While 2021 has not yet been the year we were hoping for, there is one bright spot: European courts are beginning to hold parent companies liable for human rights abuses committed outside their home country. In January 2021, the Hague Court of Appeal found Royal Dutch Shell’s (Shell) Nigerian subsidiary, Shell Petroleum Development Company (SPDC), liable for oil spills that occurred in the Niger Delta, an oil-rich region in Nigeria. Then, last week, in another case against Shell and SPDC, the UK Supreme Court held that parent companies domiciled in the UK may owe a duty of care to individuals harmed by its overseas operations. Together, these two cases highlight an exciting development in how European courts are thinking about parent company liability for human rights and environmental abuses.
This post focuses on the most recent UK case, Okpabi v. Shell. It begins by discussing the human rights and environmental harm that Shell has caused in the Niger Delta. It then examines the Okpabi case and the UK Supreme Court’s finding that parent companies may be liable for overseas abuses, a decision that builds on the UK Supreme Court decision in Vedanta v. Lungowe. The post ends by discussing Shell’s decision to bring Nigeria to arbitration under a controversial investor-state dispute settlement mechanism in a Netherlands-Nigeria investment treaty, an apparent attempt to avoid paying damages to communities harmed by an oil spill.
Shell’s abuses in the Niger Delta
The Niger Delta is an oil-rich region whose environment Shell has exploited and harmed for over fifty years. Royal Dutch Shell and its Nigerian subsidiary, SPDC, began drilling for oil in the Niger Delta in the 1960s. This drilling led to spills, gas flaring, and acid rain that has destroyed much of the Niger Delta’s soil, water, and biodiversity. The oil that lies under the soil has turned the region into an environmental disaster zone and has had devastating impacts on the health and livelihoods of the area’s fishers, farmers, and communities.
Although Shell no longer drills in the Niger Delta, the devastation from oil spills continues as a result of leaks and vandalism to existing pipelines. Shell itself admitted that from 2011 to 2018, there were at least 1,010 spills in Nigeria. Today, the Niger Delta has communities that still cannot access safe drinking water. Friends of the Earth Netherlands reports that 16,000 babies die each year from the pollution, and life expectancy in the Niger Delta is ten years lower than in the rest of the country. Additionally, thousands of people have fled the Niger Delta's contaminated environment and the state has allegedly committed retaliatory violence for resisting Shell's destruction of the region. Adding to these continued impacts, the Nigerian government only began a cleanup program five years ago, which has been largely ineffective and is marred by corruption.
Okpabi and others v. Royal Dutch Shell Plc and another
In 2015, a group of 42,500 members of the Ogale and Bille Nigerian communities filed suit in the UK High Court against Shell, which is headquartered in the Netherlands and incorporated in the UK, and against its Nigerian subsidiary, SPDC. The plaintiffs, represented by the British law firm Leigh Day, sued Shell and SPDC, alleging that oil spills near the Ogale and Bille communities have “caused widespread environmental damage, including serious water and ground contamination.” The plaintiffs claim that these spills have caused such widespread contamination that they cannot safely drink the water in their community, or even use it for fishing, agriculture, or washing.
The plaintiffs argued that Shell owed them a common law duty of care because Shell, as the parent company, “exercised significant control over material aspects of SPDC’s operations and/or assumed responsibility for SPDC’s operations.” Shell and SPDC responded by arguing that UK courts do not have jurisdiction to hear the claims because the alleged harm occurred in Nigeria, and that the companies are not liable for the harms because the oil spills are not a result of their negligence, but instead are due to sabotage and theft.
In January 2017, the UK High Court held that Shell did not exercise enough oversight, control, or direction over its subsidiary, SPDC, and therefore that the UK courts did not have jurisdiction over the case. The Court of Appeal upheld this decision in February 2018. But in February 2021, the UK Supreme Court reversed, holding that the plaintiffs had presented an arguable claim that Shell was liable. The Court further held that the Court of Appeal had mistakenly engaged in a “mini-trial” to determine that Shell did not owe the plaintiffs a duty of care. The Court instead found that the real test at this stage in the trial is whether there are “reasonable grounds for believing that disclosure may materially add to or alter the evidence relevant to whether the claim has a real prospect of success.” The Court explained that internal corporate documents are essential to deciding whether or not a parent company owes plaintiffs a duty of care.
The UK Supreme Court’s decision means that the case can proceed to the merits. While this does not itself provide remedy for the victims, it is a big step towards having their case heard in court. It is also a reaffirmation of a similar case from 2019, Vedanta Resources PLC and another v. Lungowe and others — which was also brought by Leigh Day. In Vedanta, the UK Supreme Court held that duties of care by parent companies can be determined by common law tort law – finding that they do not rely on a distinct category of negligence. In both of these cases, the UK Supreme Court has held that parent companies can be liable under UK law for a subsidiary’s actions that are carried out in another country.
This new jurisprudence from the UK Supreme Court comes just weeks after a Dutch court held that SPDC was responsible for most of the oil spills at issue in that case. The court further found that Shell had violated its duty of care regarding its overseas operations. As a result, SPDC owes damages to three of the four plaintiffs and to their communities that the spills harmed. (The court found that Shell had proved that the fourth spill was a result of sabotage and has not yet decided on liability.) To read more about this case, click here.
For more detailed legal analysis on the Okbapi case, check out this article in OpinioJuris or this article on CORE’s website. You can also click here for a comparison of the Okpabi and Friends of the Earth judgments.
Shell’s claim against Nigeria
While Shell has been defending itself against parent company liability in Europe, it has also been busy bringing arbitration proceedings against Nigeria at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). On February 10, 2021, Shell and SPDC filed an ICSID complaint to begin arbitration proceedings under a Netherlands-Nigeria bilateral investment treaty. While the details of this filing are not yet public, it appears to be a bid to avoid paying court-ordered compensation Shell owes to another community in the Niger Delta.
The Ejama Ebubu community initially sued SPDC in 2001 for an oil spill that occurred in the southern state of Rivers during the Nigerian Civil War in 1967-70. The plaintiffs argued that Shell’s negligence caused the spill. Shell has denied responsibility-- instead blaming pipeline damage on rebel groups--although it has stated that it has carried out remediation. In June 2010, a Nigerian High Court ordered SPDC and two other Shell affiliates to pay N15 billion to impacted communities for harms suffered as a result of the spill.
Although Shell won a 2019 court ruling in the UK that does not allow enforcement of the award, Shell’s appeals from the case in Nigeria have all been dismissed, including by Nigeria’s Supreme Court in November 2020. Plaintiffs allege that they are now owed N183 billion ($479 million). (In the original decision, the plaintiffs received 17 billion naira, or $44.7 million, but it has been accruing interest since then.)
While the details of the February ICSID complaint remain undisclosed, after the Nigerian Supreme Court declined to review the judgment against Shell, suggesting that the award to communities will be enforced, Nigerian law enforcement reportedly moved to seize assets from SPDC’s guarantor FirstBank in January 2021.
As Shell tries to avoid liability in this case, there is a glimmer of hope that British and Dutch courts will not allow them to escape liability in similar cases. We hope that this marks a turning point and that communities will finally get some justice.
Allie Brudney is a Staff Attorney at Corporate Accountability Lab.
