In a setback for attempts to hold multinational companies responsible for the behaviour of their subsidiaries, the High Court has ruled that group actions against oil giant Shell over pollution in Nigeria cannot proceed in London.

In His Royal Highness Emere Godwin Bebe Okpabi and Others v Royal Dutch Shell and Shell Petroleum Development Company of Nigeria Ltd, Mr Justice Fraser, sitting in the Technology and Construction Court, also criticises as ‘self defeating’ the mass of evidence brought by the claimants.

London firm Leigh Day, which brought the action on behalf of 40,000 Nigerians, said it would appeal.

The action involves a claim for compensation from Royal Dutch Shell and a local subsidiary, the Shell Petroleum Development Company of Nigeria, for pollution caused by spills from pipelines in the Niger Delta.

The claimants argue that ‘Royal Dutch Shell exercises significant direction and control over its Nigerian subsidiary and was, therefore, liable for its systematic pollution’. The defendants argue that the pollution was caused by illegal tapping and refining, activities in which at least some of the affected people must be complicit.

In judgment, Fraser said that claims against Royal Dutch Shell as ‘anchor defendant’ must fail as the Netherlands-headquartered holding company had no duty of care for acts and/or omissions of the operating subsidiary in Nigeria. The correct forum for actions against Shell Petroleum Development Company of Nigeria was the local court system, where conditional fee agreements are available, he said.

‘There is simply no connection whatsoever between this jurisdiction and the claims brought by the claimants, who are Nigerian citizens, for breaches of statutory duty and/or in common law for acts and omissions in Nigeria, by a Nigerian company,’ he said.

The judgment said that any claim based on the inadequacies of the Nigerian justice system would lead the court into making ‘damaging colonialist judgments based on inappropriate comparisons between one judicial system and another’.

Fraser noted that both parties ‘occupy firmly entrenched battle lines and are bitterly opposed to one another’s evidence and arguments’ and criticised the way they handled the case. ‘The current approach of parties in litigation such as this is wholly self-defeating, and contrary to cost-efficient conduct of litigation. This case is an ideal example of one with “masses of documents, long witness statements, detailed analysis of the issues, and long argument” being deployed on both sides.’

Such an approach is ‘diametrically opposed’ to that required under the Civil Procedure Rules, he said, raising the possibility of limiting the number and size of witness statements that can be lodged. ‘Experienced legal advisers ought not to need such strictures in order to concentrate their minds. However, a fundamental change of approach is required by the parties in cases such as these for applications of this nature.’

The judgment quotes the defendants’ estimate that the claim comprised 450 pages of evidence with almost 6,000 pages of exhibits in 22 files. This included a US diplomatic cable dating from 2006 disclosed by Wikileaks: the judge said ‘nothing in that cable advances the claimants’ case... in any appreciable respect’.

Announcing its intention to appeal, Leigh Day said that the judgment had been made at an early stage in the litigation, before any documents were disclosed and without hearing oral evidence from witnesses about the relationship between Royal Dutch Shell and its Nigerian subsidiary.

Leigh Day partner Daniel Leader said: ‘It is our view that the judgment failed to consider critical evidence which shows the decisive direction and control Royal Dutch Shell exercises over its Nigerian subsidiary. It is also inconsistent with recent judgments of the European Court of Justice and the Dutch Court of Appeal.’

Richard Hermer QC, Marie Louise Kinsler and Edward Craven (instructed by Leigh Day) acted for the claimants.

Lord Goldsmith PC QC and Sophie Lamb (instructed by Debevoise & Plimpton LLP) acted for the defendants.