Brazil dam disaster suit returns to haunt BHP Billiton
BHP has suffered a legal setback in Brazil, with a court reinstating an $8.3bn civil suit over the Samarco dam disaster.
BHP Billiton has suffered a legal setback in Brazil, where a civil suit over the Samarco dam disaster has been reinstated by the nation’s Superior Court of Justice.
The complicated case relates to the tragic Bento Rodrigues tailings dam collapse last November, linked to a mine run by Samarco, a joint venture of mining giants BHP and Vale.
BHP, Vale and Samarco had initially been hit with a civil public claim worth 20 billion reals ($8.3bn) before they reached agreement with Brazil’s federal government and two state governments on a proposal that would see $US2.3bn ($3.1bn) pledged over the next six years, as part of a broader 15-year recovery plan.
The latter agreement was reached in March and ratified by the Federal Court of Appeal in Brasilia on May 5.
It was a win for BHP (BHP) and Vale, as they sought to avoid a higher payout.
However, an appeal from the Federal Prosecutors’ Office has altered the state of play, with the Superior Court of Justice issuing an interim order suspending the decision of the Federal Court of Appeal.
It means the initial civil public claim for $8.3bn over damages and clean-up costs has been reinstated, making the potential payout a murky issue once again.
“BHP Billiton Brasil intends to appeal the decision of the Superior Court of Justice,” the miner said in a statement relating to the development.
“In the meantime, Samarco will continue to support the long-term recovery of the communities and environment affected by the dam failure.”
The ratification of the March agreement was seen as crucial to the groups avoiding a significantly higher payout as it followed on the heels of a $58bn lawsuit lodged by federal prosecutors in Brazil on the back of a six-month investigation.
That $58bn suit, separate to the $8.3bn claim, was seen to be greatly weakened by the ratification of the March deal, which is why federal prosecutors appealed the decision.
Ratings agency Standard & Poor’s at the time said the credit outlook for the Samarco JV partners was not under threat given the ratification of the March framework agreement.
“We understand that the same court, which ratified the March 2016 agreement, will decide whether the ($58bn) lawsuit proceeds or not,” the ratings agency said.
“The decision will also likely take into account the identified damages and restoration costs that were covered by the agreement, as well as addressing new claims (if any) under the new suit.”
The agency added it would wait on future judgments to determine whether credit ratings would come under pressure.
At 10.45am (AEST), BHP shares surged 3.5 per cent as investors shrugged off the development and instead focused on a global risk-on rally.
