23 Jun Business and Human Rights Symposium: Climate Change Litigation Against Corporations and the Role of Civil Liability
[Paul Mougeolle is a representative of the association Notre Affaire à Tous, legal researcher for the NGO Global Legal Action Network (GLAN) and Ph.D. candidate at University of Paris Nanterre and University of Potsdam.]
On the 26th of May 2021, the Dutch Hague District Court even upheld the famous Urgenda case law in the context of a claim against a private company, Royal Dutch Shell (RDS), the parent company of the multinational Shell group. The Court ordered the respondent company to reduce the greenhouse gases (GHG) emissions of its whole corporate group by 45% by 2030 compared to 2019 to limit global warming in a consistent manner with the Paris Agreement’s goals, independently of host state regulations applying to RDS subsidiaries and consumer behaviour (i.e. the demand for oil and gas products). It is the first time a Court sets out the possible implications of tort law and the standard of care in a preventative climate case against a corporate actor.
A case analogous to the Shell case was filed in France against the oil and gas group Total. This case is of particular interest to this blog symposium since it relies on the first mandatory human rights and environmental due diligence legislation, the French Duty of Vigilance Law, as well as on the general duty to take care of the environment (see Constitutional Council’s Michel Z decision) combined with the possibility to request measures to cease or prevent ecological harm (see art. 1252 of the French Civil code). This case presents a further opportunity to define corporate climate due diligence and the climate standard of care under French law. Given the similarities with the Shell case, including the legal basis, the type of the respondent company, and the claims, a comparable judgement could be issued in France.
Other climate cases against corporate actors are pending in Germany and the USA. However, these cases are different from the Shell and Total cases since they do not seek injunctions to reduce GHG but rather monetary compensation to adapt to the effects of global warming (sea level and high-mountain lake level rise; dams become necessary to prevent floods). Plaintiffs use various tort law causes of action to essentially assert that the multinationals harmed their interests by not engaging in a timely energy transition despite possessing sufficient knowledge of the dangers represented by fossil fuel combustion. These claims mirror allegations of breach of “due diligence” or of the “standard of care” as they highlight the inadequacy between risk identification and prevention.
However, all these lawsuits face significant hurdles, some of which are common in business and human rights litigation, while others are specific to climate litigation.
As these suits target some of the largest corporations in the world, applicants naturally encounter strong resistance from their lawyers. However, the need to fight climate change helps claimants to rally considerable popular support, human and financial resources to pursue their claims.
Another typical legal hurdle for plaintiffs is the corporations’ presence in numerous countries. In addition to that, no country in the world currently forbids the production and use of fossil fuels. On the contrary, almost every country support hydrocarbon energy by subsidising its production or consumption. A legal action before a domestic court aiming at outlawing fossil fuel companies’ global activities or requesting damages for the climate change impacts seems thus impossible to succeed. This inconsistency is one of the reasons why some US First instance courts dismissed certain complaints. For instance, one judge stated that since climate change is a worldwide problem that “deserves a solution on a more vast scale than can be supplied by a district judge”.
Moreover, plaintiffs face a specific challenge when requesting monetary compensation given the potential wide consequences of a successful claim. Opening the floodgates of liability to pay compensation in these cases could quickly lead to companies’ bankruptcies. Even if this disruptive prospect might be appealing to some litigants, the likely consequence will be that many foreign victims of climate-related impacts could go without compensation. Some scholars such as Surya Deva, therefore, recommend establishing international funds for this purpose. A massive bankruptcy of energy companies could also endanger the energy supply, which would run against basic rights. The international community must thus organise a global transition. The need for the organisation of this complex transition provided a further reason to the US judge quoted above to dismiss the claim and to defer it to the diplomatic, executive, and legislative branches.
Due inter alia to the challenges associated with seeking compensation for damages, Dutch and French claimants have decided instead to request from Shell’s and Total’s parent companies’ additional measures to mitigate global warming and contribute to the Paris Agreement goals. Given the global policymaking role of companies, these entities have the power to decide to make the activities of their groups more sustainable and thereby reduce global GHG.
However, numerous jurisdictions have not developed adequate causes of action in their laws. Plaintiffs need legal bases to potentially engage parent companies’ responsibility for the actions of their group. They also need preventative causes of action applicable in climate matters to request the reduction of GHG emissions. In the Shell and Total cases referred to above, the Dutch case law and the French legislation were considered being adequate legal bases by the applicants to file their claims for this purpose.
But even when suitable legal bases exist, claimants can face considerable difficulties, such as in France. The respondent company Total challenged the jurisdiction of the civil courts to hear the case, claiming instead that commercial courts were competent. The Total case might enter the merits stage only in 2023 after the Supreme court settles the jurisdictional issue. These delays are at odds with the urgency of the climate crisis and undermine applicants’ right to seek relief in due course. One should bear in mind that GHG should be globally halved by 2030 compared to 2010 to still have a reasonable chance to limit dangerous levels of global warming, as it was recognised by the Hague District Court in the Shell case.
In light of these procedural difficulties together with the urgency of the climate crisis, the French government – like any other government in the world – should immediately step in and regulate multinationals in climate matters. The regulation of multinational companies even constitutes an international human rights obligation according to a joint statement on human rights and climate change by five UN-Human Rights Treaty Bodies.
For now, France can hardly be considered in compliance with this international human rights obligation due inter alia to the lack of binding climate regulation in French law and the absence of effectiveness of the Duty of Vigilance Law. The NGO Notre affaire à Tous highlighted in its climate vigilance benchmark report that almost no company adequately engaged in climate due diligence processes. In other words, no company sufficiently enquired the extent to which it must and can reduce its GHG emissions to prevent climate-related harm. The companies manifestly evade the substantive requirements of the Duty of Vigilance Law that obliges them to identify and prevent serious human rights and environmental harms due to the lack of precision of the Law’s provisions or the absence of case law. This situation further calls for the regulatory intervention of the government. The Commission nationale consultative des droits de l’Homme – the French National Human Rights Institution – shares this view and recommends in its recent report on climate change that “public authorities [should] strengthen the control of the application of the Duty of Vigilance Law with regard to climate change”.
More generally, all multinational oil and gas firms try to avoid binding obligations over their so-called indirect scope 3 emissions, that result from the combustion of their products by the final user (e.g. a car driver). The companies argue that they are only putting these products on the market to meet a demand for oil and gas, driven by numerous external factors. This issue constitutes a critical point in these climate cases and more generally in the fight against global warming as scope 3 emissions constitute the greatest part of fossil fuel companies’ emissions. By taking scope 3 emissions into account, 25 corporate groups can be linked to 50% of worldwide emissions according to carbon majors report. This significant impact leads plaintiffs to argue that these firms shall do everything within their power to reduce these emissions by switching their fossil fuel production to renewable energy.
The Hague District Court solved this issue by imposing a “significant best-efforts obligation” in relation to scope 3 emissions, meaning the company would not be held accountable for failing to achieve the GHG reduction targets if it can prove it did everything within its power. This type of obligation reflects the idea that there are overlapping responsibilities of various actors for certain emissions. In other words, Shell is not the only entity that can reduce these emissions but certainly one of the most influential. The findings of the Hague District Court constitute a reasonable solution that hopefully will be upheld by the Dutch higher instances and followed globally.
The responsibility to regulate multinational corporations in climate matters should not, however, only rest with domestic courts and tort law, even if it can provide relief in certain cases. As exposed above, many hurdles and uncertainty weigh on this process. Governments must adopt adequate and effective regulations, including on the international level, to put an end to the climate crisis and to compensate for related loss and damages. As they fail to do so, plaintiffs and civil society do not have another choice as to seek State responsibility for their individual and collective failure to act, such as in the pending Duarte Agostinho case against 33 States before the European Court of Human Rights