On January 30, 2013, the district court in The Hague issued a press release announcing that Shell Petroleum Development Company of Nigeria Ltd. (“Shell Nigeria”), a wholly-owned subsidiary of Royal Dutch Shell plc, had been held liable for negligence by failing to take sufficient steps to prevent sabotage of its underground pipelines near the village of Ikot Ada Udo, Nigeria, which led to two oil spills in 2006 and 2007 [1]. The sabotage was committed by opening the overground valves with a monkey wrench. The press release reveals that the Court held that under Nigerian law, Shell Nigeria should have installed a concrete plug before the sabotage to prevent the spill. The amount of damages to be awarded will be determined in a subsequent hearing.

The district court dismissed the four other claims regarding oil spills in 2004 and 2005 brought at the same time after establishing Shell Nigeria had taken sufficient precautions to prevent the sabotage in those cases.

These lawsuits represent the first time that a Dutch multinational corporation has been sued in the Netherlands for damage caused abroad by a subsidiary. The cases were heard by district court in The Hague because the claims were not only directed against Shell Nigeria, but also against the parent company, which is headquartered in The Hague. The claims against the parent company were dismissed since, pursuant to Nigerian law, a parent company is not obliged to prevent foreign subsidiaries from harming third parties abroad.

Royal Dutch Shell plc is currently facing another lawsuit in the United States dealing with the issue of extraterritorial jurisdiction. The plaintiffs, also Nigerian, brought claims against Royal Dutch Shell plc under the Alien Tort Statute (“ATS”) in Kiobel v. Royal Dutch Shell Petroleum Co., et al. The ATS provides a mechanism for non-U.S. citizens to seek civil remedies in U.S. courts for violations of “the law of nations or a treaty of the United States.” The plaintiffs claimed the defendants aided and abetted the Nigerian government in crimes against humanity in the Ogoni region of Nigeria. The U.S. Supreme Court heard arguments regarding the applicability of the ATS during two sittings and is considering both the application of the statute to corporations and the statute’s extraterritorial reach. A decision is expected in the next few months.

These cases underscore the potential exposure of multinationals to litigation in their home jurisdictions (or other jurisdictions that have embraced extraterritoriality) for corporate actions abroad and the importance of developing human rights compliance programs as both a preventative measure and a potential defence to such claims.