Page 188 - Annual Report 2020

4 Significant events – Samarco dam failure continued
Contingent liabilities
Key judgements and estimates The following matters are disclosed as contingent liabilities and given
Judgements the status of proceedings it is not possible to provide a range of
possible outcomes or a reliable estimate of potential future exposures
The outcomes of litigation are inherently difficult to for BHP, unless otherwise stated. Ultimately, all the legal matters
predict and significant judgement has been applied disclosed as contingent liabilities could have a material adverse
in assessing the likely outcome of legal claims and impact on BHP’s business, competitive position, cash flows,
determining which legal claims require recognition of a prospects, liquidity and shareholder returns.
provision or disclosure of a contingent liability. The facts
and circumstances relating to these cases are regularly Federal Public Prosecution Office claim
evaluated in determining whether a provision for any BHP Brasil is among the defendants named in a claim brought by the
specific claim is required. Federal Public Prosecution Office on 3 May 2016, seeking R$155 billion
Management has determined that a provision can only (approximately US$28 billion) for reparation, compensation and
be recognised for obligations under the Framework moral damages in relation to the Samarco dam failure.
Agreement and Samarco Germano dam decommissioning The 12th Federal Court previously suspended the Federal Public
as at 30 June 2020. It is not yet possible to provide a Prosecution Office claim, including a R$7.7 billion (approximately
range of possible outcomes or a reliable estimate of US$1.4 billion) injunction request. Despite suspension of the claim
potential future exposures to BHP in connection to the being for a period of two years from the date of ratification of the
contingent liabilities noted below, given their status. Governance Agreement on 8 August 2018, the claim has not been
Estimates resumed and the parties may negotiate a further extension.
The provisions for Samarco dam failure and Samarco United States class action complaint – Samarco bond holders
Germano dam decommissioning currently reflect the On 14 November 2016, a putative class action complaint (Bondholder
estimated remaining costs to complete Programs under Complaint) was filed in the U.S. District Court for the Southern
the Framework Agreement and estimated costs to District of New York on behalf of purchasers of Samarco’s ten-year
complete the Germano dam decommissioning and bond notes due 2022-2024 between 31 October 2012 and
require the use of significant judgements, estimates and 30 November 2015. The Bondholder Complaint was initially filed
assumptions. Based on current estimates, it is expected against Samarco and the former chief executive officer of Samarco.
that approximately 75 per cent of remaining costs for The Bondholder Complaint was subsequently amended to include
Programs under the Framework Agreement will be BHP Group Ltd, BHP Group Plc, BHP Brasil, Vale and officers
incurred by December 2021. of Samarco, including four of Vale and BHP Brasil’s nominees
While the provisions have been measured based on to the Samarco Board. On 5 April 2017, the plaintiff discontinued
latest information available, likely changes in facts and its claims against the individual defendants.
circumstances in future reporting periods may lead to The complaint, along with a second amended complaint, has
revisions to these estimates. However, it is currently not previously been dismissed by the Court. The plaintiff filed a motion
possible to determine what facts and circumstances may for reconsideration, or leave to file a third amended complaint,
change, therefore the possible revisions in future which was denied by the Court on 30 October 2019. The plaintiff
reporting periods cannot be reliably measured. has appealed this decision and the appeal remains pending before
The key estimates that may have a material impact the Court.
upon the provisions in the next and future reporting
periods include: The amount of damages sought by the putative class is unspecified.
• timing of repealing the fishing ban along the Rio Doce, Australian class action complaints
which is subject to certain regulatory approvals and BHP Group Ltd is named as a defendant in a shareholder class action
could impact upon the duration of financial assistance filed in the Federal Court of Australia on behalf of persons who
and compensation payments; acquired shares in BHP Group Ltd on the Australian Securities
• number of people eligible for financial assistance and Exchange or shares in BHP Group Plc on the London Stock Exchange
and Johannesburg Stock Exchange in periods prior to the Samarco
compensation, as duration of registration periods and dam failure.
changes to geographical boundaries or eligibility criteria
could impact estimated future costs; The amount of damages sought is unspecified.
• costs to complete resettlement of the Bento Rodrigues, United Kingdom group action complaint
Gesteira and Paracatu communities. BHP Group Plc and BHP Group Ltd are named as defendants in
The provisions may also be affected by factors including group action claims for damages that have been filed in the courts
but not limited to: of England. These claims have been filed on behalf of certain
• resolution of existing and potential legal claims; individuals, governments, businesses and communities in Brazil
allegedly impacted by the Samarco dam failure. The amount
• potential changes in scope of work and funding amounts of damages sought in these claims is unspecified.
required under the Framework Agreement including the
impact of the decisions of the Interfederative Committee The court heard a preliminary application filed by BHP to strike out or
along with further technical analysis, community stay this action on jurisdictional and other procedural grounds in July
participation required under the Governance Agreement 2020. The court has not yet issued its judgement on this application.
and rulings made by the 12th Federal Court;
• the outcome of ongoing negotiations with State
and Federal Prosecutors, including review of
Fundação Renova’s Programs as provided in the
Governance Agreement;
• actual costs incurred;
• resolution of uncertainty in respect of the nature and
extent of Samarco’s future operations;
• costs to complete the Germano dam decommissioning;
• updates to discount and foreign exchange rates.
Given these factors, future actual expenditures may differ
from the amounts currently provided and changes to key
assumptions and estimates could result in a material impact
to the provision in the next and future reporting periods.

186 BHP Annual Report 2020