Milieudefensie et al. v. Royal Dutch Shell plc (Appeal).

Introduction

Numerous reports analysing climate litigation trends have demonstrated a significant increase in environmental protection related lawsuits brought before national and international courts. These cases, initiated by individuals, NGOs and other entities, target governments and major corporations with the aim of holding both the public and private sectors accountable for their failure to mitigate the negative environmental impacts of their policies and actions. In 2023, an estimated 230 climate litigation cases were filed with a 70% success rate in cases concerning ‘climate-washing’,’ the practice of misleading the public into believing that a company is more sustainable than it really is. Additionally there has been a rise in the filing of ‘corporate framework’ cases aimed at obliging companies to align their policies with established climate goals. Amongst the most influential cases in climate litigation to date is Milieudefensie et al. v. Royal Dutch Shell, a landmark Dutch case that has set a critical precedent in holding both governments and corporations accountable for their contributions to climate change. Milieudefensie v Shell was initially filed as a class action before the Hague District Court in April of 2019 by environmental activist group Milieudefensie (Friends of the Earth Netherlands) and co-plaintiffs. The Hague District court issued its landmark decision in 2021, ordering Shell to reduce its CO2 emissions by 45% relative to its 2019 levels by 2030 in order to comply with ‘unwritten standards of care’ under Dutch law. However, in November 2024, the Hague Court of Appeal overturned the 45% reduction mandate, reasoning that such a specific target, derived from global climate frameworks like the Paris Agreement, was too generalised to be imposed on a single company without considering its unique operational context. This decision underscores the ongoing challenges in translating global climate goals into enforceable obligations for individual corporations.

The case raises important questions about whether corporations have a legal duty of care to align their business practices with global climate goals and what this means for corporate liability in combating climate change. While Milieudefensie has not issued any statements about a possible appeal, the case's unfolding developments could redefine corporate obligations under both national and international environmental law, providing clearer expectations for companies to mitigate climate risks and align their operations with international environmental frameworks.

Facts of the case

On April 5th, 2019, Milieudefensie (Friends of the Earth Netherlands), alongside environmental organisations such as Greenpeace Nederland, ActionAid, Jongeren Milieu Actief, and Fossielvrij NL, together with more than 17,000 individual Dutch citizens, filed a lawsuit against Royal Dutch Shell plc before the Hague District Court. The lawsuit was brought on behalf of public interests, specifically focused on environmental protection and climate change mitigation.

The plaintiffs argued that Royal Dutch Shell plc (RDS), as the parent company of the Shell group and the entity responsible for establishing the group’s general policy, violated an ‘unwritten standard of care’ under Dutch law (Article 6:162 Dutch Civil Code) by failing to reduce CO2 emissions by 45% relative to 2019 levels in line with the climate goals of the Paris Agreement. The plaintiffs contended that this failure led to Shell’s business practices significantly contributing to climate change, especially given Shell’s position as the fifth-largest oil and gas multinational company in the world.

Additionally, the plaintiffs argued that Shell’s failure to reduce emissions also constituted a violation of human rights, particularly the right to life (Article 2 of the European Convention on Human Rights) and the right to respect for private and family life, home, and correspondence (Article 8 ECHR). Milieudefensie and its co-plaintiffs emphasised Shell’s misleading statements about climate change, its long-standing knowledge of the issue, and its insufficient action to reduce CO2 emissions across all scopes. These factors were cited as evidence of Shell’s unlawful and negligent actions, which the plaintiffs argue have endangered public health and the environment.

In November 2019, Shell submitted a statement of defence, denying the existence of any legal standard that would establish Shell’s violation of unwritten legal norms by failing to meet emissions targets. Furthermore, Shell contended that the human rights claims were too general and did not fall within the scope of the relevant ECHR provisions.

Despite the defendant's claims, on May 26, 2021, the Hague District Court ruled in favour of the plaintiffs, ordering Royal Dutch Shell plc to reduce its CO2 emissions by 45% by 2030 relative to 2019 levels. The court specifically directed Shell to cut emissions across all of its operations, including direct emissions from Shell’s own operations (Scope 1 and 2 according to the Greenhouse Gas Protocol) and the emissions resulting from the use of Shell's products (Scope 3 GHG Protocol), which accounted for 85% of its total emissions in 2018. The GHG protocol is the global standard for the reporting of greenhouse gas emissions of companies, governments and other organisations whereby an account of emissions grouped into categories is kept. The GHG Protocol categories includes scopes 1, 2 and 3 emissions. Scope 1 emissions include the ‘direct emissions from installations that are owned or controlled in full or in part by a company.’ These emissions are directly controlled by the company and may include emissions from on-site fuel combustion such as the burning of natural gas in boilers. Scope 2 emissions are ‘indirect emissions from third-party installations from which the company purchases electricity, steam or heat for its business activities.’ These emissions could include, for example, those derived from the electricity or heating consumed by Shell’s office buildings and factories. Finally, scope 3 emissions are ‘other indirect emissions not included in scope 2 generated in the company’s value chain, including emissions generated from the use of consumption of products the company supplies to third parties, such as other organisations or consumers.’ These emissions are the most problematic as they are difficult to control. They include the emissions from the use of Shell’s sold products by consumers such as the gasoline burned in cars by every consumer as well as emissions from the production and transportation of raw materials needed to manufacture the products. This landmark ruling highlighted Shell's responsibility not only for emissions produced through its own activities but also for the environmental impact of the products it sells, emphasising the impact of scope 3 emissions.

On July 20th, 2020, Shell appealed the District Court’s decision, and on November 12, 2024, the Hague Court of Appeal issued its ruling, overturning the 2021 judgement. The Appeals Court upheld the District Court’s finding that Shell has a duty of care under Dutch tort law to mitigate climate change impacts across all emission scopes (Scope 1, 2, and 3). However, it dismissed the specific requirement for Shell to reduce its emissions by 45% by 2030 compared to 2019 levels.

The court reasoned that imposing a specific reduction target of 45%, derived from global climate frameworks like the Paris Agreement, would be impractical and overly generalised when applied to an individual company without considering its unique operational context. Additionally, the court acknowledged that Shell had already set an emissions reduction target of 50% by 2030 (compared to its 2016 levels), which was specifically tailored to the company’s circumstances and which Shell was on track to achieve. This more context-sensitive target was viewed as a more practical and enforceable benchmark than the 45% reduction mandated by the District Court.

Legal issues

This case raised several legal questions that were addressed by both the District Court and the Appellate Court. To begin with, the District Court had to determine whether there existed a corporate duty of care under Dutch tort law, particularly under the concept of ‘unwritten standards of care’ as encompassed by article 6:162 of the Dutch Civil Code, the general basis for claims for damages that arise from torts in Dutch law. Essentially, the court had to answer whether corporations owe a responsibility to society at large to mitigate environmental damage caused by their business activities. The court also had to consider the responsibility of corporations to comply with human rights obligations.

Secondly, the court analysed the extent to which a company such as Shell could be held accountable for corporate responsibility for emissions, it therefore sought to answer to what extent Shell could be held responsible for emissions across different scopes (scope 1, 2 and 3), with particular consideration of the extent it could be held accountable for emissions arising from consumer usage of its products (scope 3 emissions). Another issue was whether a national court in the Netherlands could impose binding emissions reduction obligations on a multinational corporation like Shell, which operates in over 70 Countries. This required the courts to consider jurisdictional reach and the enforceability of their rulings on a global scale.

Finally, the Appeals Court addressed whether corporate obligations could be directly derived from global frameworks like the Paris Agreement. It also considered whether such obligations must be tailored to the specific operational and contextual realities of a company to ensure enforceability and proportionality.

Decision of the court

Following the District Court’s 2021 judgement, the appeals court overturned the decision. The court began by emphasising the significant risk that climate change poses to our well-being, underscoring that while governments are primarily tasked with protecting their citizens from the adverse effects of climate change, corporations also have a duty to reduce their greenhouse emissions in accordance with the 2016 Paris Agreement objectives. In relation to Milieudefensie’s human rights violation claims, the court highlighted that private actors, like governments, must observe the respect and ensure the protection of human rights across all operations. The court referenced international standards such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, to support its argument that businesses have an obligation to integrate human rights considerations into their business practices at all levels. The court addressed the principle of the ‘unwritten social standard of care’ in its legal reasoning, as this is the standard that defines the expected level of responsibility that a company should uphold within a society. The social standard of care may vary depending on the specific context of each company within each industry. In the case of Shell, the court, considering various factors, came to the conclusion that as one of the largest oil and gas companies in the world, it holds a significant responsibility to mitigate its impact on the climate, meaning that its social standard of care is considerable. The court continued developing its argument agreeing that Shell’s obligations are rooted in the human right to be protected from climate change however, emphasised that such obligations must be interpreted with flexibility, taking into account the operational realities of the company which refer to the feasibility of Shell to fulfill its legal duties without incurring grave repercussions or disproportionate burdens on the company. In consideration of the operational realities, the court analysed the financial capacity, technological feasibility and any other industry specific constraints such as the provenance of natural resources necessary to produce Shell’s products.

While the court affirmed that Shell has a duty under the unwritten social standard of care to reduce emissions, it also determined that it could not impose specific reduction targets, such as the District Court’s mandate of a 45% reduction by 2030. The court noted that Shell was already working towards a 50% emissions reduction by 2030 relative to its 2016 levels, which aligns with the broader climate goals advocated by the plaintiff, demonstrating that Shell was already taking adequate steps without the need for further judicially imposed targets.

Finally, the court determined that imposing a specific emissions reduction target on Shell would be unnecessary and impractical considering the complexity of the global energy market. The court particularly highlighted the challenge of reducing scope 3 emissions (that stem from consumer use of its products), which are the largest portion of Shell’s total emissions. It argued that there is insufficient scientific consensus on the precise percentage by which a company like Shell should reduce these emissions. A reduction target of 45%, which is a percentage applied to countries under international agreements like the Paris Agreement, is not suitable for application to an individual company. Imposing such a specific target on an individual company fails to consider that company’s particular context as well as the complexity of the energy market itself. Therefore, the court concluded that a 45% reduction target, drawn from international frameworks designed to address national emissions reductions, would impose disproportionate measures if applied to an individual company like Shell and may not even lead to the desired environmental impact. As a result, the court ruled that Shell has the freedom to determine how it will reduce its greenhouse gas emissions and shall not be subject to specific demands of the court.

The Hague Court of Appeal overturned the District Court's ruling, affirming that while companies like Shell have a duty to address climate change, the courts cannot impose specific emissions reduction targets. Instead, the court emphasised that the responsibility for setting such targets rests with the legislator, not the judiciary.

Legal reasoning

The Court of Appeal largely reaffirmed the District Court’s reasoning regarding Shell’s obligation to comply with the ‘unwritten standard of care’ derived from Dutch tort law (Article 6:162 Dutch Civil Code). This duty was interpreted in conjunction with non-binding yet authoritative international soft law instruments, such as the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Corporations. The court’s approach reflects an evolving application of traditional negligence frameworks to complex, long-term global risks like climate change.

The interpretation of the principle of ‘unwritten social standard of care’:

Article 6:162 of the Dutch Civil Code provides the overarching framework for tort liability, establishing the duty not to commit a wrongful act. Within this framework, the Kelderluik criteria, derived from the 1965 Kelderluik v. Rechtbank case would be applied to determine whether a duty of care exists and has been breached in negligence cases in Dutch law. This criteria helps courts assess whether an actor breached their duty of care by failing to prevent a harmful event despite having the capacity to do so. The court did not directly apply this criteria as it deemed that climate change (the harmful event in question) could not be equated to the harmful events or rather, to the dangerous situations that the Kelderluik criteria typically applies to, as these tend to be immediate and localised risks whereas climate change is a complex and systematic issue that affects the global community over time.

Nevertheless, the court alluded to the Kelderluik criteria alleging that though it could not be applied in the assessment of whether Shell acted negligently, it still represented a broader definition of the general social standard of care and may thus be used in assessing whether Shell effectively had, under this social standard of care, the obligation to reduce CO2 emissions by a certain percentage. This adaptation of traditional legal tools used to address long term challenges presents a significant step forward in the innovation of courts by demonstrating how they may adapt existing national legal frameworks to hold the corporations accountable for their impact.

Human Rights and Soft Law Instruments:

The court emphasised the connection between the ‘unwritten standard of care’ in Dutch law and international human rights instruments, particularly the European Convention on Human Rights

(ECHR), relevant human rights case law such as the landmark Urgenda case, and soft law norms like the UNGPs and OECD Guidelines. While these instruments are non-binding, the court interpreted ‘unwritten law’ in a manner that permitted reliance on such standards, declaring that these had indirect horizontal effect. It reasoned that their widespread international and political support (most notably reflected in the 2016 Paris Agreement) was sufficient to justify imposing a legally binding obligation on Shell by way of allowing values derived from fundamental rights to be incorporated into private law disputes through the concept of ‘unwritten law.’ The ‘unwritten standard’ of care under Dutch law is derived from Book 6 section 162 of the Dutch Civil Code (the general legal basis for claims of damages arising from torts). The provision reads: “A person who commits a tort towards another which can be imputed to him, must repair the damage which the other person suffers as a consequence thereof”, and provides three categories of torts that must be repaired, including acts or omissions that violate a “rule of unwritten law pertaining to proper social conduct.” This is included as an open norm enabling the import of all kinds of duties of care. Rules of unwritten law have often been used in tort cases to hold intermediaries liable, reflecting its open-ended nature. The unwritten standard of care is a concept that is intrinsically linked to ethical and political considerations and has generally been interpreted as the duty of actors to take into account, and potentially act on behalf of, the interests of another.

The extent and nature of the obligation vary, with courts considering the circumstances of each case. Courts have successfully held liable actors for risk situations, including workplace accidents, product liability, and governmental liability. The jurisprudence of Dutch courts in their interpretation of the unwritten standard of care indicates that there is no objective definition upon which to rely to define this standard means. While the flexibility of this norm enables courts to address novel social challenges and evolving ethical norms, it simultaneously introduces a degree of unpredictability, as the absence of a clear, objective definition leaves the precise scope of obligations to be determined on a case-by-case basis.

In the case of Shell, the values behind rights such as the right to life (article 2 ECHR) and the right to respect for private and family life (article 8 ECHR) were deemed relevant to inform the court’s determination of what constitutes the standard of care under Dutch tort law. This interpretation of the unwritten social standard, relying on codified Dutch law as well as the indirect horizontal effect attributed to human rights and non-binding international standards, reflected a progressive approach in holding private entities accountable for actions typically protected in the public sphere. Such an interpretation originally allowed the court to set a specific target for Shell in the 2021 District’s court judgement: a 45% reduction in CO2 emissions by 2030 across all of its operations.

Changes in the Appeal Decision:

While the appeal court maintained the same arguments concerning the existence of an unwritten standard of care that warrants Shell’s emission reduction mandate, upon re-examination of the facts, it reconsidered the 45% threshold imposed by the District Court in May 2021. The court deemed the 45% target to be too ‘general’ of an obligation to be imposed on a company by a court. In its reasoning, it acknowledged that while Shell is obliged to contribute appropriately to the climate goals of the Paris Agreement, there is no existing climate legislation that provides for a concrete reduction rate for individual companies or industries nor sufficient scientific consensus as to what the target should be.

The court found that the 45% reduction target, based on global climate goals, could not be directly applied to individual companies like Shell without considering specific sectoral and company contexts. For example, the court highlighted that the 45% emission reduction by 2030 is an average for all sectors and all regions globally, covering all greenhouse gases like CO2. When different fossil fuels are burnt, different amounts of CO2 are released. The burning of coal for instance, produces the most CO2 followed by oil and gas who release smaller quantities of CO2 upon ignition. From a global perspective, the most effective short-term strategy to reduce emissions would involve curbing coal usage. However, if a company facilitates a transition from coal to gas (supplied by Shell), Shell’s scope 3 emissions (linked to consumer use of its products) would increase. Despite this rise in Shell’s emissions, there would be a net reduction in global emissions overall from the switch from coal to gas and this is the desired outcome.

With this consideration, the court exemplified the complexity of the energy market and the impracticality and unfairness that applying a 45% reduction target would mean for large corporations such as Shell. The argument therefore is that emission reduction strategies cannot be formulated in a one-size-fits-all manner. Instead, practical considerations should be placed at the forefront of the design process of these strategies, taking into account the country, sector and company these will apply to. The court acknowledged that Shell’s size and influence in the energy sector give it a special responsibility in mitigating climate change. However, this responsibility alone does not justify disregarding the specifics of Shell’s supply portfolio or the possibility that an increase in Shell’s scope 3 emissions in the short term could, paradoxically, lead to lower global emissions overall. For the 45% global reduction target to apply directly to Shell, the court reasoned, Shell’s products and consumer base would need to represent a typical cross-section of the global market, which they do not. It therefore deemed imposing such a strict and enforceable target inappropriate.

The court further noted that no universal scientific consensus mandates that the 45% reduction target applies equally to all companies or sectors. It also highlighted several practical challenges with imposing scope 3 emission obligations: Shell’s limited ability to influence consumer choices, the likelihood that other suppliers would fill the gap if Shell reduced its sales (resulting in no overall reduction in global emissions), and the insufficiency of Milieudefensie’s measures to address emissions across the entire fossil fuel supply chain rather than just Shell’s role in the market.

EU legislation and Shell’s efforts:

An argument was presented suggesting that EU legislation, specifically the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD), could serve as a legal foundation for imposing the 45% reduction target. However, the court rejected this claim, concluding that, similar to the international conventions cited, these directives establish only general obligations for companies. They require measures such as drafting climate transition plans and reporting CO2 emissions but do not mandate a specific reduction percentage.

Moreover, the court found that Shell had already been complying with Milieudefensie’s requests as it had already been working towards a self imposed target of a 50% reduction of emissions relative to 2016 levels by 2030. The court found that Shell had reduced its scope 1 and 2 emissions by 31% compared to 2016 levels already in 2023 and found no evidence to suggest that Shell would fail to meet its planned commitments. Following this reasoning, on November 12th 2024, the Hague Court of Appeal overturned the 2021 District Court’s ruling, rejecting the generalised obligation to reduce emissions by 45% relative to 2019 levels by 2030, highlighting the need for tailoring obligations to individual cases.

Commentary

Milieudefensie et al v Royal Dutch Shell plc was the first ruling to mandate that a private company reduce its CO2 emissions. Its status as a landmark case setting a precedent that influences climate litigation worldwide cannot be overstated; however, the Hague Court of Appeal’s new ruling will likely introduce new questions about the future of environmental litigation, specifically concerning the enforceability of global environmental standards on private actors. This shift in focus is further highlighted by the Dutch court’s continued reliance on international soft law instruments and human rights standards as a means of determining corporate responsibility with regard to environmental damage. Through its interpretation of the ‘unwritten standard of care’ in Dutch tort law, the court has attempted to align national law with international standards, reflecting a progressive shift in judicial reasoning. If the Dutch court’s reasoning, which enabled it to hold private entities accountable for their contribution to climate change, were embraced by other jurisdictions, it could mark a turning point in the expansion of corporate duties, particularly in the areas of environmental protection and sustainability.

However, while this reasoning has the potential to inspire a broader expansion of corporate duties worldwide, it also invites significant critique. Some argue that this innovative interpretation of traditional legal frameworks, particularly the Dutch tort system, stretches these boundaries too far. The court itself acknowledged that tort law traditionally addresses localised and immediate harm and that it therefore had to adopt a different approach to interpreting the harm that a global crisis like climate change creates. By adapting traditional negligence principles in such a way to address climate change, the courts may be playing too expansive a role in addressing an issue that, as pointed out by the defendants, should arguably be handled by legislators. For this reason, the Dutch court’s activism in addressing what may be perceived as gaps in the law may not prove to be a sustainable legal strategy in the long term.

The Dutch courts' reliance on non-binding international instruments has sparked debate over the legitimacy of their approach. While the Dutch courts have recognized the ‘indirect horizontal effect’ of such instruments in private law disputes within their jurisdiction, extending this reasoning to the broader international community, particularly to less progressive legal systems, presents significant challenges. Soft law instruments, by their very nature, lack uniform enforceability and do not carry equal weight across jurisdictions. Consequently, the potential influence of this ruling may be constrained. Furthermore, the Appellate Court’s rejection of the 45% emissions reduction target could discourage similar ambitious rulings in other parts of the world or even slow down climate litigation by making the court appear as though it prioritises corporate interests over urgent climate goals. It is also worth considering that the acknowledgement of Shell’s own efforts (the 50% reduction in emissions target relative to its 2016 levels by 2030) as sufficient may reinforce a narrative that undermines stricter accountability measures by leaving too much room for corporate discretion. This ruling could also discourage global leaders from negotiating more international soft law instruments, given the potential emergence of a trend for judges to apply these seemingly non-enforceable standards to impose binding obligations. The role of soft law is arguably to act as a precursor to the development of hard law by providing guidance for the evolution of binding norms. The direct approach that the Dutch court took may seem aggressive in its assertion that soft law can effectively and rapidly evolve into binding standards. This could potentially create uncertainty and reluctance of states to embrace such instruments, consequently hindering international cooperation. The implications of this decision have so far proven to fit the trend of reluctance by courts to impose specific binding obligations on private entities. We have seen this in the UK High Court’s 2023 ruling, which, much like the Hague Appellate Court, has rejected demands for stricter climate policies in ClientEarth v. Shell. These rulings collectively suggest that while courts are willing to recognize the principle of corporate responsibility, they remain hesitant to set overly prescriptive mandates.

In conclusion, while the overturning of the Milieudefensie et al. v. Royal Dutch Shell plc by the Hague Appellate Court demonstrated a pragmatic approach to corporate accountability by taking into consideration the complexities of the global market and showing a greater understanding of the possible outcomes that imposing a strict target could have, it has also raised concerns about whether such caution taken by the Appellate Court could result in undermining the urgency of climate action in future litigation.

Takeaways

The key takeaways from Milieudefensie et al. v. Royal Dutch Shell plc:

1) Recognition that ‘climate change is the biggest problem of our time.’

2) Corporate responsibility for climate change is possible and existing legislation is not exhaustive.

3) Large corporations like Shell bear ‘special responsibility’ in mitigating climate impacts.

4) Challenges posed by scope 3 emissions limit the ability of courts to impose specific targets.

5) The responsibility for enacting specific climate regulations lies with the legislators.

Moving forward, Milieudefensie has not stated whether it will appeal the decision; this ruling, however, will likely serve as a reference point for courts that are seeing an increase in similar cases being brought before them. As the legal landscape continues to evolve, we may look to this case to further understand the balance that courts must strike between fostering corporate accountability and ensuring that climate litigation remains an effective tool for addressing environmental concerns.

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