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Shell agrees pay out to Nigerian community to settle long-running oil spill dispute

News / / London

Background

In 1991, the Ejama-Ebubu people began a legal campaign to hold Shell Nigeria (“Shell”) accountable for an oil spill that occurred in 1970. Shell accepted that these oil spills had occurred, but argued that these were caused by “third parties” during the Biafran war, for which Shell should not be held liable. Almost 20 years later, in 2010, a Nigerian Federal court ordered Shell to pay 17 billion naira to the Ejama-Ebubu community.

Shell has unsuccessfully attempted to challenge this ruling over several years and, in November 2020, the Nigerian Supreme Court ruled that Shell could no longer appeal the decision.

The agreement

Shell has reportedly agreed to pay 45.7 billion Nigerian naira (approximately US$111 million or £80 million) on or before 1 September 2021 in what a spokesperson for Shell called “full and final satisfaction” of the court judgment first issued in 2010.

This agreement seems to be the final chapter in a long-running dispute that reached the highest appellate court. However, as recently as 10 February 2021, Shell filed an arbitral claim with the International Centre for the Settlement of Investment Disputes (ICSID), i.e. the dispute resolution settlement body of the World Bank reportedly “seeking protection of [its] legal rights”. Shell argued that it could never properly defend itself against the substance of the claims. It has not yet been confirmed whether or not Shell has withdrawn or intends to withdraw this arbitral claim.

Toils in court

Shell may well have been persuaded to pay out and move on by a recent sequence of high profile losses in the courts throughout 2021.

In January 2021, the Hague court of appeal ruled that Shell was liable for a 2005 oil leak in an underground pipeline near Oruma, Nigeria (as detailed in our article here). The quantum of damages and compensation in relation to this ruling are yet to be determined.

This was followed shortly after, by a UK Supreme decision court in February 2021 (Okpabi and others v Royal Dutch Shell Plc and another [2021] UKSC 3) declaring that c.50,000 Nigerian farmers and fishermen could bring a claim in the English High Court against Royal Dutch Shell Plc (i.e. the parent company of the local subsidiary), for compensation after years of oil spills were alleged to have adversely affected their lives, health and local environment. This decision opens up parent companies to litigation in their countries of domicile, rather than where the alleged loss occurred. 

In May 2021, Shell hit the headlines again when the District Court of The Hague handed down its landmark decision in the matter of Milieudefensie et al. v. Royal Dutch Shell PLC. This ground-breaking decision ordered that Royal Dutch Shell Plc reduce its global net carbon emissions by 45% (compared to its 2019 emissions), by 2030. Our article examining the impact of this decision and the rise in climate change litigation can be found here.

A strategic shift toward clean energy

Shell has been gradually divesting Nigerian onshore assets for more than a decade. It holds less than half of the number of onshore licences than it did 10 years ago. Shell’s divestment strategy appears in-step with its contemporaries; most of whom have undergone significant re-branding this year in a bid to project themselves as frontrunners in the clean energy revolution. Those companies include Total, who recently re-branded to TotalEnergies, right through to smaller indigenous companies such as Seplat Petroleum, who recently re-branded to become Seplat Energy.

Comments

Whilst Shell’s agreement to settle this judgment debt is clearly a positive one, some will no doubt argue that it does not go far enough and/or is too long overdue. The energy landscape is changing and although Shell and others are intent on divestment from the Niger Delta region, it is hoped that there is some inward investment (direct or otherwise), into energy infrastructure there, that will enable the region to fully embrace and benefit from cleaner forms of energy. The re-purposing of pipelines to carry LNG is one such example.

Many may be keen to see the likes of Shell beat a hasty retreat from the region in the short term. However, perhaps the wiser longer term view would be to encourage them to engage fully in restoration endeavour and to invest in the region (financially and technically) so that it can keep pace with the clean energy revolution that is very clearly underway.

This article, written by Eric Eyo, was co-authored by Jack Maxted, Trainee Solicitor.

Eric Eyo

Eric Eyo Partner

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