Mariana tragedy: Companies propose another BRL 90 bi in damages

The mining company Samarco and its shareholders Vale and BHP Billiton have proposed contributing another BRL 90 billion to compensate for the damage caused by the collapse of the tailings dam in Mariana, Minas Gerais. Of this total, BRL 72 billion should be transferred in cash over a period to be determined. Another BRL 18 billion should be used for measures to be implemented by Samarco.

The tragedy occurred on November 5, 2015, when around 39 million cubic meters of tailings flowed into the Doce river basin. Nineteen people died and impacts were felt by people across dozens of cities up to the mouth of the river in the neighboring Espírito Santo state.

Talks on renegotiating damages have been ongoing for over two years. More than eight years after the episode, the Brazilian judiciary is dealing with over 85 thousand lawsuits—among which public civil actions, class actions, and individual lawsuits.

The negotiating table

In addition to the mining companies, the negotiating table is composed of the federal government, the state governments of Minas Gerais and Espírito Santo, the Federal Prosecution Service and the Federal Public Defender’s Office, as well as prosecutors and public defenders from the two states affected. Until last year, the mining companies had only proposed allocating BRL 42 billion for reparation measures. The figures presented were well below the BRL 126 billion demanded by the governments and justice authorities.

The corporations’ new proposal was confirmed by Vale in a Monday (Apr. 29) statement to the market at BRL 127 billion. This figure includes, in addition to the BRL 90 billion in new contributions, a further BRL 37 billion put toward repairs by March this year.

Taking this calculation into account, the proposal would meet the expectations of governments and justice institutions. However, the other participants at the negotiating table have not yet expressed their views.

The proposal stipulates that all new resources should be contributed by Samarco. If Samarco faces any financing difficulties, Vale and BHP Billiton should be named as secondary debtors and will share responsibility for payments equally. In other words, each would assume the obligation to pay half of the amounts.

The new deal comes just over three months after the companies were defeated in court. Faced with difficulties in reaching a settlement agreement, court athorities, led by federal prosecutors, had been asking since last year for a ruling on a portion of the public civil actions, in the hopes of a final decision on at least some of the issues, including compensation.

In January this year, the federal court authorities had ordered Samarco, Vale, and BHP to pay BRL 47.6 billion to repair the collective moral damage caused by the collapse, in a case led by federal prosecutors and started last year. The companies are currently appealing the decision. If the settlement agreement is signed, this ruling could be reversed, as clauses must be included in which the parties withdraw from ongoing lawsuits.

The opposing side

Organizations representing the people affected were not invited to take part in the negotiations. They are critical of the mining companies’ new compact, and argue it amounts to BRL 72 billion, thus insufficient to cover full compensation. The Movement for the People Affected by Dams—MAB in the original Portuguese acronym—expects that the offer will be rejected by the governments and the justice institutions. The organization believes that, if a new summit agreement is reached without the participation of the victims, the main problems will not be resolved.

Dissatisfied with the progress of the case in Brazil, approximately 700 thousand victims have filed a lawsuit in the UK targeting BHP Billiton, which is based in London. The law firm Pogust Goodhead, which represents them, released a note that cast doubt on whether the mining company’s new offer would include individual compensation for the victims. The text includes a statement by Tom Goodhead, the firm’s CEO. “It does not resolve the lawsuits brought by almost 700 thousand victims in London. The victims have been excluded from this process and the offer does not meet their demands for justice.”