High Court shows willingness to accept jurisdiction in Brazilian ESG dispute

Katie Hancock, commercial litigation expert at Pinsent Masons, said: “This decision is another in a line of recent decisions in which the English courts have been willing to accept jurisdiction in the face of arguments that the claimants would be unable to access appropriate legal assistance in their own countries.”

The dispute (29 pages/359 KB) revolved around a claim brought by members of an indigenous community in Brazil against two UK domiciled mining companies, Brazil Iron Limited (BIL) and Brazil Iron Trading Limited (BITL). The claim alleges that BIL and BITL exercised control over a Brazilian subsidiary and are liable for losses caused by the subsidiary’s operation of an iron ore mine, which allegedly polluted the environment, amongst other alleged wrongs. The case was issued in the High Court in London. The defendants, BIL and BITL, challenged the jurisdiction of the English court, arguing that the claim should be brought in Brazil. However, the claimants contended that the claim had a closer connection with the UK and that they would be unable to access legal representation in Brazil.

BIL and BITL argued that the claim should be heard in Brazil as that is where the mine is based, with the alleged harm having taken place in Brazil. Further, the companies said the relevant witnesses were based in Brazil and relevant documents, which were in Portuguese, could be found there. The companies also argued that the Brazilian courts would be better placed to hear the dispute because there was otherwise a risk of a judgment irreconcilable with Brazilian proceedings.

BIL and BITL put forward evidence that the English court accepting jurisdiction would discourage foreign investment in the Brazilian state, arguing that the claimants’ legal representation “meddling in Brazilian matters” may be illegal. In an effort to mitigate complaints by the claimants that they would not have reasonable access to legal support in Brazil, BIL and BITL offered to meet the costs of the community’s expert technical assistants. They further agreed that they would submit to the jurisdiction of the Brazilian court and to comply with its orders.

Sylvia Tonova, arbitration expert at Pinsent Masons, said: “The decision exemplifies the risks faced by mining companies in their global operations. Not only are mining companies exposed to political risk in the host countries where they operate, but they may also be exposed to litigation risk in their home state. To manage those political and environmental, social and governance risks, it is critical that mining projects are protected by investment treaties and mining companies apply strong management of environmental, social and governance issues to ensure sustainable and responsible business practices.”

While the court found that the subject matter of the claim was more closely connected with Brazil, the court decided that the claim should be heard in England. The court found that there was a real risk the claimants would not be able to obtain substantial justice in Brazil whereas, in England, the claims could be pursued on the basis of conditional fee agreements.

The court rejected BIL and BITL’s offer to fund the claimants’ experts, holding that “equality of arms” would require the claimants to have the same access to experts working for them as the defendants. In reaching that conclusion, the court cited a recent Court of Appeal decision against Dyson in which a similar offer was explored. In the Dyson case, the Court of Appeal found a number of factors other than access to legal representation which weighed in favour of the claim being heard in England, including evidence that relevant documents and witnesses were based in the UK.

In this case, the court found that the subject matter of the claim was more closely connected with Brazil but still held that the claim should be heard in England. The court commented that “the discussion in Dyson leads to the unsurprising conclusion that it is not fair for a Defendant to have any degree of control over a claimant’s expert evidence, whether paying for it or otherwise.”

Hancock said: “Both the Dyson claim and this claim are relatively low value. It will often be difficult for claims of this nature to be brought in jurisdictions where different rules on recovery of legal costs and the use of CFAs make it uneconomical for would-be legal representatives to act for the claimants. However, this judgment is likely to be encouraging to others seeking to bring claims against UK-headquartered companies in respect of alleged wrongs taking place overseas.”