Historic judgement rendered by the District Court of the Hague on May 26, 2021 represents the new understanding of corporate liability in regards to the risk of harm caused by their contribution to climate change. The court ordered Royal Dutch Shell to reduce its emission by net 45% by 2030 in comparison to levels in 2019 – although without assertion of any unlawful conduct by the defendant (link to the judgement in English here).
Around 70% of global emissions can be linked directly to 100 companies – one of which is Royal Dutch Shell. Its historical emission, from 1890 to present, accounts for 1.8% of global emissions, whereas its current share is around 1%. Conversely, the global share of CO2 emission of the state of Netherlands is 0.5%. From a factual standpoint, there is little to no dispute over the findings of climate science; the of biggest contributor to increased concentration of greenhouse gases (GHGs) in the atmosphere is the usage of fossil fuels for energy. Global warming has a multitude of different negative effects: from sea level rising and ice caps melting, to diminishing biodiversity, to volatile weather conditions, and the subsequent associated insecurity in food, housing, and energy – all of which affect the full enjoyment of individual rights and freedoms. The importance of limiting global warming is uncontested – proven by both parties in this case recognizing the indispensability of the 1.5˚C target set forth by the Paris Agreement and IPCC.
In April of 2019, Milieudefensie, as well as 7 other NGOs and 17 379 private individuals, started a lawsuit against Royal Dutch Shell seeking: (i) reduction of (net) 45% by 2030 compared to 2019; (ii) subsidiary reduction of 35% or (iii) reduction of 25% by 2030 compared to 2019. Plaintiffs argue that as Shell’s contribution to emissions is measurable and substantial, and therefore significantly contributes to the risk of harm to present and future generations’ interests, both in the Netherlands and abroad, it constitutes tortious behavior. They ground defendant’s liability on both violation of unwritten standard of care, both considered from the standpoint of 6:162 DCC, Dutch case law, and human rights.
The court confirmed standing interests of NGOs representing Dutch public interests (4.2.2.). The standing of ActionAid and individual claimants was declared inadmissible. In the case of ActionAid, as it did not meet the requirement of similar interests insofar as they serve the interest of the global population. In the case of individual citizens, as their interests are already served by the collective action. Despite arguments by RDS, the court has asserted the applicability of Dutch law as the interests served by the collective action are those of Dutch citizens (more precisely citizens in the Netherlands and Wadden region) and within the territory of the Dutch state.
The court concluded that RDS has an obligation of net 45% emissions reduction by 2030 compared to levels in 2019 (5.3). It derives said duty from the unwritten standard of care, as stated in 6:162 DCC, which entails that RDS has to exercise due care when creating group policy for Shell Group. It asserts that the full scope of the due care is considered by taking into account all relevant facts and circumstances of the case, the best available climate science, and broad international consensus on the protective effect of human rights against dangerous climate change. In the elaborate of the assessment (4.), the court asserts a few important remarks:
The result thereof being the obligation of RDS to reduce CO2 emissions by net 45% by the end of 2030, compared to 2019, based upon the IPCC’s scientific conclusion of the cruciality of the particular reduction pathway in preventing warming past 1.5˚C. The aforementioned obligation differs in regards to Shell Group and business relationships and consumers. In regards to the former, it has an obligation of result, meaning the net 45% emission reduction has to be achieved across the whole Shell Group and in regards to scope 1, 2, and 3 emissions by 2030. In regards to the latter, it only has obligation of conduct, meaning it has to take all necessary steps to prevent realization of the risks and to minimize any consequences.
The court determined that RDS acknowledges that RDS has policy in place, as well as that it is changing and adapting its policy. However, the court also concludes that the policy is vague, with weak wording of intent, non-binding, and with no emission reduction targets for 2030. Therefore, the current RDS’ policy does not preclude emission reduction obligations – even more so, the court asserts aptitude of the injunctive relief as the current state of affairs indicate imminent violation of the emission reduction obligation.
A few comments
The judgement by the District Court of Hague is unprecedent and showcases the development in legal thinking - regardless of the almost certain appeal by RDS.
Little needs to be said about the court reasoning in regards to collective action, choice of law, or choice of remedy. After all, the focal issue of this case is the applicable standard of care as the result of weighing of interests. As such it is dependent on the hierarchy on desirable values and important interest of the society and locality in question at that point in time.
The relief sought by the claimants implies current weighing of future interests. What are the dominant interests in 2030 can be somewhat assumed in 2021 due to the shortness of that time period. Moreover, the court acknowledges the existence of various interests globally, but limits its assessment to the interest of Dutch citizens. In this way, the court has successfully issued a reduction emission order without sacrificing legal certainty or opening its reasoning to questioning from the standpoint of the importance of interests globally.
Additionally, the court has justified the remission reduction target by both referring to the bigger importance of non-pecuniary interests, versus pecuniary interests, as well as asserting that same standard of care will apply to every other actor. In other words, the court has asserted responsibility of all, both public and private, for emission reduction.
The basic postulate of tort law is the duty to observe due care when engaging in potential harmful activities. In other words, the tortfeasor will be held liable for the damage he should have foresaw and could have mitigated. The yardstick of foreseeability is that of a reasonable man in similar circumstances. In this case specifically, the existence of duty of care was concluded by looking at facts (e.g., the effects of CO2 for the Netherlands or policy-making status of RDS), historical and present circumstances (e.g., knowledge on the linkage between emissions and global warming), science (e.g., outcomes of mitigation pathways), international law (e.g., the effect of UNGP or human rights), and legal doctrines (e.g., onerousness or proportionality of the reduction order).
RDS, although allegedly not in possession of any unique knowledge on climate change, knew enough to foresee the damage its emissions will cause or are likely to cause – as time went on, the certainty thereof grew firmer. In addition to that, RDS is the body that creates the general policy for the Shell Group – the policy which led to its share currently being around 1% of global emissions. Even more so, the policy has direct influence on the conduct of the Shell Group, as well as indirect influence on the business relations and consumers by determining energy packages that are offered. Consequently, the emissions facilitated by that policy can be linked to the temperature rise in the Netherlands which puts at risk life and of quality thereof of the inhabitants in the locality. Even though unlawfulness of the conduct is conspicuous, this is the first case in which a court has confirmed corporate duty of care for harm, or risk thereof, caused by climate change – thereby allowing it to assume its justful role in the development of contemporary legal doctrine.
Human rights effect
However, the reasoning on the contribution of human rights and intergovernmental treaties on the weighing of interests is somewhat less clear. Namely, legal certainty (partly) relies on the understanding of the delineation between powers and responsibilities of public and private entities, and different interests they uphold and represent. The underlying assumption is that the state, as the entity protecting public interests, will transpose and implement the obligations set in those treaties as it sees best fit for the citizens on its territory. This to say that the Paris Agreement, intergovernmental and/or human rights treaties are binding for the state by the virtue of its consent, created with intention to govern state conduct, and to engage with issues of public interest. Private entities might use those instruments to assert the state’s duty to act and protect their interests – as it was done in the Urgenda case.
Whilst elaborating the effect of human rights on the assessment of standard of care (4.4.9.) the court notes statements of the UNHR Committee and Special Rapporteur which conclude that the norms of human rights apply to climate change. Next, it deducts that from the UN Guiding Principles, OECD Guidelines, and other soft law instruments, corporations need to respect human rights, notwithstanding state human rights obligations, and actively prevent, mitigate and remedy violations thereof. Although the underlying meaning of the conclusion, which is that companies themselves can contribute to the harm of human rights, be it through their activities or business chains, makes sense morally, I cannot help but question its legal fortitude – especially in the face of legal certainty.
All this to say, in addition to dependence on the interests of a certain society at a certain point in time, law depends also on its wording. A pertinent example of this is the negotiation on the wording of Article 6 of the Paris Agreement which will be (again) discussed at COP26, six years after the Paris Agreement was signed into force. In that same vein, soft law instruments, such as the UN Guiding Principles, are equally as susceptible to the wording of their substance. Wording can be explicit, openly stating they do not create legal obligations, or implicit, by use of certain words or syntaxes. Therefore, a legal obligation is enfeebled if it is construed upon legal instruments that have intentionally and explicitly renounced their legally binding character; be it for the reasons of avoiding additional duties for the addressees, or of avoiding threading into the domain of public interests and states’ powers. Building on that, renouncing the importance of wording, which is the main mean by which law regulates and obliges, undermines legal certainty. This, however, does not preclude the wording of intergovernmental treaties to lend meaning to national standards of due care – within the confines of the substance of the words used.
Lastly, the UN Sustainable Development Goals are indeed coherent with the goal of the Paris Agreement. There is no denying that the issues the mentioned instruments deal with are intertwined. However, unless corporate culture and doctrine of profit maximization change, it is hard to see how the communities in direst of needs will not be affected.
Whilst the progressive thinking of the court is remarkable, as well as its dedication to the protection of human rights and interests derived therefrom, the concrete effect of this decision on the international community is yet to be seen. With that said, the lack of perfection does not diminish the significance of the decision; not only has it opened the doors of the legal arena to corporate climate liability, but has also invited climate justice to the table – and just in the nick of time.
Iva Lea Aurer, Research associate,
Vrije Universiteit Amsterdam, Faculty of Law