Law firm rejects accusations over BHP Brazil dam settlement

City lawyers advising on a £36 billion claim over Brazil’s worst environmental disaster have been accused of pressuring clients to reject a settlement offer.
Rubens Barbosa, Brazil’s former ambassador to the UK, claimed that Pogust Goodhead, the law firm, is encouraging hundreds of thousands of claimants to refuse to participate in a deal agreed last week that would mean claimants sharing nearly £24 billion in compensation for the Mariana dam collapse.
That deal was struck between the Brazilian government and BHP, the Anglo-Australian mining company at the centre of claims that it caused the disaster that killed 19 people in 2015.
The dam’s collapse was also said to have triggered an avalanche of toxic waste that spilled into several local communities.
In total, 620,000 individuals are represented in the High Court class action, along with about 2,000 businesses and dozens of local municipalities.
BHP, which is represented by Slaughter and May, one of the City’s “magic circle” law firms, has denied the claims in the High Court, and its lawyers have argued that the class action duplicated the negotiations over reparations in Brazil.
Speaking to The Times on Tuesday, Barbosa, a Brazilian lawyer who is unconnected to the claim, accused Pogust Goodhead of encouraging claimants to reject the deal and stick with the High Court claim, which is the UK’s biggest class action law suit. “This is a very worrying development,” he said.
Pogust Goodhead’s involvement in the class action is being backed by Gramercy, a US emerging markets fund that is financing the litigation.
Third-party funding of litigation is controversial. Last week The Times revealed that some of Britain’s leading retailers are facing millions of pounds in damages from a string of legal actions over equal pay that are being backed by funding companies.
The law firm and Gramercy are working on a damages-based agreement, which would result in up to 50 per cent of the compensation being paid to them if the claim is successful in court.
Barbosa, who was Brazil’s ambassador in the UK in the 1990s before taking the top role at the country’s embassy in Washington, also called on the High Court judge in London to drop the case. “This is a matter of Brazilian sovereignty,” he said, arguing that now that the Brazilian government had made a settlement offer, the issue should not be “judged twice”.
Barbosa and other backers of the Brazil government settlement have argued that even if successful in the UK court case, claimants would be unlikely to receive compensation payments until 2028 at the earliest.
They have maintained that, in contrast, the settlement deal agreed in Brazil will result in the first tranche of payments — estimated to be about £675 million — being made this year.
It is understood that the settlement deal would result in eligible individuals and small businesses receiving about £4,000 each, with an additional £1,700 for those who claimed for water damage.
The deal is also said to involve a total £1.8 billion payment to indigenous and traditional communities.
Tom Goodhead, chief executive of Pogust Goodhead, rejected Barbosa’s allegations. “These comments are ill-informed both as to the issue of jurisdiction having been comprehensively determined by the English courts, and also the obligations of a law firm such as Pogust Goodhead to advise its clients as to the consequences of entering into any settlement agreement, particularly in the context of transnational litigation,” he said.
Goodhead added that as Luís Roberto Barroso, the president of Brazil’s supreme federal court, and other local “judges, politicians and public prosecutors and defenders have recognised, the litigation brought in England has been a primary driver of BHP’s settlement with the Brazilian authorities.
“Pogust Goodhead’s clients are, however, concerned that the large bulk of the Brazilian settlement will go to governments — federal and state — rather than directly to the victims, and the amounts offered to victims are still far too low for the vast majority of claimants in the English case.”