8/30/2022
The England and Wales Court of Appeal, in a historic decision, recognized its jurisdiction over a claim filed against a controlling shareholder based in the UK, due to damages caused by the subsidiary company in another country, in this case Brazil.
November 5, 2015, marked one of the most drastic environmental accidents in Brazilian history. The collapse of the Fundão’s dam resulted in the dumping of more than 50 million m³ of tailings. Land and water were contaminated by toxic minerals, notably the Doce’s River watershed. As a result, several cities in the States of Minas Gerais and Espírito Santo were environmentally, socially, and economically damaged[1].
In 2016, as a measure to remedy the damages, the mining company, Samarco Mineração S.A. – a joint venture formed by Vale S/A and BHP Billinton – created the Renova Foundation, an NGO aiming to repair the environmental damage and compensate the victims.
The Federal Prosecution Service, for its part, filed a public civil action seeking 155 billion Brazilian reais as reparation for the damages caused. The victims also took the initiative and currently there are more than 85,000 lawsuits in Brazil discussing the disaster[2].
However, none of the measures taken have had the expected effect and many victims have not seen yet their losses repaired.
Dissatisfied with the results achieved so far, in 2018 more than two hundred thousand Brazilians – among which, citizens, companies, municipalities and other diverse organizations – filed a class action lawsuit against Samarco’s controlling shareholder, BHP, seated in London.
In 2020, in the first instance, the claim was dismissed on the grounds that there was a risk of irreconcilable judgment, due to the lawsuits filed in Brazil. Furthermore, other factors were considered, such as the British court’s alleged lack of structure to process a demand of such magnitude and complexity. However, in July 2022, the Court of Appeal reviewed the decision and recognized the competence of the British court to process and trial the case.
It is an important precedent, since it increases the range of legal measures to be taken by injured parties, and, at the same time, the risk of the controlling shareholder being condemned to pay compensation due to unlawful acts committed by its subsidiary, even when the damages take place in another country.
The case in question is not the only one. This is an inclination that is being adopted by European and North American courts. The Netherlands, for example, will define, at the end of September this year, whether it has jurisdiction to judge lawsuits arising from damage caused by Braskem, in the State of Alagoas, and by Norsk Hydro, in the State of Pará. [3]
In this scenario, it is essential to be extra cautious when doing business in the international arena. Hence the importance of having legal counsel with technical and strategic knowledge that makes it possible to design tailor-made dispute resolution clauses, considering the specificities of each business.
The L.O. Baptista’s Dispute Resolution team warns about the importance of caution in structuring business, especially when choosing the appropriate dispute resolution method, which must guarantee effectiveness and safety.
