THE BLOG

Shell's Victory and Embarrassment in the Dutch Court

27/02/2013 17:24 | Updated 28 April 2013

In a historic decision, handed down on 30th January, the District Court in The Hague held Shell Nigeria liable for a case of serious oil pollution in Nigeria. The case was filed in 2008 by farmers and fishermen living in the Niger Delta who lost their livelihoods because of the oil spills.

It is the first time a western court has ordered a multinational company to pay damages for environmental harm caused in a non-western country. This was possible because the claimants sued both Shell Nigeria and the Dutch based parent company Royal Dutch Shell, alleging they were jointly liable for the oil spills. The Court considered the claims to be sufficiently related to hear them together.

In the end, the Court dismissed the claims against parent Royal Dutch Shell because it held that under the applicable Nigerian law a parent company is not under a duty to supervise its subsidiary. Whether other legal systems hold such an obligation is yet unclear as this is an unchartered area, particularly for cases of personal injury and pollution. Of the five claims against subsidiary Shell Nigeria, the Court rejected four.

It goes without saying that Shell welcomed the judgments. Not least because the Court held that all oil spills were caused by sabotage, dismissing the claimants' arguments that the spills were due to poor maintenance. To substantiate their claim, the claimants needed information that was in Shell's domain but the Court rejected their requests to order Shell to submit relevant documents (the continental legal system does not know the pre-trial duty to disclose documents).

It is yet unclear how this lack of information influenced the claimants' position. The claimants have announced that they will appeal the Court's decision and certainly try to convince the Court of Appeal that without Shell's documents they are in a disadvantaged position to prove their claim.

Despite Shell crying victory, it is the lost case that causes the oil company particular embarrassment. This case was about an abandoned well that was freely accessible and the sabotage was committed by simply opening the overground valves with a wrench. The Court ruled that Shell Nigeria had failed to properly protect the installation against sabotage. It had created a particularly dangerous situation that could be abused by a third party and therefore more and better preventive measures should have been taken. Such as by installing a concrete plug which, as the Court said in a scathing consideration, 'after the start of this procedure actually happened'.

This means that when the Nigerian farmers and fishermen filed their claim against Shell in 2008, the oil company still had not taken action to protect the well against sabotage. It only did so in 2010, a year after the Court decided it was competent to hear the case. It goes without saying that protecting pipelines against sabotage should be a basic part of a Corporate Social Responsibility policy of any oil company but Shell did not act until the lawsuit was well on its way. This same lawsuit has now made clear that Shell is legally obliged to reduce or exclude the risk of sabotage where possible.

In 2011, a UN report concluded that the Nigerian government and oil companies, especially Shell, are responsible for 50 years of oil pollution in Ogoniland in the Niger Delta. In this context, sabotage undoubtedly plays a role but the Court's decision makes clear that sabotage as such is not a defence and that Shell's omission to prevent sabotage may lead to liability. Moreover, oil companies must not wait to fulfil this responsibility until they are under the threat of a lawsuit.

Pollution and sabotage are linked in two ways: not only does sabotage cause pollution, pollution also causes sabotage. We know that garbage on the street increases the risk of criminality so there can be no doubt about the effect of massive oil pollution on the risk of sabotage. A notable fact is that poor maintenance initially counted for the majority of oil spills but that sabotage has now taken over. If these figures are correct, they strongly suggest that poor maintenance as such has contributed to the rising number of sabotage cases. It also means there is a case to argue that Shell's responsibility to prevent sabotage should go further than the Court has held.