In Milieudefensie et al v Royal Dutch Shell plc, the Court of Appeal of the Hague ("Court of Appeal") quashed the ground-breaking emissions reduction order granted against Shell by the District Court of the Hague ("District Court") in 2021.

At first glance, the Court of Appeal's decision appears to be a win for private companies in the burgeoning field of climate change litigation, as it reverses a landmark judgment which held that Shell was legally responsible for reducing its emissions by a specific percentage to help achieve global climate targets. However, the Court of Appeal also concluded that the social duty of care under Dutch law requires companies to mitigate dangerous climate change and make an appropriate contribution to the climate goals of the Paris Agreement, which leaves the door open for further climate change litigation against private companies in the Netherlands and elsewhere.

Background: The Case at First Instance

In 2019, Milieudefensie (or Friends of the Earth Netherlands), together with other environmental organisations, brought a claim against Shell asking for an order against Shell mandating that it reduce its emissions by a set percentage. 

In 2021, the District Court agreed with Milieudefensie and ordered that by 2030, Shell must reduce its emissions by 45% relative to 2019 levels. The order related to scope 1, 2 and 3 emissions – those created by Shell's own activities (directly and indirectly – scope 1 and 2) as well as those created by the ultimate use of the fossil fuel-derived products which Shell produces and sells (scope 3).

The Court of Appeal Decision

Fast forward to November 2024, when the Court of Appeal handed down its judgment on Shell's appeal against the District Court's decision. 

Fundamental Human Right

The Court of Appeal found that protection from dangerous climate change is a fundamental human right, not only in the Netherlands but also elsewhere in the world.  It based this finding on Dutch case law, decisions of the European Court of Human Rights and United Nations reports and resolutions, referring expressly to climate change's potential damage to individuals' rights under Articles 2 and 8 of the European Convention on Human Rights. The court acknowledged that such human rights do not generally have horizontal effect under Dutch law but held that citizens can invoke them against private companies when addressing the question of what can be required of large multinationals, such as Shell, when interpreting the unwritten social standard of care in the Netherlands. 

The Court of Appeal determined that "companies like Shell, which contribute significantly to the climate problem and have it within their power to contribute to combating it, have an obligation to limit CO2 emissions in order to counter dangerous climate change, even if this obligation is not explicitly laid down in (public law) regulations of the countries in which the company operates". 

Overturning the Emission Reduction Order

Despite determining that Shell does have an obligation to reduce its emissions, the Court of Appeal overturned the order against Shell requiring it reduce its emissions by 45%. 

The court determined Shell was subject to a number of requirements under EU climate legislation, as transposed into Dutch law, such as the EU Emissions Trading System (ETS), the EU ETS2 Directive, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). Taken together, Shell's compliance with its obligations was relevant to whether it was doing enough under the social standard of care. 

In respect of Shell's scope 1 and 2 emissions the court held that Shell's own targets (which they were on course to achieving) went beyond what Milieudefensie were seeking and there was no risk of an impending violation of any legal obligation by Shell.

In respect of scope 3 emissions, the court considered that there was lack of scientific consensus as to the absolute and specific level of emission reduction that each company, sector or country should be required to make to reach global climate change targets. It also concluded that it was unlikely that imposing a reduction on the fossil fuels which Shell sells would achieve the necessary positive impact, as it would simply remove Shell from the value chain and the (already produced fossil fuels) would reach consumers via alternative sources.

The Extent of Shell's Obligation

On the one hand, the court determined that large companies in high-emission sectors (like fossil fuel production and sale) are considered to have a duty under Dutch law to help reduce emissions and fight climate change. 

However, noting that the duty is contextual, and will vary by company, sector and the countries in which the company operates, the Court of Appeal was not prepared to quantify the extent of that duty. The court determined that it is not appropriate to dictate how that duty should be discharged and acknowledged that Shell was largely free to choose its approach to reducing emissions so long as it complies with the relevant set legislative requirements outlined above.

Comment

The approach taken by the Court of Appeal in this case is consistent with the direction generally taken in recent climate change litigation against private companies (including in English cases): the court acknowledged the important role and the positive obligation that private companies have in helping to combat climate change, but showed a reluctance to dictate how a private company should discharge that obligation, leaving a wide discretion to the directors and those in charge of those companies.

However, the court's findings that the protection from climate change is a fundamental human right is important.  As is the court's recognition that Shell's position as a "major player" in the oil and gas market for over a century meant that it could be expected to be held to a much higher standard in its efforts to reduce emissions and mitigate the effects of climate change. 

Directors' Duties

In England, directors of a company owe various duties to the company. Environmentally-minded shareholders have sought to bring derivative claims against directors alleging that their failure to adopt sufficiently climate-focussed business practices amount to breaches of their statutory duties. Such cases have, so far, fallen flat. However, it is plausible that the Dutch Court of Appeal's acknowledgement of protection from dangerous climate change as a fundamental human right (and its application in the Netherlands against a private company) could fuel further claims on the basis of breaches of directors' duties.

For further discussion on directors' duties and climate change litigation in the context of a recent English Law case, see our article: "Strategic climate litigation using derivative claims – an uphill struggle?".

In February 2025, Milieudefensie confirmed that they are appealing the decision to the Supreme Court, so there may be more to come in this case. 

Authors: Fraser McKeating (Managing Associate, Dispute Resolution), Nicola Thompson (Senior Knowledge Lawyer, Dispute Resolution), Filip Tryka (Trainee - Secondee, Dispute Resolution).