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ESG provisions and litigation risks in the oil and gas industry

ESG litigation risks exist not just in Nigerian courts but in the home state courts of the parent companies of Nigerian operators. Take for instance the US Alien Tort Statute which gives US court’s jurisdiction to hear lawsuits filed by non-U.S. citizens for torts committed in violation of international law. Note also the Dutch appeals court ruling ordering Shell to pay damages for oil spill in two Niger delta villages. ESG-related litigation can also take the form of suits directed at specific oil and gas projects falling short of ESG standards.  Take for instance litigation by activists against the Keystone pipeline in Canada and the US.

Nigerian courts are starting to adopt a liberal approach towards environmental litigation issues. In Gbemre v. Shell, the Federal High Court of Nigeria ruled that the practice of massive and intense gas flaring violates the fundamental rights to life and human dignity of affected citizens guaranteed under the Nigerian Constitution and the African Charter. More recently, the Supreme Court of Nigeria, in Centre for Oil Pollution Watch v. NNPC, expanded the frontiers of locus standi in environmental litigation. The Supreme Court held that locus standi should not be used to prevent an individual or group from bringing a matter of unlawful environmental conduct to the attention of the court.

It is exigent that oil and gas companies are properly equipped to pass muster in the face of the rise of ESG.  ESG doesn’t portend the end of the fossil fuel industry. ESG not only creates risks but likewise opportunities. The oil and gas industry isn’t going away soon but the way in which it operates will have to change. Big oil is already embracing the ESG revolution. Mid-sized and small players, no doubt constrained by thinner operating margins, will be increasingly motivated by access to capital and consumer concerns to get in step.

Oil and gas companies should limit their ESG exposure by regularly reviewing policies and procedures to ensure they address ESG related issues. This would include setting and implementing ESG sustainability targets and working with legal counsel at an early stage to mitigate exposure or manage crises where it inevitably arises.

Ozi Nwadike Esq., Principal Counsel, Pristine and Sage Attorneys



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