Dutch Court Issues Mixed Ruling on Shell’s Liability for Nigerian Environmental Claim

As we wait with bated breath for the Supreme Court’s decision in Kiobel, it is worth remembering that there are viable alternatives to ATS litigation. That was particularly evident last week when The Hague District Court in the case of Akpan/Royal Dutch Shell. Here’s the Judicial Press Release (translated by Pieter Bekker):

Four Nigerian farmers and fishermen, together with Milieudefensie, commenced the lawsuits in The Netherlands, because they hold four entities within the Shell group, with its headquarters in The Hague, accountable for the damage resulting from four specific oil spills near their villages in Nigeria. The district court has found that the four oil spills were not the result of poor maintenance by Shell, but were caused by sabotage by third parties. Based on the applicable Nigerian law, an oil company in principle is not liable for oil spills resulting from sabotage. On this principal ground, all claims in four out of the five cases have been dismissed. With regard to the four lawsuits regarding an oil spill near the village of Goi in 2004 and an oil spill near the village of Oruma in 2005, the district court is of the view that Shell Nigeria took sufficient measures to prevent sabotage of its submerged oil pipelines. For this reason, and applying the general rule of Nigerian law, the Hague district court has dismissed the claims of plaintiffs Oguru, Efanga and Dooh in those four lawsuits.

In the lawsuit concerning two oil spills near the village of Ikot Ada Udo, the district court has ruled that Shell Nigeria has violated its ‘duty of care’ under applicable Nigerian law and has committed the ‘tort of negligence.’ In 2006 and 2007, an act of sabotage was committed in a very simple way near that village by using an English wrench to remove above-ground heads of an oil well abandoned by Shell Nigeria. Shell Nigeria could and should have easily prevented the sabotage by installing a concrete plug prior to 2006, whereas it only did so in 2010 while the lawsuit was pending. Consequently, the district court has ordered Shell Nigeria (i.e., Shell Petroleum Development Company of Nigeria Ltd, the Nigerian subsidiary of the Shell group) in that case to pay compensation to the Nigerian plaintiff, Mr. Akpan. The amount of compensation will need to be determined in a separate procedure, because to date the parties have only litigated the issue of liability, and the level of damages has not been addressed. Milieudefensie has brought the lawsuits together with the Nigerian plaintiffs. In the view of the district court, Milieudefensie has standing to defend environmental interests in Nigeria before the courts in The Netherlands. However, according to Nigerian law the oil spills in Nigeria are not unlawful vis-à-vis Milieudefensie and for this reason the claims of Milieudefensie have been dismissed.

Dutch courts and the parent companies of Shell The cases have been adjudicated by the Dutch court, because the claims are not only directed at Shell Nigeria, but also target the current British parent company of Shell, which has its headquarters in The Hague. The former parent companies of the Shell group in London and The Hague have also been sued. In interim rulings issued in 2009 and 2010, the district court ruled that it is justified to adjudicate the lawsuits against all Shell entities in The Netherlands, because those lawsuits are all closely connected.

In its final rulings of 30 January 2013, the district court has dismissed all claims against the parent companies, because (in short) under Nigerian law a parent company in principle is not obligated to prevent its subsidiaries from injuring third parties abroad and in the present case there are no special reasons to deviate from the general rule.

Here is a portion of Bekker’s commentary on the ruling (reprinted from OGEMID listserve with Pieter Bekker’s permission):

On January 30, 2013, the district court in The Hague, The Netherlands, announced in a press release that it has ruled that Shell Petroleum Development Company of Nigeria Ltd. (SPDC or “Shell Nigeria”), a member of the Royal Dutch Shell group of companies, is liable to pay compensation to plaintiff Friday Alfred Akpan, a resident of the Nigerian village of Ikot Ada Udo situated in Akwa Ibom State in the Niger Delta. Applying Nigerian law, the Dutch court found that Shell Nigeria had breached its duty of care and had committed the tort of negligence by failing to take sufficient measures to prevent sabotage by third persons to Shell Nigeria’s submerged pipelines near the Nigerian village in 2006 and 2007. The amount of compensation will be determined in a subsequent phase of the proceeding. The full text of the ruling (in Dutch) is yet to be released.

The lawsuit against Shell constitutes the first time that a Dutch multinational has been sued before a civil court in The Netherlands in connection with allegations of damage caused abroad by a subsidiary and appears to be part of a trend of plaintiffs from the developing world turning to the courts in developed countries for redress against multinationals.

Four Nigerian farmers and fishermen, along with Milieudefensie, the Dutch branch of the environmental group Friends of the Earth, had brought five separate lawsuits against four Shell entities and their parent company before the District Court in The Hague, claiming compensation for oil pollution damage suffered locally by the Nigerian plaintiffs in four incidents between 2004 and 2007, and allegedly caused by poor maintenance on the part of the Shell defendants.

The Hague court dismissed all claims in all but one proceeding after finding that the oil contamination was caused by sabotage by third persons as opposed to Shell’s poor maintenance of its local oil installations and that there was no evidence of Shell’s negligence in those cases. Under Nigerian law, an oil company in principle is not liable for oil pollution damage caused by third-party sabotage.

Importantly, the court dismissed all claims against Shell Nigeria’s co-defendant and parent company, Royal Dutch Shell plc, which has its headquarters in The Hague, referring to the general rule of Nigerian law according to which a parent company is not obligated to prevent foreign subsidiaries from injuring third parties abroad and finding no special reasons to deviate from the general rule. The court had found in interim rulings that it had jurisdiction over the claims against all of the Shell defendants because those claims were closely connected.

While the court accepted the Dutch environmental group’s standing to defend environmental interests in Nigeria before the courts in The Netherlands alongside the Nigerian plaintiffs, it rejected the NGO’s claims because oil pollution in Nigeria is not unlawful vis-à-vis the Dutch-based group under Nigerian law.

All plaintiffs have announced that they will appeal the district court’s ruling insofar as it concerns the court’s dismissal of the four other lawsuits and its rejection of the claims against the parent company.

The full text of the opinion (in Dutch) is available here. For more on Dutch human rights and environmental rulings similar to Akpan, see this amicus brief.

As I will discuss in greater detail later, such cases strongly suggest that domestic tort laws may be a viable alternative solution to ATS litigation. There is a wealth of cases (including US cases) applying tort law and conflict of laws that address many of the same factual scenarios that are presented in ATS litigation. Such cases will be particularly important if, as I suspect, the Supreme Court narrowly construes the ATS in Kiobel.

UPDATE: An English translation of the decision is available here.