International
Environmental Destruction & Blood: The True Price of Oil
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By Adaeze Chukwuogor, (Culture of Denial, Activism, Growth of Resentment and Conflict) JS Law and Political Science and Dara Neylon-Marques, (Corporate Impunity), JS Law and Political Science The oil and natural gas reserves found in the Niger Delta are both a blessing and curse for the Nigerian state and its people. While the oil extracted from this region positions Nigeria as the biggest oil producer in Africa, it also results in approximately 40 million litres of oil being spilled across the neighbouring areas. This has had devastating effects not only on the environment but also for the local community, whose livelihood depends on crops, that are growing weaker and a fish stock that has halved in quantity. Locals are forced to drink polluted water, while child mortality has doubled for children whose mothers were living near an oil spill. In addition, the region is home to many gas flaring plants which have led to acid rain, asthma, asphyxiation and skin corrosion. However, the shareholders and directors of oil companies like Shell or Eni have not only refrained from implementing safety measures and standards that could prevent the spillages, but they also have been slow to resolve these issues when they arise. For example, Amnesty International reported an instance in which Eni took 430 days to respond to a spill in Bayelsa State, claiming that “for more than a year, oil leaked out of the pipeline into nearby swampland and rivers, contaminating the water people drink and wash with.” This is not a problem of unforeseeable consequences or inevitable damage but rather a clear disregard for the environment and the livelihood of the citizens of the region. One may reasonably ask: How do they get away with it? Corporate Impunity In company law, the principles of separate legal personality and limited liability recognise that the company and its owners are distinct. Therefore, they should not be held liable for the company’s actions and debts, as established in the cornerstone case of Salomon v Salomon [1896]. However, at the time of the judgment, Lord Justice Lindley in the Court of Appeal pre-emptively warned about the danger of exploiting these privileges to use incorporation as a front instead of as a means to create valuable economic activity for society. This concern is particularly relevant to the situation in the Niger Delta. European multinational corporations such as Shell enjoy billion-dollar profits from its subsidiaries in Nigeria yet bear none of the responsibility for the negative environmental externalities they produce, as they are considered a separate legal entity. The legal separation between the parent and the subsidiary means that those affected by the oil spills can only seek remedies in the Nigerian jurisdiction as that is where the subsidiaries are legally based. This has two main implications. The profits of the subsidiary are commonly absorbed by the parent, so they will have a smaller pocket from which to pay reparations. Furthermore, it is easier for the subsidiary to avoid the rule of law in Nigeria due to the rampant corruption that links oil production and politics, as well as the loosened environmental protections in Nigerian law. This is exacerbated by the economic barriers that citizens might face in sourcing legal representation, especially considering the huge legal machineries that companies can afford. The parent/subsidiary strategy has become increasingly useful for multinational companies in an attempt to distance themselves from the human and environmental externalities they incur. Nevertheless, it appears changes are arising. Following the case of Vedanta v Lungowe [2019], the UK Supreme Court recently accepted in Okpabi v Royal Dutch Shell Plc [2021] that those in Nigeria affected by the environmental harm caused by Shell could seek damages in the UK. By doing so, the Court recognizes that there is a triable issue in the claim that the UK parent company owed them a duty of care due to its control over the Nigerian subsidiary which was causing the environmental damage. While it remains undecided whether the duty did in fact exist in this particular case, another recent ruling leaves room for hope. In January of this year, the International Court of Justice ruled in favour of the plaintiffs in Four Nigerian Farmers and Milieudefensie v Shell [2021]. The Court held that Shell owed the plaintiffs a duty of care due to the activities of its subsidiary in the Niger Delta and that their
