The case at The Hague Civil Court marks the first time a Dutch company has been sued for alleged environmental mismanagement caused by a foreign subsidiary and could pave the way for similar claims if it succeeds.
Royal Dutch Shell PLC long argued that the case, which was launched in 2008, should be heard in Nigeria and still maintains the Dutch court should not have jurisdiction.
Lawyers for the Nigerians argue that key policy decisions by Shell are made at its headquarters in The Hague and that means the Dutch court can rule in the case.
Just how much compensation and clean-up costs Shell faces would be addressed at a separate hearing if the court rules in favour of the farmers.
Four villagers and environmental group Friends of the Earth say Shell pipeline leaks fouled fish ponds, farmland and forests in three villages in the Niger Delta, Goi, Oruma and Ikot Ada Udo.
"If you are drinking water you are drinking crude, if you are eating fish, you are eating crude, if you are breathing, you are breathing crude," one of the farmers, Eric Dooh, told reporters outside court.
"What I expect today is justice," he added. "I expect that judges are going to proceed in this matter, have sympathy and look into our environment — tell Shell to apply the international standards where they are operating in Nigeria."
Villagers blame the leaks on corrosion of the pressurized underground pipes. Shell claims they were caused by sabotage and says its local subsidiary cleaned up the environmental damage.
Shell lawyer Jan de Bie Leuveling Tjeenk told the court sabotage and oil theft are widespread in the Niger Delta — with around 150,000 barrels per day stolen — and often leads to serious pollution as thieves illegally tap pipelines.
An earlier Dutch court ruling accepted Shell's assertion that the leaks were caused by sabotage, but lawyers for the plaintiffs argue that the judges should revisit that decision, saying the pipe was seriously corroded.
They added that Shell did not clean up the spills quickly enough.
"Shell did not do enough to prevent the oil spreading and damaging the plaintiffs' land," the villagers' lawyer, Channa Samkalden, told the court. "Shell did not act as a careful oil company."
Tjeenk said Shell's Nigerian subsidiary SPDC cleans up oil spills including those caused by sabotage in the Niger Delta even though it is not legally bound to so and invests in replacing aging pipelines.
Shell's local subsidiary remains the top foreign oil producer in Nigeria's oil-rich Niger Delta, a region of mangroves and swamps about the size of Portugal. Its production forms the backbone of crude production in Nigeria, a top supplier to the gasoline-thirsty U.S.
Shell, which discovered and started the country's oil well in the late 1950s, remains demonized by activists and local communities over oil spills and close ties to government security forces. Some Shell pipelines that crisscross the delta are decades old and can fail, causing massive pollution.
Shell, however, has begun an effort in the last decade to build clinics, roads and even natural gas power plants for the region. The company blames most spills now on thieves who tap into crude oil pipelines to steal oil.
A judgment in the case is expected late this year or early in 2013.
Jon Gambrell in Lagos, Nigeria, contributed to this report.