High Court Decision in Mariana & BHP Case Clarifies Applicability of Arbitration Clause to Non-Signatory Companies

Citation: [2023] EWHC 3281 (TCC)
Judgment on

Introduction

The High Court of Justice’s decision in Município de Mariana & Ors v BHP Group (UK) Ltd & Anor [2023] EWHC 3281 (TCC) involved complex matters surrounding the applicability of an arbitration clause to non-signatory companies and aligns directly with the intricate relationship between Brazilian law and English procedural norms. This case underscores the rigorous analytical approach courts must undertake in interpreting contracts, specifically shareholder agreements, and when considering the arbitration clause’s ambit under Section 9 of the Arbitration Act 1996.

Key Facts

The context revolves around Brazil’s worst environmental disaster - the Fundão Dam collapse - implicating Samarco Mineração S.A. (“Samarco”), of which BHP Brasil and Vale each own 50%. The defendants, BHP UK and BHP Australia, collectively deemed “BHP”, are indirect parent companies of BHP Brasil. Vale, another Brazilian company, initiated Section 9 proceedings seeking a stay of the Part 20 proceedings brought against it by BHP.

Crucially, Vale’s application rested on the assertion that even though BHP was not a signatory to the Samarco Shareholders Agreement (SHA) containing the arbitration clause, under Brazilian law, BHP should be treated as being bound by the clause. The proceedings against BHP UK in the UK courts were contingent on allegations in the Brazilian proceedings, including strict liability as a polluter, fault-based liability, and liability as a controlling shareholder under Brazilian law—all of which Vale argued fell within the scope of the arbitration clause.

The court engaged with several legal principles during its analysis:

  1. Arbitration Clause Applicability to Non-signatories: The court assessed whether under Brazilian law, which governed the SHA, non-signatories could be bound by an arbitration agreement.

  2. Matter Referred to Arbitration: Following the Supreme Court’s guidance in the case of Mozambique v Privinvest [2023] UKSC 32, the court examined whether the matters in the Part 20 Proceedings fell within the scope of the arbitration agreement by evaluating the substance of the dispute rather than mere pleadings.

  3. Interpretation of Arbitration Clauses: The case engaged with Articles 112 and 113 of the Brazilian Civil Code on the principles of contractual interpretation, necessitating a contextual approach to ascertain the intention embodied in contract language.

  4. Abuse of Process: BHP’s argument for abuse of process was based on the timing of Vale’s Section 9 application— it was pursued after a jurisdiction challenge had been decided, allegedly constituting a collateral attack on the Judgment.

Outcomes

The court determined that BHP was not bound by the arbitration clause, given the lack of direct involvement in the negotiation of the SHA and the performance of underlying contractual obligations; BHP’s actions were executed via its subsidiary, BHP Brasil. Consequently, substantive issues raised did not have arbitration as their essential or substantial matter under the clause.

Moreover, the court found that even if BHP were bound by the arbitration clause, no matters raised in the Part 20 Proceedings would fall within the ambit of the arbitration clause, including the “wide interpretation” suggested by Vale. The Honourable Mr Justice Waksman concluded that Vale’s Section 9 application for a stay was not an abuse of process yet dismissed it on the merits.

Conclusion

Mariana & Ors v BHP Group reaffirmed the autonomy of arbitration clauses while highlighting the nuanced approach required in cross-border disputes involving complex corporate structures and governance issues. The judgment is a testament to the court’s commitment to the systematic and precision-driven application of both domestic and foreign legal principles. The outcome not only provides substantial guidance on the limitations of arbitration agreements in extending to non-signatories but also confirms the importance of timely and strategic legal actions within procedural norms.