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Milieudefensie et al. v Royal Dutch Shell plc - The Paris Climate Agreement in Full Force

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Ireland

On 26 May 2021, the Hague District Court ruled that Royal Dutch Shell is obliged to reduce the CO2 emissions of the Shell group’s activities by net 45% by the end of 2030, relative to 2019, through the Shell group’s corporate policy.
 
 
This landmark ruling applies not only to Shell, but also to its suppliers, and covers both the companies' emissions and emissions from products burned by its customers. It is therefore a very far-reaching ruling, which will impact entire supply chains.
 
Background
 
The Applicants in this case comprise seven environmental groups, including Friends of the Earth Netherlands ("FOE"), Greenpeace and Fossil Free Netherlands, and 17,000 Dutch citizens.
 
The principal argument advanced by the Applicants alleged that Shell is one of the biggest climate polluters in the world, that the company has known about the severity of climate change and the impacts of oil drilling for years and despite this, continues to drill, whilst misleading the public on the issue. In so arguing, the Applicants alleged that Shell is breaching its international climate obligations under the Paris Climate Agreement.
 
In addition, it was alleged that Shell was breaching article 6:162 of the Dutch civil code and violating articles 2 and 8 of the European Convention on Human Rights – the right to life and the right to family life – by causing a danger to others when alternative measures could be taken.
 
In defence, Shell argued that climate targets should be set by the Dutch Government, rather than by companies, and that forcing one energy firm to cut back on oil and gas will only have a minor impact as long as others continue to produce fossil fuels. Shell argued that unlike the Dutch government, Shell is not a signatory to the 2015 Paris Agreement. In addition, Shell argued that it was already taking 'serious steps' to limit its use of fossil fuels and that there was no legal grounds for the case to be brought.
 
What is the Paris Climate Agreement?
 
The Paris Climate Agreement is an internationally binding UN treaty on climate change entered into force on 4 November 2016. The Agreement's main objective is to reduce global warming to 2 degrees Celsius above pre-industrial levels with an emphasis on achieving 1.5C.
 
How is it envisaged that the Paris Climate Agreement will achieve this goal?
 
The Agreement works in five year cycles with each country being required to prepare a Nationally Determined Contribution (NDC), which will become increasingly ambitious with the passing of each cycle.
 
The NDC's are submitted to the United Nations Framework Convention on Climate Change. The NDCs are used as a means of communicating the actions that each country will take in order to reduce their greenhouse gas emissions and build up resilience to adapt to the impact of climate change. Ireland operates under an EU-wide NDC that has committed up to a 40% reduction in emissions by 2030, from the emission rates recorded in 1990.
 
The Judgment
 
Following four days of hearing in December 2020 in the Hague District Court, the Court delivered judgment in favour of the Applicants.
 
In particular, the Court held that (i) Shell's sustainability policy is insufficiently “concrete”, (ii) that Shell has a duty of care towards Dutch citizens under the Dutch Civil Code in relation to its policies, emissions and consequences of emissions and (iii) that the level of emission reductions of Shell and its suppliers and buyers should be brought into line with the Paris Climate Agreement. Significantly, the Court noted that the “policy intentions and ambitions for the Shell group largely amount to rather intangible, undefined and non-binding plans for the long-term”.
 
The Court also held that there are obligations under both Dutch law and the Convention and that Shell had known for “a long time” about the damage of carbon emissions. While Shell had not acted unlawfully, the Court said it had established that there would be an “imminent violation of the reduction obligation”.
 
Further, the Court made its decision provisionally enforceable, meaning Shell will be required to meet its reduction obligations even as the case is appealed.
 
This is an unprecedented ruling that will have very significant implications for companies operating in the energy industry. It is the first time that the Paris Agreement has been found to impose obligations on private companies and the first time a Court has ruled against a company specifically requiring it to reduce its Co2 emissions. This certainly underlines a shift in judicial thinking in relation to such environmental and climate litigation (e.g. also see the Judgment of the Irish Supreme Court in July 2020 the "Climate Case Ireland" brought by Friends of the Irish Environment).
 
In addition, for climate activists seeking to enforce international climate accords, it suggests that pursuing these aims through the courts may effect significant change. This case may pave the way for more climate-related litigation taken directly against companies for not adhering to climate change policy/legislation.
 
Oisín Coghlan, the FOE Director in Ireland, noted the timely nature of the decision, coinciding with publication of the Climate Action and Low Carbon Development (Amendment) Bill 2021 in Ireland, which Bill is being actively debated in the Dáil at present.
 
While it is expected that Shell will appeal the decision of the Dutch District Court to the Superior Court in the Netherlands, the decision has nonetheless been lauded as a "precedent-setting judgement".
 
A copy of the Judgment is available here

Written by Jonathan Moore, Grainne O'Callaghan and Declan Meagher. 

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