William Wallis
Financial Times
Royal Dutch Shell
is to pay tens of millions of pounds in compensation to 15,000 Nigerian
fishermen affected by two huge oil spills. The out of court deal,
believed to be the biggest of its kind, ends a three year legal battle.
The Anglo-Dutch oil company has agreed payouts averaging £2,000 each to the fishermen in the Bodo region of the Niger delta, as part of a compensation package worth £55 million ($83 million) for what it called two "highly regrettable" spills in 2008.
The Anglo-Dutch oil company has agreed payouts averaging £2,000 each to the fishermen in the Bodo region of the Niger delta, as part of a compensation package worth £55 million ($83 million) for what it called two "highly regrettable" spills in 2008.
The deal settles a lawsuit brought against Shell in London over leaks in the Bomu-Bonny pipeline that caused environmental damage to rural coastal settlements of 49,000 people living in 35 villages, many of whom are subsistence farmers and fishermen.
The agreement is thought to be the biggest out of court settlement related to
a Nigerian oil spill and the first time thousands of individual Nigerians will receive direct compensation for one.
Some 15,600 people, including 2,000 children, will within weeks receive payments averaging £2,200 each, a sum equivalent to more than 30 times the minimum monthly wage in Nigeria, where 70 percent of the population live below the poverty line. The rest of an agreed £55 million compensation package will go to the community.
Shell Petroleum Development Company of Nigeria (SPDC), a Shell subsidiary, had admitted liability for spills of 4,000 barrels caused by operational failures but later withdrew those estimates, conceding they underestimated the extent of the leaks.
Leigh Day, lawyers representing the claimants, said 500,000 barrels had leaked, damaging 600,000 hectares of mangrove swamp. It alleged that the spills were so devastating that the local fishing industry almost ground to a halt and said Shell had originally offered just £4,000 to the entire Bodo community before the villagers sought legal action in London. Although it welcomed the outcome, the law firm said it was "deeply disappointing that Shell took six years to take the case seriously".
Mutiu Sunmonu, managing director of SPDC, said it was "pleased" to have reached agreement and clean-up work would begin soon.
Human rights group Amnesty International called the settlement "an important victory for the victims of corporate negligence".
But some activists were disappointed that the case did not go to court where it could have set a legal precedent for settlements of this kind within the UK legal system involving spills that have occurred abroad.
"This way they lose the legal precedent but the UK court system is still delivering what is by far the biggest payout so far," said Joseph Hurst-Croft, executive director of the Stakeholder Democracy Network, which works with communities in the Niger Delta.
The agreement is thought to be the biggest out of court settlement related to
a Nigerian oil spill and the first time thousands of individual Nigerians will receive direct compensation for one.
Some 15,600 people, including 2,000 children, will within weeks receive payments averaging £2,200 each, a sum equivalent to more than 30 times the minimum monthly wage in Nigeria, where 70 percent of the population live below the poverty line. The rest of an agreed £55 million compensation package will go to the community.
Shell Petroleum Development Company of Nigeria (SPDC), a Shell subsidiary, had admitted liability for spills of 4,000 barrels caused by operational failures but later withdrew those estimates, conceding they underestimated the extent of the leaks.
Leigh Day, lawyers representing the claimants, said 500,000 barrels had leaked, damaging 600,000 hectares of mangrove swamp. It alleged that the spills were so devastating that the local fishing industry almost ground to a halt and said Shell had originally offered just £4,000 to the entire Bodo community before the villagers sought legal action in London. Although it welcomed the outcome, the law firm said it was "deeply disappointing that Shell took six years to take the case seriously".
Mutiu Sunmonu, managing director of SPDC, said it was "pleased" to have reached agreement and clean-up work would begin soon.
Human rights group Amnesty International called the settlement "an important victory for the victims of corporate negligence".
But some activists were disappointed that the case did not go to court where it could have set a legal precedent for settlements of this kind within the UK legal system involving spills that have occurred abroad.
"This way they lose the legal precedent but the UK court system is still delivering what is by far the biggest payout so far," said Joseph Hurst-Croft, executive director of the Stakeholder Democracy Network, which works with communities in the Niger Delta.
More from the FT
"This is one spill. It is a big one. But if they are
liable for one spill what are they liable for over the years? If I was a
shareholder I would be factoring in future liabilities," he said.
A 2011 report by the UN Environment Programme, following an survey of Ogoniland, where Shell began producing oil in Nigeria in the 1950s, said it would take 25-30 years to treat legacy spills in the area. It provided a detailed account of the environmental destruction in the region and the damage to the livelihoods of its inhabitants as a result of oil spills.
Implementation of the report's recommendations, however, has stalled while the mechanics of the clean-up are worked out and the proportion of funds to be paid by the Nigerian government and oil companies including Shell are agreed, according to a senior Nigerian official.
UNEP recommended a figure of $1bn to cover the first five years of the operation.
The Nigerian official said the Leigh Day settlement provided an important precedent at a time when activists in Nigeria were working on putting together similar compensation cases. There have been thousands of oil spills in the Niger delta over the years, albeit of varying scale, under different operators and in many cases as the result of sabotage and oil theft.
A 2011 report by the UN Environment Programme, following an survey of Ogoniland, where Shell began producing oil in Nigeria in the 1950s, said it would take 25-30 years to treat legacy spills in the area. It provided a detailed account of the environmental destruction in the region and the damage to the livelihoods of its inhabitants as a result of oil spills.
Implementation of the report's recommendations, however, has stalled while the mechanics of the clean-up are worked out and the proportion of funds to be paid by the Nigerian government and oil companies including Shell are agreed, according to a senior Nigerian official.
UNEP recommended a figure of $1bn to cover the first five years of the operation.
The Nigerian official said the Leigh Day settlement provided an important precedent at a time when activists in Nigeria were working on putting together similar compensation cases. There have been thousands of oil spills in the Niger delta over the years, albeit of varying scale, under different operators and in many cases as the result of sabotage and oil theft.
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