Climate lawsuit against Shell dismissed on appeal

Uproar in Europe - The judgment of the Dutch court of first instance and its consequences

In a revolutionary ruling that seemed to generate a new legal practice in Europe with regard to compensation payments, the Dutch civil court in The Hague ruled at first instance in 2021 that Shell had failed to comply with the climate obligations resulting from the Paris Agreement and had thus violated the fundamental rights of the Dutch population. Shell is therefore liable for damages for its previous violations and must in future reduce its CO2 emissions by a net 45% by 2030 compared to 2019. The obligation to pay damages arises from the agreement itself and from the violation of fundamental rights.

This decision caused a great stir in Europe and seemed to completely undermine the principles of tort law that had previously applied throughout Europe. Whereas a breach of contractual or tortious obligations (e.g. protective laws) had previously been required for an obligation to pay damages, the Dutch court of first instance derived an obligation directly from international treaties or fundamental rights.

Across Europe, CO2 emitting companies prepared themselves against similar lawsuits, which actually followed. With the exception of one climate case (successful climate action brought by Swiss senior citizens before the ECtHR), however, all similar attempts at legal action were unsuccessful. Nevertheless, European companies were eagerly awaiting the decision of the Court of Appeal on the basis of the appeal lodged by Shell against this decision.

A sigh of relief in Europe - The decision of the Court of Appeal

On 12.11.2024, relief spread among European entrepreneurs. The Court of Appeal in The Hague overturned the first-instance decision in its entirety.

The obligations under the Paris Agreement and the ECHR are (treaty) provisions that are primarily addressed to the governments of the contracting states. This does not alter the fact that they can have an impact on relationships under private law. In summary, however, the court concludes that companies such as Shell, which contribute significantly to the climate problem and have the power to help combat it, are not directly bound by international treaties. Rather, companies such as Shell would bear their own responsibility for achieving the goals of the Paris Agreement.

With its decision, the Court of Appeal thus establishes that companies such as Shell are not addressees of the two international treaties and therefore cannot be obliged to pay compensation for any breach thereof.

Conclusion

The "sigh of relief" in Europe, both in business and in the legal world, following this appeal decision is palpable. For almost three years, it seemed that the world of tort law would be completely reshaped, as companies could be obliged to pay damages directly on the basis of international treaties.However, the Dutch Court of Appeal's decision now provides legal certainty and clarity. It confirms the understanding of the group of addressees of the international treaties in question, which has already been widely held.A decision on climate-relevant EU secondary legislation, on the other hand, does not make this decision. Climate proceedings based on such claims can therefore be decided in the affirmative if there is a sound basis and a justified request.