Wole Olufunwa Director and Head of Africa Practice, Singapore
The Hague court of appeal finds in favour of Nigerian farmers against Shell
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On 26 June 2005, Shell Nigeria was notified of a leak in an underground oil pipeline near Oruma. As a result of the leak, oil was visible bubbling out of the ground. Before the leak was closed, around 400 barrels of oil had been spilled (approximately 65,000 litres).
On 9 July 2005, Shell Nigeria contained the spilled oil and from 18 August 2005 to the following June, remediation; cleaning; and restoration activity took place.
The Farmers’ arguments
A group of Nigeria farmers backed by Friends of the Earth – Netherlands commenced proceedings against Shell. They argued (amongst other things) that Shell Nigeria: (i) was liable for the occurrence of the leakage; (ii) had responded inadequately to it; and (iii) was responsible for any damage to the physical integrity of the farmers by causing them to live in a polluted environment, i.e. contaminated land and fish ponds.
Shell Nigeria’s Defences
Shell argued (amongst other things) that the farmers had not provided documents showing how they had acquired ownership of the subject land and the fishing ponds; it was not clear where the fishing ponds were precisely located; and that in any event the leak had been caused by sabotage.
The Hague Court Ruling:
It was held that Shell Nigeria was liable to the Nigerian farmers who had brought the suit:
- for the damage resulting from the leakage at Oruma on 26 June 2005; and
- for failing to install an adequate leak detection system (“LDS”) prior to the oil spill.
The quantum of damages and compensation have not yet been determined.
Shell Nigeria and its parent company Royal Dutch Shell were also ordered to fit a LDS to the Oruma I and Oruma II pipelines within one year of the judgment, with a daily fine of EURO 100,000 for each day of non-compliance.
The judgment is timely and has significant humanitarian ramifications. Over the years Shell and other majors have been accused of serious contamination offences and violations in the Niger Delta region as a result of their exploration activity. Shell has always denied these allegations; often citing sabotage as the cause of such incidents (as it argued in this case). This is all too easy where lives, livelihoods, the health and viability of local ecosystems are at stake.
In this day and age, the mandated imposition of LDS systems ought to become the order of the day if any lessons are to be learned. LDS systems enable earlier detection and thus assist with mitigating against loss and damage with more effectively prompt implementation of protective and remedial actions adopted.
It is positive that the Court saw fit to order LDS systems be fitted to Oruma I & II pipelines within the year. The local farming community have also expressed hope upon learning of the judgment and this should serve as a timely notice to all majors that environmental concerns must be at the forefront of extraction operations.
The judgment could also have widespread corporate responsibility implications beyond Nigeria. The fact that the judgment purports to bind the parent company: Royal Dutch Shell, is a shot across the bow of multinational companies and their advisers. This judgment may set judicial precedent that parent companies should be held to owe a duty of care to the communities affected by the activities of their subsidiary companies; an argument that has not always succeeded in the English courts.