From the proceedings pending so far, we can identify, across various legal orders, a number of comparable legal questions and issues of climate liability under Private Law.
Private International Law
Environmental pollution knows no borders: This holds especially true for climate damage.Footnote 47 Ideally, therefore, the law should offer a global response. However, there is no harmonised global uniform law in tort law that is relevant here. Instead, questions of the forum and applicable law are regulated autonomously by the states concerned or by the EU. For cross-border climate actions, the courts must therefore first assess their international jurisdiction and decide which of the competing substantive laws shall apply in casu.Footnote 48
Prima facie, the Shell case, unlike the RWE case, did not involve any cross-border element. The plaintiffs were primarily Dutch NGOsFootnote 49, Shell’s main office is located in the Netherlands (at least to date),Footnote 50 and the plaintiff’s accusation concerned a corporate policy established in The Hague.Footnote 51 However, the action’s objective was to reduce CO2 emissions worldwide, in particular, also those produced by group companies and business partners located abroad (Scope 3 emissions). It is therefore convincing that the Hague Court addressed questions of Private International Law.
In the EU, actions against legal entities can be brought at their registered seat, administrative seat, or the seat of their headquarters. The courts in these places have international jurisdiction pursuant to Art. 4 para. 1, 63 para. 1 of the Brussels Ibis Regulation. In addition, the special jurisdiction for torts under Art. 7 No. 2 of the Brussels Ibis Regulation allows the plaintiff to choose further places of jurisdiction at the place of action or the place of the effect of the contested tort. Here already, the questions arose that then became critical again in determining the applicable law under Art. 4 and 7 of the Rome II Regulation.
The first matter in dispute concerned the question whether the place of the corporate management decision or the establishment of a fundamental corporate policy should be regarded as the place of action within the meaning of Art. 7 No. 2 of the Brussels Ibis Regulation and should therefore be considered determinative of jurisdiction. To date, company decisions (contrary to the pollution itself by industrial plants) have been classified, for the most part, as mere preparatory acts, and thus not as the place of action.Footnote 52 The Hague District Court did not comment on this in the Shell judgement. But it also did not need to do so, since the place where corporate policy is decided is typically identical with one of the jurisdictions already covered under Art. 4 para. 1, 63 para. 1 of the Brussels Ibis Regulation. Consequently, in the Shell case, Art. 7 No. 2 of the Brussels Ibis Regulation did not offer any added value from the plaintiff’s point of view.
But matters are different for the version involving the place of effect (place where the damage occurs) in Art. 7 No. 2 of the Brussels Ibis Regulation. Given that climate damages threaten to arise globally, companies fear that they can be taken to court worldwide. Scholars have therefore attempted to interpret the jurisdiction of the place of effect restrictively,Footnote 53 for instance, by turning to the mosaic theory developed for dispersed losses.Footnote 54 While the reasoning is not sufficiently convincing from a doctrinal perspective,Footnote 55 it is also not necessary in practical terms, since the territorial scope of the Brussels Ibis Regulation is limited, in any case, to the Member-State courts.Footnote 56 Therefore, companies in the EU need not fear being sued in a third state on the basis of Art. 7 No. 2 of the Brussels Ibis Regulation. Footnote 57
The applicable rules of tort law
The rule of tort law applicable to climate damages must be determined pursuant to the Rome II Regulation. The general provision under tort law in Art. 4 of the Rome II Regulation is based on the place where the damage occurred (in other words, the place where the legal interest was violated or the place of effect). But there is a special rule for “environmental damage” in Art. 7 of the Rome II Regulation. It follows the so-called principle of ubiquity (Ubiquitätsprinzip) and allows the plaintiff to deviate from the law of the place of effect by instead unilaterally invoking the law “of the country in which the event giving rise to the damage occurred”—that is, the law of the place of action.Footnote 58
The Hague District Court first stated succinctly that climate change is environmental damage. It thus affirmed the substantive scope of Art. 7 of the Rome II Regulation.Footnote 59 This subsumption presupposed that not only concrete pollution (e.g. due to a chemical accident) but also global warming caused by anthropogenic CO2 emissions as such should already be qualified as environmental damage. Yet this stance is controversial.Footnote 60
The Hague Court then came to the application of Dutch tort law by taking recourse to the place of action under Art. 7 of the Rome II Regulation.Footnote 61 This is remarkable insofar as the primary point of reference in climate liability constellations until now has been the place of the concrete greenhouse gas emission (e.g. the site of the power plant).Footnote 62 To date, previous corporate decisions of the management board have been disregarded as mere preparatory acts.Footnote 63 The Hague Court chose a different approach. It argued that the place where Shell’s board of directors established the group’s emissions and climate policy was an independent place of action.Footnote 64 Even though Art. 7 of the Rome II Regulation refers to “the harmful event”, the Court maintained that in those situations in which multiple acts contribute to environmental damage, there is leeway to qualify each of these events as an independent place of action.Footnote 65 In the alternative, the Court elaborated that Art. 4 of the Rome II also led to the application of Dutch substantive law due to domestic violations of legal interests as a result of climate change.Footnote 66
Since the plaintiffs in the Shell proceedings only claimed present and future emissions as the matter in dispute, it was not necessary to review the intertemporal applicability of the Rome II Regulation.Footnote 67 However, should future claims for damages be based (also) on emissions before 11 January 2009, it would be necessary to activate the forum state’s autonomous Private International Law (in Germany: Art. 40 ff. of the German Introductory Act to the Civil Code), in force prior to the Rome II Regulation, in order to determine the applicable tort rule.Footnote 68
The special rule pursuant to Art. 17 of the Rome II Regulation can be used to loosen or modify the tort rule in Art. 4 and 7 of the Rome II Regulation.Footnote 69 This rule establishes that the rules of safety and conduct in force at the place of action shall be taken into account. However, they are only considered at the level of substantive law (local and moral data approachFootnote 70). Accordingly, the Hague Court discussed the provision’s significance in connection with emissions certificate trading and operating permits issued at the location of the plant only at the level of the applicable substantive law (here Dutch law).Footnote 71
From a plaintiff’s perspective, substantive law presents the greatest hurdles for climate actions.
Bases for claims
Cross-jurisdictionally, the applicable rules of tort law offer most of the bases for claims for the liability of private greenhouse gas emitters. From a conflict of laws classification perspective, these rules also include provisions for claims to prevent property damage (e.g. § 1004 of the German Civil Code).Footnote 72 Considered from a comparative functional angle, various legal orders mostly have parallel prerequisites of tortious liability.Footnote 73 Differences may emerge if a legal order has strict rules of liability, independent of fault (Gefährdungshaftung), that can be utilised for climate actions.Footnote 74
The Shell lawsuit is based on Art. 6:162 of the Dutch Civil Code, the general clause of Dutch tort law. In France, the loi de vigilance passed in 2017, which imposes the duty on large companies to draw up a risk and action plan focused on human rights and environmental protection and serves as the basis for the lawsuit pending against Total, explicitly refers to the tort law of the French Civil Code.Footnote 75 Lliuya has based his action against RWE on § 1004 of the German Civil Code, the claim to removal and injunction in cases of property infringement.Footnote 76
The problem of violations of legal interest
Climate change as a problem of the commonsFootnote 77 raises the question of the scope of the protection of legal interests because global warming as such does not involve a violation of individual legal rights. The institution of the “public nuisance” under common law serves as a legal institution that can establish liability under private law if common interests have been violated.Footnote 78 By contrast, systems of civil law deal primarily with the violation of individual legal interests,Footnote 79 as is the case for the tortious general clause under German law (§ 823 para. 1 of the German Civil Code). Neither the environment, the climate nor specific climatic phenomena as such are protected under this clause.Footnote 80 They are only afforded indirect protection to the extent that individual legal interests are also affected, as is true for the property of the plaintiff Lliuya in the RWE case.Footnote 81 The Hague District Court, too, cited impending violations of individual legal interests by addressing how climate change may impair the life and limb of the Dutch population in the Wadden Region, which is at risk of flooding.Footnote 82
Causation and attribution
Much of the debate on climate liability law revolves around the question of the causation and attribution giving rise to liability.Footnote 83
The relationship of cause and effect (attribution)
The first problem is whether a sufficiently close relationship of cause and effect can be established between individual damaging events and the emissions of a specific company (attribution or imputability). Such a causal link was denied, for example, in Comer v. Murphy Oil USA.Footnote 84 In these proceedings, the plaintiffs sought to hold the oil industry liable for damages caused by Hurricane Katrina, claiming that the hurricane was a manifestation of extreme weather events due to climate change. The Court held that there was not sufficient proof of a close link between the defendants’ emissions and the hurricane damage.Footnote 85
Since then, considerable progress has been made in attribution science tracing regional and local environmental changes back to global earth warming,Footnote 86 which needs to be translated into law.Footnote 87 One example is a study conducted by the University of Oxford and the University of Washington related to the RWE case concluding that the flood risk to Huaraz, the home town of the plaintiff in the RWE case, is almost entirely caused by anthropogenic climate change.Footnote 88 The Court in the RWE case is still taking evidence on the multi-stage chain of causation from greenhouse gas emissions to global temperature increases and local climatic changes to concrete (impending) individual damage.Footnote 89
In the Shell proceedings, the Hague District Court chose not to hear evidence. In its decision, it referred instead to the reports of the Intergovernmental Panel on Climate Change (IPCC) and the Royal Netherlands Meteorological Institute.Footnote 90 The courts in the Urgenda case had already referred to the findings of such specialised institutions, which collect and assess the current state of global climate research.Footnote 91 In its decision of 24 March 2021, the German Constitutional Court also relied on IPCC reports as well as on reports of the German Environment Agency and the German government’s scientific advisory body on environmental issues.Footnote 92
There is an essential difference between these three proceedings and the RWE case: In the Shell, Urgenda, and Karlsruhe cases, it was not necessary to consider the last stage of causation because each of these decisions focused on the question of future emissions. Consequently, there was no need to trace an individual violation of legal interests back to a defendant’s concrete emissions. It was enough that the courts, by referring to the IPCC reports, affirmed the causal link between greenhouse gas emissions and climate damage in general.
The plaintiff’s side faces another problem of imputability due to the fact that the greenhouse effect is a consequence of the combined actions of countless emitters whose individual contribution to the total emissions is negligible.
Like the Dutch state in Urgenda and the German Bundestag in its response to the constitutional complaints that led to the Karlsruhe Court’s climate decision, Shell, too, tried to deny responsibility for climate change by citing the large number of emitters: It argued that its own contribution is negligible and that the obligation to reduce emissions is ineffective.Footnote 93 Moreover, Shell claimed that the space it would vacate in the energy sector in order to meet emission targets would be taken up immediately by competitors (substitution).Footnote 94
The District Court did not accept this objection of alternative behaviour (which would not have any impact on climate change)Footnote 95 on the grounds that it presupposed a “business as usual” scenario, failing to recognise that competitors were increasingly forced, both internally and externally, to make their business models (more) climate-friendly.Footnote 96 The court stated that even if Shell could not solve the global problem of climate change alone, it had to contribute to solving the problem.Footnote 97 The Hoge Raad had already advanced this reasoning in Urgenda by ordering the Dutch state “to do its part”.Footnote 98 The German Constitutional Court also did not accept the argument that other states’ emissions should relieve the Federal Republic of its responsibilities.Footnote 99
Unlawfulness: the duty of care towards third parties to reduce CO2 emissions?
Private Climate Litigation revolves around the question of whether or to what extent private emitters have a duty to reduce their greenhouse gas emissions. Either such a reduction obligation is the direct subject of the claim, as in the Shell case, or it is derived from an unwritten duty of care towards third parties that aims to adopt measures against the “source of danger CO2 emissions”.
Many German legal scholars remain sceptical about a duty of care towards third parties (Verkehrspflicht) to reduce CO2 emissions.Footnote 100 They argue that greenhouse gas emissions are (still) an inevitable component of ensuring a stable energy supply for society.Footnote 101 A reduction obligation would threaten the general public’s stable energy supply, which the German Constitutional Court has in fact recognised as the basis of a dignified existence.Footnote 102 Moreover, emitters have permits and emission allowances under public law.Footnote 103 Scholars argue that the unity of the legal order requires that these be respected.Footnote 104 Cross-jurisdictionally, disregarding permits would mean running the risk that the judgement would not be recognised and enforced in the state that issued the permits under its Public Law.Footnote 105
Shell: the duty to reduce CO2 emissions derived from Art. 6:162 of the Dutch Civil Code
In contrast to the prevailing opinion in German law, the Hague District Court, basing itself on the Dutch tortious general clause, derived a “duty of care” to reduce CO2 emissions.Footnote 106 In the grounds for the decision, it referred to the climate agreements under Public International Law. These include:
Climate protection under Public International Law
The states—as the addressees of human rights catalogues under Public International Law and, in particular, the 1992 UN Framework Convention on Climate Change of Rio de JaneiroFootnote 107, the Kyoto Protocol of 1997Footnote 108, and the Paris Agreement of 2015Footnote 109—bear the primary responsibility for reducing greenhouse gas emissions and for adopting climate-friendly measures. Private companies, on the other hand, are not subjects of Public International Law and are therefore not bound by regimes of international conventions.Footnote 110
The Hague District Court did not want to challenge this traditional conception prima facie. First, it stated that the Paris Agreement was not directly binding on Shell.Footnote 111 Yet, it promptly followed this assertion with a “but”, arguing that the climate protection goals of the Paris Agreement reflected a broad international consensus on the actions required to prevent dangerous climate change.Footnote 112 The Court cited this consensus as an argument for concretising the unwritten tortious standard of care and deriving from it a duty to reduce CO2 emissions.Footnote 113 It took up the Urgenda judgementFootnote 114 by also basing its reasoning on the right to life and limb entrenched in Art. 2 ECHR and the right to respect for private and family life guaranteed in Art. 8 ECHR. In the Dutch Court’s opinion, these human rights also included a climatic component.Footnote 115
The mandate for energy supply as a counterargument?
Energy suppliers have a duty under public law to ensure the population’s energy supply.Footnote 116 The Hague District Court used the catchphrase “the twin challenge”Footnote 117 to address the tension between the energy supply mandate on the one hand and the duty to reduce CO2 emissions on the other hand. While it recognised the importance of access to reliable and affordable energy, especially in the light of Goal 7 of the 17 UN Sustainable Development GoalsFootnote 118, it refused to conclude that Shell should have a diminished set of duties as a result.Footnote 119 Instead, it invoked Goal 13, which calls on the global community to “take urgent action to combat climate change and its impacts”.Footnote 120 The Court reasoned that the global demand for energy could not be pitted against climate protection but had to be satisfied within the framework established by the climate protection goals of the Paris Agreement.Footnote 121
Operating permits and concessions for the extraction of raw materials (Art. 17 of the Rome II Regulation)
The District Court discussed the role that Shell’s operating permits and long-term concessions for oil and gas production should play in establishing a tortious duty to reduce CO2 emissions.Footnote 122
Pursuant to Art. 17 of the Rome II Regulation, local “rules of safety and conduct” at a place of action that is not the place of effectFootnote 123 must be considered within the scope of the applicable (here: Dutch) tort statute. Following the will of the EU legislator and prevailing opinion, these rules also include (foreign) permits and authorisations.Footnote 124
The Hague District Court followed this viewFootnote 125 but left open the question of where it located the place of action. In determining the applicable tort statute according to Art. 7 of the Rome II Regulation, it held that the place of action was the place where Shell had established its emissions and climate policy (pursuant a board decision at Shell’s headquarters which to date are in The Hague).Footnote 126 Were we to assume that (only) this same place of action was decisive in cases involving Art. 17 of the Rome II Regulation, then only permits and concessions issued under Dutch law could be taken into account. But in fact, in cases involving Art. 17 of the Rome II Regulation, the source of emissions in question (e.g. the power plant) must be considered the place of action because permits fall under public law and consequently follow the principle of territoriality. For a company with several emitting industrial plants worldwide, there are several places of action within the meaning of Art. 17 of the Rome II Regulation. The respective place of action (location of the plant) then determines the substance and scope of the operating permit(s).
In terms of substantive law, the Hague District Court denied that permits and concessions could have any indemnifying effect with regard to a CO2 reduction obligation.Footnote 127 It merely stated that “it is not apparent that CO2 emissions have played any role whatsoever in these permits and concessions.”Footnote 128 This falls short. The Rome II Regulation follows the principle of the unity of the applicable law (Statutseinheit)Footnote 129 (Art. 15 of the Rome II Regulation). The tort statute comprehensively governs the grounds and consequences of liability, including the question of whether and to what extent permits affect or exclude a person’s tortious liability.Footnote 130
Under Dutch law, too, public law permits must be taken into consideration. According to the case law of the Hoge Raad, it is necessary to consider issued building permits when determining tortious liability.Footnote 131 Pursuing the logic of this case law further, we maintain that the court should have scrutinised the substance of the permits and concessions issued to the Shell group companies in question, as well as the regulatory objectives of the provisions on which they are based.
Furthermore, Dutch and Austrian courts have developed the criteria for dealing with foreign permits in other cases of environmental liability. The courts hold that foreign permits must be considered domestically if (i) the emissions are permissible under international law, (ii) the licencing requirements abroad are functionally comparable to those of the lex fori and (iii) the foreign affected parties could have been involved in the licencing procedure.Footnote 132 While the third criterion may be a good fit for neighbours close to a border (e.g. when a power plant is being built), it is not suited for global climate liability cases.Footnote 133 Nevertheless, the legal institution of substitution should serve to make productive use of the second criterion of functional comparability: If the licencing requirements are functionally comparable, foreign permits could have the same effects before a domestic court as domestic permits.Footnote 134
European emissions trading
Under international law, Art. 17 of the Kyoto Protocol (1997) contains the first reference to emissions trading as an optional instrument for reducing greenhouse gases.Footnote 135 The EU implemented this option under Community law with Directive 2003/87/EC (which has since been modified several times) and created a system for trading greenhouse gas emission certificates.Footnote 136 In the EU, plant operators can no longer use the environmental medium air unlimitedly but require a permit to do so. Footnote 137 The permit is linked to the purchase of corresponding emission certificates.Footnote 138 While the Paris Agreement (2015) still excluded global emissions trading,Footnote 139 the Parties, meeting in November 2021 at the “26th Conference of the Parties (COP 26)” in Glasgow, agreed on cornerstones for the worldwide expansion of emissions trading. In contrast to the European emissions trading system, the scheme is an international trade in emissions reduction credits, not a trade in allowances to emit a certain amount of greenhouse gases.Footnote 140 It is linked to the obligations of the countries to reduce their greenhouse gas emissions and allows the transfer of emissions reductions between them.Footnote 141
In the Shell judgement, the Hague District Court declared that, in principle, acquired EU emissions trading certificates—unlike plant operating permits—have an indemnifying effect.Footnote 142 It based its reasoning on the Hoge Raad’s case law concerning a building permit’s effect on private law.Footnote 143 If a person who acted in accordance with a permit they had been issued caused damage or nuisance to third parties in the process, their tortious liability would depend on the nature of the permit and the regulatory objective of the provisions on which it was based.Footnote 144 The concrete matter at hand involved the interests of the neighbour, who had complained of a nuisance caused by an approved construction of an annexe, which interfered with the amount of light he received and with his view. The Hoge Raad held that this case required a review to determine whether the statutory regulations on which the building permit was based (Housing Act, Spatial Planning Act) represented a final reconciliation of interests. If this was the case, the Court maintained, a (possibly divergent) reconciliation of interests by means of tort law was precluded.Footnote 145
The Hague District Court accordingly examined the objective and scope of the emissions trading scheme.Footnote 146 It asked whether the authorities issuing emission allowances had weighed Shell’s interests against the opposing interest of reducing emissions to protect the climate.Footnote 147 The court specified limits to the emissions trading system. First, it stated that because only EU companies participate in the European emissions trading system, it could only have an effect within EU borders.Footnote 148 Second, it maintained that emission allowances only applied to companies’ Scope 1 emissions,Footnote 149 i.e. only to a company’s direct emissions from sources that it owned or controlled.Footnote 150 Thus, they did not have a preclusive effect on Scope 2 and 3 emissions. Third, the court held that the latest emission reduction targets were not sufficient to achieve the objectives of the Paris Agreement.Footnote 151 Accordingly, only a small part of Shell’s corporate emissions would benefit from the indemnifying effect of EU emissions trading.Footnote 152
Scope of the reduction obligation
The parties’ most contested issue concerned the scope of the reduction obligation. The dispute focused on whether Shell’s reduction obligation also extended to its Scope 3 emissions, which account for 85% of its total emissions.Footnote 153 The Court argued in favour.Footnote 154 It derived responsibility for all emissions, including Scope 3 emissions, from the UN Guiding Principles on Business and Human Rights.Footnote 155 The principles establish that companies have the duty to respect human rights throughout the entire supply chain. The Hague Court applied this assessment to the issue of emissions.Footnote 156 In our opinion, however, extending the reduction obligation to include Scope 3 emissions goes too far.Footnote 157
Separation of powers and justiciability
Climate Litigation provides an occasion to discuss the separation of powers as well as the competences and capability of the judiciary.Footnote 158 This applies primarily to public-law proceedings in which a state’s climate policy is the subject under dispute.Footnote 159 However, the controversy does not stop at public law disputes.Footnote 160 In Climate Litigation, civil courts also decide indirectly on a society’s climate policy.Footnote 161
In German private law, the question of justiciability is embedded in traditional legal institutions of tort law or of property law. Thus, the issue of justiciability influences individual elements that establish liability, such as adequacy and attributability, the doctrine of the duty of care towards third parties (Verkehrspflichtendogmatik), or the concept of the disturber (Störer) under § 1004 of the German Civil Code.Footnote 162 US courts address the problem more explicitly and sometimes invoke the political question doctrine to dismiss climate litigation.Footnote 163 Shell tried to play this card before the Hague District Court.Footnote 164 But since Dutch law does not have any admissibility constraints comparable to the political question doctrine, the Court had to rule on the merits of the pending case.Footnote 165