (Samarco).

The Collapse released around 40 million cubic metres of toxic waste into the River Doce, killing 19 people, impacting vast numbers of people and causing massive environmental damage spread over hundreds of kilometres.  

In response, a series of proceedings were commenced in Brazil against Vale, BHP Brazil, and Samarco (Brazilian Companies) seeking redress for the victims of the Collapse. Of particular note, the Federal Attorney-General’s Office and the Federal Public Prosecutor each commenced a form of ‘class action’ called Ação Civil Pública (CPA): the 20bn CPA and the 155bn CPA, respectively.1

In July 2016, the parties to the 20bn CPA agreed on the Transaction and Conduct Adjustment Term (TTAC), which established the Renova Foundation; a private foundation under the control of the Brazilian Companies through which they were to carry out measures to remedy the environmental effects of the Collapse and make compensation.

Further proceedings were also commenced in Brazil both under the umbrella of the 20bn and 155bn CPAs (e.g., the Priority Axes, the Novel System) and in the form of general civil litigation.

Procedural History  

The Claimants commenced proceedings in England in November 2018 against the ultimate owners of BHP Brazil – BHP Group plc (now BHP Group (UK) Ltd) and BHP Group Ltd (Defendants). At all material times, the Defendants operated together as a single economic entity under a dual listed company structure, with boards of directors comprising the same individuals, a unified senior executive management structure and joint objectives.  

The Claimants pursue three causes of action against the Defendants under Brazilian law:

a) strict liability as indirect polluters under the Environmental Law
b) fault-based liability under the Civil Code
c) liability as controlling shareholders under the Corporate Law.

In August 2019, the Defendants applied to strike out or stay the English proceedings on four grounds:

a) abuse of process, particularly insofar as the English proceedings were ‘pointless and wasteful’
b) Article 34, Brussels Recast, particularly in respect of the parallel proceedings in Brazil
forum non-conveniens
d) case management (Defendants’ Application).

The Defendants’ primary case was that they should be sued in Brazil, if at all, in a new CPA which could then be consolidated with, and heard as part of, the 155bn CPA. Alternatively, the Defendants contended they were amenable to suit individual civil claims brought in by local Brazilian courts. As such, the English proceedings were said to be pointless and duplicative in view of the avenues for redress in Brazil.  

The Defendants’ Application was heard at first instance by Mr Justice Turner (Turner J). On 9 November 2020, Turner J granted the Defendants’ Application and held that the English proceedings should be struck out or stayed on all four grounds (Turner J’s Decision).

The Claimants (or Appellants) applied for permission to appeal (PTA) from Turner J’s Decision (PTA Application) on two occasions. The PTA Application was initially refused on all 15 grounds by Turner J in January 2021 and then again on the papers by Coulson LJ in March 2021.

The Claimants then took the exceptional step of applying to set aside Coulson LJ’s refusal under CPR 52.30 (52.30 Application).

The Court of Appeal upheld the 52.30 Application and further granted the PTA Application, given the considerable overlap between the issues raised by the 52.30 Application and the question of whether PTA should be granted. 

The Appeal Judgment  

On 8 July 2022, the Court of Appeal – Vice-President Underhill, Popplewell LJ and Carr LJ – unanimously allowed the Claimants’ appeal and dismissed the Defendants’ Application on all grounds.  

The Judgment begins with an in-depth analysis of the complex web of existing proceedings in Brazil. Given the Defendants’ primary case, the Court considered at paragraph [93] ff the questions whether:

i) the 155bn CPA would resume and, if so, when
ii) a new CPA could be commenced against the Defendants in Brazil and, if so, whether it could be consolidated with the 155bn CPA
iii) the Claimants could feasibly sue the Defendants in local Brazilian courts.

Having analysed the parties’ respective evidence, the Court concluded that: (i) there was a real possibility the 155bn CPA would take more than a decade to resolve (at [110])
ii) there was considerable uncertainty as to whether the Claimants could pursue a new CPA against the Defendants in Brazil (at [122])
iii) suing the Defendants in local courts in Brazil was unlikely to be an attractive alternative to a new CPA (at [130]).

Against this background and an overview of the English courts’ case management powers in respect of Group Litigation (see [134]-[142]), the Court turned to the Defendants’ Application.  

Abuse of Process 

The court has the power to strike out a valid claim where there is an abuse of process under CPR 3.4(2)(b). In the context of appellate proceeding, the Court confirmed its role with respect to abuse was to determine “whether or not the Judge reached the right answer”.  

As to the categories of abuse, while recognising they were not closed, the Court identified three well-established categories:

i) Henderson abuse
ii) collateral attack
iii) pointless and wasteful proceedings.

Notwithstanding, the Court treated it as “axiomatic that a claim brought by one claimant, which is not itself abusive, cannot become abusive merely because other claimants have chosen to bring abusive claims” (at [176]). In other words, the Court confirmed that an individual approach must be taken for each claimant and that “litigants should not be deprived of their claims without scrupulous examination of all the circumstances and unless the abuse has been sufficiently clearly established” (at [178]).  

Applying these considerations, the Court confirmed (at [179]) that Turner J’s Decision was flawed and wrong in five principal respects and, accordingly, determined afresh whether the English proceedings were abusive:  

Unmanageability (principle): The Defendants’ Application was based on the primary contention that the English proceedings were pointless and wasteful. Notwithstanding, Turner J held that the English proceedings were abusive, first and foremost, for “irredeemable unmanageability”.

The Court rejected “irredeemable unmanageability” as a form of abusive mischief identified in the authorities. For the Court, the English proceedings were an ordinary and proper use of its processes and any burden such proceedings may place on the Court was held not to be an independent basis for abuse, particularly as these arguable claims were for significant sums. Indeed, even if the parallel proceedings in Brazil had given rise to complications, the Court said that such complications would not be abusive; at most, they may warrant the exercise of case management powers.   

Unmanageability (fact): The second question was whether Turner J was right to conclude that the English proceedings were (clearly and obviously) “irredeemably unmanageable”. For the Court, it was premature to expect the Claimants to put forward detailed case management proposals at such an early stage in the proceedings (and, in any event, the Claimants had offered some preliminary suggestions). Furthermore, the Court held that Turner J had failed to undertake the scrupulous analysis necessary to maintain his finding that the “‘acute’ risk of ‘unremitting cross-contamination’” of proceedings rendered the proceedings unmanageable. The Court identified eight reasons that undermined Turner J’s conclusions, including that:

i) none of the Claimants or the Defendants were a party to the 155bn CPA; indeed, 58 high-value claimants were even excluded from the scope of the 155bn CPA
ii) the 155bn CPA had been stayed since March 2017
iii) none of the Claimants was seeking a remedy against the Defendants in Brazil.

While conceding that some individual claims may need to be reviewed “down the line”, including by reference to Henderson principles, the Court held that the potential for such issues to arise did not make them abusive on the ground that the claims are unmanageable.  

Brussels Recast / forum non conveniens factors: As part of his assessment of unmanageability, Turner J relied at first instance on the ‘risk of inconsistent judgements’ and ‘the challenge of language’ (i.e., factors normally considered under Brussels Recast / forum non conveniens). The Court was effusive in rejecting the consideration of such factors generally under the abuse doctrine. The Court accepted such considerations may support a finding of improper collateral purpose or unfair harassment abuse, or support a case management stay.

However, to otherwise apply them in respect of abuse was held to:
i) infringe the mandatory nature of Article 4, Brussels Recast
ii) impermissibly circumvent the operation of the common law
forum non conveniens principles.  

Pointless and wasteful: The Court accepted that a properly arguable claim may in principle be abusive if it is (clearly and obviously) pointless and wasteful.

However, considering afresh the Defendants’ primary argument that the English proceedings were pointless and wasteful given the avenues for ‘full redress’ in Brazil, the Court made three preliminary observations:

i) particular caution is needed when considering striking out proceedings as ‘pointless and wasteful’ when the defendant is sued as of right – doing so risks undermining a claimant’s right to choose whom to sue
ii) it is doubtful whether redress provided through optional or concurrent judicial and extra-judicial schemes, such as those in Brazil the Defendants relied on, could render the English proceedings abusive
iii) the comparative assessment of the relative advantages of seeking redress in Brazil turned upon complex evidence, which could not be adequately considered in the context of a summary strike out application.

The position of ‘the 58’ and its effect on the other claimants: It was common ground that 58 of the claimants in the English proceedings were excluded from the scope of the 155bn CPA. Notwithstanding, Turner J took a global approach in finding that the Claimants’ claims in England were pointless and wasteful.

For the Court, this approach failed to consider the material differences between ‘the 58’ and the other claimants. Indeed, for ‘the 58’, the comparison between the English proceedings and the redress available in Brazil was limited to “redress through a civil claim in Brazil against [the Defendants], which has not occurred, and redress through a civil claim against the [D]efendants [in England]”. As such, the strike out for ‘the 58’ necessarily failed.  

The consequence for the Court was that liability issues, and any common issues of causation or quantum, will be decided in England in any event. Accordingly, there was no proper basis for the Court to strike out the remainder of the Claimants’ claims. There remained significant and unresolved uncertainties as to the Claimants’ ability to achieve full redress in Brazil, including with respect to the Claimants’ ability to enforce any judgment in Brazil against Samarco and possible routes of redress following Samarco’s judicial reorganisation.

As such, the English proceedings could not be said to be obviously pointless and wasteful because the Claimants were clearly able to obtain full redress in Brazil. Furthermore, the Court noted that “[t]here [was] a realistic prospect of a trial 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.” 

Article 34, Brussels Recast 

The Claimants sued BHP Group plc (BHP England) as of right pursuant to Article 4 of the Brussels Recast Regulation (Brussels Recast). Under Article 4, EU-domiciled defendants must be sued in their Member State of domicile, which in this case was England, unless a relevant exception applies. BHP England sought to invoke on Article 34, which provides an exception where proceedings are pending in the courts of a non-EU Member State.

Where the five threshold conditions for the application of Article 34 (see Judgment, [241]) are satisfied, the Court has the discretion to grant a stay of the EU proceedings.  

The Court agreed with Turner J that the first two threshold conditions were satisfied – namely, jurisdiction based on Article 4 and an action pending before the third state when the English courts were seised (in this case, the 155bn CPA). The Court, therefore, turned to the three remaining conditions set out in Articles 34(1)(a)-(c).  

Article 34(1)(a) (‘related actions’): The parties disagreed as to the correct test for ‘relatedness’ to be applied – the ‘broad’ test in Sarrio SA v Kuwait Investment Office [1991] AC 32 contended for by the Defendants or the narrower approach taken in In re Zavarco [2016] Ch 128 and Jalla v Royal Dutch Shell Plc [2020] EWHC 45 (TCC) contended for by the Claimants. The Court agreed with Turner J that the test in Sarrio was correct and would be satisfied where it was desirable for the two actions to be heard and determined together in order to avoid the risk of irreconcilable judgments, irrespective of whether that was a practical possibility. Notwithstanding, the Court did not ultimately decide on this issue, given the Claimants’ invitation to proceed on the basis (without deciding) that the 155bn CPA was a “related action” under Article 34(1)(a).  

Article 34(1)(b) (‘recognisable judgment expected’): The Claimants appealed Turner J’s Decision with respect to Article 34(1)(b) on two key points.

First, the Claimants asserted that this provision imposed a twofold condition, namely that:

i) a judgment was expected as a matter of fact
ii) the expected judgment was one which was capable of recognition and, where applicable, enforcement.

Second, the Claimants asserted that an ‘asymmetric’ judgment in Brazil would not satisfy Article 34(1)(b). Such asymmetry purportedly arose because a judgment in the 155bn CPA proceedings would only be capable of recognition if decided in favour of the Claimants.  

The Court found for BHP England on both points. First, the Court agreed with Turner J that Article 34(1)(b) contained a single requirement; namely, that the pending action was of such a character as to give rise to a judgment capable of recognition, or where applicable, enforcement. 

The Court relied, in particular, on a textual analysis of Recitals 23 and 24, and Article 34(1)(b), as well as finding additional support from the travaux préparatoires to Brussels Recast.  Second, the Court found, as did Turner J, that it was sufficient that the judgment in the pending action was “capable” of recognition.

Here, the parties agreed that a judgment in the 155bn CPA against the Brazilian Companies would fulfil the common law criteria for recognition. As such, there was no need for the factual inquiry advocated for by the Claimants.

The Court further held that, with respect to the 58 or the 13 large businesses, the assumption made in respect of Article 34(1)(a) meant that they were not in a different position from the other claimants merely by reason of the fact that they will not be bound by the 155bn CPA judgment. Article 34(1)(b) was therefore satisfied in respect of all Claimants.  

Article 34(1)(c) (‘necessary for proper administration of justice’): While several complex issues arose in relation to the principles applicable to this limb, the Court noted that the critical question was whether Turner J was right that a ‘wait and see’ stay was necessary for the proper administration of justice. In this respect, the Court highlighted the need to keep in mind that what was under consideration was a temporary, albeit potentially lengthy, interruption to the English proceedings, which will resume after the conclusion of the 155bn CPA. 

The Court agreed with the Defendants that the factors it may consider in this respect extended to any advantage to the parties or the court from a temporary stay (i.e., the ‘wide’ approach), which included both the possible redress the Claimants may receive by awaiting judgment in the 155bn CPA and typical forum non conveniens considerations.  The Court further noted that the determination under Article 34(1)(c) was an evaluative one, not an exercise of discretion, and, as such, must be made afresh irrespective of whether Turner J had erred. Notwithstanding, the Court identified several errors made by Turner J, including:  

Turner J’s reliance on the liquidation proceedings which follow the 155bn CPA was erroneous because:

i) they could not engage Article 34 as the Brazilian courts were not presently seised of them
ii) the issues to be decided (e.g., the appropriate quantum of damages in any individual case) will not be determined in the 155bn CPA.  

The ‘pandemonium’ Turner J foresaw from parallel proceedings in Brazil did not pertain to the 155bn CPA, but the pursuit of individual claims in Brazil.  

Tuner J relied on his reasoning on the abuse application, which the Court had already found to be erroneous.  

Turning afresh to whether a stay was necessary, the Court found on two alternative bases that it would not be necessary for the proper administration of justice to stay any of the claims:  

Forum non conveniens: For the reasons set out below, the Court declined to grant a stay for BHP Group Limited (“BHP Australia”) on forum non conveniens grounds. As a result, the Claimants’ claims against BHP Australia, which are practically identical to those against BHP England, would progress in England in any event.

For the Court, there was nothing in Vedanta which preluded this outcome. Indeed, it held that the inverse situation applied here, whereby BHP England sought to rely on the risk of irreconcilable judgments as supporting a stay; not that such a risk was created by the Claimants electing to sue BHP Australia in England.  

Ignoring ‘the 13’ and BHP Australia: Assuming the above was incorrect, the Court weighed and balanced the disadvantages and advantages of a stay. The key disadvantage of a stay was held to be a delay.

As the Court noted, there was a real possibility that the final resolution of the 155bn CPA, if it resumed at all, was well over a decade away. To further delay the English proceedings for this time, when the Defendants’ Application had already delayed substantial progress for three years, would accordingly be inimical to the efficient administration of justice and likely to cause substantial prejudice to the Claimants. Against this disadvantage, the Court identified five primary uncertainties besetting the potential advantages of a stay.

In particular, the uncertainty as to when the 155bn CPA would conclude and, if so, what it would address (including the liability of BHP Brazil), as well as the limited overlap in the issues between the two proceedings, meaning that the utility to the English Court of anything said in a 155bn CPA judgment was likely to be relatively small at best.   

Forum Non Conveniens 

The forum non conveniens application was (and could only be) made by BHP Australia as it was not captured by the Recast Regulation. At first instance, Turner J found for BHP Australia on the grounds that:

i) Brazil was the ‘natural forum’, noting such factors as the tort being committed in Brazil and the governing law being Brazilian law
ii) the Claimants’ evidence fell short of short of establishing that substantial justice could not be done in Brazil.

The Court first considered how to apply the two-stage Spiliada test where a foreign forum of competent jurisdiction is identified, but it is uncertain whether it is available in practice. Such an issue arose here as BHP Australia’s primary case was that the ‘alternative forum’ was a new CPA, but the Claimants’ evidence indicated a new CPA was not available to them.

For the Court, the preferred approach on the authorities and in practice was to consider such considerations at stage two. As to a potential ‘alternative forum’, the Court held that the Defendants only realistic case was a new CPA.

The two alternatives identified9 were said to all involve a multiplicity of liability proceedings resulting in the proliferation of time, effort and expense, and acute risk of inconsistent judgments, with few, if any, of the procedural and cost-sharing advantages of group actions in England. The small claims courts would also not have expert evidence and would be overwhelmed.  

The Court then proceeded to consider the two-stage Spiliada test on two alternative bases:  

Ignoring the claim against BHP England: The Claimants’ sole ground of appeal in relation to stage one of Spiliada did not arise on this approach. As such, the Court did not express a final view, but noted two possible factors that were potentially fatal to BHP Australia’s application on this limb. First, the asymmetric nature of a new CPA meant that, if it was determined against the Claimants, the only alternative ‘forum’ – the civil proceedings – was one which failed the stage one test (see [24] above).

Second, the potential delay and uncertainty as to whether a new CPA could be consolidated with the 155bn CPA could mean that there would be no forum which would produce a binding resolution of any of the parties’ rights and obligations.   

As to stage two, the Court’s finding that there was a real risk that a new CPA against the Defendants was not available to the Claimants in Brazil was essentially dispositive of the Defendants’ Application. For the Court, the only ‘alternative forum’ (see [23] above) was one in which there was a real risk that the Claimants could not obtain substantial justice. 

The Court held that Turner J’s dismissal of the significance of the Claimants’ evidence on the ‘new CPA’ point was erroneous for four reasons, including:

i) the Court agreed with the Claimants that Turner J had applied the wrong test when he considered whether substantial justice “will not” or “cannot” be done in Brazil; rather, the proper test was whether there is a “real risk” that substantial justice will not be done
ii) Turner J took into account a number of irrelevant considerations, such as the redress available in Brazil and the fact that the Claimants had not “tested the water” by seeking to persuade the MPF to commence a new CPA.

As such, the Court held the principles required to interfere with the exercise of Turner J’s discretion were engaged, and the application failed at this second stage, if not also at stage one.  

Considering the claim against BHP England: The only additional consideration for the Court on this approach was the Claimants’ sole argument regarding stage one of Spiliada.

The Claimants contended that Turner J had misapplied the principle in Vedanta that, where a defendant is amenable to suit in a foreign (and appropriate) forum, it is not a trump card, although it remains a relevant consideration, that the claimant asserts a risk of irreconcilable judgments arising from his pursuit of another defendant here as of right.

The Court rejected as immaterial several points advanced by the Claimants, including:

i) the qualified nature of the Defendants’ submission to jurisdiction in Brazil
ii) that this was not a ‘service out of jurisdiction’ case
iii) the materially identical nature of the claims against the Defendants.

Moreover, the Court agreed with Turner J that the risk of irreconcilable judgments was immaterial in the absence of a stay because there would be no foreign proceedings as the direct result of the pursuit of the claim against an adequate alternative defendant in England.   

Case Management Stay  

Having found for the Claimants on the above grounds, the Court briefly addressed the issue of a case management stay. The Respondents sought a case management stay:
i) at first instance, for the reasons advanced both in respect of their abuse and Article 34 applications
ii) on appeal until the resolution of the 155bn CPA.

In Turner J’s Decision, Turner J held that a case management stay would not be sustainable independent of his findings on the other grounds. The Court agreed with Turner J on this point. For the Court, a case management stay was not in the “interests of justice in this case” for the reasons given in respect of the abuse and Article 34 applications.

Such interests instead required the claims to proceed. Moreover, the Court held that granting a stay of the claim against BHP England would be inconsistent with Arts. 4 and 34 of Brussels Recast. Accordingly, as with the other applications, the Court allowed the appeal and dismissed this application.  

Final Comments  

The Judgment confirms that the English courts will adopt a robust defence of the foundational principle of access to justice. Although the claim involves over 200,000 Claimants, the Court held that each claimant’s claim must be assessed on its own merits and should not be dismissed as abusive without ‘scrupulous examination of all the circumstances’.

The Court has well-established case management tools to ensure claims of this nature can proceed in a timely fashion. The Court doubted whether a claim, regardless of its magnitude, could ever be said to be ‘unmanageable’ so as to deny a claimant their right to pursue an admittedly arguable claim against a defendant properly served in this jurisdiction. Some of the criticisms levelled by Turner J at first instance, were held to be unfair.  

The Judgment issues a reminder of the nature of challenges to the jurisdiction of the English courts. The Court noted the delay that the Defendants’ (wholly unsuccessful) Application had entailed, noting that “it is desirable that [such applications] should be resolved speedily and conclusively so that the parties can get on with incurring the time and cost of pursuing or defending the claim in the known forum without fear of delay or wasted expense.  Any delay or uncertainty in the allocation of jurisdiction is itself undesirable”.   

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