Landmark decision ordering Shell to cut CO2 emissions from its global operations by 45% overturned by Hague Court of Appeal

Milieudefensie v Shell 

Summary 

On 12 November 2024, the Court of Appeal of the Hague (Court of Appeal) overturned the landmark 2021 decision of the District Court of The Hague (District Court) in Milieudefensie et al v Royal Dutch Shell, which had ordered Shell to cut CO2 emissions from its global operations by 45% by the end of 2030.1   

The Court of Appeal found that corporate actors have a general duty to reduce emissions under the “unwritten social standard of care” pursuant to Article 6:162 of the Dutch Civil Code which is informed by Articles 2 and 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms. However, the Court of Appeal took issue with the specificity of the emissions reduction target determined by the District Court, holding that Shell was not bound by an absolute reduction target of 45% (or any other specific percentage). In upholding Shell’s appeal, the Court of Appeal found that corporate actors have “the flexibility to determine [their] own strategies for cutting emissions in the mandatory climate transition plan, provided that these strategies align with the climate goals set forth in the Paris Agreement”. 

Milieudefensie has announced that it plans to appeal to the Supreme Court of the Netherlands. 

Background and procedural history   

Milieudefensie (Friends of the Earth Netherlands) commenced proceedings in April 2019 (alongside other environmental organisations, NGOs and 17,319 individual co-claimants) alleging that Shell has a legal obligation to reduce its CO2 emissions by 45% by 2030 relative to 2019 levels. Milieudefensie argued that Shell's failure to meet this reduction would constitute an unlawful act, and that Shell’s contribution to dangerous climate change violates the rights of affected individuals and communities.   

In May 2021, the District Court ordered in favour of Milieudefensie, ordering Shell to reduce its CO2 emissions by 45% by 2030, relative to 2019 levels. The order applied to emissions from both Shell’s own business operations as well as emissions from the use of oil and other products sold by Shell.  

Shell subsequently lodged an appeal on ten grounds, with the primary relevant appeal argument being that decisions regarding corporate emissions reductions should not fall within the jurisdiction of the courts, but rather, is the responsibility of lawmakers. Shell argued that since there was no established legal requirement for companies to decrease their CO2 emissions by a specified percentage, the District Court ruling should be overturned. The question to be answered on appeal was whether, based on the “unwritten social standard of care”, Shell had an assumed obligation to reduce its CO2 emissions by a certain percentage.   

Key takeaways from the appeal  

1. Protection against dangerous climate change is a human right    

The Court of Appeal confirmed the message from the primary decision that protection against dangerous climate change is a human right. The Court of Appeal held that climate change is a “critical global challenge, posing severe threats to human and animal existence and undermining rights protected by Articles 2 and 8 of the European Convention on Human Rights both domestically and internationally”.  

The Court of Appeal stated that while fundamental human rights are typically seen as vertical obligations (between the state and citizens), the values underpinning human rights can also be invoked by individuals in their relationship with private companies. This doctrine of the indirect horizontal effect of human rights implies that the responsibilities and duties arising from human rights can inform the conduct expected of private entities, including large corporations like Shell. The Court of Appeal referred to several soft law instruments such as the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct as examples of the practical application of this doctrine and the expectation for private companies to uphold human rights in their operations.  

The Court of Appeal stated that the “unwritten social standard of care” is interpreted objectively based on legislation, general legal principles, fundamental human rights, case law and/or expert reports. The Court of Appeal referred to these objective starting points to determine whether Shell had breached the “unwritten social standard of care” if it failed to reduce its CO2 emissions in the manner sought by Milieudefensie. In determining whether there has been a breach of this standard, the Court of Appeal held that “the severity of the threat of a particular danger, the contribution to the creation of the danger and the capacity to contribute to the combating of the danger are factors to be considered”. Therefore, large international corporations like Shell, who significantly contribute to increased greenhouse gas emissions and are capable of reducing their emissions have a special responsibility to proactively do so in order to combat climate change. However, as discussed further below, the Court of Appeal took issue with the specificity of the emissions reduction target ordered by the District Court.   

2. EU climate change law and the emissions reduction target of 45%  

The Court of Appeal held that while public law instruments establish important frameworks for corporate climate responsibility, they do not mandate specific, enforceable emissions reduction targets for individual companies. Rather, corporate entities have the flexibility to integrate reduction goals into their climate transition plans “where appropriate.” These targets are not binding or fixed; companies are free to determine their own strategies for reducing emissions within the context of their mandatory climate transition plans, provided that these strategies align with the goals set out in the Paris Agreement.  

The Court of Appeal assessed whether a sectoral standard for emissions reductions could be established for the oil and gas industry based on scientific consensus. While the Court of Appeal acknowledged that scientific reports indicate a significant reduction in emissions from the combustion of oil and gas is needed to limit global warming to 1.5°C, these reports assume an average global reduction in all sectors, rather than one specific company alone.  

The Court of Appeal held that applying a uniform reduction target (such as 45%) to Shell does not take into account the specific circumstances of its operations or the “specifics of Shell’s supply portfolio”. Further, the Court of Appeal noted that different fossil fuels have distinct carbon intensities and that reduction pathways can differ significantly. Ultimately, while Shell must make a “special effort” to combat climate change, it should not be held to a specific sectoral standard.  

3. Would a reduction of scope 3 emissions be effective?  

The Court of Appeal also held that a mandate on Shell to reduce its scope 3 emissions (the emissions created by third parties in their consumption of Shell’s products) would be ineffective at successfully combatting climate change. Roughly a third of Shell's reported scope 3 emissions come from its own production and the remaining two-thirds from oil and gas produced by third parties, which are on-sold by Shell. Shell argued that although it could restrict third-party fossil fuel sales to end consumers, ultimately fossil fuel producers would continue to supply those fuels and customers would continue to use those products, even if Shell was no longer part of the value chain. As such, the Court of Appeal accepted that decreasing the reselling activities of Shell Trading would not lead to an overall reduction in total CO2 emissions.  

Commentary   

The Court of Appeal’s ruling indicates that, under Dutch law, companies must contribute to mitigating climate change and fulfill a general social standard of care by supporting the emissions reduction targets of the Paris Agreement. However, the Court of Appeal clarified that it does not view existing EU climate regulations or scientific consensus as imposing a specific emissions reduction rate for individual companies. Instead, businesses can choose their own strategies for emissions reduction, provided that such measures align with the objectives of the Paris Agreement.   

This case note was prepared by Brigitte Douvos at KWM