Why the UK Supreme Court hearing on Shell and oil pollution in Nigeria matters
Since Shell first discovered oil near the village of Oloibiri in 1956, the Niger Delta has become Africa’s most valuable oil-producing region and the Anglo-Dutch giant has earned billions of dollars.
But Amnesty International’s research over many years has demonstrated that Shell’s Nigeria operations have come at the cost of the human rights of people living there.
Hundreds of oil spills a year from poorly-maintained pipelines and wells, along with inadequate clean-up practices, have damaged the health and livelihoods of the Niger Delta’s many inhabitants, who largely remain stuck in poverty. New research has exposed that a long-touted plan to systematically clean up contaminated land and waterways in the Ogoni region has failed to deliver.
Now, Shell’s Nigeria operations are facing scrutiny like never before, with an unprecedented set of legal cases against the oil company in courts in Europe.
One of these is about to reach a critical moment.
On Tuesday, 23 June, the UK’s Supreme Court will hear an appeal brought by two Niger Delta communities, Ogale and Bille. The court will decide whether it can proceed on the critical issue of whether Shell’s parent company Royal Dutch Shell (RDS) is liable for the actions of its Nigeria-based subsidiary, Shell Petroleum Development Company (SPDC).
The case is undoubtedly important for what it means for the two communities, which have suffered for years from devastating oil pollution. As the customary ruler of Ogale, King Okpabi told me last year, Shell is failing to to tackle the pollution:
“Shell spoiled our water and destroyed our livelihoods. It is now spending millions to protect itself and tell the world that it has no responsibilities towards the people of Ogale, rather than addressing the wrong it did to us. Shell, why cannot you repair the mess you have created? Why are you denying our rights?”
But the hearing also has a wider significance. It could set an important precedent on the responsibility of companies for their overseas operations, which would open the way for further litigation not only against Shell but other multinational corporations as well.
In 2015, Ogale and Bille in the Niger Delta started legal actions in the UK against both RDS and SPDC, alleging serious environmental damage stemming from oil pollution.[1] The communities claim that over several years they have suffered systematic and ongoing oil pollution because of Shell’s operations, and demand RDS compensate their inhabitants and clean up the damage, on the basis that RDS controlled and directed the operations of SPDC.
Shell has contested these claims and, to date, has successfully argued that the case should be dismissed on jurisdictional grounds.[2]
Shell claimed that its Netherlands and UK-based parent company, RDS, is a separate legal entity from its subsidiary in Nigeria, SPDC. [3] Contrary to what the claimants argued, Shell stated that, while RDS owns 100 percent of SPDC and receives profits earned by SPDC, it has no responsibility for SPDC’s actions, and does not intervene in operational matters concerning its subsidiary.[4] For these reasons, Shell argued that RDS did not have a duty of care for the people affected by the operations of its Nigerian subsidiary.
The High Court in London agreed, holding that that RDS is merely a holding company which does not exercise any control over the operations of its Nigerian subsidiary and has, therefore, no duty of care towards the communities affected by those operations.[5] In February 2018, the Court of Appeal found that the English courts do not have jurisdiction over the claims due to a lack of evidence demonstrating sufficient direction and control of the UK and Netherlands-based parent company over its Nigerian subsidiary SPDC.[6]
A key issue in the case (and these kinds of cases in general) is that the most likely source of evidence demonstrating the degree to which one company entity relates to another, is the company itself. Therefore, in this instance, such internal information can only come from within Shell itself. It is not something that members of rural Nigerian communities, like Bille and Ogale, are likely to have access to. Yet the Court of Appeal made its ruling and struck out the case without the benefit of disclosure of critical information on the actual structure of Shell and the role its headquarters play in decision making.
But the case is far from over. In July 2019, following an application by the Nigerian claimants, the UK’s Supreme Court announced it would review this decision and is expected to do so in June 2020.[7] This comes soon after the Supreme Court heard an appeal in another high-profile human rights case involving a British-domiciled multinational and its overseas operations. Its findings are potentially highly relevant to the Shell case.
This was a case brought by almost 2,000 Zambian villagers against Konkola Copper Mines and its parent company Vedanta Resources Plc, alleging that their land and water had been damaged by toxic waste from the mine.[8] As with the Okpabi case, the key preliminary issue was in relation to whether the English courts had jurisdiction to hear the case. [9]
In April 2019, the Supreme Court found that the Zambian villagers had an arguable case against both parent company and subsidiary. Unlike the Okpabi/Shell case, the court did not consider that the claimants needed to establish that the parent company had operational day-to-day control over its subsidiary. Instead, the Supreme Court focused on the public commitments that the parent company made regarding their subsidiaries and the communities in which they operate. Notably, it ruled that a company might “incur the relevant responsibility to third parties if, in published materials, it holds itself out as exercising that degree of supervision and control of its subsidiaries, even if it does not in fact do so.” In such circumstances, the judges found that it could be the very fact of failing to live up to the public commitment that may present the breach of duty.[10]
The ruling in the Vedanta case could be very relevant to Shell and other multinational corporations, which deny that their headquarters control subsidiaries. Like Vendanta, Shell makes public statements to its shareholders about how its subsidiaries must operate, and issues policies and standards with which its subsidiaries must comply.[11]
If the claims are successful in the Supreme Court, RDS could be potentially liable for the oil-related pollution generated by its Nigerian subsidiary and this may result in many more cases being brought by Nigerian communities in the UK.
[1] Okpabi and others v Royal Dutch Shell Plc and another. Leigh Day, Two new legal actions launched against Shell over Nigerian oil pollution, March 2016, https://www.leighday.co.uk/News/News-2016/March-2016/Two-new-international-legal-actions-launched-again.
[2] High Court Judgement, Okpabi and others v Royal Dutch Shell Plc and another, 26 January 2017.
[3] Witness Statement of Osagie Okunbor, managing Director of SPDC, Okpabi and others v. Royal Dutch Shell Plc and another, 26 June 2016. On file with Amnesty International.
[4] Witness Statement of Osagie Okunbor, managing Director of SPDC, Okpabi and others v. Royal Dutch Shell Plc and another, 26 June 2016. On file with Amnesty International.
[5] Okpabi and others v Royal Dutch Shell Plc and another [2017] EWHC 89 (TCC) (26 January 2017), http://www.bailii.org/ew/cases/EWHC/TCC/2017/89.html. See also Amnesty International, UK: Shell ruling gives green light for corporations to profit from abuses overseas, 26 January 2017, https://www.amnesty.org/en/latest/news/2017/01/uk-shell-ruling-gives-green-light-for-corporations-to-profit-from-abuses-overseas/
[6] Okpabi and others v Royal Dutch Shell Plc and another [2018] EWCA Civ 191 (14 February 2018), http://www.bailii.org/ew/cases/EWCA/Civ/2018/191.html.
[7] UK Supreme Court Order, 2 September 2019. Leigh Day, Supreme Court grants permission to appeal to Nigerian Communities in their fight against Shell, 24 July 2019, https://www.leighday.co.uk/News/2019/July-2019/Supreme-Court-grants-permission-to-appeal-to-Niger. Amnesty International made a submission in this case saying there are strong reasons for the Supreme Court to accept the application for permission to appeal. Amnesty International, Rule 15 submission, 26 April 2018, https://www.amnesty.org/download/Documents/AFR4483212018ENGLISH.PDF.
[8] Lugowe and others v Vedanta Resources PLC.
[9] Leigh Day, Zambia — Vedanta — Konkola Copper Mines, https://www.leighday.co.uk/International/Corporate-accountability/Environmental-damage/Zambia
[10] Vedanta Resources PLC and another (Appellants) v Lungowe and others (Respondents), [2019] UKSC 20, https://www.supremecourt.uk/cases/docs/uksc-2017-0185-judgment.pdf.
[11] Shell, Business Integrity, https://www.shell.com/sustainability/our-approach/commitments-policies-and-standards/business-integrity.html
