LONDON (Reuters) -BHP and Vale are facing a London lawsuit from the law firm representing hundreds of thousands of people over Brazil's worst environmental disaster, alleging the companies sought to cheat the firm out of legal fees by procuring settlements.

BHP said it rejected the allegations "in their entirety" and would contest them. Vale declined to comment.

Pogust Goodhead, which represents the claimants in an ongoing case against BHP over the 2015 collapse of the Fundao dam in Mariana, southeastern Brazil, says it will seek 1.3 billion pounds ($1.7 billion) for unpaid fees.

The firm was representing more than 600,000 Brazilians in the case at London's High Court. A June presentation by BHP and Vale's Samarco joint venture - which owned and operated the dam - said around 130,000 people had settled.

In a legal letter sent on Pogust Goodhead's behalf, lawyers representing the firm allege BHP, Vale and Samarco pressured claimants to "settle their claims at far below their true value".

Pogust Goodhead also alleges that a 170 billion-reais ($30.3 billion) compensation agreement which Brazil signed with BHP, Vale and Samarco in October 2024 prevented claimants from discussing the deal with the firm or paying its legal fees.

The firm says it has also incurred an extra $1 billion in borrowing costs to finance the English case over the dam's collapse.

BHP DENIES ALLEGATIONS

"We reject Pogust Goodhead's claims and allegations in their entirety and dispute their factual and legal basis," a BHP spokesperson said in a statement.

"These allegations and threatened claims are entirely without merit and BHP rejects and will vigorously contest them."

The BHP spokesperson pointed to last year's compensation deal, saying: "We continue to believe Brazil is the most appropriate, effective, and efficient place for compensation for the Fundao dam failure from Samarco to be delivered."

Pogust Goodhead's threat of legal action - in a so-called "letter before action" that is required as part of the process - is the latest development in the litigation, after the High Court last month ruled BHP should face a full contempt of court hearing for funding parallel litigation in Brazil.

BHP, meanwhile, still awaits judgment following a trial of the underlying lawsuit over the dam collapse, in which Pogust Goodhead said it was seeking damages of up to 36 billion pounds.

When the dam burst in 2015, it unleashed a wave of toxic sludge that killed 19 people, left thousands homeless, flooded forests and polluted the length of the Doce River.

The trial began in October and finished in March. BHP denies liability and says the case duplicates legal proceedings and reparation and repair programs in Brazil.