In arguably the most significant climate change judgment yet, a Dutch District Court at the Hague ordered Royal Dutch Shell PLC (Shell) to start reducing its Carbon Dioxide (CO2) emissions by 45% by 2030. The Court found that due to the serious threats and risks to the human rights of Dutch residents, private companies such as Shell may also be required to take drastic measures and make financial sacrifices to limit CO2 emissions to prevent dangerous climate change.

Background

The class action lawsuit was filed in April 2019 by seven (7) activist groups (Plaintiffs) on behalf of 17,379 Dutch citizens claiming that Shell's business model "endangers human rights and lives" and poses a threat to the goals set out in the Paris Agreement. The Plaintiffs alleged that Shell ought to be accountable for its current policy as well as conformity with the climate targets under the Paris Agreement. The Plaintiffs' sought for, amongst others, a declaration that:

  • Shell must reduce its emissions, both directly and via the companies and legal entities it commonly includes in its consolidated annual accounts and with which it jointly forms the Shell group; and
  • Shell's reduction obligation must be achieved relative to the emissions level of the Shell group in the year 2019 and in accordance with the global temperature target of the Paris Agreement, as well as in accordance with the related best available United Nations (UN) climate science.

In Defence, Shell argued that the Plaintiffs' claims were unfounded as the Plaintiffs have no legal basis to bring the action. Shell further argued that the Plaintiffs' claims require decisions which would go beyond the authority and jurisdiction of the Court, and that the remedies sought should instead come from the legislature.

Dutch Court's Judgment

The Dutch Court ultimately agreed with the Plaintiffs and found that Shell is obliged to reduce CO2 emissions by net 45% by 2030, consequently, requiring Shell (directly and indirectly through its affiliates) to accelerate their existing emissions reduction efforts to achieve the reduction obligation.

In coming to the decision, the Dutch Court held that pursuant to the Dutch Civil Code, Shell has an unwritten duty of care to the society to take adequate actions to limit contributions to climate change, even as a private company. The Court considers that the CO2 emissions for which Shell can be held responsible for pose a very serious threat, with a high risk of damage to Dutch residents with serious human rights impacts. The compelling common interest that is served by complying with the reduction obligation outweighs the negative consequences to the commercial interests of Shell, which are served by an unbridled preservation or even increase of CO2-generating activities.

Commentary

Global efforts in combating climate change can be seen with the cominginto-force of the Paris Agreement in 2016. Its central purpose is to strengthen the global response to the threat of climate change, with a goal of keeping global temperature increase to well below 2 degrees above preindustrial levels. To date, 194 nations have ratified the treaty including Malaysia.

The significance of this case is that it could prove to be the start of legal actions against energy companies around the world, as well as companies with significant CO2 emission levels. The Dutch Court in this case found that private companies may also have concrete obligations to help meet targets under the Paris Agreement – setting an example where the actual actors rather than state actors can be held accountable for climate change, having regard to international treaties.

Whilst Shell has announced its intention to appeal the judgment, it would be interesting to see if Courts in other jurisdictions would adopt a similar approach. In the meantime, private companies around the world, especially those registered in the Netherlands, should revisit their company policies to ascertain whether it complies with global climate policies as compliance with local laws may no longer suffice.

Footnote

1. Marco has significant experience in advising and representing local and international clients as well as state authorities concerning regulatory compliance to environmental transgressions. Prior to commencing legal practice, Marco was attached with the Ministry of Science, Technology and Innovation (formerly known as the Ministry of Environment, Science Technology, Energy and Climate Change) where he worked closely with the Federal Minister on public policy.

Originally published 04 June 2021

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