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In a landmark ruling rendered recently, a Dutch court ordered the Royal Dutch Corporation, and all other entities jointly forming the Shell group, to cut the emission of carbon dioxide into the atmosphere by a net 45 per cent at the end of 2030, compared to the 2019 levels. This verdict resulted from a public-interest lawsuit brought by a group of environmental NGOs, led by the Netherlands-based Friends of the Earth, claiming violations of domestic and international law governing climate change and human rights.

The decision will undoubtedly set a precedent for the snowballing climate change litigations worldwide, seeking the responsibility of both state and non-state actors in their climate actions. While the Dutch Supreme Court recently adjudicated on state liability in the Urgenda case against the Netherlands, this is indeed the first time a multinational corporation has been found liable for a deficient climate policy.

Although the case was fought in the background of an ‘imminent environment damage’ caused to the residents of a specific region in the Netherlands, the decision has broader implications for the international community in terms of the regulatory and policy framework of global climate change. Further, the case demonstrates the growing importance of domestic courts in addressing more significant global environmental governance issues.

It is essential to note that Shell had not (yet) acted manifestly to damage the environment in this case; however, its corporate policy was claimed to be in breach of the applicable laws. Apart from the procedural and substantive questions on admissibility and applicable law, which essentially revolved around the Dutch civil code and conflict of laws, the decision draws significantly on the analysis of the best available climate science and the relevant international conventions.

Rejecting Shell’s fundamental argument that a ‘mere adoption of a corporate policy does not cause any damage’ as a narrow approach, the court held that an unsound policy might be seen as an ‘event giving rise to the damage’. An unwritten principle of duty of care found in the Dutch law was pivotal for the court to reach this conclusion.

Nevertheless, the court relied on pertinent international treaties on climate change and human rights law to interpret the standard of care. Specifically, the Paris Agreement of the UNFCC aims to limit global warming to well below 2 degrees Celsius, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. In order to achieve this temperature level, the agreement mandates countries to reduce their greenhouse gas emissions drastically.

Even though this multilateral treaty does not legally bind the corporations, the Hague court made Shell directly responsible by endorsing the universal status of the Paris Agreement. According to the court, private enterprises’ adherence to the agreement is indispensable to achieve the dream of a carbon-neutral world by the mid-twenty-first century.

Further, from the standpoint of human rights, the court observed that the company has an indirect responsibility to sustain the standard of care. Relying on the European Convention on Human Rights, the court opined that human rights offer protection against dangerous climate change impacts. While the application of international law is not unusual in domestic litigations, it is perhaps the first time a court gave considerable importance to non-binding soft law standards.

The Hague court remarkably implemented some pertinent instruments such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. While making the final assessment of how much emissions the company should reduce, the court also referred to various reports of the intergovernmental panel on climate change.

Role of domestic courts

International adjudication is a critical component in global governance. Numerous courts and tribunals exist both at the global or regional level to deal with the legal problems of today’s world, ranging from trade and investment to human rights violations. However, sadly, there are no such means of dispute resolution when it comes to environmental issues. It means the only available recourse is domestic courts where the event(s) giving rise to the environmental damage occurs.

Except for the rulings of the Dutch courts implicating the liability of public and private actors, few courts have adjudicated on climate problems of universal import. Despite the scant jurisprudence, a judicial dialogue is emerging where courts have relied on the judgments from other jurisdictions. It is evident from at least two recent rulings — of an environment court in New South Wales and a German constitutional court — where the judges based their reasonings mainly on the Dutch decision in Urgenda.

In the light of a growing gap between climate commitments and the projected fossil-fuel production of countries, the domestic courts must align their judicial policy with the global climate policy to hold multinationals accountable.

A similar development transpired in a (geographically) far east court, co-incidentally, on the day before the Hague court’s decree against Shell. In that, an Australian federal court found that the Australian minister for the environment owes a duty of care to the country’s young people to ensure that no injury is caused to them from dangerous climate change. Interestingly, while deciding this case, brought by a group of students against the minister’s approval of a coal mine project, the court reproduced earlier interpretations on the duty of care by the Dutch courts. Besides, the shareholders of the big oil, like Chevron and Exxon, have already started pushing the fossil industry to take more legitimate and measurable climate practices.

The possibility of establishing a direct responsibility on non-state actors along the lines of state responsibility to protect the environment is a clear signal to both government and corporate polluters across the globe. In all probability, more business enterprises will face similar trials in the coming days. The chances of India Inc. defending such legal claims also cannot be brushed aside, given the tenuous climate actions and the greenwashing tactics that the Indian businesses pursue.

Though the Shell group has already announced its intention to appeal this decision, an annulment of it is less likely, precisely due to the existing stance of the Netherlands’ Supreme Court on the responsibility to protect the environment. In the meantime, this is a win not just for the environmentalists but also for the science, policy, and international (soft) law regulating climate change.

This article was published in The Hindu Business Line

Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.

Dr Harisankar K Sathyapalan
Dr Harisankar K Sathyapalan
Dr Harisankar K Sathyapalan is Research Fellow (International Law and Dispute Settlement) with the CPPR Centre for Comparative Studies. He is currently Assistant Professor at the School of Legal Studies, Cochin University of Science and Technology (CUSAT), India. He holds a PhD (Faculty of Law, National University of Singapore) and an LLM (Indian Law Institute, New Delhi). Hari’s research interests include transnational commercial law, conflict of laws and international dispute resolution.

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