UK Court Asks Shell to Pay Ogoni Community N183bn – TheNigerialawyer

The Queens Bench Division High Court of Justice in the United
Kingdom has ordered Shell Petroleum Development Company of Nigeria
Limited (SPDC), Shell International Company Limited and Shell
International Exploration and Production BV to pay Ejama Ebubu
community of Ogoni in Rivers State the sum of N183bn as damages for
oil spill in the area.

The verdict followed the registration and reaffirmation of the
judgment of the Federal High Court in Asaba on the compensation due
to the Ogoni community as judgment creditors in a suit filed at the
High Court of Justice, Queens Bench Division in the United
Kingdom.

The judgment awarded the community the sum of roughly N183bn in
line with the judgment given by the Federal High Court in Asaba on
June 14, 2010.

In 1970 an oil spill occurred that affected 255 hectares of
arable farm land in the Ejama-Ebubu community in the Tai-Eleme part
of Rivers State which adversely affected fishing livelihood,
farming activities and communal health of the local area. In July
2010 the Federal High Court in Asaba set damages against SPDC, in
the region of N15.4bn (or about $43 million at current NAFEX rate
of N360/$).

The recent judgment amid pre-existing adverse claims and orders
against the Anglo- Dutch giant, Royal Dutch Shell, raises fresh
claims with the registering of judgment in the sum of N182.7bn
against the three defendants all subsidiaries of the conglomerate
based in Nigeria, UK and the Netherlands.

The new judgment registered by the Queen’s Bench Division in
February 2019 followed protracted litigation which commenced at the
Federal High Court in Port Harcourt and went all the way to the
Supreme Court.

The local environment green case had dragged on for 29 years
before the Supreme Court in February 2019 in a ruling upholding
earlier FHC judgments ordered that the community be paid a total
judgment debt of N134bn ($372.2m by Shell). This is about 16 per
cent of Royal Dutch Shell’s Net Income of $23.91bn for 2018.

Analysts believe that the fresh UK judgment is likely to
compound Shell’s challenges with judgment debts across the globe
and in Nigeria, given the size of its contingent liabilities and
their potential effects of compressing the Group’s FY 2019 profit
before tax (PBT).

Royal Dutch Shell (RDSA) currently trades at a market price of
GBp2, 447.50 on the London Stock Exchange (LSE); since Q2 2018 the
Group’s quarter-on quarter net income has remained flat at GBp5bn.
This suggests that if the 2018 trend persists in 2019 the company
would likely post a net income of GBp25bn but this could fall
considerably if judgment debts in line with IFRS9 rules are charged
against its 2019 profit and loss account.

These contingent concerns may not have been priced-in with the
oil group’s price earnings ratio (P/E) of 11.17; one year return of
-3.67per cent, and a twelve month trailing earnings per share (EPS)
of GBp2.84.

Recent contingent concerns may underline a bearish trend in the
stocks London price as investors begin to charge a ‘green discount’
to accommodate fears over judgment debt outflows.

The suit was first commenced in 1991 before a Rivers State High
Court sitting at Nchia Division, when the Ejama community
represented by Isaac Osaro Ogbara, Victor Obari, John Oguru, Joseph
Ogusu, G. O. Nnah, George Osaro, and Adanta Obelle, sued the Shell
Group SPDC.
Judgment was entered for the sum of N6billion in favour of the
community by the Nchia High Court.

That judgment was conceded on appeal because the Supreme Court
had in a sister case decided that the States High Court had no
jurisdiction in oil related matters.

The plaintiffs in 2001 refiled the suit at the Federal High
Court, Port Harcourt. However, the court, presided over by Justice
Ibrahim Buba after listening to the submissions of the parties in
the suit, in his judgment in 2010, awarded N17 billion to the
representatives of the Ogoni people.

The court equally granted the Ogoni chiefs 25 per cent interest
charge on the principal sum of about N17 billion. SPDC then
appealed against the judgment and applied for a stay of execution
of the judgment pending the appeal.

As a condition for granting the stay of execution, the court
required Shell’s bankers, FirstBank, to provide a guarantee of the
judgment sum plus interest.

This condition was complied with. But Shell’s appeal failed on
merit because it failed to file a brief of argument in support of
their appeal but instead claimed that they were granted leave to
file an amended brief of argument, which the Court of Appeal found
not to be correct.

Against that judgment, Shell proceeded to the Supreme Court
which in January dismissed the appeal filed by SPDC, paving the way
for First Bank of Nigeria Limited to pay the Ejama Ebubu community
the judgment debt which was then put at N134 billion.

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