...and our largest (well, second largest) corporate making possibly the largest mistake in Australian corporate history.
...this is only going to drag its reputation and corporate execs into the open, its earlier takeover efforts to distract attention didn't work. BHP built ‘wall of omerta’ to fight Samarco lawsuit, court told Hans van LeeuwenEurope correspondent
Oct 22, 2024 – 6.48am
London | BHP is “cynically and doggedly” shirking responsibility for the Samarco dam disaster in Brazil, and has built “a wall of omerta” around past and present executives who could shed light on what happened, according to allegations aired in a London courtroom on Monday.
The allegations came in the claim filed by law firm Pogust Goodhead on behalf of its 620,000 Brazilian clients, who are seeking £36 billion ($70 billion) in reparations from BHP – one of the biggest class actions in English history.
As day one of the trial got underway in London on Monday, protesters from indigenous groups in the afflicted region of Brazil stood outside holding placards and bottles of polluted water from the River Doce.
Pogust Goodhead looks set to use the case, which will last until March, to advance not only legal arguments in favour of more compensation, but also to try to besmirch BHP’s image as an ethically and environmentally responsible miner.
In its opening statement, the firm accused BHP of being “driven by a relentless pursuit of profits”, at the risk of compromising safety.
Pogust Goodhead also critiqued what it called the company’s “years of self-serving public proclamations” on safety, and claimed these were at odds with BHP’s allegedly obstructive behaviour during the prolonged legal wrangling over this class action.
The case relates to the 2015 collapse of the Fundao tailings dam at the Germano iron ore mine. The mining complex was run by Samarco, a 50-50 joint venture between BHP and the Brazilian giant Vale.
The collapse unleashed an avalanche of mud into hundreds of kilometres of waterways. Nineteen people were killed, thousands were made homeless, livelihoods were lost and water supplies were contaminated. Samarco and its two owners have already spent almost $12 billion on compensation, reconstruction and environmental remediation.
BHP is trying to land a fresh settlement in Brazil itself, and at the weekend said its latest offer to the federal and state governments totalled 170 billion Brazilian reais ($45 billion).
It says this process would address the outstanding issues, whereas an English court case would drag out, at a cost of hundreds of millions of pounds on each side, into the late 2020s.
But Pogust Goodhead has since 2018 been trying to get a case heard in the English legal system, saying the Brazilian deal will short-change its clients. It also stands to take a 20 to 30 per cent cut of any winnings.
After years of tussle, the firm was finally able to get the case to trial – even though a large chunk of the case will in effect ask an English judge to rule on questions of Brazilian law.
Pogust Goodhead claims that Brazil’s environmental and corporate law and its civil code set up a strict liability for BHP as Samarco’s half-owner.
BHP is putting up its own experts on Brazilian law, and its defence filing claimed Pogust Goodhead is relying on “often extreme, expansive and novel interpretations of Brazilian law”, along with “far-fetched and untenable inferences”.
But even before the two sides can wrangle over the finer points of Brazilian statute, they will first argue over whether Samarco was an independent and autonomous company, or whether BHP was calling the shots – and therefore responsible for what happened.
On the first day Pogust Goodhead’s barrister, former table tennis Olympian Alain Choo Choy, KC, argued that BHP and its executives were aware of the risks with the tailings dam.
He alleged that they drove expansion plans, and allowed Vale to dump tailings into the dam from its own nearby mine, and that put pressure on the dam and contributed to its collapse.
BHP argues that its engagement with Samarco was limited to having personnel on the board of directors, which set strategy rather than reviewed operations and risks at a granular level.
The company’s statement said when its staff were acting in their capacity as Samarco directors, their fiduciary duty was to Samarco’s interests, not BHP’s.
BHP accused Pogust Goodhead of “completely fail[ing] to acknowledge the separate legal personalities … and seek[ing] repeatedly to pierce the corporate veil in order to attribute liability for Samarco’s operations to BHP”.
In court, Mr Choo Choy argued that Samarco’s executives were “intimately accountable to the board, and they are ultimately subservient to the will of the board”.
The Samarco board’s decisions could “only be made by the joint agreement of its BHP and Vale shareholders. … The real driver of decisions at board-of-director level was what BHP and Vale decided to do”.
A group of former BHP bosses from the region will be called to the witness box in the coming weeks to probe this claim, including one still-serving executive, Max Wetzig.
But many have declined: some are under criminal investigation in Brazil and have invoked their right not to self-incriminate, while others such as former chairman Jac Nasser and former CEO Andrew Mackenzie have not been called.
Pogust Goodhead said there were precedents in English law allowing the judge, Justice Finola O’Farrell, to “draw inferences” from their absence. In its opening statement, the firm said there was no “legal principle which compels the court to shut its eyes to the fact that BHP appears to have funded and encouraged this wall of omerta”.
The law firm also took aim at BHP for challenging the eligibility of some key claimants to participate in the class action.
BHP’s statement argued that the 46 municipal councils in the suit, whose claims could amount to one-fifth of the total, cannot engage in foreign court action. It said this was a constitutional prerogative of the national government alone. The company also argued that 200,000 claimants had already received compensation, and had signed contracts waiving their right to bid for more.
Pogust Goodhead’s statement argued that the waivers were invalid under Brazilian law, and contested BHP’s interpretation of international and constitutional law for the municipal councils. It has characterised this as legal chicanery designed to frustrate the court process.
“This is not BHP facing up to its responsibilities but cynically and doggedly trying to avoid them,” its statement said.
