Beyond borders: the global influence of Dutch 'Climate Litigation'

Climate Litigation in the Netherlands

(a) Imposing human rights obligations on the government

Urgenda, a Dutch foundation focusing on sustainability and innovation, conducted ambitious and pioneering climate litigation against the Dutch state, marking the first case of its kind in the Netherlands. Its objective was to compel the Dutch state to accelerate the reduction of greenhouse gas emissions beyond the targets set by the existing policy. It succeeded. In its ruling of 20 December 2019, the Dutch Supreme Court mandated the Dutch state to cut greenhouse gas emissions by 25% by the end of 2020 compared to 1990 levels, whereas the existing policy prescribed a 20% reduction. The Supreme Court based its ruling on the UN Climate Convention and the state's legal obligations to protect the life and well-being of citizens in the Netherlands under the European Convention on Human Rights (ECHR). The ECHR requires member states to guarantee their residents the rights and freedoms set out in the ECHR, including Article 2 protecting the right to life, and Article 8 protecting the right to respect for private and family life.

The international impact of the Urgenda case was recently reflected by the European Court of Human Rights (ECtHR) in the Verein KlimaSeniorinnen and others v. Switzerland case (ECtHR 9 April 2024, 53600/20). The complainants explicitly referred to the Urgenda ruling to substantiate the duty of a state to do its part. On 9 April 2024, the ECtHR ruled in favour of the complainants. In its ruling, the ECtHR directs member states to establish reduction goals for net neutrality in greenhouse gas emissions by approximately 2050. This is a less definitive approach than the Urgenda precedent, mandating a specific 25% reduction in CO2 emissions by 2020, but the ruling can be considered pivotal in holding states accountable for their climate policies.

If states are held accountable for their climate policies, this begs the question: what are the responsibilities of 'polluting' businesses?

(b) Imposing human rights obligations on polluting businesses

The Dutch association Milieudefensie, also known as Friends of the Earth Netherlands, has also been preoccupied with this question. Through legal proceedings, Milieudefensie has tried to compel Shell to significantly reduce its CO2 emissions and has been successful, at least in the court of first instance.

Milieudefensie based its claim on tort law and substantiated it by invoking human rights, particularly Article 2 and Article 8 of the ECHR, which encompass the right to life and the right to respect for private and family life. Additionally, the claim was supported by soft law instruments, such as the UN Guiding Principles on Business and Human Rights, the UN Global Compact, and the OECD Guidelines for Multinational Enterprises. The court of first instance ruled in favour of Milieudefensie and mandated Shell to cut greenhouse gas emissions by establishing explicit reduction targets.

Currently, the case is on appeal. Shell has contested the ruling, arguing that climate policy is the responsibility of governments, not individual corporations. The court of appeal's decision is anticipated in November 2024.

Since the appeal is pending, drawing conclusions based on the above would be premature. However, the court of first instance's ruling should be considered a signal to polluting businesses that they may be held accountable for their emissions and, more generally, societal and human rights obligations. Such companies should bear in mind that they may be expected to proactively contribute to climate change mitigation.

If polluting businesses can be held accountable for their emissions, then what about the companies enabling them by financing, advising, or insuring?

(c) Imposing human rights obligations on pollution-enabling businesses

Encouraged by its unanticipated success in the Shell litigation, Milieudefensie is currently attempting to widen the circle of businesses liable for societal and human rights obligations. It has identified 30 “major polluting companies” by considering CO2 emissions, industry sectors, and whether they operate internationally. Milieudefensie expects these companies to develop far-reaching climate plans.

The selected companies include Shell, already involved in proceedings with Milieudefensie, and ING, the largest bank in the Netherlands. Milieudefensie has sent ING a “notice of liability for unlawful climate policy”. Milieudefensie demands that ING align its climate policy with the Paris Agreement, reduce its CO2 emissions by at least 48%, and ensure it is not linked to the adverse climate impact of large business clients (by ceasing to finance and support polluting clients). Should ING neglect to comply, Milieudefensie will go to the Dutch courts to obtain an injunction to stop this unlawful conduct and prevent more damage.

While the claims against pollution-enabling businesses are still in the early stages, climate organisations like Milieudefensie seem committed to using legal channels to enforce corporate responsibility for climate action. As these cases progress, they could set important precedents for environmental responsibility in various sectors.

This responsibility is even more evident, with a growing trend of holding business directors personally liable and subject to criminal prosecution for their roles in pollution-enabling activities. Increasingly, regulations and case-law indicate that directors are also expected to bear responsibility, not only towards the company they govern but also towards stakeholders and society at large. Claims for damages are no longer limited to companies. It is conceivable that a court could find improper management if directors fail to take adequate measures to reduce CO2 emissions within their companies and among their customers.

Climate-related regulations

It is important to note that the legal landscape is shaped not only by court precedents related to climate litigation, but also by changing regulatory frameworks. For instance, climate-related regulations are becoming increasingly comprehensive. New European regulations have recently come into effect or are in the preparation stages. These include the Corporate Sustainability Reporting Directive, the Sustainable Finance Disclosure Regulation, and the Corporate Sustainability Due Diligence Directive. In the Netherlands, the draft Responsible and Sustainable International Business Act is currently pending.

Insurance sector as an example

To illustrate the potential ramifications of evolving jurisprudence and legislation on climate responsibilities, we can look at the insurance sector and discuss its climate-related liability risks in more detail.

The context in which insurers operate is rapidly changing as extreme droughts, floods, forest fires, subsidence, and storms are becoming more frequent and result in serious damages. It is a challenge to keep these risks affordable and insurable. Insurers are currently grappling with questions about the adequacy of existing insurance products, the applicable terms and premiums, and whether certain exclusions should apply.

In addition to the questions derived from climate change-related damage, insurers are under pressure to comply with ever-evolving climate regulations. This may expose the insurer to liability claims if their policies lag behind applicable standards or perform below the standards of sustainability adopted by other companies.

Generally, insurers face an increasing risk of exposure to climate tort claims. Should the Dutch Shell case or litigations against ING succeed, insurers (including those operating internationally) may expect to be among the businesses targeted next. Several insurers have already been named in Milieudefensie's list of 30 major polluting companies.

Arguably, insurers have a duty of care to advance sustainable practices since the insurance sector, both in the Netherlands and globally, plays a significant role in fostering sustainability. Insurers are capable of exerting influence both directly and indirectly. Directly, through their core business, the insurance practice. Through instruments like deductibles, insured sums, limited coverage, exclusions, termination options, and inquiries at the time of application or renewal of coverage, insurers can encourage policyholders to embrace sustainability. Indirectly, insurers wield influence through their investment strategies and the use of premiums.

While some insurers are already engaged in sustainable practices with the adoption of proactive policies and are shifting towards a client base committed to sustainability, this trend is expected to grow since judicial and legislative developments (and financial exposure) are compelling them to do so.

Potential impact of the newest developments

The legal actions and initiatives outlined above show that a wide range of public bodies and commercial organisations could be held liable for human rights obligations or violation of newly introduced regulations. Not only governments but also polluting companies (e.g. Shell) and pollution-enabling companies (e.g. ING) should be aware of the potential risks of having to defend themselves against climate-related claims.

We note that internationally operating companies should consider the possibility of potential claims in the Netherlands due to the  Act of the Settlement of Mass Claims in Collective Action, which allows for easier collective action. This makes the Netherlands a favourable jurisdiction for addressing environmental and human rights issues (see the winter edition of Disputes Digest 2023).

The court rulings and regulations discussed in this article underline the importance of compliance across industries. In particular, we anticipate heightened exposure to liability in sectors such as industrial manufacturing, agriculture, automotive, financial services, consultancy and the legal profession due to their climate-related activities.

Conclusion

In conclusion, the discussions and court cases mentioned above illustrate a profound shift towards accountability for climate-related responsibilities across a spectrum of businesses. Dutch courts have been at the forefront of climate litigation globally, most notably with the Urgenda case.

These court rulings, combined with evolving regulatory frameworks, are creating a landscape in which both governments and direct and indirect polluters face increased litigation risks. In particular, companies such as Shell and ING have been at the forefront of these legal challenges, underlining how the scope of liability has been extended to financial and advisory sectors that enable or support polluting activities. As climate litigation continues to develop, there is transformative pressure on industries and sectors to adopt high environmental standards. In short, the effects of climate litigation are spreading like wildfire.