ESG dispute resolution in Africa: trends and strategies

Global litigation and regulatory enforcement actions and threats related to Environmental, Social and Governance issues are on the rise, and Africa is no exception.

While Africa is the world’s second largest and second most populous continent, it has and continues to contribute the least to global carbon dioxide (CO2) emissions (according to Statista, Africa contributed 3.8% of global CO2 emissions in 2022¹). Despite contributing the least to global warming, however, the continent continues to suffer disproportionately from climate change.

The World Meteorological Organisation’s 2022 report on the State of the Climate in Africa cited withering droughts; heatwaves and associated wildfires, violent tropical storms, and catastrophic flooding as the extreme weather events which took centre stage in 2022. Most recently, in September 2023, Cyclone Daniel unleashed 400 mm of rain in a mere 24 hours in Derna, Libya² (where historical average rainfall for September is no more than 1.5mm). This resulted in the collapse of the Derna Dam, causing catastrophic flooding which resulted in the death of 4 000 people, with 10 000 reported missing.

Africa is rich in mineral, oil and other natural resources, making it a popular destination for foreign investment in large-scale engineering and infrastructure development projects. While the citizens of African countries often stand to benefit from these projects, they are the most affected by environmental disasters linked to them.

The above factors have contributed to a significantly more socially conscious, reactive and community-focused citizenry, government and regional leadership.

There are several cases outlined in which Africa-based projects are being litigated and arbitrated in courts and tribunals seated outside of Africa.

Philippi Horticultural Area Food & Farming Campaign (PHA) and Another v MEC for Local Government, Environmental Affairs and Development Planning: Western Cape and Others 2020 (3) SA 486 (WCC)

The PHA challenged the MEC’s decisions relating to a proposed development on a portion of farmland, considering that there is an underlying aquifer.

The court remitted the MEC’s decision to dismiss an appeal of the environmental authorisation granted to the developer and sent the matter back for redetermination by the MEC. The MEC was instructed to reconsider the appeal, considering new evidence and reports relating to the impact of the proposed development on the underlying aquifer, and to consider water scarcity and supply in the City of Cape Town, in the context of climate change.

Okpabi and others v Royal Dutch Shell plc and another [2021] UKSC 3

40 000 citizens in the Niger Delta brought a claim against Royal Dutch Shell, which arose from alleged oil leaks from pipelines and associated infrastructure operated, and human rights abuses committed by Shell’s Nigerian subsidiary (SPDC). The claimants allege that the oil spills caused significant environmental damage, and rendered the natural water sources unsafe for drinking, fishing, agricultural or recreational purposes.

While the merits of this claim are yet to be decided, the UK Supreme Court determined that it was at least arguable, based on the degree of control and management of SPDC, that the parent company (Royal Dutch Shell) owed a duty of care to the claimants.

Sustaining the Wild Coast NPC and Others v Minister of Mineral Resources and Energy and Others 2022 (6) SA 589 (ECMk) (1 September 2022)

In September 2022, the High Court handed down a judgment in an application to review and set aside a decision by the Minister of Mineral Resources and Energy to grant an exploration right to Impact Africa Ltd for the exploration of oil and gas in the Transkei and Algoa area. As a precursor to the exploration, the exploration company (Shell) would need to conduct a seismic survey off the Eastern Cape coast.

The court found that the consultation process undertaken by Impact was procedurally unfair, in that key stakeholders, such as those who hold customary law rights, had not been consulted. In addition, the court found that the potential harm to marine and bird life, and communities’ spiritual and cultural rights, had not been considered.

Overall, the exploration rights granted by the Minister to Impact were unlawful and were set aside, effectively putting an end to any seismic survey in the ocean off the Wild Coast of South Africa.

Friends of the Earth et al. v. Total

In 2019, six civil society organisations filed a lawsuit against Total (now TotalEnergies) in France, for allegedly failing to comply with the 2017 French Duty of Vigilance law. This law requires French companies to establish and implement reasonable vigilance measures to identify risks and prevent severe impacts on human rights, the health and safety of individuals, and the environment. The plaintiffs alleged that Total failed to adequately assess the human rights and environmental impacts of its Tilenga oil project in Uganda and Tanzania. The project was expected to displace around 100 000 people and affect numerous endangered species in the area.

In December 2021, the French Supreme Court rejected the jurisdiction of the commercial court but recognised the jurisdiction of the civil court. In February 2023, the latter court dismissed the case on procedural grounds. The merits of the case have not been adjudicated by any of the courts. The plaintiffs have, however, lodged an appeal to the Court of Cassation – France’s highest court.

Mbabazi & others v. The Attorney General and another

In September 2012, four citizens and a Ugandan NGO brought their claim against the Ugandan Attorney General and environmental authority before the High Court. The claimants alleged that extreme weather events linked to climate change inaction on the part of government had resulted in damage and loss of life.

The claimants based their claim on the Ugandan Constitution, which makes the Ugandan government a public trustee of the national resources (including its atmosphere) and imposes a duty to preserve those resources from degradation for present and future generations, stating that unless urgent action was taken, climatic patterns of prolonged droughts, floods, hurricanes and crop losses will escalate into human catastrophe for both present and future generations.

After a preliminary hearing, the High Court ordered the parties to undertake a 90-day mediation process; however, no further action has been taken since then.

These cases, among many others, allude to several trends and strategies in ESG dispute resolution in the African continent, including:

•Disputes that demand that governments adopt “climate adaptation” strategies to proactively strengthen their capacity to meet the needs of communities directly affected by climate change; for example, providing flood defense infrastructure, and putting disaster response and migration systems, and social safety nets in place.
• A more engaged and active citizenry that will demand strict compliance with environmental, procurement and consultation laws.
• Shareholder activism, where shareholders seek to mitigate ESG-related risks by holding companies accountable and influencing their behaviour through governance mechanisms and shareholder rights.
• Use of human rights and sanctions litigation by States seeking to act against those who violate internationally recognised human rights.
• Increase in colourwashing claims, where consumers and stakeholders bring claims against companies that deceptively describe their products or services as having unsubstantiated values and qualities (for example, “sustainably sourced” or “cruelty free” labels).
• Climate change litigation, where parties use “attribution science” to show a connection between impugned activities and the harm that ensued.
•The use of third-party litigation funding to finance large class actions, and community or NGO-initiated claims against large multinationals with comparatively deeper pockets.

With African countries and their citizens disproportionately affected by climate change, environmental disasters and corporate governance shortcomings, the need for ESG dispute resolution is inevitable.

1. https://www.statista.com/statistics/205966/world-carbon-dioxide-emissions-by-region/
2. https://floodlist.com/africa/climate-change-libya-floods-sepotember-2023#:~:text=When%20Storm%20Daniel%20made%20landfall,reported%20by%20Nasa’s%20Earth%20Observatory

Sandra Sithole and Chandni Gopal are Partners and Thandekile Mbatha an Associate | Webber Wentzel

This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication.

DealMakers AFRICA is a quarterly M&A publication
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