Winds of Change from The Hague: Dutch Court Dismisses Climate Lawsuit Against Oil Corporation

The Netherland’s Court of Appeal of The Hague recently handed down a landmark ruling on the question of whether companies have a legally enforceable obligation to help mitigate climate change by reducing their emissions. The ruling highlights the impact climate change has on legal proceedings around the globe.

On November 12, 2024, the long-awaited second-instance ruling was handed down in the legal dispute between Royal Dutch Shell and Milieudefensie, a Dutch environmental organization. At its core, the proceedings revolved around the question of whether the large oil and gas company can be obliged to reduce its emissions. A major point of contention has pertained to the question of the separation of powers, that is, whether a court can impose measures to minimize climate change through a civil law ruling or if this responsibility belongs to the legislator and government.

FIRST INSTANCE: ACTION GRANTED

In May 2021, the District Court of The Hague ruled that a company can also be ordered in civil court to comply with its contribution to minimizing the consequences of climate change. The court of first instance ordered Shell to reduce the total annual volume of all CO2 emissions from the group into the atmosphere in such a way that by the end of 2030, the group will only emit a net 45% of CO2 compared to 2019 levels.

The Dutch district court argued that there is an unwritten standard of due diligence for companies to respect human rights. This standard of due diligence is not diminished by the fact that states do not—or insufficiently fulfill—their own obligations to respect human rights. It is therefore not sufficient for companies to merely observe and adapt to political and legal developments. Due to the serious threat to human rights posed by the consequences of CO2 emissions, private companies can therefore also be called upon to take certain measures, even if these entail a considerable financial sacrifice.

SECOND INSTANCE: A DISMISSAL WITH CONSEQUENCES?

The oil company, as expected, appealed against the judgment of the first instance that granted the claim. Shell achieved success within the Court of Appeal of The Hague when the Dutch court of second instance dismissed the case. However, the reasoning behind the ruling suggests that the court fundamentally agrees with the court of first instance’s view that climate protection—from a legal perspective—is a decisive factor in existing and future corporate policies.

The Hague Court of Appeal also sees an unwritten standard of care in the area of tort law, which is determined by human rights and the necessity to protect against the adverse consequences of global warming. Consequently, companies that have contributed to climate change and can contribute to minimizing its consequences are generally obliged to reduce their CO2 emissions. However, in the absence of a sufficient scientific and, above all, legal basis, a Dutch company cannot be required to reduce its emissions by a specific percentage along the value chain (so-called Scope 3 emissions)—which were merely in dispute here. Furthermore, the regulations and directives recently issued at the European level as part of the “Green Deal,” particularly the EU Corporate Due Diligence Directive and Corporate Sustainability Reporting Directive, do not provide for any specific CO2 reduction targets for companies.

Even though the action failed at second instance, the court's reasoning indicates that climate-related actions in the Netherlands could be successful if they aim to prevent certain corporate projects that have a demonstrably negative impact on climate change. However, the prerequisite for this success would be the ability to successfully argue that the project would not be carried out by a competitor in any case; otherwise, the prohibition of the project against a company would not result in any effective CO2 reduction. While this is a Dutch ruling, it cannot be ruled out that, driven by the position of The Hague Court of Appeal, environmental organizations in other European countries may argue the same in court.

A LOOK AT GERMANY

In Germany, the courts have so far been rather reluctant to hear civil climate lawsuits against companies. The lawsuits there are predominantly based on a claim for injunctive relief due to a violation of general personal rights. German courts regularly reject claims for injunctive relief for several reasons. Notably, the courts—particularly in the transport sector—often also deny the unlawfulness of a company’s conduct as soon as the company’s actions do not violate laws or other regulations:

Insofar as the legislature, whose primary task is to strike a fair balance between conflicting fundamental rights . . . , has adopted a constitutionally unobjectionable regulation that (also) takes into account and protects the interests and rights of the plaintiffs, the defendant operates within these regulations and the consequences of its actions—measured against these regulations—do not constitute unlawful conduct, the plaintiffs are not entitled to a quasi-judicial claim against the defendant.

In addition, there is an increasing need for justification within the framework of the status of interference, as the companies must actually be able to prevent the alleged impairment of the rights of the plaintiff. Climate lawsuits against car manufacturers are currently pending before Germany’s Federal Court of Justice, and it remains to be seen whether the court will provide new approaches and justifications in its decisions.

CONCLUSION

In the coming years, it will be interesting to follow whether—and to what extent—European and German case law will continue to position itself and develop with regard to climate lawsuits. What is certain is that environmental organizations will not be patient until legislation has been passed that takes action against companies and their climate and corporate policies. It remains to be seen how the Dutch environmental organization will react to the dismissal of the case by the Court of The Hague. However, it is clear the court has likely not stifled future climate lawsuits at their core; rather, it may have inadvertently intensified them, drawing attention to other industries beyond the energy and automotive sectors.