Home News Towards a new compensation process for oil spills in Nigeria

Towards a new compensation process for oil spills in Nigeria

Nigeria’s oil spill compensation system is broken. Individuals and communities whose lives have been ruined by oil spills wait years for payments which often never come. Arguments about impact assessments, false claimants, and legal stalling tactics by the oil companies often mean lengthy litigation that gets lost in Nigeria’s dysfunctional legal system. This leaves legitimate claimants angry and with little faith in the oil companies or the system that is supposed to represent them and their environment.

To help improve situation SDN has been bringing together government regulators, oil companies and civil society groups so that together they can draft a new set of principles and a framework that will ensure oil spill compensation can be paid quickly to the right people when a company is found to be at fault.

Below are a collection of links to research papers and findings related to this work:

Download: Towards a Nigerian Compensation Scheme

In summary, there are a series of conflicting positions in the law on the calculation of compensation, the majority of cases been based on calculations by the oil companies that have no legal basis. Where there is a legal basis for such calculations, these refer back to enabling legislation that is 35 years old and designed for compulsory purchase. At present, neither the claimant nor the polluter can be held accountable for overdemanding or underpaying, since there is no real binding statute defining what is ‘fair and reasonable’ compensation. Furthermore, the driving enabling legislation on compensation – the Land Use Act – largely ignores the issue of pollution and its environmental damage. Compensation for oil spills is not about compulsory purchase of land.

Download: Summary of advice from Leigh-Day on existing legal and regulatory frameworks

Advice regarding international best practice in the design of oil spill response and compensation legislation. SDN is concerned that the current regime for oil spill compensation in Nigeria is unpredictable, inequitable and mired in delay. It believes that oil companies’ reliance on outdated industry-determined compensation rates in response to community and individual claims for damages is the main factor deterring settlement and fuelling litigation. As a proposed solution, SDN wishes to facilitate the introduction of a statutory compensation system.

Download: Summary report on the proper valuation of oil spill compensation

The current compensation assessment and payment mechanism in the oil and gas industry in Nigeria is largely dominated by civil courts and compensation payments are increasingly being obtained through litigation and negotiation in preference to valuation. Ideally, compensation can be obtained through a systematic professional and technical assessment of the immediate and long-term impacts of pollution on land, property and environmental resources. In terms of the quantum of compensation, there is often a wide disparity in value estimates which can differ significantly from one plot to another in similar locations. In her desire to contribute to the transformation process in the current inefficient and often counterproductive oil spill management and compensation system in Nigeria, Stakeholder Democracy Network (SDN) facilitated research on ‘New Compensation Rates and Processes in Nigeria’. An expert team of researchers and Valuers undertook the study to identify a fair and comprehensive ‘oil spill rates mechanism’ that captures the immediate and future loss of earnings due to oil spills which are presented in this report.

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