UK COURT GIVES THE GREEN LIGHT TO MASS ENVIRONMENTAL CLAIM

In a significant development for environmental litigation in the U.K., the English Court of Appeal has allowed a £5 billion damages claim brought by around 200,000 Brazilian individuals and other persons to proceed against mining company BHP. The judgment should sound a warning bell for U.K.-based parent companies with overseas operations since it provides another example of the growing risk of ESG litigation, which is increasing internationally.

The claim before the Court of Appeal concerned the collapse of the Fundão dam in the city of Mariana in Brazil in 2015^[1]. The collapse devastated more than 400 miles of the Rio Doce through to the Atlantic coast.

Before the High Court, the claimants had sought to bring damages claims, under Brazilian law, against the English and Australian group parent companies of BHP. The High Court struck out the claims as an abuse of process, including on the basis that they were said to be “irredeemably unmanageable.” The sheer scale of the litigation, including the number of claimants and the risk of irreconcilable conflicting decisions arising from parallel litigation in Brazil were key factors in the Court’s decision. The High Court went on to conclude that, even if the claims were not unmanageable, there was nothing to be gained by the claim in the English courts and therefore permitting the claimants to proceed was “pointless and wasteful” and could lead to a disproportionate use of “the scarce resources of the English courts.”

On appeal, the Court of Appeal found that the High Court had been wrong to strike out the claims. The claims were viable and not abusive as there was a realistic prospect of the claimants succeeding at trial in England and the remedies available in Brazil were not so obviously adequate that it could be said to be pointless and wasteful to pursue proceedings in England. Additionally, the risk of irreconcilable decisions in Brazil should not have factored into the High Court’s decision as to whether the claims were an abuse of process. The Court of Appeal noted that the claims are not oppressive—the claimants are not also suing the defendants in Brazil and the basis for liability asserted in England is factually distinct from that of the Brazilian claims.

The Court of Appeal also suggested that it was wrong to deny access to justice due to the unmanageability and burdensome nature of the proceedings—that a claim is said to be unmanageable does not make it an abuse. The Court of Appeal had “considerable doubts as to whether proceedings can ever truly be said to be “unmanageable”” and it took into account that the claimants had provided the Court with “clear illustrations of case management options.”

Interestingly, the Court referred to the Supreme Court’s finding in the Merricks competition class action^[2] that expense or difficulty of litigation could not deny “practicable access to justice” to a litigant or class of litigants who have a triable cause of action. BHP has said that it is currently considering whether to seek permission to appeal to the U.K. Supreme Court.

Comment

What does this decision mean? Following the recent Supreme Court decisions in Okpabi v Royal Dutch Shell Plc^[3] and Lungowe v Vedanta Resources Plc^[4], the BHP case is the latest in a line of cases where large groups of individuals have sought redress against U.K.-based parent companies in the English courts for alleged environmental damage caused by their subsidiaries in developing economies. The decision once again demonstrates the English courts’ willingness to entertain such claims. More specifically, it shows a disinclination to allow the case management difficulties that the vast scale and complexity of such cases create (or the fact of parallel claims in the countries where the environmental damage occurs) to impede their progress through the English courts.

While the contours of mass environmental and, more broadly, ESG claims in the U.K. (and elsewhere) are still taking shape, with the scope for mass environmental damage around the world expected to increase over the coming years, this decision may further encourage potential claimants impacted in countries outside the U.K. to initiate claims against U.K.-based parent companies before the English courts.

Subject to any appeal to the Supreme Court, the English courts appear to be declaring themselves a forum open for justice in these types of cases. U.K.-based parent companies should take note.