Judge rules that the local subsidiaries of the companies must comply pending a lawsuit.
A judge in Brazil has ruled that the Shell oil company and BASF chemical company local subsidiaries must boost their workers compensation funds by $382 million in order to make sure that there will be enough money available to potentially cover over 1,000 employees who claim that they fell ill following contamination at a plant for agricultural chemicals.
The ruling by judge Maria Ines Correa will be appealed by BASF SA, according to a statement.
On the other hand, Shell has stated that it will comply with the decision of the judge, pending the ruling that will be made in a class action lawsuit by the employees that is currently in the country’s capital in a higher court.
Prosecutors maintain that the additional workers compensation funds would be held until the outcome of the suit.
However, at the same time, those same prosecutors want to make sure that the funds are available should the ruling be in the favor of the employees and they be required to cover damage payments.
Two courts have already ordered both companies to make workers compensation payments. However, the case has been appealed to a higher court. The suit involves a plant that is located 75 miles to the northwest of Sao Paulo, in a city called Paulinia.
In Targa’s ruling about the case, she explained her decision by saying that the conduct of Shell and BASF was “reprehensible” and that both of those companies were trying to “circumvent their obligation.” At the same time, both of those companies strongly disputed those statements.
BASF has stated that it feels confident that higher courts will provide a better solution for the case. Shell released a statement that said that it “does not agree with the … sentence, whose content we believe lacks the necessary impartiality and deep understanding of the subject.”
The Paulinia chemical plant in question opened in 1977 and continued to be in operation until 2002, when it closed. The initial ownership was Shell’s, but in 1995, that operation was sold to American Cyanamid. In 2000, it was purchased by BASF, a massive company based in Germany, taking over the plant which produces chemicals. The BASF SE annual report for 2011 stated that the plant was “significantly contaminated by the production of crop protection products,” a point that is central to the workers compensation case. BASF stated that it was already contaminated before it was purchased and a lawsuit was filed against Shell. The two companies are still in payment talks.