Scott Lester may only have been in the risk hot seat at BHP for just over two years, but he is already having to deal with one of the mining giant’s highest profile disasters. The London High Court has delivered a stinging judgment against BHP Group, declaring the mining giant liable under Brazilian law for the catastrophic failure of the Fundão tailings dam a decade ago – a finding that could reverberate through the global market for mining and environmental liability cover.
In a 222-page decision handed down at the Royal Courts of Justice, Mrs Justice Finola O’Farrell held that the decision to continue raising the dam wall when it was unsafe was the “direct and immediate cause” of the collapse in November 2015. The disaster in Minas Gerais killed 19 people, destroyed communities along the Doce River and has long been described as Brazil’s worst environmental calamity.
The ruling exposes BHP, headquartered in the UK but listed in London and Sydney, to a claim valued at £36 billion brought by more than 600,000 Brazilian claimants, including individuals, businesses and public authorities. A further hearing has been scheduled next year to decide the quantum of damages.
BHP said it would appeal, telling investors that “the Fundao dam failure at Samarco was a tragedy that should never have happened” and pointing to the role it has played in reparations since 2015. The company said that “BHP Brasil, Vale and Samarco have provided $13.4 billion for reparation and compensation to affected people and to public authorities in Brazil” and that compensation or financial aid had been paid to more than 610,000 Brazilians.
For insurers and brokers, the judgment is notable not only for its scale but for the way the court applied Brazilian environmental law to a London-based parent with an indirect role in the operation of the facility. The dam was run by Samarco Mineração, a 50:50 joint venture between BHP and Vale, but the court rejected arguments that responsibility ended at the level of the operating company.
Mrs Justice O’Farrell noted that it was “common ground” between the parties that Brazilian law applied to the dispute. She explained that any business directly or indirectly responsible for polluting activity is treated as a polluter under that law, with liability extending to those who control, finance, participate in or profit from the activity or who create the relevant risk.
The judge found that the collapse was the result of negligence, supported by “overwhelming” evidence that the dam was unstable and that the risk of failure was foreseeable. Arguments that Samarco alone should be treated as the operator failed, leaving BHP squarely within the scope of liability.
Claimants’ lawyers described the ruling as a watershed moment. Alicia Alinia, chief executive of Pogust Goodhead, the firm representing the claimants, said it was “the first time that any of the companies behind the dam collapse have been held to account” and that the judgment delivered “long-overdue justice to the thousands whose lives were torn apart”. She said it sent a message to multinational companies that “you cannot disregard your duty of care and walk away from the devastation you caused” and argued that “BHP is now compelled to answer for its actions and pay what is owed”.
The litigation in London runs alongside a substantial settlement process in Brazil. Under an agreement with Brazilian authorities, Samarco – half owned by Vale – committed to pay 132 billion reais over 20 years for human, environmental and infrastructure damage. The High Court has held that those who received money under that settlement may still lodge claims in England, though any waivers they signed could limit what they can recover.
BHP had previously insisted that the English proceedings duplicated Brazilian actions and were unnecessary. In 2019, it successfully sought to add Vale as a co-defendant, but a subsequent settlement between the two companies removed the Brazilian miner from the London claim while leaving it liable for 50 per cent of any damages BHP is ultimately required to pay.
Attention now turns to how such a judgment interacts with BHP’s complex risk-financing arrangements. The group relies on a combination of global commercial programmes and internal vehicles, including its Guernsey-based captive and specialist insurance entities that sit at the centre of its risk, insurance and audit framework. Those structures, overseen at group level alongside BHP’s risk management framework and three-lines-of-defence model, are designed to absorb and transfer large operational and liability exposures across the portfolio.
However, the sheer scale of the Brazil claims – encompassing personal injury, property damage, business interruption and long-tail environmental harm – means that any available cover is unlikely to come close to the headline figures. Mining property programmes, general liability and environmental impairment policies typically carry substantial deductibles, sub-limits for tailings-related losses and stringent pollution exclusions.
Reinsurers have already tightened their stance on high-hazard tailings dams since both the Fundão collapse and subsequent failures in Brazil. Underwriters now demand detailed disclosure of dam design, independent stability reviews and emergency response planning, with some markets declining to write such risks at all.
For London market participants, the BHP decision underscores two trends: courts’ willingness to look beyond the immediate operator to the ultimate economic beneficiaries of hazardous activities, and the increasing tendency of mass-claimant groups to forum-shop for jurisdictions that promise more robust redress. Both developments raise the prospect of parent-level exposure for multinational resource groups whose risk transfer arrangements were originally structured around operating-company liabilities.
The combination of Brazilian environmental law, English civil procedure and a global claimant bar adept at pursuing cross-border actions means that mining companies – and their insurers – may have to rethink how they assess and price tailings-dam risk. The High Court has yet to grapple with the detail of quantum, but its liability findings will already be prompting close scrutiny of policy wordings, aggregation clauses and reinsurance protections across the sector.
For BHP, the immediate impact was a fall of more than 2% in its London-listed shares and an undertaking to reassess its financial provisions. For the insurance market, the ruling is likely to become a reference point in every future discussion about the insurability of catastrophic mining losses – and about where, in the end, the bill for systemic failures in tailings management is likely to land.
