The Mariana Dam Case – The Verdict on Costs

In a recent judgment[1] in the ongoing high-profile mass civil litigation concerning the collapse of the Fundão Dam in Brazil, the Court has determined costs following the conclusion of the stage 1 trial on liability. 

Costs order sought

The judgment on liability decided that BHP was strictly liable under Brazilian environmental law for the collapse of the dam, and the Claimants’ costs of the trial were £189 million. The Claimants sought payment on account of their costs in the sum of £113.5 million (i.e. 60% of their total costs incurred), together with pre-judgment interest at the commercial rate of 1% above base rate on their costs as from 1 August 2023.

The Defendants resisted the application, on the basis that:

• the sums sought were excessive and insufficiently evidenced;
• the Claimants were not entitled to interest on pre-judgment costs because the legal fees or disbursements were funded and the Claimants were therefore not “out of pocket”; and
• if an order for costs was to be made it should be limited to the costs of the stage 1 liability trial, with the application of a percentage reduction to the sum awarded to reflect the parties’ relative success and failure on issues.

Decision

Costs

The Court concluded that the Claimants had succeeded on the key issues of liability and were therefore, as the successful party, entitled to recover their costs against the Defendants.

In determining the appropriate costs order, the Court considered the extent to which time and resource had been devoted to the pleaded issues, reports, oral evidence and submissions. The Court considered the Claimants' evidence to support their costs incurred and determined that a significant proportion of the costs claimed were not recoverable as part of the stage 1 trial costs, including costs relating to (for example) claimant sign up, processing claimant details, taking instructions and certain costs relating to funding and insurer issues. 

Having excluded those sums, the Court ordered: (i) the Defendants to pay 90% of the Claimants’ costs; (ii) a reduction in the Claimants’ recoverable costs from £189 million to £80 million; and (iii) a payment on account of approximately £43 million.

Interest on funded costs

The Claimants’ solicitors obtained funding for the litigation such that the Claimants would not pay costs unless and until any damages were awarded. The Court held that the Claimants should be entitled to compensation for the funding expenses they will owe from any damages award - the fact that their solicitors and/or funders had assumed the risk of only being repaid from those damages did not detract from that position.

The Court awarded pre-judgment interest on costs, at the rate of 1% above base rate from 1 August 2023.

Comments

The Stage 1 trial decision marks an important development for cross-border ESG litigation. The Court held BHP liable for the dam collapse and the resulting physical, environmental and socio-economic damage it caused, demonstrating that global parent companies can be found liable for the actions or omissions of their subsidiaries. It is important that multinational companies implement robust risk management practices - inadequate environmental safeguards that lead to harm may expose them to multi-jurisdictional claims and significant costs risks.

This case shows that robust evidence may be the difference between a meaningful financial recovery and substantial reductions, and that Claimants may be entitled to interest despite not having personally incurred any costs, confirming that conditional funding structures do not negate the entitlement to interest.

At Burges Salmon we have experience with helping clients manage the cost and risk of litigation, including through alternative fee arrangements. 

Written by Christina Evered and Christopher Wenn