Shell Held Liable for Oil Spills In Nigeria - Case Comment ECLI:NL:GHDHA:2021:132 and 133

On 29 January 2021 Nigerian farmers succeeded with their claims against Royal Dutch Shell in two cases concerning oil spills in the Niger Delta from Shell`s pipelines in the villages Oruma and Goi. The conduct of Shell in Nigeria has been subject of debate for decades and the cases raise a number of interesting legal issues.  Shell claimed that the leakage from both pipelines, which polluted the fields of the farmers, was caused by `sabotage´of the pipelines. The court found, instead, that the evidence presented for sabotage did not meet the legal requirements. This blog entry illuminates the cases and discusses the underlying legal issues of liability with a view to oil pollution in Nigeria.

The Case

 Supported by the NGO Milieudefensie, four Nigerian farmers claimed that in the period 2004-2007 their fields have been polluted by pipelines owned by Shell.The cases were brought via appeals proceedings (Hoger Beroep) in front of a Dutch court in Den Haag. The farmers wanted to receive compensation and a ruling that Shell is obliged to conduct further clean-up works. The fact that there have been pipe leaks was undisputed, but according to Shell, the spills were caused by sabotage and  Nigerian law does not foresee liability of oil companies in cases of sabotage. Moreover, in Shell's opinion, the contamination has been cleaned up sufficiently. Shell says that cleaning up is done regardless of the cause of the leaks. In an interim judgement, the Court of Appeal of The Hague  already ruled that the Dutch court is competent to judge the claims of the farmers and Milieudefensie.

Friday`s two judgements are final and consider the facts under Nigerian law. According to Nigerian law the burden of proof for sabotage lies with the party bringing the defence (in this case Shell) and sabotage must be established beyond reasonable doubt (para. 5.4 - 5.9). Shell did not succeed in doing this (para. 5-27), although sabotage is viewed as the most likely cause (para. 5.23). As a result of not meeting the beyond reasonable doubt-threshold, the courts established that Shell is, thus, held to be liable for the spills in Oruma and Goi (para. 11.5 Beslissing). The amount of compensation is yet to be determined in a further procedure.

The Duty of Care for Mother Companies

The interesting parts of the judgement are those on liability. Not only Shell Nigeria, but also the mother company Royal Dutch Shell were subject to the case. The question for Royal Ducth Shell in particular was, thus, one on liability of the mother company (moeder-aansprakelijkheid). While the court established that this does not exist in Nigerian law (para. 3.27) it found that such liability can be constructed under english law, which influences legal interpretation in Nigeria, so that, as a result, mother companies can be held liable in principle for certain actions of their subsidiaries (para. 3.32). As a consequence, the court not only considered the actions and omissions by Shell Nigeria, but also by the mother company Royal Dutch Shell. 

While, according to the ruling, Royal Dutch Shell cannot be directly held liable for oil pollution in Nigeria caused by one of its subsidiaries, the mother company has a limited `duty of care´. The company is not obliged to take further restoration measure for the fields of the farmers (para. 8.28). However, the pipeline could, in the past already, have been equipped with a leakage detection system and Shell did not do that (para. 6.25). The court ruled that at least in the Oruma pipeline a better warning system needs to be installed now so that future leaks are detected sooner (para. 11.5 Beslissing). As the final parts of the judgement make very clear, this responsibility is explicitly addressed towards both Shell Nigeria and the mother company Royal Dutch Shell (para. 11.5 Beslissing).

The Outlook

The ruling is of interest for two reasons. One, it forms part of a bigger effort of NGOs to launch several disjoined court actions with the aim to hold Shell responsible for its conduct in Nigeria over the last decades (see for example the `Widows case`). Two, this current case illustrates that mother companies of oil-multinationals can be liable for the conduct of their subsidiaries. While this might feel counter-intuitive at first, it taps into a long tradition of pipeline-related cases in which rulings and even laws made mother companies effectively responsible for the conduct of their subsidiaries. A well-known example is the Dresser-France issue, where in 1982 US-president Ronald Reagan wanted to stop a European-Soviet pipeline (Yamal) and ordered the company Dresser (France), a subsidiary of Dresser-Rand (Texas), not to supply pipeline equipment to the project in the Soviet-Union. 

Overall, this judgement can be viewed as one small step towards clarifying liabilities for oil pollution in Nigeria. However, much caution is needed. In a third ruling, issued on the same day, the court ruled differently. The case is concerned with pollution from an oil well at Ikot Ada Udo in Nigeria. Here (case ECLI:NL:GHDHA:2021:134) Shell was able to overcome the high burden of proof and was able to show beyond reasonable doubt that the leakage was caused by sabotage. However, whether this means that Shell cannot be held liable for the leakage remains open. The court ruled that it first requires further information on whether the resulting pollution still needs to be cleaned up and within which geographical scope it actually spread (para. 7.2.2), as both points are disputed between the two parties. This case will be continued in April 2021. Thus, the facts and circumstances of each individual case continue to be of upmost importance and there will certainly be further cases. Liability for oil pollution remains as a legal figure torn between the hight of the burden of proof on the one hand and the practical possibilities in each individual case to present the required evidence on the other hand.