28 June 2021 | In 1970 Shell caused a huge oil spill in Nigeria. After finally being sentenced to pay damages to the affected community by the highest Nigerian court, Shell is now starting investor-state arbitration proceedings, to drag out the case even more, writes Juan Carlos Boué.
Juan Carlos Boué.* In recent days, Shell Petroleum and Shell Petroleum Development Co. (SPDC) began an arbitration against Nigeria at the World Bank’s arbitration forum, ICSID. This action was likely triggered by the attempted enforcement (which took place in January 2021) of a Nigerian federal court ruling dating from 2010, which had found SPDC liable for the damage inflicted on the Ejama-Ebubu community in the Niger River delta by an enormous oil spill (2.5 million barrels, 10 times the volume of oil spilled by the Exxon Valdez). The community was awarded 45 million dollars in damages, a sum likely to have grown ten-fold since, as it has been accruing interest at a hefty rate.
For years, SPDC vigorously contested this judgment but, in November 2020, Nigeria’s Supreme Court denied its application seeking to appeal it. However, SPDC asserts that the Supreme Court’s ruling did not actually determine liability nor, indeed, damages, and the company was able to obtain an injunction preventing enforcement while the quantum of compensation was in dispute. Members of the community tried, however, to take away some property (computers, etc) from a bank that was a guarantor for SPDC, presumably looking for information on assets that could be seized. SPDC filed the arbitration claim soon afterwards.
Thus, the central contention of the ICSID arbitration is likely to be that, as the aforementioned attempt at enforcement was not stopped, Nigeria therefore breached its international obligations under its bilateral investment treaty with The Netherlands. The explanation of the damages that the claimant companies supposedly suffered on account of this breach will doubtless make for interesting reading, whenever (and if ever) details of the proceedings become public.
This case has many striking features, not least that one of the claimants (SPDC) happens to be an entity that is majority owned (55%) by the Nigerian state oil company. But perhaps its most interesting aspect is that it stems from an oil spill that actually occurred in 1970. According to some estimates, the Niger River Delta has been subjected to the equivalent of one Exxon Valdez disaster every single year since then. As a result, it is now one of the most environmentally blighted regions on Earth and, not coincidentally, the locus of a serious armed insurrection, and a major source of criminality, arms trafficking and economic migrants.
Such is the scale of the catastrophe that, as a practical matter, whatever compensation the Ejama-Ebubu community were to obtain, it would be but a drop in the ocean in terms of what is required. So perhaps it is just as well that shareholders of the companies which controlled the oilfields whence this blight originated can rely on the World Bank’s arbitration forum to prevent corporate funds from being so needlessly squandered in this fashion.
*Juan Carlos Boué is a Mexican national and London-based counsel in the’ international corporate and arbitration practice of the international law firm Curtis, Mallet-Prevost, Colt & Mosle.