SCA dismisses Shell’s appeal but extends Shell a lifeline 

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  • The Supreme Court of Appeal today dismissed an appeal by Shell, Impact Africa and the Department of Mineral Resources and Energy of the Makhanda High Court judgment which set aside the exploration right and subsequent renewals granted to Shell to conduct oil and gas exploration off the Wild Coast of South Africa. 

The High Court found that the right was granted unlawfully because of the failure to notify and consult affected communities which in turn meant that relevant considerations, such as the communities’ right to food and livelihoods from the ocean and their spiritual and cultural rights were ignored. In addition, the Court found that the Minister failed to consider and comply with the requirements of the Integrated Coastal Management Act.

The SCA agreed and upheld this decision. However, Ponnan J in the SCA suspended the setting aside of the exploration right until Shell’s final renewal application on the right is finalised. The right has been renewed twice before, and a third renewal application was quietly brought by Shell on 21 July 2023 with no notice to affected communities.

This is a disappointing outcome for the communities and supporting organisations that brought the case to the High Court in December 2021. These include Wild Coast communities and small-scale fishers, Sustaining the Wild Coast NPC and All Rise Attorneys for Climate and the Environment NPC, represented by the Legal Resources Centre (LRC) and Richard Spoor Incorporated.  Natural Justice and Greenpeace Africa, represented by environmental law firm, Cullinan & Associates, also joined the case.

The communities argued for an outright setting aside of the exploration right based on numerous deficiencies in the consultation and decision-making process. These included that:

  • There was no consultation with affected communities and the companies’ consultations with traditional monarchs was insufficient.
  • The decision-makers failed to consider the potential harm to the fishers’ livelihoods, the impact on their cultural and spiritual rights and the contribution of oil and gas exploitation to climate change.
  • The decision-makers failed to consider and comply with the requirement of the Integrated Coastal Management Act to consider the interests of the entire community – including fishers and ocean life.
  • No evidence supported bald claims that the project will provide jobs and increase government revenues.

The SCA judgment

Before the SCA considered the merits, it addressed two preliminary issues that were raised by Shell and Impact: Firstly, the delay in bringing the case before the court. The exploration right was granted in 2013 and Impact Africa and Shell argued that the public would have known of this announcement. According to the Promotion of Administrative Justice Act (PAJA), parties are given 180 days to launch a review. However, the SCA agreed with the communities in that they were only aware of the intended exploration in October 2021, finding that, “There is no evidence that the Minister (or his delegate) gave the public notice of the decisions prior to October 2021.” [para 10].

The second preliminary issue was whether an internal appeal to the Minister of Mineral Resources and Energy should have been launched before the communities and supporting organisations approached the High Court. However, communities argued that this was not possible due to the timeframes, but also because of the reasonable apprehension of bias against them on the part of the Minister of the DMRE. The SCA agreed with the High Court, stating that, “[T]he high court can hardly be faulted for its finding that: ‘[t]his is a classic case of an internal remedy that would not have been objectively implemented and which would have rendered nugatory the values of administrative justice enshrined in the Constitution and upheld by PAJA’.”

Onto the merits of the case, the SCA focused firstly on one particular issue, that of the inadequate consultation process used by Impact Africa and Shell in the process of applying for and renewing the exploration right. Relying on the general principles of consultation that were set out in the Constitutional Court matter of Bengwenyama, the SCA confirmed that the consultation process had been inadequate. The Constitutional Court in that case found that “any administrative process conducted or decision taken in terms of the [MPRDA] must be taken in accordance with the principles of lawfulness, reasonableness and procedural fairness”.

The SCA echoed the sentiments of the High Court judgment in finding that the consultation process was inadequate, stating that “the choice of print media was plainly ill-advised. This was exacerbated by the choice of English and Afrikaans language newspapers. The process, which was more illusory than real, was thus manifestly inadequate.” [para 24]

The relief 

Despite agreement with the findings of the High Court, Ponnan J declined to set aside the right and renewal decisions in their entirety, favouring what he termed a more “pragmatic” approach “in crafting just and equitable remedies in the exercise of its wide remedial powers.”

In doing so, the Court clearly showed its concern with the potential “chilling effect on foreign investment” and what it called the “sterilising effect” of the High Court’s ruling. As a result, it held that, while the exploration right was granted unlawfully, a renewal of the unlawfully granted right may yet be granted.

The SCA directed that, in relation to the third renewal application, that “a further public participation process be conducted to cure the identified defects in the process already undertaken, especially as the parties who claim to have an interest in the matter have now been identified….” It remains unclear how a renewal process can cure the fatal defects of the original exploration right.

The SCA’s decision appears to be based on misinterpreting the High Court as having made a finding that authorising more oil and gas exploration is incompatible with South Africa complying with its international climate change obligations. The SCA commented that it cannot endorse “such a far-reaching finding, which has a sterilising effect…” [para 26]The High Court’s conclusion was, however, after summarising expert evidence, that climate change was a relevant consideration for the decision.

The communities and supporting organisations are considering an appeal to the Constitutional Court.

Source: Natural Justice 


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