On 12 November 2024, the Court of Appeal of the Hague (the Court) overturned the landmark 2021 decision of Milieudefensie et al (Milieudefensie) v Royal Dutch Shell (Shell, Shell Plc in appeal), in which the (first instance) District Court of The Hague had ordered Shell to reduce its (scope 1 through 3) CO2 emissions (emissions) by net 45% (relative to 2019) by the end of 2030. An English translation of the 2024 decision can be found here, and our blogpost on the first instance decision can be found here.
While Shell emerged victorious in the appeal, the Court’s findings are largely attributable to the narrow way in which the claim was pleaded by Milieudefensie and, in particular, the focus on a specific reduction target. The decision carries complex nuances with important observations for companies and climate litigation globally. In this blogpost, we discuss the key findings of the Court and their implications.
Key findings of the Court
Although the Court reaffirmed that Dutch law imposes a standard of care on Shell to reduce its emissions, it held that Shell cannot be bound to a 45% reduction standard (or any other percentage), as this standard does not apply to individual sectors or countries. This conclusion was based on a number of findings.
Human Rights
The Court found that “protection against dangerous climate change” is a global fundamental human right, and while the obligation to protect primarily falls on states, this does not preclude parallel obligations on companies because of the “indirect horizontal effect of fundamental rights”, which may be attributed to Articles 2 and 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) which relate to the right to (respect for private and family) life.
In this regard, the Court explained that “there is no doubt that the climate problem is the greatest issue of our time.” This echoes the recent decision of the European Court of Human Rights in the case brought against the Swiss government, KlimaSeniorinnen, in which it held that “the court notes that climate change is one of the most pressing issues of our times” (please also see our blogpost on the KlimaSeniorinnen case).
In this context, the Court reaffirmed that companies have a responsibility to protect against climate change based on the “standard of care” under Dutch law, which is informed by soft law principles such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. Specifically, the Court held that companies which “contribute significantly” to “the climate problem” have an obligation to limit their emissions, even without explicit (public law) regulations.
Percentage reduction obligation
However, the Court also found that there is no general obligation to reduce emissions by 45%. Large companies can choose their own approach to reducing their emissions so long as they are consistent with the Paris Agreement’s climate targets and EU regulation.
New investments in oil and gas
The Court made clear that Shell’s planned investments in new oil and gas projects “may be at odds” with its standard of care. However, the question of whether Shell’s planned investments in new oil and gas fields are in violation of its standard of care was not at issue in the proceedings.
Scope 1 and 2 emissions
The Court recognized that Shell had committed to reducing its scope 1 and 2 emissions by 50% by 2030, exceeding Milieudefensie's sought reduction of 45%, and had already achieved a 31% reduction by 2023. On this basis, the Court concluded that Shell has already largely achieved, and has in place specific measures to achieve, its specific reduction targets for scope 1 and 2 emissions. With regard to scope 1 and 2, therefore, an impending violation of a legal obligation could not be established.
Scope 3 emissions
The Court found that Shell can be held accountable for scope 3 emissions, affirming that corporate responsibility extends to emissions from third parties, such as customers, under existing legal frameworks. However, it ruled that imposing a specific 45% reduction target on Shell by 2030 is inappropriate, given the global and sector-specific nature of emission pathways. The Court also found that such a mandate would be ineffective, as limiting Shell’s resale of fossil fuels – which constitute two-thirds of Shell’s scope 3 emissions – would not reduce overall emissions but merely shift them to other suppliers. The Court, citing the precautionary principle, denied Milieudefensie’s claims due to uncertainties about standards and awarded costs against them. However, the awarded amount is only a fraction of actual costs, based on a standardized scale.
Observations
It is important to note that the decision relies on a Dutch civil law principle that allowed the Court to draw heavily on so called “soft law” principles to inform an “unwritten standard of care”. The approaches that have previously been taken by Courts in other jurisdictions (including the US and the UK) suggest that such soft law principles are likely to carry less weight in other legal systems.
That said, the ruling reinforces a growing trend of holding companies accountable for their climate impact, potentially encouraging new claims against businesses and governments worldwide.
In particular, the reaffirmation that companies must limit emissions may prompt more claims against businesses, not only in the oil and gas sector but also in the financial sector. Indeed, despite the ruling, Milieudefensie continues to pursue its previously announced case against a Dutch bank, seeking an injunction to reduce its emissions and demanding that the bank ceases working with companies lacking proper climate plans or expanding fossil fuel projects.
Further, the Court’s remarks about the potential conflict between Shell’s new oil and gas investments and its standard of care may encourage NGOs to bring future cases targeting such projects.
We may also see NGOs leverage the Court’s recognition of protection from climate change as a fundamental human right, which has gained traction since the 2019 Urgenda ruling.
Equally, however, and in the US in particular, we are seeing growing anti-ESG sentiment which is in direct tension with what we see in the Shell decision.
What next?
Milieudefensie has three months (i.e. until 12 February 2025) to appeal the judgment to the Dutch Supreme Court, but has not yet announced whether it will do so. At least at first blush, an appeal to the Supreme Court seems challenging, as the Supreme Court only reviews legal interpretation and reasoning, without allowing new facts or claims.
