On January 25th, 2019, a dam built to support the Córrego de Feijão iron ore mine collapsed. Built in the Brazilian state of Minas Gerais to store a slurry of byproducts from the process of separating iron from the surrounding mineral deposits, the dam’s collapse spilled approximately 11.7 million cubic meters of waste material into the municipality of Brumadinho. The immediate effects were catastrophic. 270 people, including at least 157 mine employees and over a hundred residents of surrounding villages, died in the initial mudslide, which was large enough to be visible from space. Waste from the mine, including manganese, iron, copper, aluminum and rare earth metals such as cadmium, were dumped into the surrounding region’s water supply. Mud from the dam contaminated more than 320 kilometers of the Paropeba River, a major water source for Belo Horizonte, a city with a population roughly equivalent to that of Chicago. While the long-term environmental and health impact of the disaster is still unknown, initial studies indicate that fish and crustaceans in the region show elevated levels of toxic metals in their tissue, which is then consumed by the region’s human residents.

In the initial hours after the collapse, shares belonging to the company operating the mine, Vale S.A., lost 25% of their value. This resulted in a decline of $19 billion in total market value and $4 billion of its total market capitalization. The company was also punished severely in Brazil’s domestic judicial system. Brazil’s IBAMA (Institute of Environment and Renewable Natural Resources) fined Vale 250 million Reals (approximately $48 million USD), while state-level judicial authorities in Minas Gerais froze over $3 billion dollars of the company’s assets. Several company employees, including two senior managers of the mine and two contractors, were arrested just days later, and Vale S.A. as a whole was eventually fined over $7 billion dollars in compensatory damages. Brazil’s authorities then began to investigate why the dam had passed all safety inspections prior to its collapse. As the investigation went on, it became clear that the Brumadinho dam disaster was an international story as much as a domestic one.

Just three years earlier, Vale had been partly responsible for the similar Mariana dam disaster, which killed 19, displaced several hundred, and caused significant water shortages. That dam was managed jointly by Vale, S.A. and the Anglo-Australian mining conglomerate BHP Group Limited (formerly BHP Billiton) under a 50-50 venture called Samarco Mineração S.A. After all three companies were indicted by the Brazilian Federal Police, Vale put out a public statement expressing “surprise”, in which it directly accused the Federal Police of falsely tying the company to “assumptions that have no causal link to the incident”. Just days later, an engineer publicly appeared as a witness claiming he had repeatedly warned about structural issues with the dam, which Samarco then claimed never to have seen. This revelation severely damaged Samarco’s credibility, pushing the company into settlement negotiations with the Brazilian government within the week. Samarco was barred from conducting further business in Minas Gerais, while an overlapping series of civil suits were filed against Vale and BHP in Brazilian, Australian, and British courts. To restore credibility with investors, Vale turned to a different overseas entity: Germany’s Technischer Überwachungsverein (Technical Inspection Association), more commonly known as TÜV.

TÜV is not a single organization, but rather a series of technical associations across Germany which inspect and certify technical systems. A TÜV effectively acts as both a contractor and a regulator, where a company working with TÜV receives not just an inspection service, but the privilege of claiming a high degree of safety compliance. While originally confined largely to the German-speaking world, TÜV’s regional companies have since expanded to sell certification services across the planet. Between 2017 and 2018, Vale employed TÜV SÜD (a management holding company based in southern Germany) to inspect and certify the safety of its dam in Brumadinho. Throughout 2017 and 2018, Vale made a series of public declarations to its shareholders that the dam in Brumadinho had passed all relevant safety inspections, and pointed to certification by TÜV SÜD to bolster its credibility.

When the dam collapsed anyway in 2019, recrimination began. After state prosecutors in Minas Gerais filed subpoenas to review Vale’s internal safety documents, Vale’s lawyers claimed that they had received and relied on positive safety reviews from TÜV SÜD. The Minas Gerais state prosecutors responded that TÜV SÜD was instead used to hide the safety problems with the Brumadinho dam by falsely certifying its unsafe condition and obscuring liability from Vale itself. TÜV SÜD, in turn, declined to comment, but also conspicuously stopped offering dam safety inspection services. An investigation by the European Center for Constitutional and Human Rights found that TÜV SÜD engineers had warned Vale about instability in the dam, but then certified it as safe anyway despite knowing about Vale’s failure to remedy the safety problems.

Vale’s false public statements, combined with the significant damage caused by the dam collapse, triggered a deluge of unprecedented litigation. In October 2019, the municipality of Brumadinho itself filed suit against TÜV SÜD in Munich Regional Court, a landmark piece of litigation charging that a German company is liable under Brazilian environmental and tort law in a German court. Back in Brazil, state prosecutors in Minas Gerais took the radical step of charging 16 people with homicide for their actions in Brumadinho, including Vale’s CEO Fabio Schvarstman and five employees of TÜV SÜD. Vale responded with a counterclaim against this charge for lack of jurisdiction, and Brazil’s second highest court, the Superior Court of Justice, found the claims at issue fall under the jurisdiction of Brazil’s federal authorities. In November 2021, the Brazilian Federal Police indicted 19 people, including Schvarstman and the TÜV SÜD employees, for the same crimes, including homicide. In turn, these suits attracted attention from another investigatory body: The Securities and Exchange Commission in the United States.

In April 2022, the SEC filed a false and misleading claims charge against Vale S.A. in the Eastern District of New York for its Environmental and Social Governance (ESG) disclosures to investors. The case is one of the first actions brought by the SEC’s newly announced ESG task force, and seen by many as the first sign of a regulatory crackdown against fraudulent ESG disclosure. The SEC’s jurisdiction against Vale S.A. is based entirely on the company being traded on the New York stock exchange. As such, the SEC’s investigation is not based on the substantive allegations of misconduct against the people of Brumadinho, but on the damage to shareholders caused when the dam collapse wiped out 25% of Vale’s stock value. Nevertheless, the SEC’s action ties together the prior claims against Vale and its false safety disclosures to its forward-looking goal of ESG enforcement. The SEC’s complaint cites “extraordinary audits” Vale conducted were “corrupted by the purposeful use of unreliable data, rendering the resulting stability certifications [including those endorsed by TÜV SÜD] false”. The false stability certifications were then allegedly cited in “environmental responsibility” reports Vale issued to investors, which were then filed back to the SEC as a securities disclosure.

While many of the cases against Vale S.A. are still pending, there are nevertheless several lessons to be drawn from the Brumadinho disaster. First, the Brumadinho incident shows the limits a company may face when trying to represent itself positively to investors or regulators despite the underlying facts. Vale’s public statements and safety reports about both the Mariana and Brumadinho incidents all contained material misstatements which generated litigation against it. These misstatements created liability across multiple jurisdictions and even across different areas of law, with the SEC litigation for its non-binding ESG disclosures constituting an entirely novel type of claim. Second, there are also limits on how corporations might seek to reduce their own liability by using outside entities. Neither its partnership with BHP Group Limited nor its use of TÜV SÜD- both international firms with generally strong reputations- ultimately succeeded in improving Vale’s own reputation. In fact, by expanding the number of jurisdictions where Vale’s misconduct could be tried, such international partnerships might have actually worsened Vale’s reputation as compared to if it solely conducted business in Brazil. Finally, despite Vale’s legal peril, little has improved on the ground. At least 36 more dams in the state of Minas Gerais alone are at risk of failure, let alone across Brazil or the world. Brumadinho will almost certainly not be the last mining disaster in Minas Gerais. If the litigation against Vale is still insufficient to induce compliance, it may be time to re-evaluate how compliance itself functions.

Author Biography: Jonathan Haskin is a Senior Moderator of the International Law Society’s International Law and Policy Brief (ILPB) and a J.D. candidate at The George Washington University Law School. He has a B.A. in Political Science and Government from the Univerisity of Pennsylvania.