Dutch court rules in climate case: Royal Dutch Shell v Friends of the Earth Netherlands and others
On 26 May 2021 the Hague District Court (the Court) ordered Royal Dutch Shell (Shell), both directly and via its group companies, to limit its CO2 emissions by at least net 45% at end 2030, relative to 2019 levels.
The case against Shell was brought in 2019 by, amongst others, Friends of the Earth Netherlands (Milieudefensie).
This case is a class action governed by article 3:305a (old) Dutch Civil Code (Burgerlijk Wetboek), pursuant to which a claim organization may institute legal proceedings for the protection of similar interests of other persons to safeguard the efficient and effective legal protection of the interested parties. The claimants believe that as the policy-setting head of the Shell group, Shell takes insufficient action, acts unlawfully, and should do more to reduce CO2 emissions. In their claims they demanded that by 2030 CO2 emissions will have been reduced by 45%, or alternatively, 35% or 25%, compared to 2019 levels. The claims concern the CO2 emissions of the Shell group itself as well as those of its suppliers and customers.
Obligation for Shell to ensure CO2 reduction
The Court has come to the conclusion that Shell is obliged to ensure through the Shell group's corporate policy that the CO2 emissions of the Shell group, its suppliers and its customers are reduced. This follows from the unwritten standard of care applicable to Shell, which the Court has interpreted based on the facts, widespread consensus and internationally accepted standards.
The Shell group is one of the world's largest producers and suppliers of fossil fuels. The CO2 emissions of the Shell group, its suppliers and customers exceed those of many countries. This contributes to global warming, which causes dangerous climate change and creates serious human rights risks, such as the right to life and the right to respect for private and family life. It is generally accepted that companies must respect human rights. This is an individual responsibility of companies, which is separate from states' actions. This responsibility also extends to suppliers and customers.
Shell has an obligation of result with respect to the Shell group's CO2 emissions. As regards its suppliers and customers, Shell has a material best-efforts obligation, which means that Shell must use its influence through the corporate policy for the Shell group, for instance by setting requirements on suppliers in its purchasing policy. Shell has complete freedom in how it meets its reduction obligation and in shaping the Shell group's corporate policy. The required sacrifices outweigh the interest served by fighting dangerous climate change.
Imminent breach of the reduction obligation
The Court finds that Shell is not presently in breach of its reduction obligation, as the claimants argue. Shell has enhanced the Shell group's policy and is working it out in more detail. However, seeing as the policy is not concrete, has many caveats and is based on monitoring social developments rather than the company's own responsibility for achieving a CO2 reduction, the Court finds that there is an imminent breach of the reduction obligation. Therefore, the Court has ordered Shell to reduce the emissions of the Shell group, its suppliers and its customers by net 45%, as compared to 2019 levels, by the end of 2030, through the corporate policy of the Shell group.
If you would like to know what effects this ruling can have on your business, please feel free to contact us. We are following the broader trends in class actions and ESG (among which climate litigation). Please feel free to read our articles on the Urgenda case and Shell/Nigeria. Our team has extensive experience with international litigation, class actions and ESG/corporate governance. For more information please contact Mijke Sinninghe Damsté, Huib Schrama or Bastiaan Kemp.
Huib SchramaSenior Associate Attorney at law
Huib Schrama, attorney at law, is a member of the Litigation & Risk Management practice group. Huib focuses on corporate law and liability law. He advises and litigates on class actions, directors’ liability, cartel damages, (property) finance and commercial contracts.T: +31 20 578 52 59 M: +31 653 57 36 30 E: email@example.com
Bastiaan KempSenior associate Attorney at law
Bastiaan Kemp, attorney at law, is a member of the Litigation & Risk Management practice group in our Amsterdam office. He focuses on corporate law, including corporate governance and corporate litigation.T: +31 20 578 50 46 M: +31 613 85 43 31 E: firstname.lastname@example.org