Showing posts with label Netherlands. Show all posts
Showing posts with label Netherlands. Show all posts

Tuesday, February 23, 2021

Big Oil deploys slick strategy to stay ahead of liability

Image by Ucheke CC BY-SA 4.0
On February 12, the UK Supreme Court allowed a claim of environmental catastrophe by 40,000 to 50,000 Nigerian farmers to proceed in English courts against defendant Royal Dutch Shell.  The ruling came just two weeks after farmers prevailed in a significant but more limited case against Shell's Nigerian subsidiary in a Dutch appellate court in The Hague, after 13 years of litigation, and eerily echoes the still unfolding saga of the Chevron-Ecuador battle over Lago Agrio in the Amazon.

I'm compelled to mention the UK case, though it has been covered exhaustively in the media (e.g., N.Y. Times), because I wrote just last week on the controversial scope of "alien tort" liability in U.S. courts.  The case against Royal Dutch Shell ("Shell"), for devastating oil pollution in the Rivers State of the Niger Delta, is a kind of alien tort case in UK and Dutch courts.  In the UK, no specific statutory authorization is required to sue Shell, which is incorporated in the UK and headquartered in The Hague.  Rather, jurisdiction may be invoked upon the plaintiffs' demonstration of a duty in common law tort owed by the defendant company.

UK Supreme Court
(photo by M. Zhu CC BY-NC-ND 2.0)
The UK ruling is preliminary only; the court held that the plaintiffs demonstrated a "real issue to be tried," the preliminary standard, over the role of Shell in the pollution. The nub of the problem for the plaintiffs is that operations in Nigeria were run by, and not exclusively owned by, a subsidiary corporation of Shell, the foreign-registered Shell Petroleum Development Company of Nigeria Ltd. (SPDC).

The corporate shell is designed specifically to insulate the parent company against liability for the conduct of the subsidiary.  To penetrate the shell and reach the parent, the plaintiffs must show that Shell, the parent company, directed the conduct of SPDC, the Nigerian subsidiary, or worked jointly with SPDC.  The court in The Hague allowed jurisdiction upon a comparable control theory in 2015, though ultimately entered a monetary judgment only against SPDC.

The preliminary ruling from the UK Supreme Court does not yet establish direction or joint control, but says that the plaintiffs have made a sufficient showing to serve their lawsuit on Shell.  Rather than digging into the facts, the Supreme Court faulted the courts below, both the majority that had rejected the plaintiffs' claim and the dissent, for looking too closely at the plaintiffs' evidence and effecting a sort of "mini-trial" on the question of Shell control before the case has even been pleaded properly.

Nchanga Copper Mine, Zambia, 2008
(photo by BlueSalo CC BY-SA 3.0)
Environmental damage and human toll in the developing world as a result of resource extraction by western corporations is, sadly, not a new problem, and the UK Supreme Court invoked its experience in a prior case.  In 2015, plaintiffs in Zambia won the right to sue UK-based Vedanta Resources upon allegations that copper smelting had poisoned the water supply with "rivers of acid," containing sulfuric acid and other dangerous toxins.  The cooper operation in Zambia was owned by a Vedanta subsidiary, Konkola Copper Mines.  After the Supreme Court allowed suit in England, Vedanta settled with more than 2,500 Zambian claimants.

Vedanta was decided in the spring of 2019, and only then, after the lower courts had rejected the claims against Shell, did the Supreme Court admonish judicial restraint on questions of fact in preliminary proceedings and set out an approach to analyze parent-company duty: "depend[ing] on the extent to which, and the way in which, the parent availed itself of the opportunity to take over, intervene in, control, supervise or advise the management of the relevant operations (including land use) of the subsidiary."

Niger Delta, Nigeria
(ESA photo CC BY-SA 3.0)
In pleadings and on appeal, the plaintiffs asserted a dozen bases in fact to demonstrate Shell control of SPDC, including mandatory compliance standards for subsidiaries on health, security, safety, and environment; business principles; and best practices for assets, facilities, and infrastructure.  According to the plaintiffs, "[Shell's] executive remuneration scheme depended to a significant degree on the sustainable development performance of SPDC."  The plaintiffs alleged that Shell "for many years had detailed knowledge about widespread pollution in the Niger Delta caused by spillages and leakages of oil from infrastructure operated by SPDC, including knowledge of the frequency, location and size of oil spills, including its failure to protect its oil infrastructure against the risk of damage caused by the criminal acts of third parties."

According to the New York Times report on the case, Shell is retreating from investments in the Niger Delta and other sites near human habitation, preferring to drill offshore.  Meanwhile, disputes endure over responsibility to clean up the pollution left behind by extraction and over the efficacy of cleanup efforts.  In this way, the Nigeria case is strikingly similar to others in the world, notably, the long-running dispute between rain-forest communities in Ecuador and oil giant Chevron, successor to Texaco.

In the case against Chevron, an Ecuadorean court in 2011 ordered Chevron to pay $9.5bn to residents of Lago Agrio, a community in the Amazon, for catastrophic oil pollution there.  In 2014, a U.S. federal court ruled that the judgment was procured through fraud, and the plaintiffs' champion U.S. attorney, Steven Donziger, was disbarred in 2020.  The plaintiffs' efforts to collect on the award in courts with jurisdiction over Chevron assets in other countries, such as Canada and Argentina, have failed so far.  Donziger is appealing his disbarment while also facing contempt prosecution in New York.  Celebrity environmentalists continue to hail him as a hero, railroaded by Big Oil.  Meanwhile a district court in The Hague has demanded (subscription), pursuant to arbitration, that Ecuador nullify the judgment, and the matter continues to haunt Ecuador's destabilizing presidential elections.

For the third time, I'm having my comparative law class read Paul M. Barrett's Law of the Jungle, which chronicles the Chevron-Ecuador matter until the book's 2015 publication.  For my money, Barrett's is the most even-handed account out there.  (See also coverage by Michael I. Krauss for Forbes.)  And it's not flattering of Donziger.  But it's also not flattering of Texaco.

The complicated truth of what happened at Lago Agrio is a tragedy in multiple dimensions, generating plenty of blame to go around.  Donziger might have played fast and loose with the law in Ecuador, after being rebuffed in the United States, but he was navigating the outstretched hands of a sorely corrupt judiciary.  The devastation at Lago Agrio is real, and no one, oil firms or government, has ameliorated it.  At the same time, much, if not most, of the pollution can be traced directly to the national oil company of the Ecuadorean government, which at various relevant times bore exclusive or joint responsibility for Lago Agrio.  Even insofar as Texaco controlled the site, government regulators, also riddled with corruption, were utterly derelict in their duty to protect fundamental human rights and enforce industry norms.  To date, the people of Lago Agrio, maybe the only innocent actors in the whole story, have been left to struggle with the horrific health consequences and daily challenges of water and land contaminated by lethal toxins.

In Nigeria, Shell and SPDC also lay blame on the Nigerian government, a partner of SPDC in the extraction operation through the state-owned Nigerian National Petroleum Company.  I have no doubt that the government bears responsibility both for what it did as an owner and what it did not do as a regulator.  I wager that Shell and SPDC, like Texaco and Chevron, are guilty of conscienceless exploitation, but also behaved as rational corporate actors, splitting the difference between the costs of malfeasance and the benefits of non-regulation.  Like in Lago Agrio, the people of the Niger delta are left to endure the consequences of symbiotic opportunism, while the perpetrators point their fingers at each other.

Shell corporate building in The Hague
(photo by Mr. Documents Uploader CC BY-SA 4.0)
Maybe the concept of "alien tort" in the UK is turning the tide at last.  One might expect Shell to follow Vedanta's example and settle, for public relations reasons, if nothing else.  Reuters reported that Shell settled another Niger Delta pollution claim in British courts in 2015 for €70m.  Shell has consistently pledged to clean up Niger Delta pollution, even while disavowing responsibility.  But Shell did not settle the case in the Netherlands, where the company has been able to postpone liability for 13 years to date.  The AP reported that two of four farmer-plaintiffs died since the case there was filed in 2008.  An appeal to the Dutch Supreme Court may yet be filed, and Big Oil might be emboldened by Chevron's experience.

Rivers State, Nigeria
(image by Jaimz height-field CC BY-SA 3.0)
If Shell digs in its heels in the UK, the plaintiffs have an uphill battle ahead.  They will have to produce clearer evidence to persuade the trial court that Shell exercised control at the local level, and then to link Shell oversight to the pollution in proximate causation.  Shell, fairly, will seek to muddle the chain of causation with the intervening actions of venture partners, private and public, and the third-party actions of criminals who sabotaged and burglarized the oil pipeline.  The Dutch appellate court mitigated the plaintiff-farmers' win there by nullifying defense liability in part for the actions of saboteurs, even while recognizing with regard to one claim that SPDC made nefarious access to the pipeline too easy.

If ever there is a settlement or award for plaintiffs that turns ripe for enforcement, it will remain to be determined how effectively money can be converted into remediation in a legal regime whose wavering commitment to the rule of law has been complicit in damage to the Niger Delta environment for the six-decade duration of the nation's independence.  To the plaintiffs' favor, for now, in the UK, their case is informed by their experience in The Hague, where the trial court afforded plaintiffs latitude to probe Shell files for evidence of corporate control.

The case in the UK Supreme Court is Okpabi v. Royal Dutch Shell Plc, [2021] UKSC 3 (Feb. 12, 2021).  Lord Nicholas Hamblen delivered the opinion, with which Lord Hodge, Lady Black, and Lord Briggs agreed.

Friday, October 12, 2018

Dutch court upholds dike against climate change, while Trump Administration seeks to stop climate-change 'trial of the century' in Oregon

"Little Dutch boy" at Madurodam, The Hague,
by Kara van Malssen (CC BY-NC-SA 2.0)
On Tuesday, an intermediate appellate court in the Netherlands upheld a verdict against the government demanding more state action to curb carbon emissions and combat climate change.  The court's decision (unofficial English translation) in favor of energy NGO Urgenda came just one day after the dire 12-year warning of the special report of the U.N. Intergovernmental Panel on Climate Change.  Meanwhile the Trump Administration filed an emergency motion in federal court in Oregon today in its latest bid to stop climate-change litigation in the United States.

The Netherlands is working mightily already to reduce carbon emissions.  The state projects a reduction in the neighborhood of 20% by 2020 over 1990 levels.  But that number still falls short of 25%, which the court calculated as the nation's minimum treaty commitment.  That difference, The Guardian reported, could be enough to force the shutdown of a recently opened coal-fired power plant.  The court's decision chiefly references the 1992 U.N. Framework Convention on Climate Change and traces the development of states' legal obligations through the history of climate conferences from Kyoto in 1997 to Bonn in 2017.

As the state observed in the case, "Dutch emissions are minor in absolute terms and ... the Netherlands cannot solve the global problem of climate change on its own" (¶ 30).  So the global significance of the decision is mostly symbolic, and, activists hope, an example for climate-change activism in the courts around the world.

American iterations of climate-change litigation are many, but the one case that has captured the public imagination more than any other is Juliana v. United States in the District of Oregon.  The case has played well in media because the plaintiff effort is spearheaded by a not-so-camera-shy youth group, the Earth Guardians, led by indigenous activist, hip-hop artist, and let's be honest, teen heartthrob Xiuhtezcatl Martinez.  (Below: new promo video for Martinez's debut album, Break Free.)


Juliana might yet be described best as "ill fated."  Unlike myriad climate-change-aiming lawsuits in areas such as environmental and business regulation, or upon collateral constitutional theories, such as the Commerce Clause or First Amendment, Juliana is a direct assault on the federal government under constitutional due process—literally, the right to life.

At first blush, this approach seems to face insurmountable hurdles before the merits could ever be reached: namely, standing, justiciability, official immunity, not to mention the hundred other reasons civil rights lawsuits are awfully hard to win.  Then at the threshold of the merits lie the conventional tort problems of affirmative duty, causation, and injury.  In the "constitutional tort" vein, the plaintiffs seek to breathe new breadth into the "public trust doctrine," which posits that government holds natural resources in trust for the public good.  The doctrine has seen modest success in, for example, beach access cases, but jurisprudential conservatives do not enthusiastically embrace the raw, public-policy-driven invitation to judicial intervention.

Despite conventional wisdom, the Juliana suit survived both a motion to dismiss in the trial court and an aggressive effort by the Trump Administration to shut the action down in the Court of Appeals.  (To be fair, the Obama Administration also was not ra-ra plaintiffs on this one.)  In November 2016, District Judge Ann Aiken recognized, "This is no ordinary lawsuit."  Upon detailed analysis, she rejected the government's arguments on both standing and justiciability, finding the question presented "squarely within the purview of the judiciary."

Judge Aiken speaking on recidivism reduction
at ReInvent Law in 2013 (from video CC BY 3.0)
Then, analogizing to the Supreme Court's reasoning on due process in the 2015 gay marriage case, Obergefell v. Hodges, Judge Aiken "ha[d] no doubt that the right to a climate system capable of sustaining human life is fundamental to a free and ordered society."  The Ninth Circuit in March rejected the government's bold demand that the case be dismissed to protect the separation of powers, finding the government's claim premature and well shy of the high bar for writ of mandamus.  In July, the U.S. Supreme Court denied the government's appeal for a stay.

Thus back on the District of Oregon docket, Juliana was scheduled to open at trial on October 29.  A headline in The Japan Times, over a pro-plaintiff commentary by Princeton bioethics professor Peter Singer, titled Juliana "the trial of the century."  One week ago, on October 5, the Administration filed another motion for stay in the trial court.  Undoubtedly buoyed by the appointment of Justice Brett Kavanaugh, the Government today renewed its motion to stay and asserted its intention to petition the U.S. Supreme Court for mandamus relief.

In the Dutch case, the government tried to fend off the lawsuit on grounds equivalent to standing and justiciability, but to no avail.  The Dutch Civil Code authorizes class actions (a rarity in Europe) specifically by interest groups on behalf of citizens.  Moreover, the court reasoned that individual human rights claims must be justiciable in Dutch courts if individuals could bring the same claims in the European Court of Human Rights.  The government argued "trias politica," that is, separation of powers, to which the court responded (cheekily?): "This defence does not hold water. The Court is obliged to apply provisions with direct effect of treaties to which the Netherlands is party, including [the European human rights convention].  After all, such provisions form part of the Dutch jurisdiction and even take precedence over Dutch laws that deviate from them" (¶ 69).

Under the European human rights convention, Urgenda relied on articles 2 and 8, respectively the rights to life and privacy, the latter including the inviolability of family life—the same two notions cited by Judge Aiken in her Obergefell-inspired due process analysis under the Fifth and Fourteenth Amendments.

You can await the next development in Juliana via PACER under case no. 6:15-cv-01517.

[UPDATE: U.S. Supreme Court issued an extraordinary stay on Oct. 19.  See, e.g., Richard Franks @ Legal Planet.  HT @ Flannery Rogers.]

[UPDATE: Joel Stronberg at Resilience reported that despite the earlier Roberts stay, SCOTUS issued an order on November 2 clearing the way for Juliana to go to trial.]

[UPDATE:  Juliana returns to oral argument in the Ninth Circuit in Portland, Oregon, on June 4, 2019. Track the case at Climate Case Chart, which explains: "The government [appellant argues] that the plaintiffs lacked standing and that their lawsuit was not a cognizable case or controversy under Article III of the Constitution. The government contended that a 'quick look at the climate change issues and actions pending before Congress and the Executive Branch'—including the Green New Deal, carbon tax legislation, and the replacement for the Clean Power Plan—'confirms that Plaintiffs have petitioned the wrong branch.' The government also argued that the plaintiffs were required to proceed under the Administrative Procedure Act and that their constitutional claims failed on the merits."]

[UPDATE: The Dutch Supreme Court upheld the outcome in Urgenda on Dec. 20, 2019.]

[UPDATE: On January 17, 2020, the Ninth Circuit dismissed Juliana for failure of standing. An appeal to the U.S. Supreme Court is inevitable, but extremely unlikely to succeed. The case is Juliana v. United States, No. 18-36082.]