On January 30, 2013, the district court in The Hague, The Netherlands, ruled that Shell Petroleum Development Company of Nigeria Ltd. (SPDC or Shell Nigeria), a member of the Royal Dutch Shell group of companies, is liable to pay compensation to plaintiff Friday Alfred Akpan, a resident of the Nigerian village of Ikot Ada Udo situated in Akwa Ibom State in the Niger Delta.  Applying Nigerian law, the Dutch court found that Shell Nigeria had breached its duty of care and had committed the tort of negligence by failing to take sufficient measures to prevent sabotage by third persons to Shell Nigeria’s submerged pipelines near the Nigerian village in 2006 and 2007.  The amount of compensation will be determined in a subsequent phase of the proceeding.

The lawsuit against Shell constitutes the first time that a Dutch multinational has been sued before a civil court in The Netherlands in connection with allegations of damage caused abroad.

Four Nigerian farmers and fishermen, along with Milieudefensie, the Dutch branch of the environmental group Friends of the Earth, had brought five separate lawsuits against four Shell entities and their parent company before the district court in The Hague, claiming compensation for oil pollution damage suffered locally by the Nigerian plaintiffs in four incidents between 2004 and 2007, and allegedly caused by poor maintenance on the part of the Shell defendants.

The Hague court dismissed all claims in all but one proceeding after finding that the oil contamination was caused by sabotage by third persons as opposed to Shell’s poor maintenance of its local oil installations and that there was no evidence of Shell’s negligence in those cases.  Under Nigerian law, an oil company in principle is not liable for oil pollution damage caused by third-party sabotage.

Importantly, the court dismissed all claims against Shell Nigeria’s co-defendant and parent company, Royal Dutch Shell plc, which has its headquarters in The Hague, referring to the general rule of Nigerian law according to which a parent company is not obligated to prevent foreign subsidiaries from injuring third parties abroad and finding no special reasons to deviate from the general rule.  The court had found in interim rulings that it had jurisdiction over the claims against all of the Shell defendants because those claims were closely connected.

While the court accepted the Dutch environmental group’s standing to defend environmental interests in Nigeria before the courts in The Netherlands alongside the Nigerian plaintiffs, it rejected the NGO’s claims because oil pollution in Nigeria is not unlawful vis-à-vis the Dutch-based group under Nigerian law.

All plaintiffs have announced that they will appeal the district court’s ruling insofar as it concerns the court’s dismissal of the four other lawsuits and its rejection of the claims against the parent company.

Other members of the Royal Dutch Shell group of companies, organized in The Netherlands and the UK, are defending a separate human rights-related lawsuit brought by Nigerian plaintiffs in US courts under the Alien Tort Statute (ATS) in Kiobel v. Royal Dutch Shell Petroleum Co., et al.  Plaintiffs in Kiobel, who are Nigerian citizens from the Ogoni region of Nigeria, brought claims under the ATS, which permits non-US plaintiffs to file civil tort actions in US federal courts for violations of the “law of nations or a treaty of the United States.”  The plaintiffs in Kiobel allege that the corporate defendants aided and abetted human rights abuses committed by the Nigerian government, including torture; cruel, inhuman, and degrading treatment; and arbitrary arrest and detention.  The case is currently under review by the US Supreme Court, which is considering both the availability of corporate liability under the ATS and the statute’s extraterritorial reach.  (See previous Steptoe alert on Kiobel.)  A decision is expected by June 2013.

These cases highlight the continuing risks to multinational companies of human rights-related litigation both in and outside the United States based on various common law and statutory theories.  As pressure from investors, consumers, personnel, and other stakeholders to ensure respect for human rights continues, companies should develop robust human rights compliance programs with a view to preventing adverse impacts on human rights, as well as avoiding the legal and reputational consequences associated with allegations of corporate human rights harms.