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

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

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

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 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.

On February 3, 2021, the magistrate issued a decision rejecting the request for an injunction for the implementation of the environmental integrity program by the steel company and for the suspension of tax incentives or benefits, on the grounds that there is no legal provision imposing the need for the environmental integrity by companies that explore activities potentially harmful to the environment. The decision also states that even in the face of strong evidence that the company committed environmental violations in 2012, it is not possible to impose the requests made by the plaintiff, because it is not known whether the company continues to practice the same acts. In addition, the judge also did not accept the request for blocking or unavailability of assets in the amount of BRL 16,000,000.00 from the company to repair environmental damage, on the understanding that even if there is a causal link as to the company's participation in environmental infractions as a result of the records drawn up by IBAMA, the current moment requires a greater incursion of evidence of the damage caused by the steel company.

On March 2, 2021, the competent judge issued another decision, rejecting the motions for clarification of both parties, on the grounds of the presence of defects and irregularities in the documents.

On October 5, 2022, Geraldo and GMM Participações submitted their defense, in which they argued that there was no proof of environmental damage and the causal link, that the claim for damages for residual damage was generic, that there were no internal rules for the use of the Social Cost of Carbon and, therefore, requested that the action be dismissed and that the request for a reversal of the burden of proof be rejected.

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

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

Terrestrial means "of the earth" and relates to the risks to ecological system that includes all living organisms and their interactions within land-based environments, such as forests, grasslands, and deserts.

Coal is a combustible sedimentary rock formed from carbonised plant matter, rich in carbon and hydrocarbons, and occurring in several main types including hard coal and brown coal.

Either money or something of monetary value is transferred between two or more organisations, people or countries.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

Energy derived from biological compounds that are renewable due to their short life cycle within the carbon dioxide cycle.

This sector involves activities to move goods and people, alongside the storage of products.

A tax advantage is an economic benefit applied to certain accounts or investments that are, by law, tax-reduced, tax-deferred, or tax-free. This can apply to investments in areas such as green energy projects or the agricultural sector, where tax advantages can help manage financial risks.

The activities of industries that transforms raw materials into finished goods through industrial processes.

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

Policy instrument

Risk

Renewable energy

Fossil fuel

Economic sector

Finance