Shell Case Background
In May 2021, the District Court of The Hague ruled that Shell must reduce its greenhouse gas (GHG) emissions by 45% by 2030. This ruling was based on Dutch tort law and human rights obligations, emphasising Shell's duty of care to mitigate its contribution to dangerous climate change.
Shell appealed the ruling in first instance, and two organisations, Milieu & Mens and Clintel, sought to join the proceedings. The court of appeal allowed Milieu & Mens to join, recognising their interest in the economic implications of the ruling, but rejected Clintel's request due to their differing views on climate science.
Court of Appeal's ruling in appeal
The court of appeal acknowledged that climate change is a fundamental human rights issue, protected under Articles 2 and 8 of the European Convention on Human Rights (ECHR). As for Shell specifically, there are heightened expectations compared to other companies (outside the fossil fuel sector) to reduce its GHG emissions, due to Shell’s significant role in fossil fuel sector. Despite this recognition, the court did not impose a specific reduction obligation on Shell, citing the complexity of establishing such a mandate for a single company.
The court of appeal noted that while EU regulations require companies to prepare climate transition plans consistent with the European Union's climate objectives, they do not mandate specific GHG reduction targets for individual companies. This lack of specific legal requirements influenced the court of appeal's decision not to impose a concrete reduction obligation on Shell.
Shell is on track to meet its target of a 50% reduction in Scope 1 and 2 emissions by 2030 according to the court of appeal, which exceeds the demands of Milieudefensie et al. The court of appeal therefore found no imminent breach of legal duty under Article 6:162 of the Dutch Civil Code, as Shell's current efforts align with its ambitious targets.
The court of appeal acknowledged that approximately 95% of Shell's emissions are Scope 3, primarily arising from the combustion of oil and gas sold by Shell. Nevertheless, the court of appeal did not impose a specific reduction obligation on these GHG emissions, citing the complexity of causality and market dynamics. The court of appeal supported Shell's argument that ceasing the resale of fossil fuels would not lead to actual GHG emission reductions, as alternative suppliers would likely meet customer demand.
The court of appeal upheld Shell's general duty of care to mitigate climate change but did not enforce specific reduction targets. This ruling seems to show the added value of sector-wide regulations – such as the CSDDD (please be referred to our earlier blog) – to ensure consistent accountability and highlights the challenges of imposing specific obligations on individual companies in the light of ESG litigation. In the case-analysis, we dive deeper into this ruling and its potential impact on ESG litigation.
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