Shell vs. Bodo Community; International Negotiations Case Study

The Negotiation Process Around the Shell Oil Spills of 2008 in the Bodo Community, Nigeria

Hilda Esedebe & Rodney TrappM.Sc International Business Development & ConsultingProfessor Patrick Germain-Thomas: Negotiations DossierMay 22nd, 2014

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Introduction• In August and December 2008, two major oil

spills disrupted the lives of the 69,000 or so people living in Bodo, a town in Rivers State, Nigeria, in the Niger Delta. Years later, the prolonged failure of the Shell Petroleum Development Company of Nigeria (Shell), a subsidiary of Royal Dutch Shell, to clean up the oil spill, continues to have catastrophic consequences for the Bodo community. A class action law suit against Shell was launched and is still ongoing. The negotiation process of this suit is the subject of this dossier.

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Structural ContextPolitical and Socio-Economic Situation in

Nigeria: GDP of $ 510 billion – largest economy in Africa

Instability: ethnic disputes, religious differences, poverty & unemployment, terrorism

Endemic/systemic corruption

Under-development i.e. education system, hydro and electricity, transportation & infrastructure, policing and legal system

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Structural ContextOil Industry in Nigeria and its history with Shell:

•Oil was discovered in Nigeria in 1956 in the Niger Delta after half a century of exploration. The discovery was made by Shell-BP.•Crude oil production of 2 million bpd•$95 Billion USD in petroleum exports•98% of total exports revenue

•Shell is Nigeria’s oldest energy company since it was first given the license to prospect for oil by the Nigeria government in 1937•Business activities in Nigeria include exploring and producing oil and gas onshore as well as offshore and gas sales and distribution•$467 Billion USD in revenue, 2012

•Past law suits include; four Nigerians & Friends of the Earth Netherlands at the Hague Court, 2008• CSR – promote cooperation with the Nigerian government and transparency to avoid resource exploitation

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Structural ContextThe Bodo Community:

•In Rivers State, Nigeria, in the Niger Delta •Population ~69 000 – mostly fisherpersons

The Bodo Creek and Mangroves: economic backbone for the local inhabitants, providing fish, shrimp, crabs, wood, honey and traditional medicine. Mangrove bark is used for coloring cloth, net preservation and glue production, and its branches are used as net mending sticks and handles for axes. Estimated economic value of mangrove forests to the local community is in the range of US$27,264–35,921 per hectare (ha) per year

•The environmental impact of the 2008 spills have been catastrophic to the mangrove forest and waterways•Most of the Bodo community lost their livelihood and now suffer from poverty and health issues•Some with the means have moved away from the area to seek better lives elsewhere or commute great distances to fish

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Structural Context

http://www.youtube.com/watch?v=yQ_iNWcJIoA

Video

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ActorsShell

Interests/Stakes & Goals:•Access to oil•Renewal of contracts with the government•Negative Publicity•Minimize financial fallout i.e. bags of rice and beans

Power Balance & Power Resources:•High power balance•Nigerian Government

BATNA: UK courts determine

that 3rd party intervention is primary cause of

problems and rules in their

favor

Personality Traits & Relationships:•Good indication previously provided•Trust issues with regards to who is actually part of the Bodo community and which lawyers represent which parties•Claims of sabotage by third parties•Security issues at sites impede progress

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Actors

Bodo Community (11,000-15,000) represented by Martyn Day, Leigh Day & Co based out of London, EnglandInterests/

Stakes & Goals:•Cleanup oil spill and restore the environment•Improvement to community, health and livelihoods restored•Fair compensation for losses sustained by the Bodo community

Power Balance & Power Resources:•Low power balance•Non-governmental, Human Rights Organizations•The Bodo Council of Chiefs & Elders

BATNA:Proceed with law suit in UK in hopes of a

positive ruling

Personality Traits & Relationships:•Leigh Day 1987: Taking on David and Goliath legal struggles for justice •The injured or those treated unlawfully by others•Martyn Day: Senior Partner & founder specializing in international, environment and product liability claims, often as group actions•One of the UK’s most powerful lawyers

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Actors The British Court

Interests/Stakes & Goals:•To reach an agreement

Power Balance

& Power Resources:• Power to

issue ruling

Personality Traits & Relationships:•Objectivity

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Actors Bert Ronhaar - mediator, Dutch ambassador to Nigeria

Interests/Stakes & Goals:•To facilitate negotiation process•Contribute to better representation of Dutch companies in Nigeria

Power Balance

& Power Resources:• Support

from the Dutch Government

Personality Traits & Relationships:•Neutral mediator•Supporting and encouraging business cooperation between Nigeria & the Netherlands•Recently retired

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Ecosystem & Livelihood

Sabotage & Safe Access

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Zone of Possible Agreements - ZOPA

$20 millon $200

millonWhat Shell is willing to offer

What Bodo is willing to accept

ZOPA

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1958 1993 2008 2008 2008 2009 2009 2012 2013 c22013

2nd pipeline rupture in Bodo Bia Barma Dec 7

SPDC clamps oil spill, Nov 7, 2008

SPDC stops production in Ogoni land

Council of Elders alert SPDC of oil spill Sept 2008

Various government agencies request SPDC address the spillage issue

Jan – March 2009

CEHRD publishes report about Oil Spillage in Bodo Creek, Oct 10, 2008

Shell-Bodo Case Timeline

Key Facts

First Oil Spill lasted for 72 day

Second Oil Spill lasted for 79 days

SPDC initially offered the community 50 bags of rice, beans, garri, cartons of sugar, cartons of milk powder, tea, tomatoes and tins of groundnut oil.

SPDC’s second offer was twice as much in food supplies.

The oil spills virtually destroy the bioavailability of the Bodo Creek Area and the livelihoods of the region’s fishermen and farmers.

SPDC starts operation in Ogoni land

Council of Chiefs alert SPDC of oil spill Dec 9

Leigh Day files court paper in London, March 23, 2012

Council of Chiefs reject offer

1st pipeline rupture in Bodo Creek Aug 28, 2008

SPDC clamps 2nd oil spill, Feb 19, 2009

SPDC offers 50 bags each of food supplies, May 2, 2009

SPDC gets serious about negotiations

SPDC goes to the negotiation table Sept 7-14

Bodo Community goes to negotiations table Sept. 9-14

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Four Sub-processes of Negotiation(Walton and McKersie, 1965)

Distributive Bargaining

Integrative StructuringAttitudinal

BargainingIntra-

organizational Bargaining

Shell wants:• Provide

Compensation Commensurate with Nigerian Quality of Life Standards

• Begin clean-up and remediation without

3rd party interventionBodo wants:• Fair compensation

for losses from 2008

• Restoration of land and water to natural state & use experts in the clean up process

Shell & Bodo agree to:• Dutch Mediation

• Clean up environment

• Compensation for loss

• Both want Shell Operations in Nigeria

• Improved relations with Local and National Government

• Decrease in illegal activity

• Access to the land, but for different reasons

Shell• Partnership with

FGN• Practicing CSR/

Sustainability Development

• Addressing issues raised by UNEP Report 2011

• Clean water projects with Rivers State government

Bodo• Filing court case

in UK

• Begin clean-up and remediation

Shell • Has licensing

agreements with Nigerian Govt (FGN)

• SPDC must answer to its parent company

Bodo• Martyn Day has to

answer to Council of Chiefs and Elders

• Independent Reports by CEHRD, UNEP

• Relies on distribution of oil proceed from FGN

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Three Steps in Negotiation Process(William Zartman, 1978)

Pre-Negotiation Phase

Shell provides modest food supplies 2009Shell agrees to oil spill liability 2011Bodo secures legal representation

Search for Formula

Shell makes compensation offerBodo seeks fair compensation and remediation

Working out Details

Negotiations Collapse

Turning Point of Seriousness

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Outcome

The Sept 2013 negotiations broke down with no agreements made

Bodo Camp – ▫ Shell’s low compensation offer was ‘derisory and insulting’

▫ Shell’s clean up efforts need to be managed by experts, not inexperienced locals.

▫ “One of the largest companies in the world is acting like the playground bully, trying to batter local people, whose lives have been devastated, into submission.”

Shell Camp ▫ Expectations from solicitors to the community were too high and “disproportionate

to Nigerian standards

▫ Shell’s existing clean-up efforts have be thwarted by other oil spills caused by crude oil theft and other illegal activities

▫ “We took part in this settlement negotiation with two objectives – to make a generous offer of compensation to those who suffered hardship as a result of the two highly regrettable operation spills in 2008, and to make progress in relation to clean up,”

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Next StepsPlans for the Future

▫ Both parties are continuing with legal proceedings in the United Kingdom

▫ Shell welcomes continued dialogue and involvement of other interested Nigerian parties and oil companies.

Our Recommendations

1. Shell should explore better ways to protect their oil pipeline, even considering relocating them underground

2. Shell needs to provide more security for their remediation consultants and assessors

3. Shell should consider adding a Community Benefits Agreement (CBA) to their offer. The CBA would provide long-term supports and services to the Bodo Community.

4. Shell should consider applying global CSR standards and best practices to their operations in Nigeria.

5. The Bodo Chiefs and Elders should implement self-policing efforts to help deter oil theft and equipment sabotage

6. The FGN needs to enforce existing laws and regulations relating to the operation of oil companies

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ReferencesSlide 2. http://www.youtube.com/watch?v=yQ_iNWcJIoA

Slide 4. http://www.nnpcgroup.com/NNPCBusiness/BusinessInformation/OilGasinNigeria/IndustryHistory.aspxhttp://www.shell.com.ng/http://www.reuters.com/article/2013/01/30/us-shell-nigeria-lawsuit-idUSBRE90S16X20130130http://www.inasp.info/uploads/filer_public/2013/04/03/3_handout_4.pdf

Slides 5, 6 and 7. http://ezproxy.library.nyu.edu:3295/content/48/3/391.full

Slide 8. http://www.leighday.co.uk/http://en.wikipedia.org/wiki/Martyn_Day

Slide 11. Steiner, R. (2008). Double Standards? International Standards to prevent and control pipeline oil Spills, Compared with Shell practices in Nigeria. A report submitted to Friends of the Earth, Netherlands.

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ReferencesSlide 12. UNEP (United Nations Environment Programme). Environmental Assessment of Ogoniland. Nairobi: United Nations Environment Programme; 2011.

Slide 13. AI/CEHRD (Amnesty International/Center for the Environment, Human Rights and Development). The True ‘Tragedy’: Delays and Failures in Tackling Oil Spills in the Niger Delta. London: Amnesty International; 2011.

Slide 13. SourceURL: http://inhabitat.com/shell-finally-accepts-liability-for-nigeria-oil-spills-requiring-1-billion-clean-up/nigeria-oil-spill-leigh-day/

Slide 14. SourceURL: http://mg.co.za/article/2013-09-10-nigeria-shells-debates-compensation-with-bodo-people-five-years-after-oil-spill

Slide 15. SourceURL: http://businessnews.com.ng/2013/09/14/shellbodo-oil-spill-negotiations-deadlock/

Slide 15. http://www.leighday.co.uk/News/2013/September-2013/Shell-to-Meet-with-UK-Lawyers-of-oil-spill-victims

Slide 16. http://www.nationalnetworkonline.com/vol11n1/bodocommunity.html