Setback for Shell in $1.95bn debt appeal as Egbalor community wins Round One

• Shell ordered to deposit N800bn judgement debt with court
• Shell ordered not to sell assets until it obeys order

Operating in Nigeria as Shell Petroleum Development Company (SPDC), international oil company, Shell, which has joined other businesses to review its investments in Russia over the invasion of Ukraine, but which is contesting a judgement debt of N800 billion (or $1.95 billion) awarded the Egbalor, Ebubu community in Eleme Local Government Area of Rivers State over environmental

destruction that occurred as a result of an oil spill, ran into some setbacks on Friday at the Appeal Court Owerri Division as three justices that sat on its appeal found against it in the interlocutory applications brought ahead of the main appeal it has filed to upturn the lower court’s judgement.
Indeed, plans by the international oil company to sell some assets in Nigeria are now on hold as the justices ruled that Shell must deposit the said judgement sum of N800 billion with the court within 48 hours without which it must not carry out any assets sale.
In a unanimous decision, the three justices of the Court of Appeal Owerri Division who are taking the appeal, specifically ruled and ordered as follows:
That the international oil giant, Shell, is restrained from disposing of any of its assets in Nigeria pending the satisfaction of the judgement debt in favour of the Egbalor Community;
Shell is ordered to pay the entire judgement debt of N800 billion plus accrued interest from the date of Judgement of the Federal High Court on 20/11/2020 into an interest yielding escrow account controlled by the Court of Appeal within 48 hours of the ruling!
The judgement on Friday was the outcome of arguments heard last month over key applications before the main appeal.
Four significant applications had been argued before the justices, one of which came from Shell and three from the lawyers to the Egbalor Community.
The applications are Shell’s presentation of an application for stay of execution of the judgement pending appeal; while the community’s lawyers presented the following applications for the justices to consider:
A motion by the community’s lawyers, Ndarani (SAN) & Co., asking the Court of Appeal, Owerri Division to order Shell to pay the judgement debt of N800 billion (about $2 billion) with interest at 2% per annum from the date of the judgement on 27th November 2020 into court pending the outcome of the appeal proceedings;
An application to set aside Shell’s Notice of Appeal on the ground that it is incurably defective on points of law;
An application for an order of the Court of Appeal to halt any sale of Shell’s assets in Nigeria, pending the outcome of the Court proceedings in this case and/or final satisfaction of the judgement debt by Shell Nigeria and its parent companies, Shell International Limited and Shell Exploration & Production B.V.
Last month, all the pending motions had been vigorously moved and fully argued, with the court refusing to take Shell’s motion for stay of execution of the judgement pending appeal, opting instead for accelerated hearing of the substantive appeal.
The judgement debt, which Shell is appealing against, was given against Nigeria based Shell Petroleum Development Company (SPDC), and its parent companies, Shell International United Kingdom and Shell International Exploration and Production BV (SIE&P), Netherlands.
They got into trouble over Shell operations when the international oil company was sued for an oil spill that occurred on swamp farmlands in Egbalor, Ebubu, Eleme Local Government Area of Rivers State. The judgement against SPDC and its parent companies in the UK and Netherlands was obtained by some 88 persons in November 2020 over spillage on their fishing facilities in Ejalawa community in Oken-Ogogu swamp farmlands.
Tijani G. Ringim, judge of the Federal High Court, Owerri, Imo State, had in the judgement in 2020 held Shell Nigeria, Shell International Exploration and Production BV (SIE&P) and the Nigerian National Petroleum Corporation (NNPC) liable for the spill and granted the plaintiff the relief in the sum of N800 billion.
Shell has played it cool since the judgement was passed in 2020 and has not made any statement except to pursue an appeal with many analysts suggesting that it was ready for a slugfest by taking this appeal route and would be ready to go as far as the Supreme Court in search of an outcome it would be comfortable with.
It is not clear what the thinking is at Shell’s global headquarters regarding this case, given the size of the judgement debt. For a company that has been looking to exit assets in troubled areas of operations in Nigeria, with some assets already in the market for which it is looking to realise $3 billion, some issues have come up relating to what impact this ongoing dispute might have on bidders’ attitude to potential after sale liabilities.
International oil companies (IOCs) have often been subject to rigorous scrutiny especially in relation to how they treat host communities. Shell has operated in Nigeria for decades and it has not really been regarded as a shining example in the treatment of the communities where it operates.
Accusations have often been levelled by drawing comparison with the way Shell and other IOCs carry on their operations in Nigeria and in other jurisdictions. To this many would say IOCs take advantage of the prevailing corrupt environment that allows them to get away with murder by just extracting host communities resources and leaving them high and dry.
The $1.95 billion judgement is huge. But it is not only the cash involved, Shell has a responsibility to also clean up and it is thought in some quarters that this could be something that it is trying to avoid. Indeed, the plaintiffs in the case had sought for another order directing Shell to depollute and rehabilitate the destroyed farmland, ponds and agricultural products.
The judge in delivering judgement obliged them when he said: “The defendants shall promptly and expeditiously remediate the land of the plaintiffs to its International Agricultural Soil (IAS). The first and third defendant shall depollute and rehabilitate the farms and more particularly the fish ponds, of the plaintiffs.”
It is, therefore, not just the N800 billion compensation judgement, there is even more that the judgement requires of Shell. For one though, it exposes the kind of relationship that has existed between oil producers and their host communities, especially IOCs who had been exploiting Nigeria’s oil for decades with the backing of the might of the federal government, in what one legal expert called ‘legal theft’ of resources of the Niger Delta.
The judge who delivered the judgement said pipelines were laid and abandoned, which can be interpreted to mean that once the IOC laid the pipes and oil flowed through them to where they were needed, what happened thereafter was not of concern to the oil producers.