June 1, 2021
We updated this publication on July 22, 2021.
On May 26, 2021, the Hague District Court in the Netherlands ordered Royal Dutch Shell (RDS) to reduce its greenhouse gas emissions more rapidly than it had planned. Milieudefensie et al v. Royal Dutch Shell PLC marks the first time any court has ordered a private corporation to align its policies with the climate change goals under the Paris Agreement. This landmark decision in international climate change jurisprudence has the potential to have far-reaching legal and practical impacts on corporations worldwide – and, particularly when the growing adoption of ESG (Environment, Social and Governance) principles is increasingly leading corporations (and their stakeholders) to assess and address their climate impact, could be a catalyst in the ongoing shift toward renewable energy sources. Here is our analysis of the Dutch Court’s decision, the key legal implications of it, and what it could mean for corporations in Canada.
The Landmark Decision
In Milieudefensie et al v. Royal Dutch Shell PLC, several environmental organizations together claimed against RDS seeking a declaration that the company’s existing climate change policy was unlawful, and an order requiring it to reduce its greenhouse gas emissions by 45% (based on 2019 levels) by the end of 2030.
Claimants’ Argument. The claimants based their argument on the unwritten standard of care under the Dutch Civil Code (Book 6, Section 162), which requires corporations to exercise due care in society, based on all of the surrounding circumstances. The claimants argued that to satisfy this standard of care, RDS had to implement climate change policy informed by international human rights obligations, as well as the greenhouse gas reduction targets that will be necessary to meet one of the principal goals under the Paris Agreement: to ensure global temperatures do not increase by more than 2 ̊ C by 2100, with a goal to limit any increase to 1.5 ̊ C.
Defendant’s Argument. Throughout the proceeding, RDS recognized the need to tackle climate change by achieving the goals of the Paris Agreement and by reducing greenhouse gas emissions, and had adopted corporate policy in order to achieve net zero by 2050. However, RDS argued that the court was not the proper venue to address such a complex, policy-laden issue, and that achieving international climate change goals required the collective effort of society as a whole, not one corporate actor.
Ultimately, the Court sided with the claimants, deciding that to satisfy the unwritten standard of care, RDS had to reduce its greenhouse gas emissions by 45% by the end of 2030 through the implementation of, and adherence to, a more aggressive corporate policy.
Key Legal Implications
From a legal perspective, the RDS decision is notable for several reasons.
The Policy-Law Line. In general, courts worldwide have shown great restraint in relation to evaluating government responses to climate change, let alone a corporation’s. Absent binding domestic legislation, courts have instead typically viewed the issue of combatting climate change as one that falls squarely in the realm of policy, and thus largely off-limits to courts. For example, in the 2020 decision in R (on the application of Friends of the Earth Ltd and others) v Heathrow Airport Ltd., the UK Supreme Court overturned a lower court’s decision that the Secretary of State breached his duties under the UK Planning Act by failing to consider the climate change commitments under the Paris Agreement before approving a project to expand Heathrow Airport. However, the Dutch Court appears decidedly unshackled by this history of judicial restraint.
The Standard of Care Analysis. The Court found that RDS’s obligation to implement corporate policy to reduce greenhouse gas emissions was grounded in the legal duty owed to Dutch residents and the inhabitants of the Wadden region, where RDS holds its headquarters. The Court found that these citizens were facing serious and irreversible consequences and human rights risks as a result of rising global temperatures. The Court recognized that although the Paris Agreement is non-binding on corporations, it held that “the goals of the Paris Agreement represent a universally endorsed and accepted standard that protects the common interest of preventing dangerous climate change” (at para 4.4.27). The Court also considered a variety of other international and domestic agreements, legislation, and policies in its analysis of the ‘surrounding circumstances’ to inform the applicable standard of care. Accordingly, the Court held that a broad consensus around what needed to be done to prevent the most serious impacts of climate change should form the basis of the standard of care owed by RDS and other companies in adopting corporate policy to curtail greenhouse gas emissions. Specifically, the Court found (at para. 4.4.29):
…the court deduces that reduction pathways aiming for net 45% reduction of CO2 emissions in 2030, relative to 2010 levels, offer the best possible chance worldwide to prevent the most serious consequences of dangerous climate change…there is a widely endorsed consensus that in order to limit global warming to 1.5 °C, reduction pathways that reduce CO2 emissions by net 45% in 2030, relative to 2010 levels, and by net 100% in 2050, should be chosen. The court includes this broad consensus in its interpretation of the unwritten standard of care.
The Court’s approach to interpreting the standard of care is particularly striking for two main reasons:
The Canadian Effect. It remains to be seen whether a Canadian (or any) court will be inspired to follow the Dutch court’s approach and adopt a similar standard of care analysis.
Notably, on July 20, 2021, RDS issued a statement confirming it will appeal the decision – an unsurprising scenario, given both the severity and the novelty of the Court’s decision.
Key Practical Implications
Regardless of whether any court relies on the RDS decision, practically, its very issuance will be felt in corporate boardrooms worldwide, both those that have yet to come up with a climate change policy, and those with policies that do not meet the ambitious goals under the Paris Agreement.
Corporate Uncertainty & Risk. While this Dutch decision in no way imposes a duty upon Canadian companies akin to that imposed on RDS, it introduces more legal uncertainty and risk around the issue for businesses everywhere, particularly those operating in high-emitting industries. There is now one case in the world that says no business, even one with an existing emission reduction policy, is safe from the scrutiny of the court, and from potential liability.
Government Policy-Making. The decision will likely also give pause to government policy-makers considering how certain climate change legislation could impact businesses in their jurisdictions. In its reasoning, the Court lingered on the existence of domestic climate change legislation (in addition to a plethora of international agreements, conventions, and scientific reports) as another factor supporting its analysis that a high standard of care was appropriate to impose on RDS. Local governments might therefore be forced to consider how their legislation or even policies could lend themselves to the ‘surrounding circumstances’ a court might consider when determining the ‘standard of care’. For example, the recently enacted (though not yet in force) Nova Scotia Sustainable Development Goals Act sets a target of achieving net zero by 2050.
Renewables Shift. Even if no other court in the world follows the Dutch court’s lead, RDS is the umbrella corporation with over 1000 affiliated companies worldwide. As the Court acknowledged, RDS may have to “…take drastic measures and make financial sacrifices to limit CO2 emissions…”, which could “…curb the potential growth of the Shell group…” (at para 4.4.53). Given the size of RDS and the significant acceleration in its climate change policy this decision requires, there is no telling what ripple effects it will have on the energy industry. If this case is a harbinger of things to come in international climate change law, this body of jurisprudence could very well become a catalyst in the ongoing move toward renewable energy sources.
Please contact your McInnes Cooper lawyer or any member of our Energy & Natural Resources Team @ McInnes Cooper to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
© McInnes Cooper, 2021. All rights reserved. McInnes Cooper owns the copyright in this document. You may reproduce and distribute this document in its entirety as long as you do not alter the form or the content and you give McInnes Cooper credit for it. You must obtain McInnes Cooper’s consent for any other form of reproduction or distribution. Email us at [email protected] to request our consent.
Aug 26, 2024
On June 20, 2024, the Canadian Competition Act was amended to specifically make greenwashing claims reviewable conduct. Pressure on Canadian…
Aug 22, 2024
In early April 2024, Nova Scotia’s Energy Reform (2024) Act (Bill 404) passed, marking the beginning of a new direction for Nova Scotia’s…
Feb 23, 2024
On January 24, 2024, the Nova Scotia Supreme Court upheld the N.S. Environment Minister’s approval of a proposed windfarm development’s…
Nov 1, 2023
On October 13, 2023, the Supreme Court of Canada issued its judicial reference opinion: a significant portion of Canada’s federal…
Aug 8, 2023
We updated this publication on August 10, 2023. The Nova Scotia commercial net-metering regime just took another step toward implementation.…
Jan 25, 2023
Buzz around the potential of hydrogen as a green energy source has been growing. And the Atlantic Canadian provinces are poised to become a key…
Nov 10, 2022
Updated August 8, 2023. October 2022 amendments to the N.S. Renewable Electricity Regulations ushered in a new Commercial Net-metering regime…
Jun 24, 2022
The New Brunswick Court of Queen’s Bench has issued a court order to stop Indigenous fishers (all apparently members of the Wolastoqey Nation)…
Jun 6, 2022
The Federal Court’s April 22, 2022 decision in Mowi Canada West Inc. v. Canada (Fisheries, Oceans and Coast Guard) has implications for the…
Feb 3, 2022
On January 26, 2022, the British Columbia Court of Appeal extended an injunction preventing protesters from interfering with a logging…
Nov 10, 2021
On November 5, 2021, the Province of Nova Scotia passed the Environmental Goals and Climate Change Reduction Act. The Act will serve as the…
Oct 29, 2021
The New Brunswick Reduction of Greenhouse Gas Emissions Regulation, effected under the N.B. Climate Change Act, establishes specific…
Oct 19, 2021
Canada’s aquaculture industry is poised for growth but that growth is being challenged by regulatory uncertainty and a lack of confidence…
Jul 27, 2021
Canadian entities regularly contract with foreign companies to provide services in Canada. To complete its obligations under the contract, the…
Jun 21, 2021
There is a duty to consult Indigenous groups when the Crown contemplates actions that may adversely affect their rights under section 35 of the…
Apr 13, 2021
On April 7, 2021, the Nova Scotia government introduced Bill 97, amendments to the N.S. Electricity Act aimed at growing the solar industry in…
Jan 20, 2021
We updated this publication on July 8, 2022. 2020 was a year filled with challenges, including in the relationship between Indigenous…
Apr 20, 2020
As countries around the world grapple with the spread of COVID-19, global restrictions and containment measures have presented a range of…
Feb 4, 2020
Tidal developers considering responding to the FORCE Berth D procurement now have a clearer view of just what the successful proponent will get.…
Nov 22, 2019
The Environmental Emergency Regulations, effected under section 200(1) of the Canadian Environmental Protection Act (CEPA) and in force since…
Jun 29, 2018
The Crown’s duty to consult Indigenous Peoples has evolved considerably since the Supreme Court of Canada’s first detailed articulation of…
Feb 13, 2018
The much-anticipated Nova Scotia marine renewable energy regime finally has the force of law. First introduced over two years ago, the Nova…
Nov 30, 2017
On November 30, 2017, the Supreme Court of Canada denied Geophysical Service Incorporated’s (GSI) application for leave to appeal the decision…
Nov 17, 2017
It’s official: as of October 31, 2017, “facilitation payments” contravene Canada’s Corruption of Foreign Public Officials Act (CFPOA).…
Nov 7, 2017
On November 2, 2017, the Supreme Court of Canada was faced with the Ktunaxa Nation’s claim that a Ministerial decision to approve a project…
Sep 29, 2017
Atlantic Canada is at a turning point. The region’s history and economic development have historically been inextricably linked to the ocean.…
Aug 16, 2017
In the not-so-distant past, Canadian enforcement of its anti-corruption and anti-bribery legal regime has been relatively laid-back. But the…
Jul 28, 2017
All stakeholders in any major project development already know that adequate consultation before - rather than after - a project is approved is…
May 11, 2017
The Extractive Sector Transparency Measures Act is one of several anti-bribery and anti-corruption laws aimed at fighting corruption in the…
May 1, 2017
NOTE: On November 30, 2017, the Supreme Court of Canada denied Geophysical Service Incorporated’s (GSI) application for leave to appeal the…
Apr 20, 2017
On April 13, 2017, Canada’s federal government introduced legislation that, if passed into law, will legalize recreational cannabis in Canada.…
Apr 17, 2017
Recreational cannabis isn’t legal yet - but much of the associated stigma is already gone, usage is up and employers are feeling the workplace…
Jan 25, 2017
Doing business with the public sector creates an often overlooked – but very real – risk that the confidential information a business…
Dec 7, 2016
Updated February 7, 2024. We live in a world of change. New ideas and new industries are rapidly developing and the list keeps growing: tidal…
Nov 9, 2016
The balance between the public’s interest in accessing offshore petroleum resources data and operators’ commercial interests is at the heart…
Sep 12, 2016
On September 9, 2016, the Supreme Court of Canada decided in Musqueam Indian Band v. Musqueam Indian Band (Board of Review) that an Indian band…
Jun 17, 2016
In its June 16, 2016 decision in Rogers Communications Inc. v. Châteauguay (City), the Supreme Court of Canada decided a municipality’s…
Jun 10, 2016
Administrative monetary penalties, or “AMPs”, are a new phenomenon in the Canadian offshore. AMPs were introduced to the Newfoundland &…
Jun 6, 2016
On June 2, 2016, the Supreme Court of Canada denied an Alberta First Nation’s request to appeal the Court of Appeal’s dismissal of its bid…
Jun 6, 2016
Each Provincial government is under the legal duty to consult; the manner in which each carries out its legal duty to consult differs depending…
May 2, 2016
Updated October 4, 2023. Workplace accidents regularly lead to charges under occupational health and safety (OHS) law. These charges can be…
Apr 19, 2016
On April 14, 2016, the Supreme Court of Canada decided that Métis and “non-status Indians” are “Indians” under section 91(24) of the…
Mar 24, 2016
When a business responds to a public sector Request for Proposal or Expression of Interest (both of which we’ll refer to as an RFP for these…
Mar 9, 2016
On January 11, 2016, the Ontario Superior Court of Justice sentenced a front-line supervisor to imprisonment for 3½ years for four counts of…
Feb 15, 2016
On February 26, 2016, the bulk of the offshore-related amendments of the Energy Safety and Security Act (ESSA, formerly known as Bill C-22) take…
Dec 21, 2015
A practical and current guide created to help you navigate the increasingly important issues surrounding offshore decommissioning and…
Jul 17, 2015
On the heels of National Aboriginal Day, we pause to take a look back at two significant Aboriginal law cases decided in the last year, how…
Jul 10, 2015
On April 15, 2015, British Columbia’s Court of Appeal confirmed that First Nations can make certain legal claims grounded in Aboriginal rights…
Jun 25, 2015
Updated October 4, 2023. Most people know a company itself has occupational health and safety (OHS) obligations and risks corporate liability…
Dec 10, 2014
“Corporate Social Responsibility” (CSR) as a concept has been floating around in business-speak for years – but stakeholders in the mining…
Jul 15, 2014
On July 11, 2014, the Supreme Court of Canada confirmed that the “Crown” in historical treaties with First Nations groups includes both the…
Jun 26, 2014
On June 26, 2014, in its groundbreaking decision on Aboriginal title in Tsilhqot’in Nation v. B.C., the Supreme Court of Canada …
Subscribe to McInnes Cooper to stay current with our leading insights on legal updates, trends, news, events, and services.