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.