Shell Faces Setback with UK High Court Nigeria Ruling
(Bloomberg) -- Thousands of Nigerians can sue Royal Dutch Shell Plc in London over environmental damage in the West African nation, the U.K.’s top court said.
The Supreme Court on Friday reversed two earlier rulings that blocked the case from being heard in England. The decision could pave the way for similar claims from the developing world against British companies.
The ruling is the second legal setback for Shell, headquartered in The Hague, in recent weeks after a Dutch court ordered the company’s Nigerian subsidiary to pay compensation for spills that occurred more than 13 years ago. The prospect of more lawsuits in Europe comes at a bad time for the company as it outlines its plans to transition to cleaner energy.
The residents of fishing and farming communities in the crude-rich Niger Delta region say oil spills from pipelines operated by Shell’s local unit have destroyed their land and livelihoods. More than five years after filing their lawsuit, the roughly 42,000 individuals represented will be allowed a trial where they can try to persuade a U.K. court to order the energy giant to pay compensation and clean up the pollution.
The decision may force other U.K. multinationals to rethink how they operate abroad, says lawyer Rick Munro.
“Before this ruling they will have worked on the assumption that the U.K. parent is not liable for the acts and omissions of overseas subsidiaries where it does not exercise control over local management,” said BDB Pitmans’ Munro. “The ruling is likely to cause concern within the boardrooms.”
Shell says most oil spills are caused by theft or sabotage and argued the case should be litigated in Nigeria where judges have a better understanding of the local environment.
“This is a disappointing decision,” a spokesman for Shell’s Nigerian unit said in an emailed statement. The company cleans up the damage “regardless of the cause,” he said.
But activists hailed the ruling.
“This decision is a crucial first step for communities who have experienced decades of pollution to get access to remedy,” Arianne Griffith, a senior campaigner at London-based Global Witness, said in an emailed statement.
The Supreme Court found Shell’s parent company, incorporated in the U.K., could owe the impacted communities a duty of care for the activities of its subsidiary, said Leigh Day, the law firm representing the Nigerians. The judges concluded there is “a good arguable case” that Royal Dutch Shell is legally responsible for the pollution at the heart of the case, the firm said in a statement.
Shell’s local unit is the operator of pipelines and oil licenses in a joint venture with Nigeria’s national energy company, Total SE and Eni SpA. The group needs to take a “hard look” at its onshore activities in Africa’s largest crude producer due to continuing challenges with theft and sabotage, Chief Executive Ben van Beurden said earlier this month. Shell has divested about half of its business in the West African country in the last decade.
The judgment follows a landmark ruling by the U.K. Supreme Court two years ago that allowed more than 2,500 Zambians to proceed to trial against Vedanta Resources Plc for pollution caused by a copper-mining unit. The parties settled that dispute out of court in January.
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