A Shell logo is seen at a gas station in Buenos Aires, March 2018. Photo: Reuters/Marcos Brindicci
In a landmark ruling rendered last week, a Dutch court ordered the Royal Dutch Corporation, and all other entities jointly forming the Shell group, to cut their carbon dioxide emissions by a net 45% by the end of 2030, compared to 2019 levels.
The verdict resulted from a public interest lawsuit brought by a group of environmental NGOs, led by the Netherlands-based Friends of the Earth (Milieudefensie). They claimed violations of domestic and international law governing climate change and human rights.
The decision will undoubtedly go into the annals of history and set a precedent for climate change litigation worldwide, demanding accountability from both state and non-state actors vis-à-vis their climate actions.
While the Dutch Supreme Court recently adjudicated on state liability in the Urgenda case against the Netherlands, the Shell verdict is the first time a multinational corporation was found liable for deficient climate policy. Although the case was fought in the background of an “imminent environmental damage” caused to the residents of a specific region in the Netherlands, the decision has broader implications for the international community in terms of the regulatory and policy frameworks of climate change.
The case also demonstrates the growing importance of domestic courts in addressing more significant global environmental governance issues.
Climate science, human rights and soft law
At the outset, it’s essential that Shell had not (yet) acted manifestly to damage the environment in this case. However, its corporate policy was found to be in breach of the applicable laws. Apart from the procedural and substantive questions on admissibility and applicable law, which essentially revolved around the Dutch civil code and conflict of laws, the decision drew significantly on the best available climate science and the relevant international conventions.
Rejecting Shell’s fundamental argument that a “mere adoption of a corporate policy does not cause any damage” as a narrow approach, the court held that an unsound policy might be seen as an “event giving rise to the damage”. An unwritten principle of duty of care found in Dutch law was pivotal for the court to reach this conclusion.
Nevertheless, the court also banked on pertinent international treaties on climate change and human rights law to interpret the standard of care. Specifically, the Paris Agreement aims to limit global warming to well below 2º C, preferably to 1.5º C, compared to pre-industrial levels. To achieve this, the agreement requires countries to drastically reduce their greenhouse gas emissions.
Even though the agreement doesn’t legally bind the corporations, the court made Shell directly responsible by endorsing the universal status of the Paris Agreement. According to the court, private enterprises’ adherence to the agreement is indispensable to achieve the dream of a carbon-neutral world by the end of the century.
Further, from a human-rights standpoint, and of the European Convention on Human Rights in particular, the court observed that the company has an indirect responsibility to sustain the standard of care. While the application of international law is not unusual in domestic litigation, it is perhaps the first time a court has accorded such importance to non-binding soft law standards.
The Hague court remarkably implemented some pertinent instruments like the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. In order to make the final assessment of how much emissions the company should reduce, the court also referred to various reports of the Intergovernmental Panel on Climate Change.
Domestic courts and global governance
International adjudication is a critical component of global governance. Numerous courts and tribunals exist at the global and regional levels, to deal with legal problems ranging from trade and investment to human rights violations. However, sadly, there are no such means of dispute resolution for environmental issues. It means the only available recourse is domestic courts, located in places where the events giving rise to the environmental damage occur.
Except for the rulings of the Dutch courts implicating the liability of public and private actors, few others have adjudicated on climate problems of universal import. But despite the scant jurisprudence, a judicial dialogue is clearly emerging where courts have relied on judgements from other jurisdictions. This is evident from at least two recent rulings: of an environmental court in New South Wales and a German constitutional court. Here, the judges based their reasoning mainly on the Dutch decision in the Urgenda case.
The writing on the wall is clear: In the light of a growing gap between climate commitments and the projected fossil-fuel production of countries, domestic courts must align their judicial policy with the global climate policy to hold multinationals accountable.
A similar development transpired in a (geographically) distant court – coincidentally on the day before the Hague court pronounced its verdict against Shell. An Australian federal court found that the Australian minister for the environment owes a duty of care to the country’s young people and must protect them from the worst of climate change. While deciding this case, brought by a group of students against the minister’s approval for a coal mine project, the court reproduced previous interpretations on the duty of care by the Dutch courts.
In addition, activist hedge funds have already started pushing Big Oil players Chevron and Exxon Mobil to adopt more legitimate and measurable pro-climate practices.
The possibility of establishing direct responsibility on the part of non-state actors, along the lines of state responsibility, to protect the environment is a clear signal to both government and corporate polluters across the globe. In all probability, more business enterprises will face similar trials in the coming months.
We can’t brush aside the chances of India Inc. defending such claims either, given the questionable activities and greenwashing tactics that many Indian businesses pursue. Though the Shell group has already announced its intention to appeal, the ruling is unlikely to be annulled thanks to the Netherlands’ Supreme Court stand on the responsibility to protect the environment.
In the meantime, let’s celebrate this win as not just for environmentalists but for science, for policy and the international (soft) laws governing climate change.
Harisankar K. Sathyapalan is an assistant professor of law at the Cochin University of Science and Technology and a research fellow with the Centre for Public Policy Research, Kochi. He tweets at @SankarHari. The views here are the author’s own.