Shell Loses Dutch Court Case Over Nigeria Oil Spills
Dutch Court Orders Shell Nigeria to Compensate for Oil Spills
(Bloomberg) -- A Dutch court has ordered Royal Dutch Shell Plc’s Nigerian unit to compensate for oil spills in two villages over 13 years ago.
Shell Nigeria is liable for damages from pipeline leaks in the villages of Oruma and Goi, the Hague Court of Appeals said in a ruling Friday. The amount of compensation will be decided later. The court also ordered the Nigerian unit and its Hague-headquartered parent company to build better warning systems so future leaks can be quickly detected.
The case is the first in which a company and its foreign subsidiary have been tried in the Netherlands for allegedly breaching duty of care abroad, and it could have far-reaching implications for future suits brought against oil firms. The ruling sets a precedent for where such cases can be heard and potentially increases the number of court procedures in oil companies’ home countries, rather than those where alleged pollution is taking place.
“We continue to believe that the spills in Oruma and Goi were the result of sabotage. We are therefore disappointed that this court has made a different finding on the cause of these spills and in its finding that” Shell’s Nigeria unit is liable, Shell said in a statement. “Sabotage, crude oil theft and illegal refining are a major challenge in the Niger Delta.”
The farmers opposing Shell welcomed the outcome. “I am very, very happy,” Princewill Efanga, who took over the claim from his deceased father Alali Efanga said. “The common man in Nigeria now has hope because of what happened today.”
The court also said that a case over whether Shell was liable for an oil leak in the village of Ikot Ada Udo would continue. The court established that the spill was a result of sabotage, but is seeking to determine whether the pollution has spread and if it still needs to be cleaned.
Duty of Care
For Milieudefensie, the Dutch arm of Friends of the Earth that filed the case more than a decade ago, the biggest victory is the judge’s statement that Shell’s global headquarters in the Netherlands had a duty of care toward the Oruma villagers to prevent this will happen again. The parent company has in the past argued that it’s not liable for the Nigerian operations since that’s handled by the local unit Shell Petroleum Development Corp.
“This case is of great importance because it is the first time a parent company is held responsible for what happens in a region in which it is not active itself,” Eric de Brabandere, professor in International Dispute Settlement at Leiden University said. “And could be the start of something important.”
“But it is not a full victory for Milieudefensie because Shell’s mother company holds no liability for the damages done, only the liability to act on prevention,” he said.
The Nigerian unit and Shell are liable to pay 100,000 euros ($121,000) each day if they fail to install the leak detection systems on the Oruma I and II pipelines a year after the order, the court said, to prevent similar leaks from happening in the future.
Shell has other legal woes to contend with. In a separate action brought by Milieudefensie, a court in The Hague will determine in May whether Shell is violating human rights by extracting fossil fuels. While in the U.K., thousands of Nigerians are asking British legal authorities for permission to sue the company for environmental damages caused in the Niger Delta.
After Friday’s ruling, the only possible future legal avenue left to either party, would be to appeal at the Netherlands’ highest court.
©2021 Bloomberg L.P.