Presentation to Committee on Foreign Trade and Development - - PDF document

1 Presentation to Committee on Foreign Trade and Development Cooperation House of Representatives of the States General The Netherlands 17 June 2019 OPL 245 oil field, Nigeria: What leaked Shell emails reveal I would like to start by thanking the Committee on Foreign Trade and Development Cooperation for agreeing to meet us. It is a great honour. To introduce ourselves, we represent four organisations – The Corner House, HEDA, Re:Common and Global Witness – that, for the past six years, have been investigating alleged bribery by Shell in Nigeria relating to the acquisition of the massive OPL 245 oil field. SLIDE : Background To give some background:

 OPL 245 is a 2,000 square kilometre oil field located offshore from the Niger Delta in Nigeria.  In 1998, the exploration licence was granted by the then oil Minister, Chief Dan Etete, to a company called Malabu Oil and Gas, a company set up just five days previously and which had no experience of oil sector operations.  The award was illegal because Malabu was a company in which Dan Etete had a major interest.  In 2001, Shell entered into an agreement with Malabu to operate the block.  The same year, the Nigerian Government revoked Malabu's licence, later awarding it in 2002 to Shell's Nigerian subsidiary on a production sharing basis with the government-owned Nigerian National Petroleum Corporation.  In 2006 the government revoked Shell's license and restored the block to Malabu, prompting Shell to take Nigeria to international Arbitration under a bilateral investment agreement between Nigeria and the Netherlands.  In 2010, Etete sought to sell the block directly to Shell and Eni but negotiations were halted in December 2010 after Mohamed Abacha, the son of the former dictator, claimed he was part owner of Malabu and that Etete had fraudulently taken control of the company.  Shell and Eni therefore sought a revised structure for the deal whereby they avoided acquiring the block directly from Malabu but instead used the Nigerian Government as an intermediary

2 SLIDE: SHELL on trial Some 1.1 billion dollars was alleged to have been paid in bribes to Nigerian

• fficials, including former President Jonathan and the former Attorney General,

to secure the deal. To put that into perspective, 1 billion dollars is roughly the entire annual health budget of Nigeria. A number of prosecutions and investigations are now under way:

 Shell, together with a number of senior managers, is currently being prosecuted for corruption in Italy1 and Nigeria2. These prosecutions were all triggered by complaints made by our organisations.  Two intermediaries in the deal have already been convicted in Italy for bribery relating to the case.  An investigation is under way in The Netherlands.  The company has disclosed that it has been told that the Dutch investigation has revealed prosecutable offenses.  A civil action in Nigeria by HEDA is seeking to have the licence revoked on the grounds that it was corruptly awarded.

We should stress that Shell itself denies any wrongdoing relating to the deal. SLIDE: Importance of Shell It is, of course, for the courts to decide the guilt or innocence of Shell: and we will steer well clear from making any comments in that regard. We would, however, like to draw your attention to the wider implications of the case, which has been described as the biggest corporate corruption trial in history. Shell is one of the biggest companies in The Netherlands, employing some 82,000 people worldwide3, including thousands in the Netherlands4 Many Dutch pensioners who are not employees of Shell also have an interest in the company since their pensions are invested in Shell. So the outcome of the case is of critical interest to them. Their livelihoods could well be affected. SLIDE: Implications for Shell A conviction for corruption could have severe consequences for the company:

 Shell could face possible debarment in the EU5 and US from bidding for public

• contracts. In 2018, Shell had contracts worth $937 million with the US

Department of Defense.6 These could be lost in the future, at least for a period.

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 The company could also see its licence to operate OPL 245 revoked. This could be a severely blow to its business in Nigeria. In internal documents, Shell has described OPL 245 as “a key building block in Shell's aspiration in Offshore Nigeria” with “significant strategic 'hub' value”.7  The company could face major fines and damages claims. There is already a civil claim against Shell in London for some $3billion: and damages would also be sought in Milan if the courts find against Shell.

All this would hit the company's bottom line and reputation. SLIDE: Wider concerns Internationally, the reputation of The Netherlands as a country is also at stake. If it fails to prosecute the company where there is the evidence to do so, it will lose credibility abroad – and Dutch companies could find themselves disadvantaged when doing business in countries that take the fight against corruption seriously. So what might seem like a case of alleged corruption in a country that is a long way away from Holland has the potential to come home to roost. Indeed, the crippling damage that corruption has already wrought in countries like Nigeria already affects your constituents. By fuelling injustice and poverty, corruption also fuels forced migration: and many migrants have made their way here. For all these reasons, we would hope and expect that Dutch policy makers would be giving their full attention to the case. The more so since, on the evidence we have seen, Shell was the primary architect of this deal. Moreover, the way that the deal was constructed and executed is emblematic of the way that Shell operates in Nigeria. We are therefore greatly heartened by the interest shown by this committee. In our view, the case has great relevance to the committee’s oversight remit on foreign trade and path-breaking work in conditioning support for Dutch companies on compliance with the OECD Guidelines on Multinational Enterprises. Indeed, we believe that the case raises questions about Shell’s compliance with these Guidelines, which we would request you to investigate further. SLIDE: The OECD Guidelines The Guidelines are important in laying down the minimum ground rules for good corporate governance.

4 Chapter VII of the Guidelines specifically address “Combating Bribery, Bribe, Solicitations and Extortion”.8 The Guidance specifically recommends that “enterprises carry out risk-based due diligence to identify, prevent and mitigate actual and potential adverse impacts related to ... bribery and corruption.”9 We would therefore expect Shell to have robust and effective anti-corruption due diligence procedures in place. But our investigations have revealed a massive mismatch between the rhetoric and the reality. What we have learned is that, despite its public claims to excellence, its adherence to anti-bribery due diligence procedures fell far short in the company’s dealings on OPL 245. We know this because, in April 2017, a massive cache of internal Shell emails and other documents was leaked to the press internationally. SLIDE: What the emails reveal We would like to give just three examples of what the leaked documents reveal that are of concern:

 The decisions were made by the most Senior Management here in The Hague not in Nigeria  Shell Senior Management knew that bribes would be paid  Senior Management knew that Nigeria would lose out from the deal – in our estimate to the tune of nearly $6 billion.

SLIDE: The decisions were made in Hague Royal Dutch Shell insists that it is just a holding company and that operational decisions are made by its autonomous subsidiaries.10 The emails reveal this to be untrue. The deal was brokered at the highest level of Shell here in The Hague by Shell's most senior executives. Malcolm Brinded, the Executive Director for Upstream International, was charged with heading the negotiations. Formal approval was specifically sought from RDS’ then Chief Executive Officer, Peter Voser.

5 An email from Brinded to Peter Voser states: “Please find attached the proposed (Proposal to Commence Negotiations) which sets out in detail the summary l gave recently. This is one where your formal endorsement is appropriate given the history and the political/business principles issues involved”.11 An internal Shell investigation also confirms the chain of command. A note of an interview with Peter Robinson, then Vice President for Sub-Saharan Africa, states: “Absolute transparency in terms of the rest of the deal team and up to the line to IC, ECMB and, ultimately, to ECPV and ECSH”.12 IC stands for Iain Craig, Shell’s then Head of Exploration for Sub-Saharan Africa; ECMB stands for Executive Committee Malcolm Brinded; ECPV for Executive Committee Peter Voser, the then Chief Executive of RDS; and ECSH for Executive Committee Simon Henry, then Chief Financial Officer for RDS. SLIDE: Shell knew bribes would be paid Shell has repeatedly told shareholders, regulators and the public that it has effective anti-bribery policies and procedures.13 But the emails show that Shell KNEW that bribes would have to be paid to cement the purchase of the oil block – and yet still went ahead with the deal. That knowledge went right to the top. A briefing document prepared for Malcolm Brinded was clear: “the President is motivated to see 245 closed quickly - driven by expectations about the proceeds that Malabu will receive and political contributions that will flow as a consequence".14 SLIDE: Shell knew that Nigeria would lose out Shell described the 2011 contract for OPL 245 as a Production Sharing Contract. As normally understood in the oil industry, that would mean Nigeria getting a share of oil revenues. In fact, the deal excluded Nigeria from such revenues. Internal emails show that senior executives KNEW that the PSC description was deceptive.

6 Malcolm Brinded told his fellow board members: “This is no longer a PSC”.15 Brinded was candid about where that left Nigeria: “The solution proposed leaves NNPC without any economic interest in the license - a first in deepwater and obviously carrying some longer term risk”.16 An analysis of the fiscal terms for the deal, commissioned by us from Resources for Development Consulting, concludes that the 2011 deal deprived the Nigerian people of nearly $6 billion in potential revenues from the book.17 That is nearly enough to fund Nigeria's combined health and education budgets for more than two years. This at a time when 80% of Nigerians live in poverty on less than $2 a day Concerns and potential lines of investigation Of course, the OPL 245 deal took place some years ago. But Nigeria is still suffering the consequences. And the behaviour of Shell raises real concerns about the present. Are Shell’s anti-corruption controls today compliant with the OECD Guidelines? Certainly, they would have failed the test in 2011. Have improvements been made? If so, how robust are the controls today? We would strongly urge the Committee to investigate this; and we stand ready to

• ffer any assistance that we can.

1 Procura della Republica, Richiesta di rinvio a guidizio, Al Guildice per L'Udienza Preliminare presso il Tribunale di Milan, 7 February 2017 2 Landmark prosecution as Nigerian authorities charge Shell and Eni over shady $1.1 billion OPL 245 deal, 3 March 2017, https://www.globalwitness.org/en/press-releases/landmark-prosecution- nigerian-authorities-charge-shell-and-eni-over-shady-11-billion-opl-245-deal/ Nigerian authorities bring money laundering charges against former Nigerian Oil minister Etete and former Justice Minister Adoke over OPL 245 oil deal, Global Witness, 22 December 2016, https://www.globalwitness.org/en/press-releases/nigerian-authorities-bring-money-laundering- charges-against-former-nigerian-oil-minister-etete-and-former-justice-minister-adoke-over-opl-245-

• il-deal

3 www.shell.com/about-us/who-are-we.html 4 https://reports.shell.com/investors-handbook/2016/data/ 5 EU Procurement Directive: “Public contracts should not be awarded to economic operators that have participated in a criminal organisation or have been found guilty of corruption”. See: https://eur- lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32014L0024&from=EN

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6 www.fi-aeroweb.com/Top-100-Defense-Contractors.html 7 Group Investment Proposal, 10/09/2008, available at https://www.scribd.com/document/366329015/group-20invest-20proposal-2010-9-08 8 http://www.oecd.org/daf/inv/mne/48004323.pdf 9 http://mneguidelines.oecd.org/OECD-Due-Diligence-Guidance-for-Responsible-Business- Conduct.pdf 10 In a 2016 witness statement to the UK High Court, RDS’ then Company Secretary, Michiel Brandjes was unequivocal: “RDS is a holding company. It is not an operating company. As a holding company, it does not have any employees . . . RDS does not involve itself or otherwise intervene in its many hundreds of subsidiaries. As a holding company, it does not have the expertise or capacity to do so.” 11 Brinded, M (2010b) "FW: Draft 245 PCN". Email from Brinded, Malcolm A RDS-ECMB Voser, Peter R RDS-CEPV; Henry, Simon P RDS-ECSH; Hess, Beat W RDS-ECBH Cc: Wetselaar, Maarten SIEP-EPF; Ruddock, Keith A SI-LSEP. 22 March 2010 15:50. Available at: https://www.scribd.com/document/394359744/Shell-20emails-20pp-20296-311-2054772-13- 20faldone-2017-0#download&from_embed, p.14. 12 Interview with Peter Robinson By telecon 16th November 2012. See: http://saharareporters.com/2018/09/11/exclusive-leaked-emails-reveal-shell%E2%80%99s-lies-reps- 2012-about-opl-245 13 See for example, Shell Annual Report 2011, http://reports.shell.com/annualreport/2011/servicepages/downloads/files/entire_shell_20f_11.pdf, p.88. 14 0Pl245 Brief for ECMB Call with Descalzi - 23rd August 2010. Available at https://royaldutchshellplc.com/wp-content/uploads/2017/12/OPL-245-EMAILS.pdf, p.11. 15 “FW: Draft 245 PCN, 22 March 2010” Email from Malcolm Brinded to Peter Voser, Simon Henry, Beat Hess, Maarten Wetselaar, Keith Ruddock. Available at: https://www.scribd.com/document/394359744/Shell-20emails-20pp-20296-311-2054772-13- 20faldone-2017-0#download&from_embed, p.10. 16 “FW: Draft 245 PCN, 25 March 2010” Email from Malcolm Brinded to Peter Voser, Simon Henry, Beat Hess, Maarten Wetselaar, Keith Ruddock. Available at: https://www.scribd.com/document/394359744/Shell-20emails-20pp-20296-311-2054772-13- 20faldone-2017-0#download&from_embed, p.14. 17 Don Hubert, Government Revenues from OPL 245: Assessing the Impact of Different Fiscal Terms, https://hedang.org/wp-content/uploads/2019/05/R4D-Nigeria245-GovernmentRevenueAnalysis- Final-Links.pdf