The Shell case in a nutshell
In May 2021, the District Court of The Hague ruled that Shell – as head of the Shell-group – has a duty of care to mitigate its contribution to dangerous climate change, and therefore an obligation to reduce its global greenhouse gas (GHG) emissions by 45% by 2030, based on 2019 levels (please be referred to our earlier blog on this here). The court ruled that Shell has a ‘result obligation’ with respect to the Shells group GHG emissions (Scope 1 and 2). As for its suppliers and customers, the court speaks of a material ‘best-efforts obligation’ (Scope 3).
The court based this duty of care on the open standards of Dutch tort law (Article 6:162 Dutch Civil Code) as well as on human rights and soft law instruments (please be referred to our ESG trend report on the rise of ESG litigation and horizontal human rights enforcement). The ruling of the court in first instance emphasized that Shell-group’s global emissions significantly impact climate change, which poses ‘serious and irreversible’ risks to Dutch residents. In setting this reduction obligation for Shell, the court referenced several factors, including the global emissions impact, the human rights of Dutch citizens (such as the rights to life and family), and Shell’s control over its subsidiaries within the Shell-group and supply chains.
Today, on 12 November 2024, the Court of Appeal of The Hague issued its decision in appeal. The Court of Appeal acknowledged – in short – that Shell has a duty of care to limit its GHG emissions due to climate-related human rights obligations that (also) extend to companies. Despite this endorsed duty of care, the Court of Appeal found that it could not impose a specific reduction obligation to Shell.
The Court of Appeal upheld the duty of care for Shell, but it could not impose the absolute 45% GHG emissions reduction target. The court cited recent EU regulations requiring climate-conscious corporate strategy adjustments (such as the CSDDDD which also impose such obligations, please be referred to our earlier blog on this here), but these do not mandate an explicit reduction of 45%, and the variability in country- and sector-specific targets further undermines applying a concrete reduction obligation on Shell. Additionally, according to the court, Shell showed that it is committed to reduce its Scope 1 and 2 emissions in line with Milieudefensie’s claims. Therefore, the court ruled that Milieudefensie’s claims with respect to Scope 1 and 2 are inadmissible because no immediate breach of Shell's duty of care could be established.
With respect to Milieudefensie’s claims relating to Scope 3, the court ruled that these claims were not enforceable, thereby following Shell's argument that – briefly put – stopping trading in fossil fuels would not lead to actual GHG emission reductions because other suppliers would continue to meet customer demand. As this would only remove Shell from the global value chain without reducing overall GHG emissions, the court found that Milieudefensie did not have a sufficient interest in its claim with respect to Scope 3 emissions, and therefore the court also dismissed this claim.
What’s next?
The outcome of the Shell appeal is pivotal for future ESG litigation in the Netherlands. Our firm is closely monitoring ESG litigation and legislation and potential liability and litigation risks in this respect. Feel free to contact one of our colleagues below for more information about the ESG litigation in the Netherlands.