A year ago, the Hague District Court ordered Royal Dutch Shell Plc (RDS) to reduce the Shell group’s carbon dioxide emissions by 45% (compared to 2019 levels) by 2030 (1), in a landmark case which put several environmental organisations against RDS, the parent company of the Shell group and shareholder of over 1110 companies established in 160 countries. The organisations brought this case on behalf of more than 17 000 citizens of the Netherlands who consider that Shell is threatening their human rights (in particular, the right to a healthy environment) by contributing to global warming.
As its parent company, RDS is responsible for determining the Shell group’s general commercial policy, which is implemented by the various companies of the group. It is also responsible for reporting all its emissions – whether direct emissions from owned or controlled sources, in whole or in part (scope 1), indirect emissions from third-party sources from which it purchases raw materials, electricity, steam or heating for its operations (scope 2) or other indirect emissions resulting from the organisation’s activities but produced by sources owned or controlled by third parties, such as consumers or other organisations (scope 3) – and carrying out oversight of the management of climate change-related risks in the short, medium and long term (2).
Unfortunately, there is a clear link between global warming and anthropogenic greenhouse gas emissions, particularly, the ones arising from the fossil fuel sector.. Ever since the beginning of the Industrial Revolution, mankind has massively increased its use of energy, primarily produced by burning fossil fuels (coal, oil and gas), which leads to the release of large quantities of greenhouse gases that are not fully absorbed by the forests and oceans (3). The Shell group, as the oil market leader, is associated with emissions of hundreds of thousands of tonnes of carbon dioxide per year, which exceed the emissions of several countries, including those of the Netherlands (4). In that regard, in the present case the Court sought to determine the existence of an obligation from RDS to reduce all emissions (scopes 1, 2 and 3).
The Court based its decision on RDS’s implied duty of care towards current and future Netherlands residents, set out in Section 162 of Book 6 of the Netherlands Civil Code, from which it follows that acting against what is generally to be expected under the unwritten law is unlawful. This duty of care was interpreted in accordance with 14 factors (5), as well as the United Nations Sustainable Development Goals, the global temperature objectives set out in the Paris Agreement (limiting the temperature increase to 1.5°C above pre-industrial levels) based on the available science on dangerous climate change (6), and the widespread international consensus that businesses should respect human rights, which arises from the United Nations Guiding Principles on Business and Human Rights (7), the UN Global Compact and the OECD Guidelines for Multinational Enterprises (8), instruments adopted by RDS (9).
The first argument put forward by the organisations was that global warming, to which RDS contributed, had serious and irreversible consequences in the Netherlands and in the Wadden region, both in terms of the health of its inhabitants (due to deterioration in air quality and an increase in infectious diseases, bacterial diseases in water and food, and exposure to ultraviolet radiation) and the variations in water levels, deterioration in water quality and salinisation. In this respect, it should be noted that temperature increase in the Netherlands (of about 1.7°C above the pre-industrial temperature) has been almost twice as fast as the global average (whose increase is 0.8°C above the pre-industrial temperature) (10).
The organisations also evoked the right to life and the right to respect for private and family life of the Dutch and the inhabitants of the Wadden region, enshrined in Articles 2 and 8 of the European Convention on Human Rights and Articles 6 and 17 of the International Covenant on Civil and Political Rights (ICCPR). Although these instruments apply to relations between States and citizens and cannot be directly invoked, the Court has held that the intrinsic value of human rights in society leads to the possibility of them being used as a reference in interpreting RDS’s duty of care (11). It can also be drawn from the Urgenda decision that these articles offer protection against the consequences of dangerous climate change caused by carbon dioxide emissions (12). The United Nations Human Rights Council, which pronounces on violations of the ICCPR, has determined the same in respect to Articles 6 and 17 (13), finding that environmental degradation and unsustainable development constitute pressing threats on the ability of present and future generations to enjoy their right to life (14).
In its ruling, the Court took into account the role of fossil fuels in meeting the world’s energy demand, admitting that they cannot be dispensed within the current state of technological progress, as recognised by the Intergovernmental Panel on Climate Change and the International Energy Agency, and that the worldwide reduction of carbon dioxide emissions calls for complex, global, and difficult-to-predict changes in society and the economy, in particular in terms of consumption patterns (15). In that regard, the Court accepted RDS’s argument that the energy transition that is needed to achieve the reduction of global emissions requires a concerted effort from the society as a whole (16), since both energy supply and demand have to be transformed together and greenhouse gas emissions anywhere in the world also contribute to the imminent environmental damages in the Netherlands and the Wadden region.
However, based on the broad international consensus that all companies should work independently to have net zero emissions by 2050 so that collectively we can achieve the goals set out in the Paris Agreement (17), it was considered that RDS should do more than monitor developments in society regarding the energy transition and comply with regulations in the countries where the Shell group operates. In that sense, RDS’s argument that private entities cannot take any steps to accelerate this transition until States determine legal frameworks and public policies on the topic was rejected (18).
The Court also stressed that the fact that RDS is not the only party responsible for tackling dangerous climate change does not absolve itself from individual responsibility to make its contribution in respect to the Shell group’s significant emissions, that it can control and influence (19). The Court recognised two types of obligations: a results obligation in respect to scope 1 and 2 emissions and a significant best efforts obligation in respect to scope 3 emissions. This subdivision clearly demonstrates that the solution to the problem is not solely passed on to RDS, although RDS must take the necessary steps to remove or prevent serious risks resulting from the carbon dioxide emissions it generates, and use its influence to limit any lasting consequences as far as possible (20), for example, by forgoing new investments in fossil fuel extraction and changing the energy mix offered by the Shell group.
Following this reasoning, the Court concluded that RDS has an obligation to reduce its net emissions levels by 45% (compared to 2019 levels) by 2030 (21). This obligation refers to the aggregate annual volume of all scope 1, 2 and 3 carbon dioxide emissions of the Shell group, as it is internationally recognised that companies are also responsible for scope 3 emissions, especially when these constitute the majority of the company’s emissions. In the Shell group’s case, approximately 85% of emissions fall in this scope (22). It should be noted that no additional obligation was recognised regarding emissions arising from activities of the Shell group already covered by the EU Emissions Trading System (ETS) (23).
The conviction embodies a much steeper reduction than RDS’ previous long-term target contained in its Net Carbon Footprint Ambition, released in December 2017, which was a reduction of scope 1, 2 and 3 emissions by 20% in 2035, and 50% in 2050. The Shell group’s planned ambitions and investments for new exploration have become incompatible with the reduction obligation of RDS recognised by the Court (24).
Therefore, RDS will have to significantly change the group’s corporate policy, regardless of the results this may have on its growth or profitability, which will lead to the equivalent of 740 million tonnes per year of carbon dioxide being eliminated by the end of this decade (25). However, it will be challenging to assess the implementation of this ruling, as the Court only assigned a target and not a reference plan. In this sense, the environmental organisations may go back to court and seek periodic penalty payments if the target is not achieved by 2030.
This is already the second landmark climate case that has taken place in the Netherlands, following the Urgenda case. Although it is a Dutch national decision and the Dutch legal system provides more freedom for the decision-maker to interpret unwritten rules than other European legal systems, this decision is quite plausible to influence future decisions outside the Netherlands, as it represents the first imposition of a specific mitigation obligation on a private company and is a demonstration of how domestic litigation can contribute to the ‘hardening’ of non-binding international law relative to responsible business conduct (26). According to Anna Holligan, this judgement sets a precedent regarding litigation with multinationals, in particular oil companies and other major polluters (27).
Nevertheless, based on the argument that States are the entities responsible for adopting policies to reduce the demand for carbon-based fuels and that it is not up to RDS to influence the energy choices of its consumers, on 23 August 2021, RDS filed the process of appeal of the decision, which is estimated to take one or two years (28).
(1) Milieudefensie et al v. Royal Dutch Shell PLC, The Hague District Court, 26 May 2021, C/09/571932/HA ZA 19-379. Decision available at https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2021:5339.
(2) Ibid, paras 2.5.1 – 2.5.4.
(3) IPCC, Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty (2018), p. 37. Available at https://www.ipcc.ch/site/assets/uploads/sites/2/2019/06/SR15_Full_Report_High_Res.pdf.
(4) Milieudefensie et al v. Royal Dutch Shell PLC, para 4.4.5.
(5) Ibid, para 4.4.2.
(6) Paris Agreement (2015). Available at https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A22016A1019%2801%29.
(7) Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework (2011). Available at https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf.
(8) OECD Guidelines for Multinational Enterprises (2011). Available at https://www.oecd.org/daf/inv/mne/48004323.pdf.
(9) Milieudefensie et al v. Royal Dutch Shell PLC, para 3.2.
(10) Ibid, para 4.4.6.
(11) Ibid, para 4.4.9.
(12) The State of the Netherlands v. Stichting Urgenda, Supreme Court of the Netherlands, 20 December 2019, 19/00135, para 5.6.2. Decision available at https://www.urgenda.nl/wp-content/uploads/ENG-Dutch-Supreme-Court-Urgenda-v-Netherlands-20-12-2019.pdf.
(13) In regard to Article 6, see United Nations Human Rights Council, General Comment No. 36 (2018) on article 6 of the International Covenant on Civil and Political Rights, on the right to life, CCPR/C/GC/36, pp. 14-15. Regarding Article 17, see Portillo Cáceres and others v. Paraguay, United Nations Human Rights Council, 20 September 2019, CCPR/C/126/D/2751/2016, section 7.7. Available at https://www.escr-net.org/sites/default/files/caselaw/portillo_caceres_v_paraguay_-_english_g1927913.pdf.
(14) Ione Teitiota v New Zealand, United Nations Human Rights Council, 23 September 2020, CCPR/C/127/D/2728/2016, section 9.4. Decision available at https://tbinternet.ohchr.org/_layouts/15/treatybodyexternal/Download.aspx?symbolno=CCPR/C/127/D/2728/2016&Lang=en.
(15) Milieudefensie et al v. Royal Dutch Shell PLC, para 4.4.31.
(16) Ibid, para 4.4.33.
(17) Thomas Hale and Oxford Net Zero, Mapping of current practices around net zero targets (2020), p. 3. Available at https://netzeroclimate.org/wp-content/uploads/2020/12/Net-Zero-Target-Map.pdf.
(18) Milieudefensie et al v. Royal Dutch Shell PLC, para 4.4.52.
(19) Following the understanding of the Supreme Court of the Netherlands, 23 September 1988, ECLI:NL:HR:1988:AD5713, para 3.5.1. Decision available, in Dutch, at https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:HR:1988:AD5713.
(20) Milieudefensie et al v. Royal Dutch Shell PLC, para 4.4.39.
(21) Ibid, para 5.3.
(22) Ibid, para 4.4.19.
(23) Following the understanding of the Supreme Court of the Netherlands, 21 October 2005, ECLI:NL:HR:2005:AT8823, para 3.5.1. Decision available, in Dutch, at https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:HR:2005:AT8823.
(24) Milieudefensie et al v. Royal Dutch Shell PLC, para 4.5.3.
(25) What a Dutch Court Ruling Means for Shell and Big Oil in BloombergQuint, 4 June 2021. Available at https://www.bloombergquint.com/quicktakes/what-a-dutch-court-ruling-means-for-shell-and-big-oil-quicktake.
(26) Chiara Macchi and Josephine van Zeben, Business and human rights implications of climate change litigation: Milieudefensie et al. v Royal Dutch Shell (2021). RECIEL. 30(3):409-415. doi:10.1111/reel.12416, p. 409. Available at https://onlinelibrary.wiley.com/doi/epdf/10.1111/reel.12416.
(27) Shell: Netherlands court orders oil giant to cut emissions in BBC News, 26 May 2021. Available at https://www.bbc.com/news/world-europe-57257982.
(28) Frequently Asked Questions (FAQ) on Dutch District Court Legal Case in Shell, 22 March 2022. Available at https://www.shell.com/media/news-and-media-releases/2021/shell-confirms-decision-to-appeal-court-ruling-in-netherlands-climate-case/_jcr_content/par/grid_copy_copy_copy_/p0/textimage.stream/1647925854400/460167304a697f411be1b9f80c6e05be0ac057fb/dutch-district-legal-case-faq.pdf.
Suggested citaion: S. Pacheco, ‘Landmark ruling: Milieudefensie et al. v Royal Dutch Shell’, Nova Centre on Business, Human Rights and the Environment Blog, 02 June 2022