The rise in climate-related litigation over recent years (particularly following the 2015 Paris Climate Agreement) has resulted in increased litigation risks for companies. Since 2020, about 500 such cases have been registered globally (a quarter of the total number of climate actions recorded). The majority originate from the US, while Australia, the UK and the EU are increasingly popular jurisdictions.
Pro-regulatory claims for more climate protection
Most claims seeking greater climate protection are directed against states, but they are increasingly being brought against companies in a variety of sectors, including energy, transport, food and agriculture, and finance.
In March 2021, the Federal Constitutional Court required the German legislature to amend the Climate Protection Act. The court considered the climate protection measures in the Act to be insufficient to protect future generations, finding the Act to be unconstitutional in this respect. The court assumed a constitutional duty of the state to protect citizens from climate change risks, thereby making climate protection actionable to a certain extent.
Increasingly, claimants are also seeking to compel companies to meet certain climate targets through private law actions. In May 2021, the District Court of The Hague issued a widely publicised ruling ordering the oil and gas company Shell to reduce its global emissions by 45 per cent by 2030 compared to 2019. It is noteworthy that the court not only looked at Shell's own emissions, but also assumed a best-efforts obligation on Shell to work towards a reduction of emissions in business relationships with its suppliers and end users. The ruling is under appeal.
Following the Shell ruling, the main claimant in the case, the NGO Milieudefensie, called on 30 other companies, including the airline KLM, the bank ABN Amro and the consumer goods manufacturer Unilever, to submit emission reduction plans.
In Germany, four climate claims were filed in 2021 that attempt to follow up on the argument of the Federal Constitutional Court by making a right to climate protection actionable in relation to companies. The claims, which were filed by the NGO Deutsche Umwelthilfe ("DUH") and Greenpeace, are directed against BMW, Mercedes and Volkswagen, demanding that the German auto manufacturers commit to a tighter carbon emissions budget, and discontinue the worldwide sale of cars with internal combustion engines by 2030. A climate change claim has also been filed against Wintershall Dea to prevent the Norwegian gas and oil producer from developing any new natural gas or oil production after 2026.
On 13 September 2022, the Stuttgart Regional Court dismissed the action against Mercedes at first instance. The court found insufficient proof that the claimants' personal rights would be impacted. In addition, the court emphasised that the courts are prohibited from taking legislative decisions. DUH filed an appeal.
In the Shell case, the Dutch court relied on a provision of Dutch law, pursuant to which a breach of an unwritten standard of care (in this case, among other things, knowledge about climate change) can result in liability towards third parties. German tort law does not have such a far-reaching general clause. Instead, claimants in a German claim must show: (i) damage to a legal interest protected under the German Civil Code; (ii) a causal link between a company's actions and the alleged damage; and (iii) that the respondents are liable, even while acting in compliance with applicable law. It is unlikely that these hurdles can be easily overcome.
Compensatory claims
The best-known climate-related compensatory claim in Germany is that of Saúl Lliuya's ("SL") against RWE, the German multinational energy company. As a resident of Huaraz, a Peruvian city situated below a glacial lake, SL claims that climate change has caused increasing glacial melt, which has led to a significant rise in the lake’s water level. In order to protect Huaraz from flooding, various protective measures have to be implemented. SL is seeking a declaration that RWE will contribute to the cost of these measures. The lawsuit claims that the share of the costs to be paid by RWE must be based on the proportionate share of greenhouse gas emissions caused by RWE worldwide since the beginning of industrialisation, which is claimed to amount to 0.47 per cent.
On appeal, the Hamm Higher Regional Court considered the action to be sound in principle and has since entered the evidentiary stage. It remains to be seen whether German courts will find a causal link between emissions, climate change and the alleged damage, and how they will approach the fact that the emitter complied with applicable law.
Conclusion
Climate litigation is on the rise (and is widely anticipated to increase further, particularly as a result of extreme weather events), presenting a real risk for companies. Potential climate claims pose significant strategic, financial and reputational risks. A transition plan detailing the company's intended contribution to achieving the Paris climate goals may help to limit these risks.
