Court rejects Shell’s bid to unfreeze bank accounts

A Nigerian court rejected Royal Dutch Shell Plc’s bid to overturn an order restricting access to the company’s bank accounts in the West African country, a spokesman said.

Aiteo Eastern E&P Co. obtained an injunction from a federal court in Lagos on Jan. 25 directing Shell and multiple Nigerian banks not to let the oil major withdraw funds “without first preserving or ring-fencing” almost $2.8 billion. A judge refused Shell’s application to vacate the order at a hearing on Tuesday, according to a spokesman for the company’s Nigerian unit.

Shell has filed an appeal against the decision maintaining the freeze, the spokesman said. A spokesman for Aiteo, which is demanding billions of dollars in damages from Shell in the underlying lawsuit, didn’t respond to a request for comment. The case has been adjourned until March 29.

The court had restricted Royal Dutch Shell Plc’s access to its bank accounts in the West African country amid a legal dispute with a local oil producer over a pipeline deal six years ago.

Aiteo Eastern E&P Co. Ltd. is demanding billions of dollars in damages, claiming Shell misrepresented the condition of the pipeline and under-counted the volume of crude one of its facilities received from the Nigerian firm, according to court documents seen by Bloomberg.

Shell said Aiteo’s lawsuit is baseless and it was working to overturn the freezing order.

The dispute is just one among a growing list of legal entanglements related to Shell’s business in Nigeria. Since the start of the year, a Dutch court has ordered the company to pay compensation for oil spills in two villages more than a decade ago, and the U.K. Supreme Court allowed 40,000 fishermen and farmers to sue Shell in England.

The legal precedents could result in the company facing more cases related to Nigeria in its home country.

A federal court in Lagos, Nigeria’s commercial hub, on February 15 retained an injunction issued late last month directing Shell not to withdraw funds held at 20 banks “without first preserving or ring-fencing” almost $2.8 billion. The judge, Oluremi Oguntoyinbo, then adjourned proceedings until February 24.

Aiteo’s allegations relate to its $2.4 billion purchase in 2015 of a 45 per cent interest in an oil block and pipeline from a trio of multinational companies: Shell, Total SE and Eni SpA. Nigeria’s state-owned energy company owns the rest.

The African company secured a loan of almost $1.5 billion from local and international banks to fund its entrance into the oil exploration and production business, according to a lawsuit the company filed against four Shell units and the parent company on January 15. Aiteo is controlled by prominent Nigerian businessman Benedict Peters.