04 June 2021
by Mijke Sinninghe Damsté , Huib Schrama and Bastiaan Kemp
Loyens & Loeff
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On 27 May 2021 the Hague District Court (the Court) orderedRoyal Dutch Shell (Shell), both directly and via its groupcompanies, to limit its CO2 emissions by at least net 45% at end2030, relative to 2019 levels.
Class action
The case against Shell was brought in 2019 by, amongst others,Friends of the Earth Netherlands (Milieudefensie).
This case is a class action governed by article 3:305a (old)Dutch Civil Code (Burgerlijk Wetboek), pursuant to which aclaim organization may institute legal proceedings for theprotection of similar interests of other persons to safeguard theefficient and effective legal protection of the interested parties.The claimants believe that as the policy-setting head of the Shellgroup, Shell takes insufficient action, acts unlawfully, and shoulddo more to reduce CO2 emissions. In their claims they demanded thatby 2030 CO2 emissions will have been reduced by 45%, oralternatively, 35% or 25%, compared to 2019 levels. The claimsconcern the CO2 emissions of the Shell group itself as well asthose of its suppliers and customers.
Obligation for Shell to ensure CO2 reduction
The Court has come to the conclusion that Shell is obliged toensure through the Shell group's corporate policy that the CO2emissions of the Shell group, its suppliers and its customers arereduced. This follows from the unwritten standard of careapplicable to Shell, which the Court has interpreted based on thefacts, widespread consensus and internationally acceptedstandards.
The Shell group is one of the world's largest producers andsuppliers of fossil fuels. The CO2 emissions of the Shell group,its suppliers and customers exceed those of many countries. Thiscontributes to global warming, which causes dangerous climatechange and creates serious human rights risks, such as the right tolife and the right to respect for private and family life. It isgenerally accepted that companies must respect human rights. Thisis an individual responsibility of companies, which is separatefrom states' actions. This responsibility also extends tosuppliers and customers.
Shell has an obligation of result with respect to the Shellgroup's CO2 emissions. As regards its suppliers and customers,Shell has a material best-efforts obligation, which means thatShell must use its influence through the corporate policy for theShell group, for instance by setting requirements on suppliers inits purchasing policy. Shell has complete freedom in how it meetsits reduction obligation and in shaping the Shell group'scorporate policy. The required sacrifices outweigh the interestserved by fighting dangerous climate change.
Imminent breach of the reduction obligation
The Court finds that Shell is not presently in breach of itsreduction obligation, as the claimants argue. Shell has enhancedthe Shell group's policy and is working it out in more detail.However, seeing as the policy is not concrete, has many caveats andis based on monitoring social developments rather than thecompany's own responsibility for achieving a CO2 reduction, theCourt finds that there is an imminent breach of the reductionobligation. Therefore, the Court has ordered Shell to reduce theemissions of the Shell group, its suppliers and its customers bynet 45%, as compared to 2019 levels, by the end of 2030, throughthe corporate policy of the Shell group.
Possible effects
If you would like to know what effects this ruling can have onyour business, please feel free to contact us. We are following thebroader trends in class actions and ESG (among which climatelitigation). Please feel free to read our articles on the Urgenda case and Shell/Nigeria.
The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circ*mstances.
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