Guest post by Marie-José van der Heijden

Dutch court holds Nigerian subsidiary of Shell civilly liable for oil pollution in Nigeria

On 30 January 2013, the Dutch district court of The Hague has held a Nigerian subsidiary of Shell, Shell Petroleum Development Company of Nigeria (SPDC) Ltd., civilly liable for oil pollution near the community Ikot Ada Ido in Nigeria. Five cases against the multinational Shell were brought before the Dutch court by Milieudefensie (the Dutch branch of Friends of the Earth) and four Nigerian farmers. The Dutch court dismissed all the other four claims against Shell. Notably, the Shell parent companies are not held liable. However, in one case Shell must pay compensation to the Nigerian farmer and fisherman Mr. Akpan, who sustained damages because of the two oil leakages of the oil installation of the operator SPDC. The amount of the compensation will be fixed in a separate procedure. Parties may appeal the decisions.

(District Court of The Hague 30 January 2013, LJN BY9854, available at: http://www.rechtspraak.nl; see also BY9850 and BY9845.)

Several years ago, four Nigerians joined by Milieudefensie brought proceedings against four legal persons of Shell with headquarters in The Hague before the Dutch district court. They claimed that Shell is responsible for the oil pollution near their villages in Nigeria (para. 3). Four oil leakages caused the sustained environmental damage. However, the court held that the oil leakages were not caused by alleged negligent maintenance by Shell, but the leakages were caused by sabotage by third parties. As Nigerian law applied to the case – for the damages were sustained in Nigeria – civil liability of the Shell companies had to be decided according to Nigerian tort law. With regard to the oil leakages near the village of Goi in 2004 and near the village of Oruma in 2005 respectively, SPDC had taken sufficient measures to prevent sabotage to its underground oil pipes. In case of sabotage, the main Nigerian legal rule is that the operator is not liable for the damage (para. 4.40). In accordance with this rule, the Dutch court therefore dismissed the claims in these four cases against Oguru, Efanga, and Dooh.

On the other hand, with regard to the two oil leakages near the village of Ikot Ada Udo the court held that SPDC breached its duty of care under the tort of negligence. In that case, the sabotage by tampering of the wellhead could have been easily done by applying a wrench to the valves. In Nigerian law, the operator can however be held liable in case of sabotage in case the operator has taken insufficient measures to limit or mitigate the risk of sabotage of a specific oil pipe of the oil installation. According to the court the requirements to hold an operator liable in case of sabotage are found in the Nigerian precedent or legal authority of Shell Petroleum Development Company (Nigeria) Limited v Otoko (1990): ‘the operator must have foreseen the sabotage and should have taken measures to prevent it.’ (para. 4.41) In this case, the court held that both requirements of foreseeability and proximity were satisfied (para. 4.42-43). Access to the installation and the valves to open the pipe above ground was free and unprotected against saboteurs since 1959 or 1960. SPDC should have known that there is a high risk of sabotage of the installation above ground under these specific conditions (4.43). More and better precautionary measures should have been taken such as securing the wellhead as was done in 2010 only after the case had been brought to the Dutch court (para. 4.43-44). Consequently, the court finds that it is fair, just and reasonable to establish that the SPDC had a specific duty of care vis-à-vis the people surrounding the installation and in particular to the farmers and fishermen like Akpan, a duty that was breached (4.45). If the wellhead had been sufficiently secured, the oil leakages of 2006 en 2007 would not have occurred and hence Akpan would not have sustained damages. Thus, SPDC was held civilly liable on negligence (para. 4.45).

In a separate procedure, the amount of compensation to be paid to Mr. Akpan will be established.

In these five cases, the Nigerian claimants were joined by the NGO Milieudefensie. According to Dutch law, a foundation or association, such as Milieudefensie, can bring claims against Shell on the basis of Art. 3:305a Dutch Civil Code (BW), the representative group action (para. 4.11). According to the court, Milieudefensie could represent the environment interests in Nigeria before the Dutch court on this legal basis. As this provision is part of Dutch civil procedural law, the admissibility question was therefore not decided under Nigerian but under Dutch law. The court held that all the legal requirements to legally represent the Nigerian environmental interests were satisfied (paras. 4.12-13). In particular, the court took into account that the case consists of similar claims of many Nigerians. Thus, collective or mass litigation would be less burdensome, compared to individual litigation (para. 4.12). Yet, Nigerian law is the applicable law regarding the substantive law issues (paras. 4.8-9). Hence, the liability question regarding the NGO should be decided by applying Nigerian tort law. Under Nigerian tort law, the Shell companies did however not breach a duty of care vis-à-vis Milieudefensie. Thus, all claims of Milieudefensie were dismissed (para. 4.35).

These cases against Shell for oil pollution in Nigeria are often referred to as foreign direct liability cases, as multinational corporations are being held liable for environmental or human rights violations in the host States (in this case: Nigeria) before the courts of their home States (in this case: Netherlands, as jurisdiction in which Shell has its headquarters), in which the parent companies are incorporated or have their headquarters. This case is a unique case in the sense that it is the first time a multinational is being held accountable and liable for overseas’ violations before Dutch civil courts. However, as stated, only the Nigerian subsidiary is held liable, not the parent companies. Under Nigerian law and under many common law jurisdictions, the Dutch court held that the parent companies generally have no legal duty to prevent (overseas’) damage to third parties by their subsidiaries (paras. 4.24 and 4.26-4.32). Moreover, there were no facts or circumstances to deviate from this principle (paras. 4.24 and 4.33, referring to the English Chandler v. Cape PLC case).[1] In sum, the Dutch Shell Nigeria case is no doubt a landmark case, though it is no clear victory for the NGO and the Nigerian farmers, who principally aimed to hold the parent companies responsible for the damages. Whether the result would have been different if Dutch law applied remains one of the yet unanswered questions.

Marie-José van der Heijden is an assistant professor at the Molengraaff Institute for Private Law, Utrecht University.