LONDON - A court in the Netherlands Wednesday dismissed four claims for compensation against Royal Dutch Shell PLC's Nigerian subsidiary, but awarded damages in a fifth, in cases brought by farmers and fishermen claiming that oil spills from pipelines in Nigeria damaged their livelihoods.
The size of damages awarded has yet to be decided, but the ruling is an apparent victory for the oil giant. The court concluded that the oil spills weren't caused by poor maintenance by Shell's Nigerian subsidiary, but by sabotage from third parties.
Significantly, the court also dismissed all claims against the parent company, based in the Netherlands, saying that Nigerian law meant only Shell's local subsidiary was liable. This means the case doesn't set a legal precedent over how Dutch companies are held responsible for the actions of their foreign subsidiaries.
Oil companies will be relieved by the verdict, principally that a precedent of a general responsibility of the parent company to the subsidiary hasn't been established in relation to Nigeria, said Simon Tysoe, a partner at law firm Herbert Smith Freehills, who specializes in the energy and natural resources sector.
The ruling could also dissuade other people from bringing claims such as this in a European court, he added.
The lawsuit was brought by environmental group Friends of the Earth Netherlands and four Nigerian farmers and fishermen, who were seeking compensation over claims that oil spills from Shell pipelines in Nigeria damaged their livelihood. They also said they wanted the Anglo-Dutch oil company, based in The Hague, to complete the cleanup of the spills.
The court, which posted the verdict on its website, said that in the single case where Shell's Nigerian subsidiary was ordered to pay compensation, the company "could and should have prevented" the sabotage of its pipeline that caused the spill by installing a concrete plug on an abandoned oil well before 2006.
The sabotage was committed in 2006 and 2007 by opening the underground valves with a monkey wrench, the court said. Shell installed a concrete plug on the well in 2010.
Mutiu Sunmonu, the managing director of Shell Petroleum Development Company, Shell's subsidiary in Nigeria, welcomed the court's ruling that all spill cases were caused by criminal activity.
"Oil pollution is a problem in Nigeria, affecting the daily lives of people in the Niger Delta. However, the vast majority of oil pollution is caused by oil thieves and illegal refiners," Mr. Sunmonu said. "This causes major environmental and economic damage, and is the real tragedy of the Niger Delta."
Friends of the Earth Netherlands oil and mining campaigner Evert Hassink said the group would appeal the court's verdict in the four cases that were dismissed and would also appeal the ruling that the parent company wasn't responsible.
Mr. Hassink said that Shell had a duty of care to prevent sabotage of its pipelines. "An oil giant cannot leave 7,000 kilometers of pipeline and hundreds of installations unprotected and unguarded in a politically unstable and economically underdeveloped region," Friends of the Earth Netherlands said.
The oil spills at Oruma, Goi and Ikot Ada Udo in the Niger Delta took place between 2004 and 2007. The total amount of oil spilled in the three locations was about 1,100 barrels.
Shell had said previously that a joint investigation found that sabotage was the cause of the spills in each of the three spill locations. In the first case a hole had been bored into the pipeline, in the second it had been cut with a hacksaw and in the third a valve had been manually opened, the investigation found. The joint investigation team included members of the local community, local authorities and Shell.
Pipelines are commonly tapped in Nigeria to steal the oil inside. Many parts of the Niger Delta have a thriving trade in oil stolen this way, known locally as "bunkering." A report by the United Nations Office on Drugs and Crime in 2009 estimated as much as 150,000 barrels of oil a day was being stolen in that manner.
Copyright (c) 2012 Dow Jones & Company, Inc.
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