Corporate Climate Change Obligations in Milieudefensie v Royal Dutch Shell

In the midst of ongoing negotiations at the 29^th Conference of the Parties (COP) at the UN Climate Change Conference in Baku, the Court of Appeal of the Hague in the Netherlands handed down an important judgment which will no doubt be the subject of scrutiny and discussion between delegates, observers and interested parties with respect to corporate action on climate change. On 12 November 2024, the Court of Appeal granted Shell’s appeal of a 2021 ruling by the Hague District Court. We reported on the previous first instance decision before the District Court here. In short, the lower court previously found that Shell had a duty to reduce its greenhouse gas emissions by 45%, relative to 2019 levels, by 2030. Shell succeeded in appealing that decision, and the Court of Appeal’s judgment will no doubt inform the approach to future climate cases both in the Netherlands and elsewhere.

            The Court reaffirmed one important point of principle arising from the District Court: Shell did have an obligation to reduce its emissions. This was by reference to its unwritten social standard of care under the Dutch Civil Code which was the basis of the lower court’s earlier findings. Importantly, the Court of Appeal reinforced the characterisation of climate change as a human rights concern, drawing on the European Court of Human Rights’ recent decision in KlimaSeniorinnen v Switzerland, other case law from outside of Europe, and the work of the United Nations. It found that “there can be no doubt that protection from dangerous climate change is a human right” (paragraph 7.17). This is consistent with similar developments in recent years with respect to international soft law on business and human rights; for example, the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct was updated in 2023 to address climate change issues, and the United Nations Working Group on business and human rights also issued recent guidance on the interface of climate change with the UN Guiding Principles on Business and Human Rights. In relying on the ‘indirect horizontal effect of human rights’ in interpreting the standard of care, the Court was clear that “companies like Shell, which contribute significantly to the climate problem and have it within their power to contribute to combating it, have an obligation to limit CO2 emissions in order to counter dangerous climate change” (paragraph 7.27).

            Where Shell succeeded, however, was to overturn the specific reduction target that the District Court had previously set. According to the Court of Appeal, there was no specific legal obligation for Shell to reduce its emissions by the 45% target directed by the District Court – or indeed any other particular alternative numerical target. While the Court noted there will be certain measures expected of Shell pursuant to EU law, the Court indicated that this did not result in any absolute reduction obligation in the foreseeable future and granted the company considerable leeway, noting that “companies are free to choose their own approach to reducing their emissions in the – mandatory – climate transition plan as long as it is consistent with the Paris Agreement’s climate targets.” (paragraph 7.56). In addition, the Court also cast doubt about whether a specific obligation with respect to Shell’s Scope 3 emissions (i.e. indirect emissions from the combustion of oil and gas sold by Shell and which comprised of 95% of its total reported emissions) would be effective.  The Court suggested that while Shell did have an obligation to reduce its Scope 3 emissions, it was not possible to identify a specific sectoral standard based on the basis of current scientific consensus.

            It is quite possible that this latest decision will go to the Dutch Supreme Court on further appeal, meaning these issues will once again be revisited. If that is the case, then by the time that court considers these questions, the law (and prevailing science) is likely to have shifted further. Indeed, States – the Netherlands included – are now gathering again in the Hague to litigate climate change, but this time, before the International Court of Justice at the Peace Palace with respect to the Advisory Opinion on the Obligations of States in respect of Climate Change. The development of legal standards in this space is continuing to grow with an ever-increasing cross-fertilisation between human rights law, tort law and international law with respect to climate change. Companies are advised to take heed of the judgment’s wider conclusions with respect to the shared responsibility of corporates to take measures to reduce their greenhouse gas emissions and combat climate change, and to take meaningful and appropriate steps in their plans and operations in fulfilment of that responsibility.

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            If you have any questions about the issues addressed in this Client Alert, or if you would like a copy of any of the materials we reference, please do not hesitate to contact us:

Julianne Hughes-Jennett
Email: jhughesjennett@quinnemanuel.com
Phone: +44 20 7653-2220

Marjun Parcasio
Email: marjunparcasio@quinnemanuel.com
Phone: +44 20 7653-2011

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