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Freshfields Sustainability

| 2 minutes read

Oral hearings in appeal of landmark Shell judgment commence

Today is an important day for climate litigation, marking the beginning of a series of oral hearings in the appeal proceedings of the landmark 2021 Shell judgment in which the District Court of The Hague ordered Shell to reduce its emissions by net 45% by 2030, compared to 2019 levels, through Shell’s corporate policy (Reduction Obligation), as a rule of unwritten Dutch law. The 2021 judgment delivered by the court may be reviewed via YouTube (Dutch only, 30 minutes) or in brief via the judicial website (Dutch only, 1 minute).  The ruling was unprecedented as it was the first time a court ordered a private company to reduce its emissions. Considering the gravitas of the case, it is also referred to as the “Climate Case” (Klimaatzaak), the lead claimant being Friends of the Earth Netherlands (Milieudefensie).

The oral hearings are scheduled for 2,3,4 and 12 April and can viewed livestream (Dutch only). After the final oral hearing, it could take anywhere between 4 - 12 months for a judgment to arrive.

The Reduction Obligation

The Reduction Obligation laid down in the 2021 judgment covers Shell’s entire energy portfolio and the combined volume of all emissions from scope 1 to 3 as follows:

  • Scope 1: the (direct) emissions from facilities that Shell wholly or partially owns or has operational control over
  • Scope 2: the (indirect energy) emissions from third-party installations from which electricity, steam or heat is purchased for the purposes of business activities (suppliers)
  • Scope 3: the emissions resulting from Shell’s business activities, but which arise from sources owned or controlled by third parties such as suppliers or consumers, including emissions from the use of purchased crude oil and gas.

The Reduction Obligation insists that Shell has a result obligation (resultaatsverplichting) with regard to its own CO2 emissions (scope 1). Regarding suppliers and customers (scopes 2 and 3), Shell has an onerous best-efforts obligation (zwaarwegende inspanningsverplichting), which means that Shell must use its influence through its group policies, for example by imposing requirements on suppliers during procurement. The court stated that Shell has complete freedom to fulfil the Reduction Obligation as it sees fit and to shape its corporate policies and strategy accordingly. According to the court, the sacrifices this requires outweigh the interest served by countering dangerous climate change.

Shell’s Statement of Appeal

In March 2022, Shell filed its Statement of Appeal. Its main arguments are:

  1. The first instance court’s imposition of the Reduction Obligation would not support the global energy transition, and the Reduction Obligation is an ineffective mechanism for reducing global emissions.
  2. The first instance court did not properly apply Dutch law, and the Reduction Obligation as an unwritten rule of law does not fit within the Dutch legal system. 
  3. A general global average net 45% greenhouse gas emissions reduction target for 2030 cannot be translated into a specific legal obligation on Shell to achieve the same precise reduction.
  4. Neither international human rights law nor business and human rights principles support the existence of a binding Reduction Obligation.
  5. The judgment is contrary to fundamental principles of EU law and policy.
  6. There is no unwritten law that establishes a Reduction Obligation for Scope 3 emissions.
  7. Any decision on the claims of Milieudefensie et al. goes beyond the law-making function of the court. 

Recent developments

After Milieudefensie et al. and Shell submitted their appeal briefs, the court of appeal permitted one new party – Dutch Foundation M&M (Milieu & Mens) – to join the appeal proceedings in support of Shell. M&M aims to protect, promote and represent the interests and rights of Dutch citizens in relation to energy in a broad sense. It requested permission to join the proceedings because it fears that any Reduction Obligation imposed on Shell will lead to increased fuel/energy costs for Dutch citizens, as a result of which the energy certainty for Dutch citizens (and SMEs) would be jeopardised. Another Dutch Foundation, Climate Intelligence (Clintel), applied for permission to intervene in the proceedings or, alternatively, to join the appeal proceedings in support of Shell. Its application was denied