How Shell used an international investment treaty to browbeat Nigeria into a lucrative deal on OPL 245 oil field

The Netherlands has bilateral investment treaties (BITs) with many countries. These treaties are intended to provide for arbitration in the event that multinationals’ investments conflict with the country’s policies. However, Shell used this option of with another objective: to put pressure on the Nigerian government in order to acquire a lucrative oil field. Nigeria agreed to a settlement with exceedingly favourable conditions for Shell. The Dutch investment policy thus allowed a highly disputed deal to take place in Nigeria.

The Italian Public Prosecutor’s Office has accused Shell and its Italian affiliate ENI of involvement in corruption in this case. The organisations Corner House, Global Witness, HEDA and Re:Common started the case in Italy and in the Netherlands charges were also brought against Shell, current CEO Ben van Beurden, and three former Shell directors, due to the controversial deal.

Up until now, not much has been known about how Shell placed pressure on the Nigerian government between 2007 and 2011 to reach an agreement on OPL 245 via an arbitration case at the International Centre for Settlement of Investment Disputes (ICSID), an international arbitration institution based in Washington. This ICSID case was based on the Netherlands-Nigeria BIT of 1992.

In this factsheet we show, through Shell’s internal emails and documents, that the company’s objective was not to win the arbitration case – little advantage could be expected from that. However, the correspondence shows that Shell was gambling on Nigeria being afraid of an “embarrassing outcome” so that they would return the rights to OPL 245 to Shell on their own initiative.

This factsheet also shows how Shell used its relationship with its Nigerian subsidiary in an opportunistic way to influence legal processes to its advantage. Furthermore, we sketch how Shell received a substantial fiscal advantage with the 2011 deal, which could mean a loss of billions of dollars in oil income for the Nigerian treasury, according to a recent study.

 

 

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