Page 33 - BHP | Annual Report 2018
P. 33

Operational risks
            Our potential liability from litigation and other actions resulting from the Samarco dam failure is subject to significant uncertainty
            and cannot be reliably estimated at this time, but could have a material adverse impact on our business continued
           On 18 January 2017, BHP Billiton Brasil, together with Vale and   The Interim Security provided under the Preliminary Agreement   Strategic Report
           Samarco, entered into a Preliminary Agreement with the Federal   is maintained for a period of 30 months under the Governance
           Prosecutors’ Office in Brazil, which outlines the process and   Agreement, after which Samarco, Vale and BHP Billiton Brasil
           timeline for further negotiations towards a settlement regarding   will be required to provide security of an amount equal to
           the R$20 billion Public Civil Claim and the R$155 billion Federal   Fundação Renova’s annual budget up to a limit of R$2.2 billion.
           Public Prosecution Office claim.
                                                               As noted above, BHP Billiton Brasil has been named as a defendant
           Under the Preliminary Agreement, BHP Billiton Brasil, Samarco   in numerous other lawsuits that are at early stages of proceedings.
           and Vale agreed interim security (Interim Security) comprising   The lawsuits seek various remedies, including rehabilitation costs,
           R$1.3 billion (approximately US$335 million) in insurance bonds,   compensation to injured individuals and families of the deceased,   Governance at BHP
           R$100 million (approximately US$25 million) in liquid assets,   recovery of personal and property losses and injunctive relief.
           a charge of R$800 million (approximately US$210 million) over   In addition, government inquiries and investigations relating
           Samarco’s assets, and R$200 million (approximately US$50 million)   to the Samarco dam failure have been commenced by numerous
           to be allocated within the next four years through existing   agencies of the Brazilian Government and are ongoing, including
           Framework Agreement programs in the Municipalities of Barra   criminal investigations by the federal and state police, and
           Longa, Rio Doce, Santa Cruz do Escalvado and Ponte Nova.  by federal prosecutors.
           On 24 January 2017, BHP Billiton Brasil, Samarco and Vale provided   Other lawsuits and investigations are at the early stages of
           the Interim Security to the Court, which was to remain in place   proceedings, including two shareholder actions filed in Australia
           until the earlier of 30 June 2017 and the date that a final settlement   against BHP and a Samarco bondholder action filed in the
           arrangement was agreed between the Federal Prosecutors,   United States against Samarco, Vale, BHP Billiton Brasil and BHP.
           and BHP Billiton Brasil, Vale and Samarco. Following a series   Additional lawsuits and government investigations relating to   Remuneration Report
           of extensions, the parties reached an agreement in the form   the Samarco dam failure may be brought against BHP Billiton Brasil
           of the Governance Agreement (summarised below).     and possibly other BHP entities in Brazil or other jurisdictions.
           On 25 June 2018, Samarco, Vale and BHP Billiton Brasil, the other   Given the status of the legal proceedings referred to above, it
           parties to the Framework Agreement, the Public Prosecutors   is not possible to provide a range of possible outcomes or a reliable
           Office and the Public Defense Office agreed an arrangement   estimate of potential future exposures for BHP, unless otherwise
           which settles the R$20 billion Public Civil Claim, enhances   stated. Ultimately, all of these legal matters could have a material
           community participation in decisions related to the remediation   adverse impact on BHP’s business, competitive position, cash
           and compensation programs (Programs) under the Framework   flows, prospects, liquidity and shareholder returns.
           Agreement, and establishes a process to renegotiate those   Our potential costs and liabilities in relation to the Samarco
           Programs over two years and to progress settlement of the   dam failure are subject to a high degree of uncertainty and cannot   Directors’ Report
           R$155 billion Federal Public Prosecution Office claim (Governance   be reliably estimated at this time. The total amounts that we may
           Agreement). The Governance Agreement was ratified by the   be required to pay will be dependent on many factors, including
           12th Federal Court of Minas Gerais on 8 August 2018, settling the   the timing and nature of a potential restart of operations at Samarco,
           R$20 billion Public Civil Claim and suspending the R$155 billion   the number of claims that become payable, the quantum of any
           Federal Public Prosecution Office claim for a period of two years   fines levied, the outcome of litigation and the amount and timing
           from the date of ratification.
                                                               of payments under any judgements or settlements. Nevertheless,
           During the two-year period, the parties will work together to   such potential costs and liabilities could have a material adverse
           design a single process for the renegotiation of the Programs   effect on our business, competitive position, cash flows, prospects,
           and progress settlement of the R$155 billion Federal Public   liquidity and shareholder returns.
           Prosecution Office claim.
                                                                    For information on the Samarco dam failure,     Financial Statements
           The renegotiation of the Programs will be based on certain   refer to section 1.8.
           agreed principles, such as full reparation consistent with Brazilian
           law, the requirement for a technical basis for any proposed   For more information on some of the legal proceedings relating
           changes, consideration of findings from the socio-economic   to the Samarco dam failure, refer to section 6.5.
           and socio-environmental experts appointed by Samarco, Vale
           and BHP Billiton Brasil, consideration of findings from experts   For more information on the shareholder and bondholder
           appointed by the Prosecutors, and consideration of the feedback   actions and other lawsuits relating to the Samarco dam failure,
           from impacted communities. During the renegotiation period   refer to section 6.5.
           and up until revisions to the Programs are agreed, the Fundação
           Renova will continue to implement the Programs in accordance
           with the terms of the Framework Agreement and the                                                        Additional information
           Governance Agreement.                                                                                    Shareholder information

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