Climate change liability is always upon the State considering that the citizens have a right in rem to a clean environment. Although with the advent of industry and technology in the modern world, multinational and private corporations do play a cardinal role in global climate change through carbon emission and toxic sewage outlets into water bodies. These corporations evade their liability by not ratifying environmental and human rights treaties. This concept has been completely reversed by the revolutionary judgment of the District Court of Hague in the case of Milieudefensie v. Shell. The Court mainly highlighted three cardinal rationales behind its judgment. The unwritten duty of care was one of the riveting aspects stated by the Court which determined the corporations do have a duty of care according to the Dutch Civil Code even when not assented to international treaties. Few other ‘soft laws’ were also referred to, to imply that corporates shall take necessary precautions to prevent interventions of human rights laws. Thereafter, the Court also dredged that Shell’s activities were in direct connection with the threatened occurrence of climate change. Furthermore, the Court opined that private companies do have individual responsibility in emission reduction and that any contravention would hold them accountable irrespective of their accession to treaties. The applicability of the suit arose from Article 7 of the Rome II Regulation which is in consonance to non-contractual obligation arises out of environmental damage and also that the interests of current and future generations of Dutch residents were at stake. With the alarming rise in temperature within the Earth’s atmosphere, private corporations would not be able to dodge their basic liability to protect human rights and abide by environmental law standards.
Introduction
Multinational Corporations and Private Companies play a pivotal role in the sustenance of climate change globally but often they waive their liabilities by not acceding to International environmental and human rights treaties. The District Court of Hague on May 26, 2021, held that all companies have their personal legal responsibility to prevent and mitigate dangerous repercussions on climate change which is likely to become a landmark decision for climate change claimants. By virtue of this ruling, it can be sought that mere treaties do not exclude them from a duty to adhere to basic human rights, and thus, Royal Dutch Shell was required to diminish the aggregate annual value of CO2 emissions into the atmosphere by 45% net in 2030 compared to 2019 levels that resulted from all business operations and sold energy-carrying products of Shell group. [1]
Since the 1980s, a momentous fraction of greenhouse gases that have been emitted into the atmosphere can be traced back to 25 companies called the ‘Carbon Majors’[2]. The primary issue in the case Milieudefensie v. Shell revolves around the fact that Shell alone is responsible for 1.8% of all anthropogenic CO2 emissions and currently is accountable for 1% of yearly global emissions which is double that of Netherlands through their business activities and products causing havoc change in climatic conditions.
Contentions of the Parties in the Suit
Shell was summoned[3] by Milieudefensie (Friends of the Earth, Netherlands) and the co-plaintiffs in April 2019 which stated Shell’s contribution to the drastic climate change in violation of its duty to care under the Dutch Civil Law and Articles 2 and 8 of the European Convention of Human Rights (ECHR). Milieudefensie argued that the company has a strong moral liability to protect human rights even though it is not a Contracting Party to the ECHR. The Plaintiffs also extend the argument to the Paris Agreement’s goals and scientific evidence relating to the dangers of climatic change. Shell’s primary contention involved that it is a private company that is not bound by the clauses of international conventions and treaties and thus is not obliged to act in a manner to mitigate the impact on the environment which indirectly hampers the human rights of the Dutch citizens.
Climate Urgency w.r.t. Scope I, II and III Emissions from Private Companies
The Court highlighted the necessity of capping the greenhouse gas emissions and in doing so there have been references made to the reports of the Intergovernmental Panel on Climate Change (IPCC) and United Nations Environmental Programme (UNEP). It is because the Court inherently visualized a plausible threat on the Netherlands and the Wadden Sea Islands which may be subject to lethal and irreversible climate change and the connected risks of health to the Dutch citizens and Dutch-Wadden region citizens. The ‘emission gap’ as described by UNEP was also inculcated in the order which requires the parties acceding to the Paris Agreement[4] to limit global warming to 1.5˚C or 2˚C. Citing these reasons, the Court found it fundamental to mitigate the components of climate change.
Shell’s emissions can be segregated into three scopes mainly, based on the Protocol of World Resources Institute Greenhouse Gas[5]. Scope I emissions emerge from Shell-owned or controlled facilities. The Scope II emissions originate from third-party facilities from which Shell purchases electricity, power, or energy for its business activities. The residual ones are considered as the Scope III emissions which result from Shell’s operations caused by greenhouse gas sources owned and controlled by third parties.
Shell argued in its petition that it has no control over the Scope III emissions as it emerges from ‘end users’ and such cannot be attributed to the company. The Court dismissed this argument in its ruling stating that this responsibility is a ‘performance obligation’ for the Shell Group and for the emissions that fall under the ambit of Scope III, is subject to significant best efforts obligations. With this order, the District Court of Hague embarks the responsibility upon the private companies to reduce their Scope II emissions. It is significant in this respect that within the European Union only Scope I emissions are included, for example, emissions of fossil fuels extracted in one state but used in another state are not attributed to the exporting state. It was also concluded that the standard of care included the need for companies to take responsibility for Scope III emissions especially “where these emissions form the majority of a company’s CO2 emissions, as is the case for companies that produce and sell fossil fuels.” Therefore, the Court underlines the legal distinction that must be made between the allocation of Scope I, II, and III emissions but that does not diminish Shell’s obligation for Scope II and III emissions.
Standing & Applicability of the Suit
To ascertain the standing of the case, the Court found that the “common interest of preventing dangerous climate change by reducing CO2 emissions can be protected in a class action“, but held that the “interests of current and future generations of the world’s population … is not suitable” for a class action under Dutch law. However, the court also found that the interests of current and future generations of Dutch residents were sufficiently similar to be served by a class action because climate change will affect all Dutch residents similarly. Therefore, it was declared that one of the co-plaintiffs, Action Aid, who primarily works on activities relating to developing nations, lacked standing, as did the 17,000 Dutch (citizens) plaintiffs whose interests were already served by the action brought to the Court. The remaining Plaintiffs were permitted to proceed with the suit with their claims as they inclined towards the interests of current and future generations of Dutch residents.
The applicability of the suit arises from Article 7 of the Rome II Regulation[6]. It makes it compelling to choose Dutch Law as the applicable law to the suit. Article 7 of the Rome II Regulation provides that where a non-contractual obligation arises out of environmental damage, the claimant may choose to base its claim on the law of the country in which the “event giving rise to the damage occurred”. Shell maintained that the mere adoption of its corporate policy did not give rise to damage to the environment. Rather, CO2 emissions caused the damage, meaning that claims must be based on the law of each jurisdiction in which CO2 emissions occurred. The court held that Shell’s interpretation of Article 7 was too narrow. The corporate policy adopted by Shell constituted an “independent clause” of environmental damage and, as such, Dutch law is the applicable law.
Unwritten Duty of Care
The most riveting aspect of the District Court’s order was in determining Shell’s unwritten duty of care. Although Shell is not an acceding party to the European Convention on Human Rights (ECHR)[7] and International Covenant on Civil and Political Rights (ICCPR)[8] but the human rights provisions from these conventions are applicable in ascertaining the company’s duty of care. Book 6, Section 162 of the Dutch Civil Code implies a duty of care and not to act in conflict with customary rules and also to take steps to prevent dangerous climate change. Article 2 (Right to life) and Article 8 (Right to respect for private and family life, home, and correspondence). The ECHR has been given indirect horizontal effect on a grand scale through open standards of private law, such as the social standard of care[9] and this also colors the duty of care that private individuals and legal entities have towards each other.
As the provisions could not be invoked directly, the Court implied that it would, therefore “factor in the human rights and the values they embody in its interpretation of the unwritten standard of care”. The Court also advances into interpreting several ‘soft laws’ such as the United Nations Guiding Principles on Business and Human Rights[10] and OECD Guidelines for Multinational Enterprise[11] and deduced that it is an internationally accepted concept that companies must adhere to human rights laws which implies that they should take necessary precautions to mitigate and further prevent acts that would contravene human rights laws. The UNGP is non-binding, but as an authoritative and internationally endorsed soft law instrument, the court considered it suitable as a guideline for interpreting the unwritten standard of care.
Causal Connection between Shell’s Action and the Threatened Occurrence of Climate Change
The District Court of Hague echoed the successful arguments of the Urgenda v. Netherlands Judgement[12] as stated by the Dutch Supreme Court because it provided the concept of individual partial responsibility to contribute in curbing the drastic changes in climate change as much as possible. This stance has been taken because of the compelling heed that comes with the responsibility that each emission reduction results in a determinate change in the global carbon budget. The difficulty that arises in ascertaining a causal link is the reason that it has been bypassed under the ‘application of fair share approach’ as defined by the Dutch Supreme Court in the case of Luciano Lliuya v. RWE AG.[13] A striking difference with this German climate change litigation, however, is that the ruling of the District Court relates to Shell’s general climate policy while the former case relates to RWE’s contribution to the melting of the glacier near Huarez, Peru, and the costs of the protective measures that the claimant wants to take due to the threat it poses.
Accountability of Private Companies
The other prominent aspect of the Court’s decision was with regards to Shell’s responsibility as a private entity to mitigate the drastic climate changes. It was stated that:
“..Due to the compelling interests which are served with the reduction obligation, [Shell] must do its part with respect to the emissions over it has control and influence. It is an individual responsibility that falls on [Shell], of which much may be expected …… therefore; [Shell] must do more than monitoring developments in society and comply with the regulations in the countries where the Shell group operates.”
Despite being non-binding as against Shell, the goals of the Paris Agreement, namely that global warming must be kept well below 2°C compared to pre-industrial levels, were relevant to determining the extent of Shell’s CO2 emissions ‘reduction obligation’. While distinguishing between the emissions of Shell group concerning the wider group of entities within Shell’s business network, including end-users, namely the Scope III emissions, it could be deduced that Shell bore a higher degree of responsibility than the latter which thus decreased the standard of Shell’s obligation to ‘significant best efforts’.
The Court believes that a private company has to take up a wide variety of measures and because of the pecuniary relatives it attracts; this does not make the reduction obligation disproportionate. Hence, due to the hefty dangers which may potentially arise because of climate change, it is a compulsory responsibility that private companies adopt varied measures to curb any such lethal changes in the environment. The Court also further criticized the steps taken by Shell as ‘intangible, undefined and non-binding’ and noted that ‘emission reduction targets from 2030 are lacking completely. In conclusion, the Court called attention to the fact that Shell is not currently in breach of its reduction obligation but its lack of action suggests an ‘imminent violation’.
Conclusion
This decision of the District Court of Hague follows in the wake of the landmark decision of the Urgenda case in which the Dutch Supreme Court ruled that the State also has a duty to pursue the ambitious greenhouse gas emission target and this represents, in effect, an extension of the principles in Urgenda case to private corporations as well. They too owe a duty under the Dutch Laws to take necessary actions in curbing the climate change phenomena and that the human rights of the Dutch residents are relevant to that duty.
After this judgment as pronounced by the District Court of Hague, several climate change-related claims against corporations have higher chances of succeeding as there has also been a pivot towards rights-based claims. This inherently explains that along with States, private corporations and companies also have a basic duty to care towards the public and the environment and they simply cannot shrug off their liability. The fact that they have not acceded to International Conventions or treaties does not strip off the entire obligation that they have as entities under International law and they thus cannot use it as a permissible defense from any litigation. Such a defense is available would exclude the multinationals from such a serious responsibility which would in turn pace the way towards climate change. Every entity is required to provide basic human rights irrespective of it being a part of any Convention and these rights lay the foundation for one’s existence in a peaceful society. The unwritten duty of care extends to the environment as the alarming rise in temperature within the Earth’s atmosphere would thus affect not only the present but future generations as well which would lay a grim impact on the whole ecosystem.
The order is provisionally enforceable although Shell intends to appeal this decision will indisputably embolden claimants to pursue further climate change-related claims against energy and fossil fuel companies on the grounds of human rights and environmental impact so the number of claims worldwide is set to increase.
[1]https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2021:5339&showbutton=true&keyword=ECLI%3aNL%3aRBDHA%3a2021%3a5337
[2] https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/327/original/Carbon-Majors-Report-2017.pdf?1499691240
[3] https://en.milieudefensie.nl/news/court-summons-translation.pdf
[4] https://unfccc.int/sites/default/files/english_paris_agreement.pdf
[6] https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:199:0040:0049:EN:PDF
[7] https://www.echr.coe.int/Documents/Convention_ENG.pdf
[8] https://www.ohchr.org/EN/ProfessionalInterest/Pages/CCPR.aspx
[9] https://wilmap.stanford.edu/entries/article-6162-dutch-civil-code
[10] https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf
[11] http://mneguidelines.oecd.org/guidelines/
[12] https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:HR:2019:2007
[13] http://climatecasechart.com/climate-change-litigation/non-us-case/lliuya-v-rwe-ag/
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