902: Dutch case turns climate change ratchet

Today’s entry reports on a Dutch case that could have implications for infrastructure projects here.

On Wednesday 26 May 2021 the Hague District Court issued a judgment in a case brought by Milieudefensie, the Dutch equivalent of Friends of the Earth, against Royal Dutch Shell, parent company of the Shell group. Essentially Milieudefensie won, and Shell now has to comply with the national target of a 45% reduction in CO2 emissions by 2030 as an individual company. The judgment can be found here (it may look as if it’s going to be in Dutch, but it is in English).

How did a court manage to carry a national government obligation over to a private company, given human rights only apply to emanations of the state? TL;DR: the court uses tort and the UN Guiding Principles to ascribe human rights obligations to Shell and decides it must match the IPCC limit it declared in its 2018 report.

Details

The court first decided (secton 4.2 of the judgment) that the issue was justiciable (ie capable of being decided by a court), although only by six of the claimants – the claims of 17,379 individual claimants were dismissed. One of the six was the National Association for the Conservation of the Waddenzee, which EU law specialists will recognise as the successful claimant in the 2003 ‘Waddenzee’ case, one of the leading habitats cases, so they have some previous.

The applicable law (section 4.3) was then held to be Dutch law, based on ‘Rome II‘, the EU regulation about where claims, including environmental ones, may be brought. This was even though the emissions occur worldwide. Shell tried to argue that their parent company was only setting policies, not causing the damage, but that didn’t wash.

The next and by far the longest section (4.4) deals with Shell’s obligations. The court concluded that Shell’s obligation to reduce emissions arises from ‘the unwritten standard of care laid down in Book 6 Section 162 Dutch Civil Code. Putting aside how a written code can contain an unwritten standard, this is what lawyers know as tort – where there is no contract between two parties but one can be found to have wronged the other and have to pay damages. Tort does exist in the UK (it is called delict in Scotland).

The court then uses the UN Guiding Principles to interpret the duty of care and conclude that businesses must respect human rights as well as states. ‘This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved’ (4.4.15). The court says that this may depend on the severity of the enterprise’s adverse human rights impacts, so large companies in emission-intensive businesses are likely to be in the most trouble under this interpretation.

But smaller companies shouldn’t breathe a sigh of relief. The judgment then says that the responsiblity extends to Shell’s supply chain and end-users, so-called ‘Scope 3 emissions‘ (4.4.18). It cites a 2020 report by the University of Oxford to support this, although it concludes that for Scope 3 this is only a ‘best-efforts’ obligation (4.4.24).

Finally, the court decides what obligation should be imposed on Shell. It notes there is no well-defined specification for what a company should be required to do. It bases its conclusion that it should be a 45% reduction from 2010 levels by 2030 not on the Dutch national target, which that is, but on the Intergovernmental Panel on Climate Change (IPCC) 2018 report (SR15) from which it is derived. The court did settle on a net reduction (ie being able to offset positive emissions with negative ones) rather than the absolute one the claimants were calling for.

Shell have said they will appeal. Like the UK, they have a Court of Appeal and a Supreme Court. Shell had to pay fees and Milieudefensie’s costs but these were capped at a mere €22,732.

Analysis

Could this judgment extend to other companies? At the moment it only applies to Shell, it doesn’t automatically carry over and would need further challenges or legislation. The judgment was particularly focused on the scale of Shell’s emissions, and so it could easily be applied to other large emitters; small ones less so. However, Shell’s supply chain and end-users were also captured, so the tentacles of the obligation could reach down to many smaller companies even without further challenges.

Could this happen in other countries, including the UK? Friends of the Earth are certainly encouraging similar challenges to be launched in other countries, and it is certain that there will be more of them. Will they succeed? In England and Wales, for example, tort exists but I have not seen a court carry human rights obligations over to private companies yet, whether in reliance of the UN General Principles or otherwise, so unless I’ve missed something that would be new. Not being in the EU isn’t particularly relevant.

Could this affect infrastructure projects? The private company human rights argument doesn’t arise because it is the decision of the Secretary of State that gets challenged, so it is already a state decision. However, the usual argument that no one project should be singled out for its carbon impacts as it is for government policy to deal with may now be weaker, since if a single highly emitting company can be singled out, in the Netherlands at least, so why not a single highly emitting project?

Whatever the implications of this case, it is another sign of the climate change ratchet continuing to tighten. In related news, an Australian court decided the environment minister owes a duty of care not to injure young people through allowing climate change, although stopped short of ordering the refusal of the project in question, a coal mine extension – she could still refuse it voluntarily.