Big Oil, human rights and sustainable development in Africa

EXECUTIVE SUMMARY

The African continent has lost billions through mismanaged transnational transactions. [1]"> These large amounts of funds could have contributed immensely to Africa’s growth. Social and environmental damages caused by activities of some multinationals in Africa have raised additional concerns. Existing legal and regulatory frameworks find themselves incapable of holding multinationals liable especially after investment treaties have been signed. African countries resort to playing catch up, whilst crafty contractual clauses limit or minimise liabilities for these foreign actors. Conventional international law and human rights frameworks impose obligations upon the state, but the role of the private sector in broadly protecting these rights has been overlooked over the years. [2] The increasing role of the private sector in public functions resulting from privatisation, economic globalisation and trade liberalization, as well as the potential of the private sector to contribute to the development of Africa, have made it necessary for existing policy, legal and regulatory regimes to be revisited.

INTRODUCTION

The private sector is capable of directly violating individual rights. Rights under threat include the right against discrimination, liberty, physical integrity, labour rights, and most importantly health and environmental rights. [3] The commission on transnational corporations has recognised the potential of the private sector in influencing and affecting individual rights. In so doing it has spelt out the responsibility of the private sector whilst ensuring that they realise they have a role to play in sustainably developing areas within which they operate. [4] Growing awareness of corporate social responsibility [5] coupled with multilateral initiatives such as those driven by the UN Special Representative on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises may also provide further guidance on the responsibility of corporations. [6] In Africa necessary legal and regulatory frameworks to manage responsibility by the private sector towards individuals are not yet fully developed or there is lack of adequate regulatory oversight. This coupled with increasing trade openness and non inclusive economic growth has left transnational corporations operating at whim.

Nigeria is one of the biggest oil and gas producers in Africa and the tenth largest in the world. [7] The country has struggled with slow poisoning of waters and the destruction of vegetation and agricultural land by oil spills which occur during petroleum operations. But since the inception of the oil industry in Nigeria, more than twenty-five years ago, [8] there has been no adequate concerned and effective effort on the part of government, let alone oil operators, to control environmental problems associated with the industry. [9] Nigerian regulations of the oil industry seem inadequate leaving a loophole which has resulted in the private industry self regulating. [10]

SELECTED RELATED DECISIONS

Shell Nigeria is the largest oil and gas company in that country. It arguably obtains 12 percent of its oil from Nigeria and has continuously been accused of environmental damages and human rights abuses resulting from its activities. [11] Numerous cases have been brought in various tribunals globally with the view of addressing social, environmental and governance issues that arise around Shell’s operations in Nigeria. [12] These include the recently decided case in the District Court of The Hague where claims were brought by Nigerian farmers in 2008 seeking to hold Royal Dutch Shell accountable for damage by oil spilled from its pipelines. [13] The verdict for this precedent setting case was delivered on the 30 January 2013 when the Dutch court dismissed most of the claims, but held in favour of one farmer in a spill that occurred near the village of Ikot Ada Udo. The court decided that Shell’s local subsidiary Shell Petroleum Development Company of Nigeria was liable for damages and ordered compensation. The Dutch court’s finding in favour of Mr Akpan can be interpreted as a success towards opening up future avenues for holding multinationals at a higher standard when it comes to responsibility for environmental damages and could open doors for other suits. [14]

Shell is also facing ongoing legal action brought in a UK court on behalf of 11,000 members of the Niger Delta Bodo community, who say the company is responsible for spilling 500,000 barrels in 2008. Shell has acknowledged liability for two spills within the region but estimates the amount spilled is far lower. The case could be heard in the High Court in London next year. [15] In 2009 Shell agreed to pay 15.5 million Dollars to settle a class action lawsuit which was instituted on the basis of a U.S Alien Tort Claims Statute [16] resulting from the 1995 execution of author and Niger Delta activist Ken Saro-Wiwa. [17] The U.S Statute has been the basis of various claims instituted against foreign multinationals operating outside the U.S. [18] The Act grants jurisdiction to some Federal courts for certain violations of international law.

WEST AFRICA SPEAKS

On 14th December 2012 the Court of Justice of the Economic Community of West African States arrived at a ground breaking decision that could re-invent determination of liability for private actors towards economic, social and environmental damages within African. [19] This case has the potential of placing a larger responsibility on the relevant governments to ensure that existing regulatory frameworks are adequate and that they are being enforced accordingly. The complaint was lodged in July 2009 by the registered trustees of the socio-economic rights and accountability project (SERAP) against the President of the Federal Republic of Nigeria, the Nigerian National Petroleum Company, Shell Petroleum Development Company, ELF Petroleum Nigeria Ltd, AGIP Nigeria PLC, Chevron OIL Nigeria PLC and Exxon Mobil.

The complaint was based on allegations of defendants’ violation of rights to health, adequate standards of living (including access to clean water, housing, work, education, food, and a clean and healthy environment), as well as the right to economic and social development of the people of the Niger Delta. The complaint was also directed towards failure of the Nigerian government to enforce laws and regulations to protect the environment and prevent pollution. It was contended that the Niger Delta, an area richly endowed in land, water, forest and fauna, was being subjected to extreme degradation due to oil spillage (caused by among others, pipeline corrosion, vandalism and bunkering). It was averred that the Delta had for decades been exposed to oil spills which in turn destroyed crops, damaged the quality and productivity of soil, and contaminated water. It was also pointed out that such damage could have been curtailed or averted because it resulted from human error, poor infrastructural maintenance, and uncontrolled vandalism. It was noted that there was failure by corporations to comply with government regulations pertaining to swift and effective clean up after oil accidents. Where steps to comply with regulations took place, they were neither done timorously, nor effectively or adequately. In addition, corporate social responsibility through community development including the construction of water and sanitation facilities as well individual compensation were either inadequate or done on an ad-hoc basis and very poorly executed.

Allegations including those based on contravention of article 1 and 24 of the African Charter on Human and Peoples Rights (ACHPR) were addressed. The attitude of the government of Nigeria seemed to be in contravention of the provision of article 24 which required that ‘all peoples shall have a right to a general satisfactory environment favourable to their development’. It also contravened article 1 which required that ‘member states to the Organisation of African Unity parties to the present Charter shall recognise the rights, duties and freedoms enshrined in this Charter and shall undertake to adopt “legislative” or “other measures” to give effect to them’. Nigeria by virtue of being an ECOWAS member state and party to the African Charter was bound by the said articles. The duty assigned by article 1 and 24 of the African Charter was both an obligation to stipulate regulations, provide structural, financial support and other measures, as well as an obligation to diligently and vigilantly ensure necessary compliance and accountability by oil corporations in addressing oil spills.

Nigeria had a responsibility to set up the requisite legal and regulatory framework, and hold accountable those who caused such environmental degradation as well as ensuring that adequate and timely reparation was provided. In terms of addressing the said spills, the Nigerian government enacted the necessary legislative frameworks and development agencies were set up, but all these measures fell short of preventing the continuous environmental degradation within the region. Actual accountability by the concerned corporations was inadequate due to lack of legislation enforcement by relevant regulatory authorities. The ECOWAS court concluded that by continuously failing or omitting to deal adequately with corporate actions that harmed human rights and the environment, the government of Nigeria had compounded the problem. This in turn rendered it responsible for aiding and abetting oil companies who committed such violations and in essence contravening article 1 and 24 of the ACHPR.

LESSONS FOR AFRICA

This case represents a novel attempt by a regional tribunal to indirectly ensure that businesses carried out in Africa are socially conscious and responsible for the environment and economic as well as social development of the communities within which they operate. With numerous recent mineral, oil and gas discoveries in various areas in Africa, [20] it has become imperative that strict measures must be undertaken by governments and the necessary agencies to protect the well being of communities where extraction takes place. At the same time, this calls for the extraction industry to take responsibility for the communities within which they operate. The ECOWAS court seems to have taken a bold step in guaranteeing that where governments by omission fail to ensure compliance with international best practices in terms of business, human rights and the environment, then they bear the responsibility for harm and human rights violations resulting from actions of corporations. By invoking article 1 and 24 of the ACHPR together and stretching it to include not only regulatory and structural provision, but also vigilance and diligence in ensuring compliance with such provisions, the ECOWAS court has put a higher level of responsibility on member state governments. They are now expected to ensure that multinationals responsible for prospecting in Africa are brought to task whenever environmental or social damage is done. The decision in this case has the potential of changing the way private sector responsibility towards individual citizens is addressed, as well as setting precedent in bringing responsible governments to task whenever they independently fail to enforce such responsibility.

CONCLUSION

Africa is still lugging behind when it comes to the governance of its natural resources. This loophole is observed when social and environmental damages happen as in the above case. It is also observed when failure in human development and discontent within sectors responsible for mineral extraction happens. Economic growth resulting from mineral, oil and gas wealth is not translating into human development and better livelihoods for most parts of Africa. With the exception of a few countries, most resource rich areas in Africa are concurrently stuck in deplorable poverty and discontent despite or because of their natural resource wealth. African governments responsible for the administration and management of such resources do not seem to have the necessary expertise to negotiate for investment treaties that safeguard their economic, social and environmental wellbeing. They also do not seem to have the capacity or will to enforce relevant regulations. The consequence of such oversight is the inability to hold the relevant private sectors responsible when things go wrong, as well as facing limitations in reaping benefits of Africa’s mineral wealth for its sustainable development. With the right regulatory, structural and policy frameworks aimed at vigilantly enforcing responsibility on the part of the private sector as well as a responsible private sector ready to perform its social responsibilities, Africa has the potential of achieving economic and human development.

RECOMMENDATIONS

African countries need to invest more in their negotiators so that they acquire the necessary prowess to advance their negotiation positions when it comes to investment treaties and investment disputes. Initiatives such as those taken by the Africa Development Bank’s Legal Support Facility as well as the African International Legal Awareness and the Lawyers for Africa Programme are but a few steps that need to be promoted. These will equip African countries with the right set of skills to negotiate investment and other bilateral treaties on equal footing with their counterparts.

There is also a need for sound principles to guide the process of drafting effective contracts in Africa’s natural resource sector. Seeing that Africa’s natural resources are attached to the land, that African communities live on, there should be representational involvement and consultation of the communities and civil society when it comes to drafting of contracts and distribution of benefits from oil revenues.

African countries are also in dire need of revisiting legal and regulatory regimes that address and manage foreign investment. Specific attention needs to be paid to the extractive industry, environmental matters, governance, regulations that manage fiscal arrangements and taxation regulations.

Monitoring and evaluation as well as follow up systems have to be set up to ensure that regulatory mechanisms put in place are observed. Where there is failure to do so, necessary steps, as per legal and regulatory provisions need to be taken diligently, vigilantly and effectively. Impunity and nepotism need to be put to check both at government and private sector level, otherwise the industry which can prove to be lucrative for Africa’s sustainable development will only result in further plundering.

* Dr Olivia Kokushubila Lwabukuna is a research specialist in sustainable development and international trade at the Africa Institute of South Africa in Pretoria and an advocate at law.

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END NOTES

[i"> Tasamba J ‘ Africa: continent losing billions through multinationals’ All Africa July 31 2012 http://allafrica.com/stories/printable/201207310184.html

[ii"> Adeleke F ‘The case for corporate transparency in Africa’ Paper presented at the First Global Conference on Transparency Research Rutgers University-Newark May 19-20 2011 at 1

[iii"> Adeleke above at 3

[iv"> The 1983 Code by the commission on Transnational corporations states ‘transnational corporations shall/should disclose to the public in the countries in which they operate all appropriate information on the content and the extent known on possible hazardous effects of the product they produce or market in the countries concerned by means of proper labelling, information and accurate advertising or other appropriate methods’.

[v"> See U.N. Econ and Soc. Council, Comm. On Human Right, Sub-Comm. On the Promotion and Protection of Human Rights, Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights, U.N. Doc E/CN 4/Sub.2/2003/12/Rev. (Aug. 26, 2003); See also the newly introduced ISO Guidance on Corporate Social Responsibility (ISO 26000)- the most important part

of the standard relates to its detailed guidance on the seven core subjects of social responsibility: human rights, organisational governance, labour practices, the environment, consumer issues, fair operating practices, and community involvement and development

[vi"> In June 2011 the Human Rights Council unanimously adopted the Guiding Principles on Business and Human Rights; the Principles state that business enterprises of every size and nationality have a responsibility to respect human rights and that this responsibility exists ‘over and above compliance with national laws and regulations protecting human rights’; See also U.N. Guiding Principles on Business and Human Rights, U.N. Doc. A/HRC/17/31 (Mar. 21, 2011)

[vii"> Toscano P, ‘The World’s 15 Biggest Oil Producers’ CNBC.Com 3 March 2011 http://www.cnbc.com/id/41887743/page/7 ;Crude production: 2.51 million barrels per day, share of world production: 2.95%, daily crude exports to the US: 1.02 million barrels, proven reserves: 37.2 billion barrels; see also the 2010/2011 Energy Information Administration (EIA), a division of the US Department of Energy

[viii"> In 1956, Shell British Petroleum (now Royal Dutch Shell) discovered crude oil at Oloibiri, within the Niger Delta. Commercial production began in 1958. See also Egberongbe F, Nwilo P and Badejo O ‘Oil spill disaster monitoring along Nigerian coastline’ Promoting land administration and good governance 5th FIG Regional Conference Accra Ghana March 8-11 2006 at 2

[ix"> Greenpeace Internationals’ Shell Shocked, at 11

[x"> Baird J ‘Oil’s shame in Africa’ Newsweek July 27 2010 at 27

[xi"> Jolly D and Reed S ‘Mixed decision for Shell in Nigerian oil spill suits’ Global Business with Reuters at New York Times.Com January 30 2013 http://www.nytimes.com/2013/01/31/business/global/dutch-court-rules-shell-partly-responsible/

[xii"> See also SERAC and CESR vs. Nigeria African Commission on Human and People’s Rights (ACHPR) communication 155/96

[xiii"> The lawsuit involved Shell’s parent company in the Netherlands and its Nigerian subsidiary, which operates a joint venture between the Nigerian National Petroleum Corporation, Shell, Total E&P Nigeria Limited as well as Nigerian Agip Oil Company Limited.

[xiv"> It should be noted that liability in such claims is only limited to the subsidiary company. Such outlook is based on global legal principles of company law and law of corporations. A subsidiary company usually has its own independent personality. This also means that the implications of the decision are limited in application to consequences of actions of Shell Nigeria. Nevertheless, such a decision is a ground breaking standard of guidance for claims brought in other jurisdictions where Shell operates.

[xv"> Reuters ‘Dutch Court says Shell is responsible for Nigeria spills’ at Dawn.Com 3 February 2013 http://dawn.com/2013/01/30/dutch-court-says-shell-responsible-for-nigeria-spills/

[xvi"> 28 U.S.C. 1350 (2006)

[xvii"> Kiobel vs. Royal Dutch Petroleum Company 621 F.3d 111 (2nd Cir. 2010), cert. granted, 132 S. Ct 472 (2011) (No. 10-1491), argued February 2, 2012 Kiobel was expected to be decided by the Court sometime in 2012 Term

[xiii"> In that case the petitioners claimed that Royal Dutch Shell aided the Nigerian government in committing various acts of violence against protesters of oil exploration projects in the Ogoni region. Shell denied any form of responsibility, and claimed to only have opted for settlement because it wanted to end the litigation and move on.

[xix"> SERAP vs. Federal Republic of Nigeria The Court of Justice of the Economic Community of West African States (ECOWAS) Ibadan, Nigeria 14th December 2012 Judgement No. ECW/CCJ.JUD/18/12

[xx"> Mozambique, Uganda, additional areas in Ghana, Kenya, Tanzania, Sierra Leone and various other places in Africa