Dutch court: Shell partly responsible for oil spills in Nigeria

The District Court of  The Hague rendered a judgement on 30 January in a case against the UK/Dutch/Nigerian oil business group Shell (Reuters). Oil spills from a well on an abandoned oil exploration site had harmed nearby Nigerians’ livelihood and environment. The site had been operated by a Nigerian company wholly owned (through intermediary subsidiaries) by Royal Dutch Petroleum (Shell).

What’s in the judgement and why did both sides embrace the judgement as a success? Here are the key points:

Victories for Shell:

  • All claims against the Dutch parent company were dismissed. This was not a result of the company law doctrine of separate legal personality. Instead of attempting to pierce the corporate veil, the plaintiffs had quite understandably asserted that the parent company itself was liable, since it could have and should have induced its Nigerian subsidiary to avoid the oil spills. However, in the court’s view the requirements of the tort of negligence were not fulfilled. In particular, the Dutch company and the Nigerian land owner didn’t seem to be proximate enough for the court to recognise under “fair, just and reasonable” standards a duty of care of the Dutch company in this case. Also, the parent company’s flowery environmental policy and its involvement in the subsidiary’s policy appeared to be rather “general” to the court – too general to say that the parent had assumed a duty to care for the neighbouring Nigerians or to supervise its subsidiary.
  • All claims brought by Milieudefensie, a Dutch environmental protection association, were dismissed. A Dutch environmental association can stand up in a Dutch court for the interests of Nigerians affected by environmental pollution. But the court held that the association had wrongly asserted own claims in negligence, not claims of the Nigerians.

Victory for the Nigerian plaintiff:

  • The court granted the Nigerian farmer and fisherman claims against the Nigerian company. The subsidiary could have and should have secured the oil well by simple means properly enough so that the sabotage by oil thieves would have been avoided. It owed these measures to the farmers and fishermen, because they lived in the vicinity and were therefore proximate.

The judgement of the court of The Hague is quite a breakthrough since all the plaintiff, the Nigerian defendant, and the matter of the case are located outside of the EU. The EU’s current jurisdictional regulation allows for the application of the Dutch procedural rule that makes such far reaching jurisdiction possible. The European Parliament has made sure that the residual applicability of the European rules of “exorbitant jurisdiction” will be maintained beyond January 2015, when the recast version of the Brussels-I Regulation on jurisdiction takes effect.

While the Dutch parent company might take the judgement as a relief, the door is also still ajar for parent company negligence. The court accepted that a liability of parent companies in such constellations was possible; it just didn’t find the facts and argument in this case compelling. The judgement tries to delineate from a “fair, just and reasonable” point of view the duty of care of the Dutch company with regard to its foreign subsidiary and the people living in its vicinity. This approach gives quite some room to discretion, and it also allows a court to look at what the UN Guiding Principles on business and human rights have to say about the commonly accepted standard of due diligence throughout global business operations. Moreover, the judgement mentions that a duty of care can in any event exist if the relationship between the defendant and its subsidiary was such that the defendant had to supervise its subsidiary or had to exercise control over it. Concepts of control and supervision are indeed quite familiar in company groupings.

The judgement could anyway ultimately amount to a financial burden for the Dutch parent company. It’s not unusual that parent companies have to equip their subsidiaries with certain funds. And when the Nigerian plaintiff seeks enforcement of the judgement against the subsidiary, it wouldn’t be a surprise if such claims of the subsidiary against its parent are attached in the Netherlands based on the Dutch judgement.

This opinion is based on an English translation of the judgement, kindly provided by SOMO. District Court of The Hague, judgement of 30 January 2013 – C/09/337050.