BHP considering its options after Samarco ruling

BHP (ASX:BHP) is thinking of appealing its loss in a British court on Friday in a £5 billion ($US8.7 billion) lawsuit brought against it by 202,600 Brazilian claimants who are suing Samarco over the tailings dams disaster in 2015.

The decision saw BHP shares drop 1.9% in London and more than 2% in New York.

Britain’s Court of Appeal ruled that the lawsuit, which will be one of the biggest cases by value in the English courts, can go ahead to trial. The three judges overturned an earlier decision that the courts should not hear the case, which was filed in 2018.

Before that can happen, BHP will probably appeal to the UK’s Supreme Court.

The lawsuit centres around Brazil’s worst ever environmental disaster in 2015, when the Fundão Dam at the Samaco iron ore mine and pellet-making plant (half-owned by Vale) collapsed, releasing around millions of cubic metres of tailings which then swept away vegetation, villages and killed 19 people.

In the lawsuit, the Brazilian claimants allege their homes and livelihoods have been damaged by the disaster and are claiming compensation of at least £5 billion ($A8.7 billion).

It was followed less than four years later by another even larger dam disaster at an iron ore mine owned solely by Vale. The Brumadinho accident in 2019 killed 270 people and was even more destructive.

The Court of Appeal said the overlap with the Brazilian legal proceedings was “relatively limited.”

“The vast majority of claimants who have recovered damages have only received very modest sums in respect of moral damages for interruption to their water supply,” the judges said.

BHP said Friday’s judgment was a decision about jurisdiction and not related to the merits of the claim. The miner said it would review the ruling carefully and consider its next steps, which include an appeal to the Supreme Court.

“We will continue to defend the action, which we believe remains unnecessary as it duplicates matters already covered by the existing and ongoing work of the Renova Foundation under the supervision of the Brazilian Courts and legal proceedings in Brazil,” the company said.

“By the end of this year, around £4.5bn will have been spent in Brazil on reparation and compensation programs for those impacted by the dam collapse.”

BHP and Vale set up the Renova Foundation in 2016 with Vale to carry out repair and compensation work. BHP believes the quickest and fairest way to settle claims is through the programs managed by the foundation.

Tyler Broda, analyst at RBC Capital Markets, told the Financial Times that Friday’s ruling was a “modest negative”.

“The process is still likely to take some time, especially if BHP pursues an appeal to the UK Supreme court,” he said. “In addition, there is considerable potential that these claims are covered by Renova.”