Shell should reconstitute or take a second look at its office of Public Affairs (Government Relations) in Nigeria to imbue them with a new approach to sustainable development, social license and community engagement initiatives. When the leadership and the management team of Shell in Nigeria consider the surrounding communities where they exploit oil as enemy territory and deal with the owners of land as expendable interests, the report should not be unexpected. The local communities and the people come first. Shell Global Management should blame Nigerian citizens who are in leadership positions within the Shell operation in Nigeria for their problems in the Niger Delta. They would rather spend money on security, bribing the local chiefs, than investing proudly in the communities where they milk the black gold. We are not surprise by the report, because we wrote about the security and unfriendly relationship between Shell and the people in the Niger Delta extensively in the past.
The following is an excerpts from our article titled "Bonga Oil Spillage: Niger Delta, and Sustainable Development" posted January 02, 2012 (
Presently, it costs Shell much more to provide security for its workers and facilities in comparison to what other oil companies, similarly situated, pay to maintain production at the same capacity. The facts are that whenever Shell declares force majeure, both Shell and the federal government suffer enormous financial setbacks, running into millions of dollars in revenues, royalties, and taxes. When those are factored into the huge security budget and the replacement cost resulting from recurring expenses associated with burning and lootings, you would have much more than enough to finance the demands of the local communities before they escalate out of control into kidnapping proportions. According to the International Finance Corporation (IFC), “before disputes escalate to settlement at the international level, companies must ensure that they have in place adequate mechanisms for dispute resolution between their stakeholders and the communities. A grievance mechanism should provide a way for the communities to hold the company accountable, to be sure it takes community inputs seriously, deals with them through a clear and transparent process, follows through with actions, and communicates with the community.”
The interest of the local people overrides all other considerations. You cannot provide bread and butter for the local chiefs and make millions of dollars available to influential politicians to write off your taxes, and expedite the contracting process, while 99.9% of the people do not have clean water to drink, cannot fish, and cannot farm.
Exploration of crude oil is intertwined with environmental hazards and other problems; therefore, the same effort and resources should be devoted to managing exploration and disaster preventive measures and control.
The demand for the integration of human rights, human development and sustainable development within the framework of every investment agreement in the extractive sector is not just an intellectual exercise. It is real and achievable if diligently pursued. Investment Treaties and Stabilisation Clauses do not provide the kind of stability that developing some forms of relationship (social license) with the community provides.
The earlier nation-states and foreign investors embrace and acknowledge the interests and concerns of indigenous people and inculcate those concerns into their final investment agreements, the closer we are to peace and sustainable human development in the mineral-producing areas anywhere in the World. Nothing enriches shareholders' value more than sustainable income.
The earlier nation-states and foreign investors embrace and acknowledge the interests and concerns of indigenous people and inculcate those concerns into their final investment agreements, the closer we are to peace and sustainable human development in the mineral-producing areas anywhere in the World. Nothing enriches shareholders' value more than sustainable income.
.
Finally, it is our firm belief that any IOC that values life, liberty, freedom, and fundamental human rights of others, especially people living in and around mines and rigs; any IOC with genuinely concern for living things, creatures, and the environment in and around its facilities; any IOC that values peaceful investment climate inherent in cordial business relationship with local communities, should not prevaricate on these issues and the solutions proffered.
Therefore, we strongly hold that the number one problem facing multinationals in the extractive sector, especially in developing countries, Niger Delta in particular, is a failure of corporate responsibility. In addition, the host nation should hold IOCs liable for any financial loss resulting from the declaration of force majeure unconnected with natural disaster or unforeseeable catastrophic occurrences. Also, we firmly believe that the health and environmental hazards prevalent in the oil producing areas and Niger Delta in particular, are preventable, and the economic deprivations and financial losses inherent in oil spillage and pollution are compensable. And that host nations and communities should demand punitive damages where catastrophic occurrences are foreseeable, egregious, and preventable.
Therefore, we strongly hold that the number one problem facing multinationals in the extractive sector, especially in developing countries, Niger Delta in particular, is a failure of corporate responsibility. In addition, the host nation should hold IOCs liable for any financial loss resulting from the declaration of force majeure unconnected with natural disaster or unforeseeable catastrophic occurrences. Also, we firmly believe that the health and environmental hazards prevalent in the oil producing areas and Niger Delta in particular, are preventable, and the economic deprivations and financial losses inherent in oil spillage and pollution are compensable. And that host nations and communities should demand punitive damages where catastrophic occurrences are foreseeable, egregious, and preventable.
The United Nations has, over the years, developed numerous papers and articles on this very issue of the integration of human rights and investors’ interests in natural resources agreements with host nations for the purpose of ensuring sustainable development. The one that I find most revealing and enlivening is the Rio Declaration of 1992. Four of the articles are reproduced below.
“Human beings are at the centre of concerns for sustainable development. They are entitled to a healthy and productive life in harmony with nature...The right to development must be fulfilled to equitably meet developmental and environmental needs of present and future generations…In order to achieve sustainable development, environmental protection shall constitute an integral part of the development process and cannot be considered in isolation from it…Indigenous people and their communities, and other local communities, have a vital role in environmental management and development because of their knowledge and traditional practices. States should recognise and duly support their identity, culture and interests and enable their effective participation in the achievement of sustainable development.” UN RIO DECLARATION: Principles 1, 3, 4, & 24
December, 2011
The following is another excerpt from the article titled "Stabilisation Clause versus Human Rights (an abridged version appeared on the AIPN discussion Board on LinkedIn)" that was posted on March 23, 2012.
Given the restive situation in the Niger Delta, it is trite to conclude that stabilization clauses standing alone, cannot guarantee the stability that investors desire in an economy. Presently, Anglo-Dutch Shell BP and AGIP are downsizing operations in Nigeria, because of the upsurge in vandalism, kidnapping, and the indiscriminate destruction of construction facilities by the militants in some parts of the Niger Delta. In fact, the Nigerian government did not introduce a new tax regime or change the dynamics of the regulatory framework governing any PSA. The civil society created an atmosphere that makes performance at the projected level commercially impracticable, thus making it difficult comparatively for Shell to remain in operation as it was 10 or 15 years ago. So, a stabilisation clause as a safety net is not foolproof.
There must be in place mechanisms for resolving and promptly, too, disputes and disagreements between IOC and local communities before they escalate to mass protest, vandalism of pipelines, and kidnapping of expatriate workers. No doubt, "grievance mechanisms will respond to project needs better if they are established early as a measure to preempt rather than react to escalation of tension with surrounding communities."[ii]
Similarly, investment treaties and stabilisation clauses do not provide the kind of stability that developing some forms of relationship (social license) with the community provides. Susan Joyce put it better: "The governments define the scope of legal compliance, but the broader scope of the responsibility to respect is defined by social expectations – as part of the company’s social license to operate."[iii]
In light of the foregoing, the call for integration of human rights, human development, and sustainable development initiatives within the framework of every investment agreement shouldn't be seen as just another intellectual exercise. It must be encouraged in order to ensure peaceful co-existence between every IOC and local communities. Given the scale of nationalisation of foreign investments by host governments in the past decades, foreign investors and their negotiators must be circumspect of undue advantages and the often weak bargaining power of host nations during the negotiation process.
Suffice it to declare at this juncture that stabilisation of the interests of local communities provides more stability than stabilisation clauses in any investment agreement. In a similar vein, sustainable development of the local communities provides more stability than convoluted taxation formulas embedded via stabilisation clauses into investment agreements by IOCs and their highly skilled and powerful Lawyers and Accountants. It is more about social license - engaging and interacting with the local people socially and economically. Based on indisputable facts, social license trumps stabilisation clauses as far as investment stability goes in foreign soil. More emphasis should be on the office of Director of Public Affairs – an office with a positive and social mandate, with the ability to project a positive social image of IOCs before the local communities. Therefore, Lawyers, Accountants, and Geologists who represent some of these multinationals having investments or contemplating investments in developing countries should be cognizant of these developing trends in natural resources agreements and be conscious of the fact that the stabilisation clause has its limitations.
Thank you.
No comments:
Post a Comment
The Lord is my Shepherd; I shall not want.