Milieudefensie et al. v. Royal Dutch Shell plc.

Summary:

On April 5th, 2019, the environmental group Milieudefensie/Friends of the Earth Netherlands and co-plaintiffs served Shell a court summons alleging Shell’s contributions to climate change violate its duty of care under Dutch law and human rights obligations. The case was filed in the Hague District Court. 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. The plaintiffs seek a ruling from the court that Shell must reduce its CO2 emissions by 45% by 2030 compared to 2010 levels and to zero by 2050, in line with the Paris Climate Agreement.

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 suit against Shell, 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. Plaintiffs base this duty of care argument on Article 6:162 of the Dutch Civil Code as further informed by Articles 2 and 8 of the European Convention on Human Rights (ECHR) which guarantee rights to life (Article 2) and rights to a private life, family life, home, and correspondence (Article 8). Plaintiffs’ argument outlines how Shell’s long knowledge of climate change, misleading statements on climate change, and inadequate action to reduce climate change help support a finding of Shell’s unlawful endangerment of Dutch citizens and actions constituting hazardous negligence.

In November 2019, Shell submitted a Statement of Defense. Shell argued, among other defenses, that there is no legal standard, statutory or otherwise, that would establish that Shell is acting in conflict with an unwritten legal standard by failing to comply with emissions caps. Shell also argued that plaintiffs' claims are too general to fall within the scope of ECHR Articles 2 and 8.

In September and October 2020, the parties provided their evidence for factual and legal justification. Four days of hearings were then held on 1, 3, 15 and 17 December 2020. Documents from the hearings are available here.

On May 26, 2021, the Hague District Court ordered Shell to reduce its emissions by 45% by 2030, relative to 2019, across all activities including both its own emissions and end-use emissions. The Court wrote that it "orders [Royal Dutch Shell (“RDS”)], both directly and via the companies and legal entities it commonly includes in its consolidated annual accounts and with which it jointly forms the Shell group, to limit or cause to be limited the aggregate annual volume of all CO2 emissions into the atmosphere (Scope 1, 2 and 3) due to the business operations and sold energy-carrying products of the Shell group to such an extent that this volume will have reduced by at least net 45% at end 2030, relative to 2019 levels." In other words, the Court ordered Shell to reduce emissions by a net 45% across both emissions from its own operations and emissions from the use of the oil it produces. The Court made its decision provisionally enforceable, meaning Shell will be required to meet its reduction obligations even as the case is appealed.

In its decision, the Court allowed the class action by Milieudefensie, Greenpeace NL, Fossielvrij NL, Waddenvereniging, Both ENDS, and Young Friends of the Earth NL because the interests served in the class action aligned with the objectives stated in their articles of association. The Court rejected claims by ActionAid, because its operations were not geared toward Dutch citizens, and individual claimants, because their interests were already served by the class action and they did not present independent interests.

The Court wrote "RDS’ reduction obligation ensues from the unwritten standard of care laid down in Book 6 Section 162 Dutch Civil Code, which means that acting in conflict with what is generally accepted according to unwritten law is unlawful." Plaintiffs had argued that, stemming from this standard of care, Shell had an obligation to prevent dangerous climate change through its policies, and the Court applied the standard of care to the company's policies, emissions, consequences of its emissions, and its human rights and international and regional legal obligations. The Court concluded that the standard of care included the need for companies to take responsibility for Scope 3 emissions, especially "where these emissions form the majority of a company’s CO2 emissions, as is the case for companies that produce and sell fossil fuels."

In applying this standard of care to Shell, the Court concluded that it must reduce its Scope 1, 2, and 3 emissions, across its entire energy portfolio, by 45% by 2030, relative to 2019 emission levels. The Court gave Shell flexibility in allocating emissions cuts between Scope 1, 2, and 3 emissions, so long as in aggregate, the total emissions were reduced by 45%. The Court wrote, "With respect to the business relations of the Shell group, including the end-users, this constitutes a significant best-efforts obligation, in which context RDS may be expected to take the necessary steps to remove or prevent the serious risks ensuing from the CO2 emissions generated by them, and to use its influence to limit any lasting consequences as much as possible. A consequence of this significant obligation may be that RDS will forgo new investments in the extraction of fossil fuels and/or will limit its production of fossil resources."

The Court rejected arguments by Shell that the EU Emissions Trading System (ETS) preempted further emissions cuts ordered by the court, and arguments that the reduction obligation would have no effect. The Court rejected the ETS argument on the grounds that the ETS only applies to some of the emissions in Europe Shell is responsible for, and the ETS does not cover emissions outside the EU. The standard of care, on the other hand, requires Shell to reduce all global emissions that will harm Dutch citizens. Further, the Court rejected the claim that a reduction obligation would have no effect because such emissions would be substituted by other companies. The Court wrote that it remains to be seen whether other companies will substitute Shell production in the face of Paris Agreement obligations and noted the causal relationship between production limitation and emissions reduction. The Court wrote, "The court acknowledges that RDS cannot solve this global problem on its own. However, this does not absolve RDS of its individual partial responsibility to do its part regarding the emissions of the Shell group, which it can control and influence."

On July 20, 2022, Shell appealed the decision.

On April 25, 2022, Milieudefensie sent a letter to Shell’s Board of Directors calling for urgent action to comply with the verdict of May 26, 2021 and warning for personal liability risks towards third parties resulting from a failure to act.

At Issue: Whether a private company violated a duty of care and human rights obligations by failing to take adequate action to curb contributions to climate change