BHP hit with $7.2 billion claim for Brazil dam collapse

BHP Brazil dam collapse Samarco Vale claim Fundao tailings dam
BHP faces a $7.2 billion lawsuit in the UK over the 2015 Brazil dam failure that saw 19 people lose their lives.

The world’s biggest miner, BHP (ASX: BHP), has been hit with the UK’s biggest damages claim of $7.2 billion for its part in the 2015 Fundao tailings dam failure in Brazil.

The failure of the dam killed 19 people and sent about 40 million cubic metres of toxic sludge through various communities on the Rio Doce river, before eventually spilling into the Atlantic Ocean 650km away and polluting beaches.

While the more recent January collapse of a Vale-operated tailings dam in the town of Brumadinho in Brazil killed an estimated 300 people, the Fundao dam collapse is still regarded as being the biggest environmental disaster in Brazil and has led to massive compensation and remediation work by BHP and its Samarco joint venture partner, Brazil’s Vale.

Claim made on behalf of 235,000 people

The claim was served on BHP by law firm SPG Law on behalf of 235,000 Brazilian individuals and organisations, including municipal governments, utility companies, indigenous tribes and the Catholic Church.

The claim argues that BHP was “woefully negligent” leading up to the 2015 Brazil dam failure, failing to act on repeated warnings from independent safety experts.

It also says that iron ore output was increased despite these safety concerns, placing the pursuit of profit over human and environmental risk.

Negligent BHP put profits ahead of people – claim

“Driven by concern for declining revenues amid the falling market price of iron ore, the company took risks, increased production and turned a blind eye to dangers that ultimately claimed lives and destroyed communities,” said SPG Law partner Tom Goodhead, which is representing claimants.

“BHP was woefully negligent in its duty of care and the damages sought are entirely commensurate with the devastation the company has wrought,” he said.

Samarco dam disaster Brazil
The impact of the dam collapse devastated surrounding communities.

Brazil charged 22 people in 2016 with offences, including murder, over the Fundao dam’s collapse.

Last year BHP and Vale settled a $7.4 billion civil claim with local authorities to establish a clean-up fund.

Other public cases, such as a $57 billion civil reparation case, are suspended.

BHP fighting on several legal fronts

BHP, which has separately settled a US investor class action and continues to battle Australian shareholder lawsuits, has rejected all charges against the company, as well as current and former staff.

This claim – which was lodged in the UK because BHP is a joint UK and Australian company – has compiled a massive 6.3 million pages of evidence showing loss and suffering.

Mr Goodhead said he expected BHP to argue that is was already compensating those affected but he said many of the people represented by the claim had received virtually nothing.

Some of those claims included a man who was left mute after watching his brother die engulfed in mud and a man who was shot in the legs by someone who wanted to take some of his bottled water and was left paralysed from the waist down.

Claimants also include 130 members of the indigenous Krenak community whose “entire way of life has been utterly devastated”.

One of the central legal arguments about the claim is expected to focus on jurisdiction and control, with the fact that the Samarco joint venture between BHP and Vale had its own management team and the fact that legal claims can be made in Brazil rather than the UK likely to be used as a defence by BHP.

However, in the claim SPG Law says that BHP was kept fully informed about safety issues at Samarco but still took no action.

BHP is also facing a class-action lawsuit from shareholders in Australia over the dam failure, over claims it failed to disclose the risk of the dam’s failure to the stock market and misled investors.

John is a highly experienced business journalist and formerly chief business writer for the Herald Sun. He has covered Federal politics in Canberra, was Los Angeles Bureau chief for News Limited and was also chief of staff for the Herald Sun. He has covered a wide range of small and large cap ASX stocks and has a special interest in mining, technology and biotech.