BHP Mariana Dam litigation: Court of Appeal upholds interest award in CFA-funded claim

Background

The collapse of the Fundão Dam in south-eastern Brazil near the municipality of Mariana remains one of the most significant environmental disasters in Brazil’s history. More than a decade later, the resulting litigation continues to attract considerable legal and commercial attention.

In November 2018, over 450,000 claimants commenced one of the largest group actions ever brought before the English courts, seeking compensation estimated at approximately £36 billion for losses arising from the collapse of the dam.

During the Stage 1 trial, heard in November 2025, the High Court concluded that the collapse resulted from foreseeable structural instability which would have been identified through proper risk assessment and stability analysis. The Court also determined issues of liability, holding that BHP Australia and BHP UK (together, ‘BHP’) were ‘polluters’ for the purposes of Brazilian environmental law and were strictly liable under the Brazilian Civil Code for the collapse of the Dam.

Appeal by BHP

Following the Stage 1 trial, BHP was ordered to pay:

1. 90% of the Claimants’ costs of the Stage 1 trial,

2. pre-judgment interest at a rate of 1% above UK base rate on the Claimants recoverable Stage 1 costs for the period 1 August 2023 to 26 January 2026,

3. £43 million on account of costs.

BHP appealed the award of pre-judgment interest.

The Claimants’ legal costs were, and remain, funded by way of a conditional fee agreement (‘CFA’) (more commonly known as a ‘no win, no fee’ agreement). Third party litigation funding was obtained to meet the operational costs of the litigation. BHP therefore argued that the Claimants were not out of pocket, because they had not spent or borrowed monies to fund their legal costs and that this was a pre-requisite to an award of pre-judgment interest.

Dismissal of Appeal

The Court of Appeal dismissed BHP’s appeal for the following reasons:

1. The Court’s power to award pre-judgment interest derives from CPR 44.2(6)(g), which confers a broad discretion to award interest on costs.

2. The purpose of CPR 44.2(6)(g) is to compensate a party for the loss of the time value of money. This may arise where a party has been kept out of its money or where it is liable to compensate someone else (whether that be a solicitor, insurer or third-party funder) for the fact that legal services have been provided ‘on credit’.

3. There is nothing in the wording of CPR 44.2(6)(g) which limits an award of interest to situations where the receiving party has actually expended or borrowed money to meet its legal costs. Such a limitation would improperly fetter the broad discretion expressly granted by the rule.

4. Although the claimants were not obliged to pay their solicitors unless the claim succeeded, success gave rise to a liability to pay both base costs and a success fee under the CFA. The obligation to pay a success fee constitutes a liability to compensate solicitors for contingent and delayed payment and therefore falls within CPR 44.2(6)(g).

5. The Court rejected the argument that this approach undermined the prohibition on the inter partes recovery of success fees. An award of pre-judgment interest is distinct from an award of the success fee itself, and the interest is not awarded to reimburse the success fee.

The Stage 2 trial, which will determine the claimants’ entitlement to damages, is currently listed to run from April 2027 to December 2027, with closing submissions scheduled for March 2028.

Commentary

The judgment provides helpful clarification regarding the Court’s power to award pre-judgment interest on costs under CPR 44.2(6)(g).

Significantly, the Court confirmed that the jurisdiction is not restricted to cases where a receiving party has incurred borrowing costs or funded litigation from its own resources. The provision of legal services on a contingent or deferred payment basis may itself justify compensation for the time value of those services. The decision is therefore likely to be of interest to parties involved in funded litigation more generally, including claims supported by CFAs and other alternative funding arrangements

Its implications extend beyond large-scale group litigation. Parties who instruct solicitors under CFAs should be aware that liabilities arising from contingent fee arrangements may justify an award of pre-judgment interest. Equally, defendants assessing their potential exposure to adverse costs orders should bear in mind that liability may extend liability may extend beyond the underlying costs themselves to include pre-judgment interest on those costs, potentially increasing overall exposure in high-value litigation.

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