OFFSHORE EXPLORATION OP-ED
Shell judgment adds to growing body of decisions that companies must take rights of communities seriously
The decision should not be seen as an assault on the private sector, but rather as guidance on the approach that extractive companies ought to follow, and that it is critical to consult meaningfully with communities as part of the licence application process.
As 2021 ended, the Eastern Cape high court granted local communities’ request for an urgent interim injunction prohibiting Shell Exploration and Production South Africa BV, Impact Africa Limited and BG International Limited (Shell) from conducting any seismic exploration activities off the coast of South Africa’s Eastern Cape province.
In support of its decision, the court found that there was a reasonable likelihood that the proposed exploration activities would violate the applicants’ (and the communities whom they represent) rights to an environment that is not harmful to their health and wellbeing, to participate in and enjoy the cultural life of their choice, as well as to just administrative action.
In response to the order, Shell terminated the contract with the company responsible for conducting the seismic survey. The Amazon Warrior, the vessel in question, has since left South Africa’s coastal waters.
This judgment forms part of a series of significant South African and international decisions (including the Baleni, Maledu, and Okpabi) which confirms that companies — particularly those in the extractives sector — must take the rights of communities seriously or risk the chance of suffering significant financial loss.
The decision should, however, not be seen as an assault on the private sector, but rather as guidance on the approach that extractive companies ought to follow when intending to undertake any exploration and production activities. According to the decision, it is critical for companies to consult meaningfully with communities as part of the licence application process. In doing so, companies should apprise communities of the nature and extent of their proposed activities in a form that is easy for the communities to understand.
While consultation does not mean negotiation, companies should show that they properly considered the response which the communities provided during the consultation process. Where necessary, companies must also provide an adequate response to this. This may include adapting the proposed activities in response to these concerns.
History is littered with examples of operations that fail when extractive companies lose their social or societal licence to operate. Owing to the critical role which the extractives sector will play in the transition away from fossil fuels, the world cannot afford any further unnecessary delays. It is therefore important that governments, communities, and the private sector work together to ensure a just transition to a sustainable economy.
In the remainder of this article, we consider the background to the dispute between the Eastern Cape communities, Shell and the South African government as well as some of the key points from the judgment.
In November 2021, civil society organisations initiated a campaign over news that one of Shell’s subsidiaries, Impact Africa Limited, planned to commence a nearly five-month-long seismic survey off the Wild Coast in South Africa’s Eastern Cape.
Soon after the news broke, several non-profit companies, individuals and a communal property association (the Applicants) instituted an application for an urgent injunction in the Eastern Cape high court. The application comprised two parts. Under Part A (which is the subject matter of the recent decision), the Applicants sought an interim injunction against Shell that would prevent it from proceeding with the seismic survey. The injunction would remain in place until Part B of the application is finalised.
Under Part B (which will be argued at a future date), the Applicants requested the court to order a permanent injunction that would prohibit Shell from proceeding with the seismic survey until it obtains the necessary environmental authorisation(s) under the National Environmental Management Act, 1998 (Nema).
The court’s reasoning
In order to obtain the interim injunction, the Applicants were required to show that there was a reasonable possibility that their rights would be imminently and irreparably harmed unless the injunction was granted. They were also required to show that they did not have access to any alternative relief and that the balance of convenience favoured the grant of the injunction.
A prima facie right
As indicated, the Applicants’ case was based on their right to an environment that is not harmful to their health and wellbeing, to participate in and enjoy the cultural life of their choice, as well as to just administrative action.
The right to just administrative action (which includes procedural fairness) was particularly important in this matter because the Applicants’ case rested on the fact that they were not consulted before the exploration right (under which the seismic activities would be conducted) was granted. This, in their view, amounted to a fatal flaw in the exploration right application process.
The court agreed with the Applicants and held that “meaningful consultation entails providing communities with the necessary information on the proposed activities and affording them an opportunity to make informed representations”. In support of its decision, the court indicated that the consultation process was “inadequate and substantially flawed” for at least the following reasons:
- The consultation notices were only published in English and Afrikaans newspapers which meant that the isiZulu- and isiXhosa-speaking members of the communities were either unaware of the consultation process or unable to read and fully understand the notices;
- The briefing sessions with interested and affected parties were only held in Port Elizabeth (Gqeberha), East London and Port St Johns. Because these venues were far away from the communities, the communities were effectively excluded from these meetings;
- Shell only spoke to the “Kings” of communities on the assumption that they spoke for their people when this was not the case;
- Shell did not follow through with the consultation processes which it proposed in the environmental management programme which accompanied the exploration right application; and
- Shell failed to show what the stakeholder analysis on which it relied during the exploration right application process entailed as well as why the previous studies which it used were adequate.
On the strength of its reasoning, the court held that Shell’s exploration right was awarded on the basis of an inadequate and substantially flawed public consultation process. In light of this finding, the court indicated that the exploration licence was also unlawful and invalid.
The Applicants identified three categories of harm.
First, the impact which the seismic survey activities would have on the role which the ocean played in the communities’ cultural life as well as their traditional practices.
Second, the impact on the Wild Coast’s marine life, including vulnerable species such as the humpback dolphin, turtles and zooplankton.
Finally, that impact which the proposed exploration activities would have on the livelihoods of the small-scale fishermen who reside on the Wild Coast.
Shell failed to provide any expert rebuttal to the Applicants’ experts’ allegations in respect of the first and second set of harm. The court, therefore, found that the Applicants’ allegations were undisputed. The court moreover held that the allegations in respect of the irreparable harm to marine life adequately established how Shell’s conduct would negatively impact the livelihood of coastal fishermen.
Balance of convenience
The court held that the balance of convenience favoured the Applicants for two reasons.
First, while the injunction may result in Shell suffering financial loss, the loss cannot justify the infringement of constitutional rights. In the court’s view, “where constitutional rights are in issue, the balance of convenience favours the protection of those rights.”
Second, Shell could not use its failure to consult the Applicants meaningfully as a ground for why the interim interdict should not be granted.
In addition, in light of the evidence which the Applicants’ experts provided, there was a real chance that the Wild Coast’s marine life would be harmed. The precautionary principle may therefore be justifiably invoked. This approach is enshrined in section 2(4)(a)(vii) of Nema which provides that the principle of sustainable development requires that “a risk-averse and cautious approach is applied, which takes into account the limits of current knowledge about the consequences of decisions and actions”.
Availability of an alternative remedy
Finally, Shell requested the court to consider whether the Applicants should have requested the Minister of Mineral Resources and Energy, Gwede Mantashe, to cancel the exploration right through the mechanism created under sections 47 and 90 of the Mineral and Petroleum Resources Development Act, 2002 (MPRDA).
The court found that the mechanism was not a satisfactory remedy for two reasons.
First, it was a time-consuming process “which would allow for the continuous threat of the Applicants’ rights”.
Second, the minister had tweeted that the objections to Shell’s activities constitute “apartheid and colonialism of a special type”. In the court’s view, the minister’s emotive tweets indicated that he was potentially biased towards Shell which would have tainted any decision under sections 47 and 90.
In the circumstance, the court found that there was no suitable alternative remedy available to the Applicants.
The court found that the Applicants had successfully established a case for an interim injunction and ruled in their favour. In addition to prohibiting Shell from continuing with the seismic survey, the court also ordered that Shell and the minister pay the Applicants’ costs. DM/OBP
Peter Leon is Partner and Africa Co-Chair; Ernst Muller is Senior Associate; and Amanda Hattingh Associate at law firm Herbert Smith Freehills.