Oil multinational Shell has settled a spill claim for $83.2m with a
community in Nigeria’s southern Delta region, in a case that lawyers
believe could open up oil companies to further liability claims.
The settlement agreement, brokered as the case was moving through the
British courts system, is the largest payout ever made to a community
in the Niger Delta. Each of the 15,600 claimants from the Bodo community
in the Ogoniland district of the eastern Delta will receive $3,300 from
the payout, with another $30.25m going into community projects.
“This is a historic moment for the people of the Niger Delta, and I hope hope Shell learned lots of lessons through this process… They have a major duty to check out damage caused, not to wait for lawyers to come from abroad to make claims,” Martyn Day, senior partner at legal firm Leigh Day which represents the community, tells This Is Africa.
The claims centre around two 2008 operational spills from Shell’s onshore pipeline system near the Bodo community settlement. The Niger Delta is the heart of Nigeria’s crude production, making it the largest producer in Africa.
“We are satisfied that the settlement amount is fair
and just, and the community are as well,” says Shell spokesperson Sally Donaldson.
Initial claims were as high as £300m ($453.7m), according to Ms Donaldson, a sum she describes as “just a bit bonkers”. “That is one of the reasons it took so long to reach a settlement,” she says.
While Shell’s representatives believe the applicability of this precedent will be limited, Leigh Day’s lawyers believe this could be fertile grounds for future litigation.
“I think it is highly likely that there will be more cases,” Mr Day argues. “It is clear there are a lot of operationally caused spills which could lead to a lot of other good cases.”
He claims his firm has been approached by at least five different communities in the Delta with similar complaints to the residents of Bodo. Now that the settlement has been reached, he says Leigh Day’s lawyers would be going out to check out the claims in greater depth.
Shell, according to documents submitted on behalf of the claimants to the Royal Courts of Justice in London, “was and continues to be the single most dominant of the independent oil companies who have exploited the oil resources of Nigeria”. Together with its offshore operations, Shell’s Nigerian interests produced an average of 693,000 barrels per day in 2013.
This sum is a drop from the 949,000 barrels per day Shell produced in Nigeria in 2012, reflecting the “impact of oil theft, sabotage and related deferments”, according to company reports. The company believes that the prevalence of oil theft limits the number of cases where this case could serve as a precedent for future claims.
“If we ever cause a spill for operational reasons then we will compensate,” Ms Donaldson claims. “[But] what we do find in the Niger Delta is that over 90 percent of spills are caused not for operational reasons but by sabotage and theft.”
Yet it is precisely here that lawyers believe rulings in the Bodo case could open oil companies in the Delta to third party liability claims.
“The judge ruled that there could be liability for third party damage if we could show negligence on the part of the company,” says Mr Day.
According to one judgement issued in the case, the court rules that neglect by a licensee to repair punctured pipelines “can be proved to be the enabling cause of preventable damage to the pipeline by people illegally engaged in bunkering which causes spillage could give rise to a liability”.
However, the ruling on third party liability might be less straight forward than Mr Day claims, with the judge noting that companies’ neglect “may be difficult to prove, but there is that theoretical possibility”.
Shell maintains it is only responsible for spills in the case of operational failures, as was the case in Bodo, and not in cases where pipelines punctured by thieves and bunkerers leak into the surrounding area. The company claims locals have made at least 20 attempts to puncture sections of its Trans Niger pipeline - the same one that caused the spills in Bodo - in 2013 alone.
Oil bunkering and theft are growing issues in the volatile Delta region, where militant groups have been active for years. Whereas kidnapping was big business in the first decade of the 2000s, stealing oil directly from pipelines for illegal resale is now a massive source of income. According to some estimates, as much as $1.5bn worth of oil is stolen in Nigeria every month.
This industrial-scale theft allows “politicians, military officers, militants, oil industry personnel, oil traders and communities to profit, as [well as] organised criminal groups”, according to think tank Chatham House.
While companies like Shell cannot be asked to control the actions of thieves operating in the area, pipeline punctures have the same devastating effects on the surrounding environment and communities as operationally caused spills if left unrepaired. The London court concluded that “short of a policing or military or paramilitary defence of the pipelines, it is my judgment that the protection requirement...involves a general shielding and caring obligation”.
Despite the challenges involved in proving third party liability for companies operating in this challenging security environment, Mr Day remains confident that this may be a fruitful avenue for future legal challenges.
“We have clearly seen cases in which Shell’s response to these incidents has been laggardly, so there may be a heck of a lot of good cases coming out of that,” he says.
“This is a historic moment for the people of the Niger Delta, and I hope hope Shell learned lots of lessons through this process… They have a major duty to check out damage caused, not to wait for lawyers to come from abroad to make claims,” Martyn Day, senior partner at legal firm Leigh Day which represents the community, tells This Is Africa.
The claims centre around two 2008 operational spills from Shell’s onshore pipeline system near the Bodo community settlement. The Niger Delta is the heart of Nigeria’s crude production, making it the largest producer in Africa.
“We are satisfied that the settlement amount is fair
and just, and the community are as well,” says Shell spokesperson Sally Donaldson.
Initial claims were as high as £300m ($453.7m), according to Ms Donaldson, a sum she describes as “just a bit bonkers”. “That is one of the reasons it took so long to reach a settlement,” she says.
While Shell’s representatives believe the applicability of this precedent will be limited, Leigh Day’s lawyers believe this could be fertile grounds for future litigation.
“I think it is highly likely that there will be more cases,” Mr Day argues. “It is clear there are a lot of operationally caused spills which could lead to a lot of other good cases.”
He claims his firm has been approached by at least five different communities in the Delta with similar complaints to the residents of Bodo. Now that the settlement has been reached, he says Leigh Day’s lawyers would be going out to check out the claims in greater depth.
Shell, according to documents submitted on behalf of the claimants to the Royal Courts of Justice in London, “was and continues to be the single most dominant of the independent oil companies who have exploited the oil resources of Nigeria”. Together with its offshore operations, Shell’s Nigerian interests produced an average of 693,000 barrels per day in 2013.
This sum is a drop from the 949,000 barrels per day Shell produced in Nigeria in 2012, reflecting the “impact of oil theft, sabotage and related deferments”, according to company reports. The company believes that the prevalence of oil theft limits the number of cases where this case could serve as a precedent for future claims.
“If we ever cause a spill for operational reasons then we will compensate,” Ms Donaldson claims. “[But] what we do find in the Niger Delta is that over 90 percent of spills are caused not for operational reasons but by sabotage and theft.”
Yet it is precisely here that lawyers believe rulings in the Bodo case could open oil companies in the Delta to third party liability claims.
“The judge ruled that there could be liability for third party damage if we could show negligence on the part of the company,” says Mr Day.
According to one judgement issued in the case, the court rules that neglect by a licensee to repair punctured pipelines “can be proved to be the enabling cause of preventable damage to the pipeline by people illegally engaged in bunkering which causes spillage could give rise to a liability”.
However, the ruling on third party liability might be less straight forward than Mr Day claims, with the judge noting that companies’ neglect “may be difficult to prove, but there is that theoretical possibility”.
Shell maintains it is only responsible for spills in the case of operational failures, as was the case in Bodo, and not in cases where pipelines punctured by thieves and bunkerers leak into the surrounding area. The company claims locals have made at least 20 attempts to puncture sections of its Trans Niger pipeline - the same one that caused the spills in Bodo - in 2013 alone.
Oil bunkering and theft are growing issues in the volatile Delta region, where militant groups have been active for years. Whereas kidnapping was big business in the first decade of the 2000s, stealing oil directly from pipelines for illegal resale is now a massive source of income. According to some estimates, as much as $1.5bn worth of oil is stolen in Nigeria every month.
This industrial-scale theft allows “politicians, military officers, militants, oil industry personnel, oil traders and communities to profit, as [well as] organised criminal groups”, according to think tank Chatham House.
While companies like Shell cannot be asked to control the actions of thieves operating in the area, pipeline punctures have the same devastating effects on the surrounding environment and communities as operationally caused spills if left unrepaired. The London court concluded that “short of a policing or military or paramilitary defence of the pipelines, it is my judgment that the protection requirement...involves a general shielding and caring obligation”.
Despite the challenges involved in proving third party liability for companies operating in this challenging security environment, Mr Day remains confident that this may be a fruitful avenue for future legal challenges.
“We have clearly seen cases in which Shell’s response to these incidents has been laggardly, so there may be a heck of a lot of good cases coming out of that,” he says.
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