Dutch Court of Appeal’s Ruling in Shell v Vereniging Milieudefensie: Implications for Climate Change Litigation in New Zealand

While many climate change cases have been squarely directed at governments around the world, private companies are increasingly the target. One of the most high profile cases globally is Shell v Vereniging Milieudefensie, an action between more than 17,000 Dutch citizens and the oil giant Royal Dutch Shell (Shell).

This case builds on the landmark Urgenda decision which found that the Dutch government's inadequate action on climate change violated a duty of care to its citizens. In the claim against Shell, the plaintiffs extend this argument to private companies, arguing that given the Paris Agreement's goals and the scientific evidence regarding the dangers of climate change, Shell has a duty of care to take action to reduce its greenhouse gas emissions.

The plaintiffs were successful in the Hague District Court, which ordered Shell to reduce its emissions by 45% by 2030, which would require Shell to remove the equivalent of 740 million tonnes of carbon per year from its ledger. That was the first time a non-state entity has been legally obliged to align its policies with the Paris Climate Accord.

Shell appealed that decision, and the Dutch Court of Appeal has now issued its decision. The result is mixed. The Court generally endorsed the approach of the lower court and held that Shell does have a legal duty of care to curb dangerous climate change. However, the remedy imposed by the lower court has been overturned, meaning that Shell no longer has to meet the specific emissions reduction target of 45% by 2030.

In this case review we take a closer look at the Dutch Court of Appeal's analysis, which will almost certainly be cited by the New Zealand court's as they continue to grapple with the role of the law in responding to climate change, especially on the question of private law actions against companies.

Standing of the plaintiffs

The plaintiff is an environmental group called Milieudefensie (MD), translated as Friends of the Earth Netherlands. Co-plaintiffs include other NGOs (ActionAid NL, Both ENDS, Fossielvrij NL, Greenpeace NL, Young Friends of the Earth NL, Waddenvereniging) and more than 17000 citizens.

Unlike Smith v Fonterra Co-Operative Group Ltd (the New Zealand equivalent of the Shell case), the Court did not discuss standing at length. It agreed with the Hague District Court that the interests of present and future global generations were too wide for collective action. However, the interests of Dutch residents were sufficiently specific, and this area would be affected similarly. The Court affirmed that collective action was the most efficient way to protect these interests. Rejecting Shell's claim that this was purely political, the Court found a legal basis for the claim, confirming MD's standing and concluding that an amendment to the New Civil Code Transitional Act wouldn't change this.

The relevance of international human rights and climate change law

The Court of Appeal decided that its interpretation and application of Dutch tort law, required it to consider international human rights law instruments, as well as EU and international climate law. While not legally binding, it considered that these shaped corporate responsibility on climate change. These included:

• The European Convention for the Protection of Human Rights and Fundamental Freedoms, ensuring the right to life and family life;
• the Paris Agreement and its climate goals;
• reports from the Intergovernmental Panel on Climate Change (IPCC) reports highlighting the need for global carbon emission reductions;
• the United Nations Guiding Principles on Business and Human Rights, outlining businesses' responsibility to respect human rights; and
• the OECD Guidelines for Multinational Enterprises on responsible business conduct.

The Court concluded that protection from dangerous climate change is a human right. Rights to life and family life are impacted by climate change, and while human rights typically apply between the state and individuals, the Court argued that they can also apply horizontally between companies and individuals. Shell's prominent position in the fossil fuel industry imposes an elevated obligation to reduce emissions, regardless of government regulations.

The Court held that while legislators have set climate regulations, these don't absolve companies from further action. Companies have an implicit duty of care to reduce emissions, beyond regulatory compliance. This broadens the scope of corporate responsibility and reinforces the growing view that protection from climate change is a human right enforceable against private companies.

Shell cannot be held to the specific emissions reduction target

The Hague District Court ruled that Shell must reduce its CO2 emissions-both directly and through its group operations-by at least 45% by 2030 compared to 2019 levels. This reduction applied to emission categories defined by the Greenhouse Gas Protocol:

1. Scope 1: Direct emissions from owned or controlled sources.
2. Scope 2: Indirect emissions from purchased electricity, steam, heat, or cooling.
3. Scope 3: All other indirect emissions within Shell's value chain, including those from end users (customers).

These targets formed the heart of Shell's appeal.

The Court first addressed Scope 1 and 2 emissions, noting that Shell had already made significant progress toward meeting the reduction target recognised by the District Court. Shell had independently committed to reducing its Scope 1 and 2 emissions by 50% by 2030 relative to 2016 levels, which led the Court to conclude that Shell was not in violation of the required standard.

Regarding Scope 3 emissions, the Court questioned whether a global reduction standard could apply to all sectors and countries. The 45% global average reduction target, drawn from IPCC reports for meeting Paris Agreement goals, was considered unrealistic. Different countries and sectors followed various reduction paths, and equity issues arose between nations. While Shell had a duty to reduce emissions, it could not be held to an average global reduction target.

The Court also reviewed expert reports on whether there was a sector-specific reduction threshold for the oil and gas industry. The reports were inconsistent, preventing the establishment of a sectoral standard. As climate science improves, equity issues will still render establishing a sectoral standard challenging.

The last inquiry was whether reducing Shell's Scope 3 emissions would achieve MD's desired emission reduction. The Court dismissed Shell's claim that it had no control over Scope 3 emissions but acknowledged that Shell's reduction could lead customers to switch to more polluting alternatives. Thus, the Court found insufficient grounds to establish a causal link between Shell's sales limitation and the reduction of emissions.

MD's claims failed on all three points. The Court found no global or sectoral reduction threshold, as well as no sufficient evidence that MD's claim would achieve the intended emissions reduction. Despite this, the ruling was not a total victory for Shell. The Court emphasised that legislative bodies have primary responsibility for addressing climate change, but companies must also fulfil an implicit duty to mitigate their contribution.

Investment in New Oil and Gas Fields

An adjacent issue was Shell's investment in new oil and gas fields. While the issue was not sufficiently at the heart of the present case to result in a court order, the Court hinted that such investments could be at odds with its duty of care to curb dangerous climate change.

The Court warned against the "lock-in effect" of investing in new fossil fuel infrastructure, stating that, such projects (once completed) often become economically difficult to abandon, locking companies into fossil fuel production. This undermines the transition to renewable energy, as this infrastructure benefits from institutional support making it harder to compete with.

The Court's obiter comments almost certainly pave the road for future legal challenges on this issue.

Implications for Future Climate Litigation

Climate change is a global phenomenon, and national courts and lawyers are drawing heavily on case law from around the world. While this decision only applies in the Netherlands, it will have wider effects internationally as a precedent-setting judgment. Carbon intensive industries must continue to closely monitor such developments. Although the remedies sought by the plaintiff in the Shell case have proved to be overly ambitious (subject to further appeal), the judgment leaves carbon intensive companies vulnerable to refined legal claims. It may not be sufficient to simply comply with minimum legislative requirements to reduce carbon emissions.

This article was written with the assistance of Chloë Almey, a Solicitor in our Corporate and Commercial team.

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