Royal Dutch Shell Ordered to Reduce Its Carbon Emissions
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Royal Dutch Shell Ordered to Reduce Its Carbon Emissions

In a historic decision on May 26, 2021, the Hague District Court ordered Royal Dutch Shell to cut its carbon emissions by 45 percent by 2030, compared to 2019 levels. The ruling came in a petition filed by seven Dutch environmental organizations, of which Milieudefensie represented 17,379 individual claimants. The applicants argued that Shell should reduce its emissions in accordance with the global temperature target set under the 2015 Paris Climate Agreement. 

Shell is the world’s largest oil and gas trader.  It produced 1.38 billion tonnes of CO2 in 2020, roughly 4.5% of global energy-related emissions that year. As the first successful climate litigation against a private energy company, this decision can pave the way for legal actions against energy companies across the world. 

The Dispute and the Decision: Milieudefensie based its claim on the unwritten duty of care under Book 6, Section 162 of the Dutch Civil Code, which is the basis for tort-based liability: A person who violates a “rule of unwritten law pertaining to proper social conduct” must compensate for the damage caused as a consequence of the impugned action. It establishes a “standard of care”, which, according to Milieudefensie, obligates Shell to curtail its GHG emissions through its corporate policy.

Shell argued that as a non-State actor, it is not bound by intergovernmental climate or human rights principles. As for soft law obligations, Shell argued that there was a distinction between States’ responsibility to prevent violations of human rights within their territories, and businesses’ responsibility. States were expected to “make difficult balancing decisions to reconcile different societal needs [namely human rights protection and economic development]. To achieve the appropriate balance, States need to take a broad approach to manage the business and human rights agenda.” Shell argued that only States are obligated to balance different societal needs, not businesses. Shell was merely obligated to undertake independent action aimed at addressing climate change.

The primary question before the Dutch Court related to the application of human rights standards while interpreting the standard of care expected of a private company. Drawing upon its jurisprudence in Urgenda Foundation v Netherlands, the Court reaffirmed the relationship between human rights and climate change. It stated that Articles 2 and 8 of the European Convention on Human Rights provided protection against adverse impacts of anthropogenic climate change caused by CO2 emissions. The Court acknowledged that the applicants cannot directly enforce these provisions against Shell as these obligations exist only between States and citizens. However, the Court went on to state that due to the “fundamental interest of human rights and the value for society that [the provisions] embody, they may play a role in the relationship between the applicants and [Shell].”

The Court noted that states’ obligations to protect their citizens’ human rights are more extensive than businesses. Dismissing Shell’s claim, it observed that businesses’ obligations to respect human rights exist independently of states’ obligations. They are global standards of care expected from all businesses regardless of their place of operation. States’ unwillingness or inability to fulfill their own obligations under the UN Guiding Principles does not absolve businesses from their obligations or diminish them. Accordingly, the Court noted, “It is not enough for companies to monitor developments and follow the measures states take; they have an individual responsibility.” Interpreting the scope of such responsibility, the Court indicated that it includes addressing the adverse human rights impacts of their operations. To that end, a business must take measures to “prevent, limit and, where necessary, address these impacts”.

The Court’s decision solidified the existence of businesses’ obligations to respect and protect human rights. Notably, it was the fundamental nature of the obligations, and the value they sought to protect, that prompted the Court to enforce them, albeit indirectly, against a non-State actor. Given the universal nature of these obligations, the Court emphasized that all businesses are bound by them, independent of states’ obligations. Moreover, businesses must undertake active measures to respect these obligations, over and above any measures undertaken to ensure compliance with states’ directions. Even in the absence of state directions, the UN Guiding Principles obligate businesses to respect human rights through independent and self-driven action. Furthermore, while all corporations have a responsibility to respect human rights, the extent of responsibility depends on the severity of their impacts, which in turn depends on their scale, scope, and irremediable character. 

The Court’s decision has created a fertile ground for enforcing human rights against businesses. The Court has also indicated that States possess significantly more extensive responsibilities. 

The question of horizontal application of human rights enshrined in Part III of the Indian Constitution has been debated before the Supreme Court several times. Part III of the Constitution enshrines fundamental rights, including the right to life under Article 21.

In the case of MC Mehta v Union of India, a public interest petition was filed claiming compensation for victims of an oleum gas leak from Shriram Food and Fertilizers. Shriram was a private corporation. The question before the Supreme Court of India was whether it could be brought within the ambit of Article 12.

The Court stated that Article 12 had been expanded “to inject respect for human rights and social conscience in our corporate structure. The purpose of expansion has not been to destroy the raison d’etre of creating corporations but to advance the human rights jurisprudence. Prima facie we are not inclined to accept the apprehensions of learned counsel for Shriram as well-founded when he says that our including within the ambit of Article 12 and thus subjecting to the discipline of Article 21 those private corporations whose activities have the potential of affecting the life and health of the people…[This] would deal a death blow to the policy of encouraging and permitting private entrepreneurial activity.”

The Supreme Court observed that the primary objective for expanding the scope of Article 12 was to prevent violation of human rights by corporations. Much like the Hague District Court in Milieudefensie, the Supreme Court sought to instill respect for human rights in corporations’ conscience and operations, irrespective of their ownership and control. This problematizes the initial criteria developed by the Supreme Court which sought to penalize any agency or instrumentality of the government. Practically speaking, the test cannot cater to India’s current, highly privatized industrial setup.

The impact of climate change on human rights is more evident than ever. The right to life under the Indian Constitution has been widened to include a host of environmental rights, including the right to a healthy environment. To enable its realization, it must be made available against all business enterprises. Addressing human rights violations, and instilling respect for human rights in private businesses, will also further the goal of transnational climate governance.

 

Kanika Jamwal is a Lecturer at O.P. Jindal Global Law School, Sonipat, India. 

Prof.(Dr.) Armin Rosencranz is a Professor and Dean at O.P. Jindal School of Environment and Sustainability, Sonipat, India. 

 

Suggested Citations: Kanika Jamwal and Armin Rosencranz, Royal Dutch Shell Ordered to Reduce its Carbon Emissions, JURIST- Academic Commentary, June 15, 2021, https://www.jurist.org/commentary/2021/06/jamwal-rosencranz-royal-dutch-carbon-emissions/.

This article was prepared for publication by Vishwajeet Deshmukh. Please direct any questions or comments to her at commentary@jurist.org


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