Federal Environmental Agency (IBAMA) v. Siderúrgica São Luiz Ltd. and Martins

Summary:

In July 2019, Brazil’s Attorney-General’s Office (“Advocacia-Geral da União”), representing the Federal Environment Agency (“IBAMA”), filed a public civil action (environmental class-action) against a steel company (Siderúrgica São Luiz Ltda.) and its managing partner (Mr. Martins), for environmental and climate damages allegedly caused by the company’s continuous and fraudulent use of illegally sourced coal in its units in the State of Minas Gerais.

According to IBAMA, the company falsified the 'certificates of origin’ for the coal it purchased. IBAMA claims that the company purchased and burned 44,636 cubic meters of coal, fomenting a scheme of illegal deforestation for coal production.

Highlighting the key role of steel production in the 'life cycle’ of coal, IBAMA contends that the defendants should be held strictly and jointly liable for the (i) environmental damages resulting from the illegal deforestation (equivalent to an area of approximately 2,231 football fields), and (ii) climate damages resulting from the greenhouse gases emitted from the illegal deforestation, from the conversion of the illegally sourced biomass into coal, and from burning the illegally sourced coal in its steel production.

Based on the National Environmental Policy and National Climate Change Policy (Laws Nos. 6,938/1981 and 12,187/2009, respectively), IBAMA seeks remedies for both environmental and climate damage allegedly caused by the defendants: (i) reforestation of an equivalent area; (ii) compensation for interim and residual environmental damages; (iii) compensation for climate damages based on the social cost of carbon, which should be invested into the creation of carbon sinks; (iv) collective moral damages, to be valued according to the defendants’ profits from their illegal activities (disgorgement of profits); (v) undertaking of environmental compliance programmes; (vi) unavailability of goods and values as well as loss or restriction of tax benefits and incentives, and loss or suspension of participation in financing lines in official credit establishments.

At Issue: Brazil seeks to hold a steel company and its manager liable for environmental damages (promoting illegal deforestation) and climate damages (greenhouse gases derived from the illegally sourced coal)