The multinational faces risks of multiple law suits in the U.S., U.K., and the EU over its actions in the Niger Delta.
Independent investigators at the University of Essex, have placed a caveat on investing in Royal Dutch Shell Plc (Shell), the parent company of Shell Petroleum Development Company of Nigeria Ltd (SPDC), as the company’s activities in the Niger Delta may soon “trigger a major wave of suits” that is likely to increase the company’s liabilities considerably.
A report published by the Essex Business and Human Rights Project, warns that the string of cases against the oil exploration company in the UK, US, Nigeria and the Netherlands may multiply significantly due to recent pronouncement by UK courts that a parent company can be held accountable for environmental, health and safety standard breach by a subsidiary.
Shell has often denied liability to the havoc done to the environment, eco-system and livelihood of the people of the Niger Delta claiming not to be involved in the day to day running of its subsidiaries.
However, the report, titled: “Corporate Liability in a New Setting: Shell and the Changing Legal Landscape for the Multinational Oil Industry in the Niger Delta”, argues that since Shell “oversees such standards worldwide, and is in ultimate control of their implementation” it is complicit in that it “[falls] short of making sure that the standards are implemented in the Niger Delta.”
Some of the probable liabilities may also include sizeable damages for failures to take steps to prevent and clean up oil spills and difficulty in meeting U.S. and European stock exchange rules that frown at feeding potential investors statements misleading information on matters of material fact.
The company may also face liabilities in the areas anti-corruption, labour and complicity in human rights abuses.
According to the report, because Nigerian laws and regulations safeguarding the environment correspond with international environmental protection laws, it has become increasingly easy for cases to be brought against shell in American, UK and European Union courts which might lead to great “impacts on the corporate balance sheet.”
The report, therefore enjoins investors to consider:
1. “The potential costs to the company of a rise in litigation against it arising from its activity in the Niger Delta if this litigation shifts to the UK, the US, or the Netherlands because of the role of Shell‘s parent company, Royal Dutch Shell?”
2. “The potential risks to Shell of falling so far below the standards for acceptable contamination set by the World Health Organization, as indicated in the report on the company‘s activity by the United Nations Environment Program?”
3. “How effective a defence is Shell‘s claim that sabotage is often the reason for the oil spills?”
4. “What standards can investors expect from Shell in the light of BP/US and Total/French/EU responses to the Deepwater Horizon and Erika oil spills?”
On Shell’s claim that majority of the oil spill in the Niger Delta were caused by sabotage, the report said shell’s claim “may not be supported by the facts; and even if it is, this does not absolve Shell from responsibility for not having adequately supervised the facility that was interfered with.”
It also argued that international regulations expect Shell to do a proper clean up as “sabotage does not relieve the obligation to clean up and to remediate.”
Bribery and corrupt practices
The report said liability accrued to Shell through dodgy deals that hinge on bribery and corruption has increased in the last two years. It mentioned the $48 million fine Shell paid in the U.S. for bribery in Nigeria in 2010 and the disgorgement of profits obtained through bribery.
It warned that since the argument of “double jeopardy” does not hold transnationally, Shell could be made to face simultaneous criminal and civil corruption charges in UK, US and the Netherlands if new evidence of bribery in Nigeria emerges.
The report said the U.S. Security and Exchange Commission, SEC, “found that [Shell] did not have adequate procedures in place to detect and prevent bribery within the Group. Failure by the Group to adjust its procedures in light of the 2010 agreements (with SEC) are likely to lead to larger fines in any future cases.”
Shell is currently being investigated for its role in the transfer of $1.1 billion (N155 billion) to ex-convict Dan Etete through the help of the Nigerian government.
Responding to the report, Peter Frankental, the Economic Relations Progamme Director of Amnesty International U.K., said:
“Amnesty International welcomes the findings of today’s independent report. It draws attention to Shell’s precarious legal position arising from its appalling impacts in the Niger Delta and brings closer the day when the company will be held accountable. Large parts of the Niger Delta, home to more than 30 million people, have become a polluted wasteland due to the activities of oil companies.”
“Numerous oil spills have left local communities with little option but to drink polluted water, eat contaminated fish, farm on spoiled land, and breathe in air that reeks of oil and gas.”
“Shell can no longer wriggle away from its responsibilities. This report sets out a clear legal basis for its parent company to exercise a duty of care towards those affected by the operations of its subsidiary in the Niger Delta.”
Support PREMIUM TIMES' journalism of integrity and credibility
Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.
For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.
By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.
TEXT AD: To place an advert here . Call Willie - +2348098788999