Shell ordered to reduce CO2 emissions

On the 26th of May, the Dutch Court of The Hague (the Court) rendered a landmark judgment in a climate change case between a group of several Dutch NGOs and more than 17,000 individual co-claimants (Milieudefensie) and Royal Dutch Shell (RDS). The Court ordered RDS to reduce the CO2 emissions of the Shell group by net 45% in 2030 compared to 2019 levels through the Shell group's corporate policy.

In April 2019, Milieudefensie filed a case against RDS requesting a declaratory decision that RDS acts unlawfully towards Milieudefensie if it fails to reduce or cause to reduce the aggregate annual volume of all CO2 emissions of the Shell group by 45% (relative to 2019 levels) before 2030. Milieudefensie claimed that RDS has an obligation, following from an unwritten standard of care, to contribute to the prevention of dangerous climate change through the corporate policy it determines for the Shell group. In interpreting this standard of care, Milieudefensie relied upon principles of Dutch tort law, human rights, specifically the right to life and the right to respect for private and family life, as well as soft law endorsed by RDS, such as the UN Guiding Principles on Business and Human Rights, the UN Global Compact and the OECD Guidelines for Multinational Enterprises.

RDS is likely to appeal, however the Court has ordered its judgment to be provisionally enforceable, meaning the order to reduce is effective even during the appeal.

We set out the key take-aways of this landmark judgment below.

Collective action

The claimants filed their claim as a collective claim in the general interest under Article 3:305a Dutch Civil Code. A requirement for a foundation or association to file such a collective claim is that the class action is aimed to protect similar interests. According to the Court, the interests of current and future generations of the world’s population cannot be bundled in a class action. Although the entire world population is served by curbing dangerous climate change, there are huge differences in the time and manner in which the global population at various locations will be affected by global warming caused by CO2 emissions.

However, the Court does conclude that the interests of current and future generations of Dutch residents and the inhabitants of the Wadden Sea area (“Dutch residents”) are suitable for bundling in a class action. Even though there will be differences in time, extent and intensity to which Dutch residents will be affected by climate change caused by CO2 emissions, these differences are much smaller and of a different nature than when it concerns those of the entire global population.

Applicable law

Milieudefensie successfully argued that Dutch law was applicable within the meaning of Article 7 Rome II. RDS’ adoption of the corporate policy of the Shell group constitutes an independent event that may contribute to (imminent) environmental damage with of Dutch residents. Although Article 7 Rome II refers to an ‘event giving rise to the damage’, i.e. singular, it leaves room for situations in which multiple events giving rise to the damage in multiple countries can be identified, as is characteristic of environmental damage and imminent environmental damage.

RDS’ breach of a (unwritten) standard of care

RDS’ reduction obligation arises from the unwritten standard of care laid down in Article 162 of Book 6 of the Dutch Civil Code. This means that acting in conflict with what is “generally accepted” (according to unwritten law) is unlawful.

In its interpretation of this unwritten standard of care, the Court factored in human rights and the values they embody, such as the rights protected by the European Convention on Human Rights (ECHR) and ICCPR which apply in relationships between States and citizens. The Court recognised that Milieudefensie cannot directly invoke these human rights with respect to RDS but, due to the fundamental interest of human rights and the value for society as a whole they embody, the Court factored them into the interpretation of the unwritten standard of care.

The Court concluded that it follows from the Urgenda judgment of the Dutch Supreme Court that Articles 2 and 8 ECHR offer protection against the consequences of dangerous climate change due to CO2 emissions induced global warming.[1] The serious and irreversible consequences of dangerous climate change in the Netherlands pose a threat to the human rights of Dutch residents.

The Court also followed the UN Guiding Principles (UNGP) in its interpretation of the unwritten standard of care. The UNGP are in line with the content of other, widely accepted soft law instruments. Since 2011, the European Commission has expected European businesses to meet their responsibilities to respect human rights, as formulated in the UNGP. For this reason, the Court concluded that the UNGP are suitable as a guideline in the interpretation of the unwritten standard of care. Due to the universally endorsed content of the UNGP, the Court considered it irrelevant whether or not RDS has committed itself to the UNGP, although RDS does state on its website that it supports the UNGP.

The responsibility of business enterprises to respect human rights, as formulated in the UNGP, is a global standard of expected conduct for all business enterprises wherever they operate. It exists independently of States’ abilities and/or willingness to fulfil their own human rights obligations, and does not diminish those obligations. It exists over and above compliance with national laws and regulations protecting human rights. Therefore, it is not enough for companies to monitor developments and follow the measures States take; they have an individual responsibility. This includes the human rights enshrined in the ICCPR as well as other ‘internationally recognized human rights’, including the ECHR and the OECD guidelines.

RDS’ obligation to decrease its emissions

The Court was of the opinion that much may be expected of RDS. In formulating the corporate policy of the Shell group, RDS should take as a guideline that the Shell group’s CO2 emissions in 2030 must be net 45% lower relative to 2019 levels. RDS is free to choose its particular reduction pathway and differentiating as it sees fit. This is an obligation of results for emissions connected to activities of the Shell group because of the far-reaching control and influence of RDS over the Shell group. With respect to the business relations of the Shell group, including the end-users, this constitutes a significant best-efforts obligation, in which context RDS may be expected to take the necessary steps to remove or prevent the serious risks ensuing from the CO2 emissions generated by them, and to use its influence to limit any lasting consequences as much as possible. A consequence of this significant obligation may be that RDS will forgo new investments in the extraction of fossil fuels and/or will limit its production of fossil resources.

Conclusion and implications

Milieudefensie’s successful claim seems a bold next step in recent climate-related Dutch litigation. This judgment follows the recent Dutch Supreme Court's groundbreaking decision in Urgenda, in which it held that the Dutch State has a positive obligation under the ECHR to reduce emissions of greenhouse gasses by at least 25% by the end of 2020 measured against 1990.

A notable difference between the Urgenda case and Milieudefensie’s recent win is that the Court has now held that human rights are no longer the prerogative of proceedings between States and citizens. The fact that, in its interpretation of the unwritten standard of care, the Court relies on human rights with reference to soft law is a first in so-called “horizontal cases” (proceedings between non-state actors).

More importantly, it formulates an individual responsibility for business to comply with soft law principles, regardless of States’ abilities and/or willingness to fulfil their own human rights obligation. It now is no longer enough for companies to monitor developments and follow the measures States take; they have an individual responsibility which transcends compliance with national laws and regulations protecting human rights.

Footnotes

[1] Supreme Court 20 December 2019, ECLI:NL:HR:2019:2006.