Case story

  • Netherlands

OECD NCP Netherlands - Fenceline Community and FoE NL vs. Royal Dutch Shell

2006

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Story

On 16 May 2006 the Complaintant accused Shell of withholding information from local residents and employees about the environmental, health, and safety impacts of its Pandacan oil depot, which is situated in the heart of densely populated Manila. The complaint also alleged that Shell’s plans and procedures to mitigate potential hazards at its oil depot were insufficient, and that Shell was improperly involved in local political activities.

The complaint requested that Shell:

  • - Comply with Ordinance No. 8027 by completely removing its oil depot from Pandacan and relocating it where it would not put the people’s health and safety at risk;

  • - Assume responsibility for the health problems of the people of Pandacan that were a result, partly or otherwise, of the maintenance of the oil depot therein;

  • - Assume complete responsibility for the contamination of the soil in Pandacan where its oil facilities are located;

  • - Actively monitor and improve the air quality around its facilities;

  • - Desist from engaging in deceptive campaigns to gain support for the retention of its facility;

  • - Desist from involvement in bribery and local political activities;

  • - Provide information to the public regarding the potential risks of its operations and involve the local community in decision-making;

  • - Improve and upgrade its equipment, and continuously enhance the training of its people in disaster preparedness and management, to respond to oil leakages and other accidents.


Procedure

After promptly conducting an Initial Assessment and accepting the case, the Dutch NCP held numerous bilateral discussions with Shell/PSPC and with the Complainants, in order to unravel the complexity of the issues submitted. Throughout the procedure, both parties put a lot of effort into providing the NCP with the requested information. Nevertheless, additional input appeared to be necessary.

In the first months of 2007, after consulting the parties involved, the NCP prepared a fact-finding mission to Manila, including assistance by experts of the DCMR, which was paid for by the NCP. On 7 March 2007, the Supreme Court of the Philippines announced a decision in favor of Social Justice Society and Mr Cabigao and Mr. Tumbokon, stating that Ordinance 8027 should be enforced and implemented. PSPC and the other two involved oil companies asked the Court to intervene and to reconsider the decision. Because PSPC wanted to avoid inappropriate parallel proceedings on the relocation of the oil depot, given the developments at the Supreme Court case, the NCP had to decide to postpone its visit to Manila. Pending the decision of the Supreme Court, the NCP procedure was put ‘on hold’ for more than six months.

In the meantime, the newly formed independent NCP took office. It applied a broader interpretation to the issue of ‘parallel proceedings’. On 28 November 2007, the members of the recently reformed NCP (appointed 4 July 2007) met with representatives of both parties in order to get acquainted with one another and to discuss the ongoing standstill in the process. During this joint meeting, the NCP and parties involved decided, inter alia, that Shell/PSPC and the Complainants would inform the NCP on their opinions on two issues:

  • - Firstly, on the usefulness and added value to the NCP procedure of a mission to Manila by the NCP and two independent technical advisors while the case was still pending before the Supreme Court;

  • - Secondly, on a joint meeting between the NCP, PSPC and the local notifying partners during the mission, in which the facts and arguments stated in the notification and Shell/PSPC’s reaction would be discussed.

After receiving the reactions of both parties, the NCP drafted a ‘Terms or Reference’ for both parts of the mission to be planned and proposed to call on the services in Manila of Mr. La Viña, paid for by the NCP, for additional background information, research and identification of options for mediation, in preparation of the NCP visit. Mr. La Viña has a long record of objectivity and independence, and an outstanding reputation in mediation processes, in the Philippines and internationally. Both parties agreed to involve Mr. La Viña as an advisor to the NCP.

On 13 February 2008, the Supreme Court ordered the implementation of Ordinance 8027 of the City of Manila, requiring PSPC, Chevron and Petron to relocate. On 14 March 2008, Shell/PSPC wrote a letter to the NCP in which it stated that following the 13 February 2008 ruling of the Supreme Court “PSPC [would] leave Pandacan” and that this meant that the “root issue of the OECD complaint [had] been dealt with”. Furthermore, it indicated that the four remaining issues (engagement and community programs; gift giving; evacuation and site safety: security and disclosure of confidential product information) should be discussed with the Complainants in a future-oriented mediation process.

The NCP accepted this as an opportunity to move forward in dealing with the specific instance. In order to prepare for a first mediation meeting it called in the DCMR and Mr. La Viña to assist. Unfortunately, it proved difficult to reach agreement between notifiers and Shell/PSPC on the Terms of Reference for the assignments of the DCMR and Mr. La Viña. The parties appeared to have differing views on the scope, confidentiality and orientation (towards the past or future) of the surveys. In the meantime, the NCP nevertheless took responsibility for Mr. La Viña to commence his work as an advisor to the NCP.

On 17 April 2008, based on a comparison of issues (to be) dealt with in the Philippine legal system and the issues put forward in the complaint, the NCP presented its preliminary conclusions on the Pandacan situation following the Supreme Court ruling. Shell/PSPC reacted, stating that, inter alia, an assessment of its Pandacan facilities would no longer be relevant now that the Supreme Court ruled that the oil depot had to be relocated. Besides, there was uncertainty about the role the Regional Trial Court would reserve for itself with respect to monitoring the required relocation plan. The NCP postponed its mission to Manila that was planned for the end of May.

On 29 July 2008, the NCP arranged a joint video-conference with Shell/PSPC and notifiers to discuss the draft report and recommendations of Mr. La Viña. Taking into account the comments made by both parties, Mr. La Viña finalized his report to the NCP on 14 August, 2008.

On 19 September 2008, the NCP presented to both parties a comprehensive overview of the NCP process, resulting in a proposed agenda for a mediation mission from November 10 to 14. The reactions of both parties to this overview and agenda were critical, and they urged the NCP to revalidate or verify some ‘facts’. Although most of the disputed issues could theoretically be resolved during a mediation attempt, the mediation mission had to be postponed. The reason for this was the incompatibility of time schedules of the representatives of all parties involved. However, the NCP took advantage of the opportunity to conduct a fact-finding mission instead of a mediation mission during the period from November 10 to 14 which had already been scheduled. During this mission the status of some possibly relevant, but disputed facts could be confirmed. Furthermore, the NCP hired the DCMR to visit Pilipinas Shell Petroleum Corporation for assistance in the evaluation of the general safety of the PSPC Facility and the environmental management of the PSPC Facility at the Pandacan depot. PSPC gladly cooperated, but also insisted that the DCMR and NCP sign quite restrictive confidentiality agreements.

During this mission, NCP members Mrs. J.F.G. Bunders and Mr. H. Mulder interviewed or spoke with:

  • - Management and advisors to the management of PSPC;

  • - The independent Health Panel established by PSPC;

  • - Local residents of Barangay 830, 833 and 834, and their captains;

  • - A member of the Manila City Council;

  • - Representatives of the Fenceline Community;

  • - A representative of the Front to Oust the Oil Depot;

  • - A professor of the Polytechnic University of The Philippines.

No representative from Friends of the Earth was available during the mission.

All of the information derived from talks with PSPC employees and from the DCMR investigation was declared strictly confidential by PSPC, which NCP accepted, although this confidentiality was stricter than the confidentiality already prescribed in the procedural guidance of the OECD guidelines for multinational enterprises. The NCP and the DCMR had signed separate confidentiality agreements for that purpose.

In order to prepare for a mediation attempt, the NCP paid special attention to issues that might arise between PSPC/PDSI and the notifiers concerning stakeholder engagement during the relocation process and monitoring of the relocation process.

On 18 December 2008, the NCP received a letter from PSPC, in response to the NCP’s request to come up with proposals for ‘a way forward’ in dealing with the specific instance under the OECD guidelines. The letter does not mention ‘relocation’ as a possible issue in the NCP process.

In light of the economic crisis, the Manila City Council started discussions in early 2009 on a new Ordinance (7177), which would allow the oil companies to stay at Pandacan and continue operating in Manila. This ordinance superseded Ordinance 8027, which was passed in 2001 and reclassified Pandacan as a commercial instead of an industrial area, and Ordinance 8119 passed in 2006 which gave medium and heavy industries seven years to vacate the city.

In the meantime, the NCP prepared its draft evaluation of the complaint, to be shared with both parties in two parallel drafting rounds, in preparation of its final mediation mission, scheduled for 15 to 17 April. Unfortunately, there was some delay, due to uncertainty about the way in which the results of the DCMR investigation could be shared with the notifiers. On 9 March and 27 March 2009 the NCP arranged teleconferences with PSPC and the Complainants respectively, in which it shared its evaluation of the complaint in a point-by-point fashion, while covering all issues raised in the complaint.

PSPC preferred to reserve its reaction to the evaluation points until it received the full text of the evaluation. In a letter dated 23 March 2009, it called (among other things) for parallel legal procedures as a reason for not being open to mediation on the topic of relocation.

On 2 April 2009, the NCP received an elaborate and constructive written reaction to the evaluation from the Complainants. The Complainants remained open to potential mediation efforts by the NCP and believed that such efforts would have to focus largely on the relocation issue. Furthermore, the Complainants had many questions regarding the conclusions of the DCMR investigation.

On the same day, PSPC published an advertisement in several major daily newspapers in which it countered the view that the entire Pandacan oil depot was a safety and health threat to Manila residents, stating that its own community survey showed overwhelming support for the depot’s continued stay and expressing its willingness to listen and respond to stakeholders’ questions.

On 14 April 2009, during another teleconference with the NCP, PSPC confirmed that it considered relocation of the Pandacan depots as not being an appropriate topic for mediation. The NCP requested PSPC’s cooperation in getting answers to the questions the Complainants had regarding the DCMR’s conclusions. In a letter, PSPC confirmed its position with respect to relocation as a mediation topic but promised cooperation in answering the questions of the Complainants. The NCP asked PSPC to reconsider its position with respect to relocation as a topic for mediation. It called off its mediation mission to Manila.

On 17 April 2009, the NCP received the Complainants’ questions. The Complainants expressed their concern about PSPC’s call for parallel legal procedures. With the help of the DCMR and PSPC, answers were provided on 28 April 2009.

On 7 May 2009, the NCP received a letter from PSPC stating that:

  • PSPC had cooperated with the NCP over the past three years in trying to resolve the issues put forward by the notifiers;

  • During the process, it made many clarifying comments and constructive suggestions to reach an orderly conclusion to the complaint;

  • It nevertheless maintained that relocation of the Pandacan depot was not an appropriate proper topic for mediation between the NCP, Complainants and PSPC, for the following reasons:

    • Local parallel proceedings and political activity on relocation;

    • Any relocation activity would be commercially sensitive and PSPC is linked with its joint venture partners who are not involved in the NCP procedure;

    • Discussion of business decisions falls outside of the scope of the Guidelines;

  • Discussions within the NCP procedure should be restricted to the matters brought forward in the complaint and mentioned in the point-by-point draft evaluation:

    • Manipulation;

    • Concealment of negotiations with government and environmental and health risks of activities;

    • Lack of specific plans to mitigate the hazards of the oil depot.

On 10 May 2009, the NCP asked the Complainants whether they still saw merit in a mediatory attempt by the NCP on issues mentioned in the point-to-point draft evaluation, if 'relocation' was not to be part of the discussions.

On 13 May 2009, the Complainants replied that unfortunately they saw no value in further mediation efforts by the NCP if the issue of relocation was not to be discussed. They were disappointed that Shell/PSPC refused to include the critical issue of relocation in the discussion and mediation that are part of the NCP procedure. They felt that the relocation issue was at the core of the problems raised in the complaint and that it could not be separated from the other issues. Aside from this, they regretted the frequent and unjust call by PSPC for parallel proceedings and for confidentiality in relation to business information. The Complainants advised the NCP to prepare its Final Statement on the Pandacan case.

On 14 May 2009, the NCP informed both parties that it unfortunately had to conclude that there was no scope left for its mediatory attempts. Furthermore, it explained the procedure by which it would prepare its Final Statement.


Outcome

Unable to get the parties together for mediation, the NCP closed the case and issued a final statement in August 2009, more than three years after the complaint was filed. In its statement, the NCP dismissed both the allegation the Shell had manipulated local government, and the allegation that Shell had concealed negotiations with the government and environmental/health risks of its activities.

However, the NCP upheld the claim that Shell had failed to comply with the OECD Guidelines’ clause on disclosure of non-financial information, including environmental reporting, in its interaction with local communities and stakeholders. The NCP’s statement includes a number of recommendations to Shell for improved implementation of the Guidelines in its operations.

The Complainants blame the NCP’s failure to reach a mediated solution on Shell’s obstinacy and obstruction of the specific instance process. As an example, they cite Shell’s unreasonably high confidentiality requirements during the procedure - a situation that the NCP itself, in its final statement, found "regrettable" and counterproductive, but was powerless to do anything against. The Complainants believe that while the NCP genuinely did its best to come to a mediated solution, its hands were tied as it lacked the authority to force a large company like Shell to even come to the negotiation table. The Guidelines’ voluntary nature and the absence of consequences attached to breaching of the Guidelines means that the NCP is unable to compel companies to take the OECD Guidelines seriously.

The case casts an ominous light on the current functioning of the OECD Guidelines’ specific instance mechanism and highlights the urgency of strengthening and upgrading the Guidelines in the 2010 review. In this regard, the Dutch NCP’s “Further Reflections” at the end of its Final Statement provide some constructive guidance.

One result of the case is that Shell Philippines has initiated an “independent” risk assessment of the Pandacan depot and invited some local residents and stakeholders to participate. However, a large group of local citizens and community leaders have questions about the “independence” of the initiative. The questions were directly posed to Shell Philippines, but the company has declined to respond.

NCP Netherlands Final Statement

Contributor(s): This article was modified by Ejfturnbull (3), Kyle (2).