Professor's Opinion - No escape possible

Shell cannot run away from the Dutch courts

Cees van Dam, Professor of International Business and Human Rights at Rotterdam School of Management, Erasmus University

 

In November, Royal Dutch Shell plc (RDS) announced its plan to abandon its dual share structure and relocate its headquarters to its Shell Centre building on the South Bank in London. On Friday, 10 December 2021, Human Rights Day, the shareholders agreed with the board’s plan.

In addition to the reasons for the decision given by Shell, there have been more speculative reasons suggested by others. One of them is that the long-lasting love affair between the Dutch government and Shell has gone awry over the past decade. This became particularly obvious with the failure of Dutch Prime Minister Mark Rutte to deliver on his promise to abolish the Dutch dividend tax. A Dutch government no longer serving Shell’s interests implied an irretrievable impairment of the once golden relationship.

The Dutch courts have not been very helpful either in protecting the relationship. In 2019, the Supreme Court handed down a preliminary ruling, in principle confirming that not only the Dutch State, but also the NAM (Nederlandse Aardolie Maatschappij), in which Shell has a 50 per cent stake, is liable for the material and immaterial damage caused by the earthquakes in Groningen. NAM is a company engaged in the production of natural gas and petroleum in the Netherlands and on the Dutch continental shelf, and is owned jointly by RDS and ExxonMobil. These earthquakes were caused by decades of gas extraction by the NAM, which until 2014 was enthusiastically supported by a revenue-hungry Dutch government until this became politically untenable.

In January 2021, the Hague Court of Appeal found subsidiary Shell Nigeria liable for oil pollution in the Niger Delta, and ordered parent company RDS to install a leak detection system on a major oil pipeline.

In May 2021 the District Court in The Hague ordered RDS to substantially reduce its greenhouse gas emissions (see my blog post on this decision).

Does moving headquarters to London mean that Shell escapes the jurisdiction of the Dutch courts? The short answer is no, albeit with one exception. And in that case, Shell is probably worse off in the English courts than in the Dutch courts.

EU law (Brussels I Regulation) allows claimants to sue RDS in the country where it is incorporated (the United Kingdom) or where it has its headquarters (the Netherlands). The claimants may choose. This explains why RDS has been sued in both countries: in 2021 it also lost a case about oil pollution in the Niger Delta before the UK Supreme Court.

 

Escaping the pending climate case?

In the Dutch climate case, the District Court in The Hague ordered RDS to reduce its greenhouse gas emissions by 45 per cent by 2030 compared to 2019. An appeal against this decision is currently pending before the Hague Court of Appeal.

Could RDS argue that the Dutch courts will lose their jurisdiction to hear the claim because its headquarters are no longer in The Hague? The answer is no. Under Dutch procedural law a defendant must raise all defences at the start of the proceedings at the first instance court (the District Court). If it does not do so, it loses its right to raise defences later in the procedure (before the Court of Appeal and the Supreme Court).

Neither is the Dutch court held to relinquish its jurisdiction on its own initiative (ex officio). The principle of perpetuatio fori means that the facts on the date of serving the summons are decisive for the court’s jurisdiction: on 5 April 2019 Shell’s headquarters were in The Hague. From then on, the case remains in the Netherlands, regardless of any movement of the parties.

In other words: moving its headquarters to London has zero effect on the jurisdiction of the Dutch courts in the climate case over Shell. The case will continue to be heard in the Netherlands until a decision has become final.

 

Escaping future climate cases?

Would it be possible for claimants like Milieudefensie and Greenpeace to bring new climate cases against Shell after it has moved its headquarters to London?

The answer is probably yes. It is arguable that the basis for the jurisdiction of the Dutch courts would be that the harmful event occurred or may occur in the Netherlands. The harmful event is either the event giving rise to the damage (such as the relevant company decisions) or the place where the damage occurred (the effects of climate change for residents of the Netherlands and the Wadden Sea area). It should be noted that after Brexit, jurisdiction and enforcement rules for future cases are not entirely clear. This fog in the Channel is caused by the fact that these topics were not properly addressed in the Withdrawal Agreement.

 

Escaping the pending ‘Shell Nigeria’ case?

The long-lasting case of Milieudefensie and four farmers and fishers from the Niger Delta against Royal Dutch Shell and its Nigerian subsidiary SPDC has been ongoing since 2008 and is currently pending before the Dutch Supreme Court. In January 2021, the Hague Court of Appeal held SPDC strictly liable for the consequences of two major oil spills and ordered both SPDC and RDS to install a leak detection system on a key oil pipeline. The former decisions have not been appealed (and therefore have become final), but the latter decision is subject to an appeal, as is Milieudefensie’s complaint that the Court of Appeal should have also held RDS’ predecessors liable.

Does the removal of Shell’s headquarters to London mean that the Dutch Supreme Court is no longer competent to decide the case? For the same reasons as mentioned above, the answer is no. When the summons was served – in 2008 – is decisive in this matter. At that point, RDS did not dispute the jurisdiction of the Dutch court (of course not, as it was headquartered in The Hague), and therefore, this defence has been blocked for the remainder of the dispute. The case will stay in the Netherlands until the final court decision is handed down.

 

Escaping future ‘Shell Nigeria’ cases?

The main consequence of moving Shell’s headquarters to London is that it will no longer be possible to file new cases of the ‘Shell Nigeria’ type before the Dutch courts. This is because none of the three options for jurisdiction mentioned above (place of incorporation, place of headquarters, place where harm occurred) point to the Netherlands.

This, however, would not help Shell much because for these cases it has more to fear from the English courts than the Dutch courts. In early 2021, RDS lost a case before the UK Supreme Court that was brought by over 40,000 victims of oil pollution in the Niger Delta. The Supreme Court decided that it was arguable that RDS owed the victims a duty of care. This means that in principle the case can go to trial, and this implies an obligation for Shell to disclose company documents that are relevant to the claim. The threat of disclosure followed by a trial not only scares companies out of their wits, it also considerably strengthens the hand of victims to negotiate an out of court settlement. Dutch procedural law (and generally continental European legal systems) do not know this disclosure requirement. This means that on this point, for Shell moving to London is more like jumping out of the Dutch frying pan into the English fire.

 

Conclusion

It is likely that a mix of factors has played a role in Shell’s decision to move its headquarters across the North Sea to London. From the analysis above, it is clear that escaping the Dutch courts has not been one of them. For pending cases (climate and Shell Nigeria), this is simply not possible. When Shell’s CEO closes the door of the Hague headquarters behind him, he will know that the ghosts of Shell’s Royal Dutch past will keep haunting him.

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