"Corporate Climate Responsibility After “Milieudefensie vs. Shell” Court of Appeal Decision", 17 December 2024

The recent decision by The Hague Court of Appeal on 12 November 2024 in the case Milieudefensie vs. Shell was eagerly awaited in both legal academia and the oil and gas industry. It overturns the path-breaking initial 2021 judgment, in which the Shell group was ordered to reduce its aggregate annual volume of CO2 emissions by 45% by 2030, relative to 2019 values.

...The first point worth making clear is that the appeal decision did not retract the crucial reasoning that underpins the first-instance pronouncement, that is, under Dutch tort law principles, corporations do have a special ‘social’ duty of care to reduce emissions, in alignment with international and scientific goals, beyond existing European or domestic laws.

The Court of Appeals reiterates that Shell, in order for its actions to be considered lawful, must take into account all this vast body of formal and informal provisions well beyond strict climate legislation, to which it is directly subject (such as, at EU level, among others, the EU ETS and the next ETS 2 Directives, the Corporate Sustainability Reporting Directive, and the recent Corporate Sustainability Due Diligence Directive (CSDDD).

The message conveyed is that corporate compliance with existing legislation is insufficient...

For the Court of Appeal, the problem lies in the precise content of this social duty of care – i.e., the percentages of reduction and their concrete application...

Interestingly, the Court also pointed out that Shell has «tools» at its disposal that «have been developed that can help Shell influence its customers’ choices....

..[T]he Court of Appeal ... rejects a straightforward application of the 45 per cent reduction. It notes that these percentages are not meant to be equally and uniformly imposed on specific world regions, economic sectors, or companies. In the Court’s reasoning, also different sources of emissions should be burdened with different standards of reduction....The conclusion is that «the court cannot determine what specific reduction obligation applies to Shell» (§ 7:73)...