Lawsuits loom German inspectors under fire after Brazil disaster

Testing agency TÜV Süd and its boss are under intense pressure following the collapse of a South American dam the company declared safe just a few months ago. Huge damage claims may follow.
Someone made a deadly mistake. Quelle: AP

Someone made a deadly mistake.

(Source: AP)

It’s the nightmare of every inspection engineer: a derailed train, exploded tank or a collapsed dam that one’s own certifying agency has just given a clean bill of health.

German inspection agency TÜV Süd and its boss, Axel Stepken, are in crisis mode after a dam burst last Friday in Brumadinho, Brazil, triggered a deadly mudslide. The death toll following the disaster has reached 58 and is expected to keep climbing.

The Munich-based firm checked the dam twice last year for mining company Vale — a legally required routine inspection on June 18 and a further security check on September 26.

“We will fully support the investigation and make all necessary documents available to the investigating authorities,” TÜV Süd said on Monday. It declined further comment.

The company could face huge compensation claims if it is found to be partly responsible for the disaster, and the reputation of the TÜV brand, a weighty trademark imbued with Germany’s reputation for engineering prowess, is at stake.

Household name

TÜV stands for Technischer Überwachungsverein, or Technical Inspection Association. The entity dates back to 1865 during the industrial revolution, when a steam-boiler explosion at a Mannheim brewery prompted engineers to form an inspection society to check boilers — a  practice that had already been introduced in Britain.

Similar associations were formed around Germany, where TÜV is now a household name, particularly for statutory car inspections. Over time these firms grew in importance, spreading into different industries and evolving into multinationals. There are now three main holding companies for TÜV organizations in Germany: TÜV Süd, TÜV Rheinland and TÜV Nord.

After Stepken took the helm at TÜV Süd in 2007, he diversified the group and broadened its international reach. Since 2007, its revenue has doubled to €2.4 billion ($2.74 billion) from fees for checking roller coasters, certifying chemical plants, and inspecting hygiene standards in hospitals and canteen kitchens around the world.

In 2011, the business ran into trouble when investment fraudsters at the S&K real-estate group used an audit by TÜV Süd to attract investors. When the scandal came to light, Stepken said his firm would stop certifying financial products.

Warning ignored

German inspection agencies pride themselves on their reliability in assessing structural safety, and that’s precisely where TÜV Süd now faces accusations following the Brazilian dam collapse. Vale's CEO, Fabio Schvartsman, blamed the German inspectors, saying they had declared the dam stable and safe just months ago.

In December, Brazilian authorities had argued about whether to extend the mine’s license and allow an expansion of mining operations. A representative of IBAMA, an environmental protection agency authority, voted against the license. The transcript of the meeting shows that he warned of the risk of a dam break and a chain reaction, which is exactly what ended up happening.

It's still completely unclear whether the German inspectors share any blame, and whether the conclusion will be that this was a dam too far in TÜV Süd’s global expansion. Stepken urgently needs facts now – and legal advice.

Alexander Busch is a Latin America correspondent for Handelsblatt. Markus Fasse is a Handelsblatt correspondent based in Munich. David Crossland adapted this story into English for Handelsblatt Today. To contact the authors: [email protected], [email protected]