Presentation Prof. Dr Jaap Spier, BIICL, London, 29 June 2022

Introduction

NGO Milieudefensie et al. sought injunctive relief that Royal Dutch Shell (since it moved its head-office to London Shell) must reduce the scope 1-3 GHG emissions of all companies belonging to the Shell group by at least 45% in 2030 compared to 2019.

The District Court of the Hague issued a slightly softened relief. Shell has to reduce the scope 1 emissions of the entire group of companies, as sought. It has a “significant best efforts” obligation to reduce the scope 2 and 3 emissions of the entire group by at least net 45% in 2030 compared to 2019. The final part of the judgment does not refer to a “significant best efforts” obligation, but it follows from the judgment, read in its entirety, that this was meant. The judgment does not shed light on the meaning of “significant best efforts”.

The lengthy judgment is based on the standard of care emanating from the key provision of Dutch tort law, a blanket norm. According to the Court, the standard of care is determined by the impact of climate change on Dutch residents. The Court emphasises that its interpretation of the unwritten standard of care includes – among other issues – the following factors:

  • the policy-setting position of the parent company
  • the right to life and the right to respect private and family life of Dutch residents
  • the UN Guiding Principles
  • the parent company’s influence of the CO2 emissions of the Shell group and its business relations
  • what is needed to prevent dangerous climate change
  • possible reduction pathways
  • the twin challenge of curbing dangerous climate change and meeting the growing global population energy demand
  • the effectiveness of the reduction obligation
  • the responsibility of states and society
  • the onerousness for the Shell group to meet the reduction obligation
  • the proportionality of Shell’s reduction obligation
  • the policy, policy intentions and ambitions of the Shell group

Shell has lodged an appeal. Its statement of appeal is available on the internet.

A ground-breaking judgment

The judgment is courageous and ground-breaking. To me, the scope 1 obligation is convincing. The same goes, by and large, for the scope 2 obligation, defined as

“indirect emissions from third-party sources from which the organization has purchased or acquired electricity, steam, or heating for its operations”.

The scope 3 obligation is far less self-explanatory. The judgment does not mention any truly convincing argument for such a far-reaching obligation. That does not necessarily mean that the judgment is mistaken. The blanket norm of Dutch tort law, the open and vague “norms” of soft law and the urgency to reduce global emissions allow for the Court’s interpretation.

I don’t dare to speculate about the prospects of the appeal. Seeing the still increasing global emissions and the increasingly alarming IPCC reports, I would be surprised if the scope 1 and 2 part will be reversed. The IPCC reports could also stimulate the Court of Appeal to confirm the scope 3 obligation. Depending on the shortage of fossil fuels, due to the war in the Ukraine and – God forbid – possible other wars at the time of the judgment in appeal, a scope-3 victory for Shell does not seem unlikely, I think.

Lessons to be learned

Too much focus on this case

The debate predominantly focusses on the question whether the appeal stands a fair chance of success (whether the judgment is “right”). To me, that is the wrong question. Let me explain why

  • the increasingly alarming IPCC reports
  • the ever more and more serious natural catastrophes at a stage global temperature has increased by approximately 1.1C
  • global emissions are still rising
  • the ill-considered/informed debate about 2050. In any realistic scenario, we don’t have 30 more years. Hence, it is irresponsible to bet on net zero by 2050
  • even net zero by 2050/1.5C is unrealistic, seeing
  1. the vague zero-trajectories offered by many States and enterprises
  2. China pledges net zero emissions by 2060, India by 2070
  3. the political situation in f.i. US and Brazil
  4. a not unlikely swing to the extreme right caused by the war in the Ukraine; those people don’t believe in climate change
  • It would be against the odds if politicians are going to agree on sufficient and enforceable legal instruments. That may happen at some stage, but the coming years are vital

Whether we like it or not, litigation is unavoidable

Hence, it should not come as a surprise that NGOs and developing countries feel an urgent need to take action. We may, or may not, appreciate every single case, but what else could they do?

I don’t deny that far-reaching judgments may be unfair to specific defendants. But opinions diverge on what is unfair. Developing countries and people living in those countries, bereft of any luxury, quite often even of basic amenities of life, do not care about less luxury in our part of the world. The same may well go for their courts.

No debate about climate obligations

As a matter of fact key players do not show the slightest interest to discern their legal obligations. That goes for States, enterprises, investors and auditors. That unavoidably means: they cannot comply with their obligations. They do not want to either.

An international group of experts has taken up the gauntlet. We’ve drafted the Principles on climate obligations of enterprises (and years earlier of States, both available at no cost on the internet). The former Principles are endorsed by 90 eminent lawyers. Top experts kindly wrote supportive prefaces. The “real world” does not show any interest. They don’t want to learn their obligations. Although I still believe that our Principles are more balanced than most judgments, my goal is not to promote them. My point is: we must make the debate concrete. If those at the wheel stick to ignorance or leaning backwards, the sword of the law has to bring them to their senses.

With notable exceptions, the legal debate and, to the extent I can judge, legal opinions, also hinge upon shortcomings, misunderstandings and lack of expertise

  • the 2050 paradigm
  • unwillingness to enter into meaningful discussions about the obligations of key players
  • lack of understanding how the law works
  • a focus on the courts of the country where their clients are based.

Litigation before multiple courts

GHG emissions in, say, the UK have a global impact. Hence, it is likely that English enterprises can be sued before multiple courts. Some courts in other countries may want to abstain if an English enterprise is sued before them, much more likely than not other courts will be keen to judge cases on their merits. That means: even if a victory in the UK can be taken for granted, the prospects may be very different in other countries. Particularly so in countries disproportionally impaired by climate change, as some Asian and Latin American judgments illustrate.

I’m not suggesting that foreign courts should be willing to adjudicate scope 3 emissions of a group of companies not based in the relevant country. Strikingly, even after it had moved its head office to the UK – its seat was already in the UK – Shell did not challenge that the full case can be decided by a Dutch court (not the only mistake they’ve made, I think).

Concrete debate required

Because enterprises can be sued before multiple courts, they would be best served to explore global obligations. Not doing so may come at a high price

  • enterprises may, and likely will, be treated on unexpectedly far-reaching judgments, requiring swift and costly measures, potentially also to remedy shortcomings in the past. The only questions are: how far-reaching and which courts are going to grant such relief?
  • they may face liability, also of their directors and officers, if it turns out that they did not comply with their obligations.

As to liability: I strongly believe that the floodgates must be kept shut. Seeing that few enterprises take sufficient action and don’t care about their obligations, it is quite a step to leave vulnerable countries and vulnerable people living in those countries empty-handed. I can only hope that crushing liability will be avoided, but I would be surprised if all claims are doomed to founder.

Defenses unconvincing

Criticasters will answer:

  • these are political issues. My answer is: certainly, in an ideal world. But we don’t live in such a world. It is irresponsible to wait for political action that will come too late. We know perfectly well that it will come too late. Nevertheless, some courts will buy the argument, others won’t.
  • all we have to do is comply with “the Paris Agreement” (PA). To many that means: keeping global warming at 2C and net zero by 2050. Neither of the two is part of the PA. The PA does not contain obligations of enterprises. Even if it were different, when the planet is in flames and the fortunes of nature and future generations are in peril, one cannot avoid to sacrifice legal doctrine for the common good.

Summary

My sobering message can be summarised as follows:

Cave canem. Beware of the dog. As long as society basically opts for a sit-and-wait- position, the real dogs are climate change and our lethargy, not litigation; even not if it ends up in overly bold judgments. The deadlock must be overcome. That requires swift and bold action.