Friends of the Earth Netherlands v Royal Dutch Shell PLC: a trendsetter for corporate liability?

International legal scholarship has long dealt with an important legal blackhole; whether corporations possess international legal personality. Currently, it is mainly recognised that corporations possess a partial legal personality under international law. This has the effect of holding them liable for not abiding by certain obligations they are imposed to fulfil. Nevertheless, the idea of corporate legal personality has been very important in the field of international environmental law too, and within the realm of climate change.


There is still much debate, however, as to whether corporations have direct or indirect obligations with regards to certain international legal domains. In May 2021, a Dutch case, Friends of the Earth Netherlands et al v Royal Dutch Shell PLC, [1] discussed whether a corporation could be held liable for breaching international obligations. The Dutch Court eventually found that Royal Dutch Shell (RDS) could be held liable for its environmentally harmful actions. [2] Additionally, as a result of the company’s unclear policy, [3] the Court imposed onto it the obligation to reduce its carbon dioxide (CO2) emissions by 45%, compared to its emissions of 2019, by 2030. [4] Although a national law finding, this judgment may potentially impact greatly the global legal arena. Could this case have opened the floodgate to ensure the recognition of corporate legal personality within international law?

The Dutch District Court case: how was this conclusion reached?


After a review of admissibility, through the application of the Rome II Regulation (EC) No. 864/2007, [5] it was confirmed that the Dutch Courts could rule on the subject matter and that Dutch law was applicable. [6] As there was no clear initial obligation compelling RDS to reduce its emissions, the Court had to use judicial creativity to come to such a conclusion. In the Dutch Civil Law Code, Article 6:162 creates an unwritten standard of care. [7] This standard of care entails that one must ensure that measures are taken if you expose others to a certain harm. [8] Taking this standard of care as the starting point, the Court then worked international human rights law and international environmental soft law obligations into the standard to ensure liability on the part of RDS.


Importantly, the Court relied on the United Nations Guiding Principles on Business and Human Rights [9] which, although not creating binding obligations on corporations, [10] emphasise the importance of businesses respecting human rights. Notably, Principle 11 outlines the idea that businesses should respect human rights. [11] Following the release of these Guidelines, the European Commission clarified that all European businesses are expected to respect and follow these. [12] Consequently, these Guidelines could be used as a reference point for the Dutch unwritten ‘standard of care’, even if RDS had not explicitly consented to them, as these are generally accepted through the European Commission’s recognition. [13] It is important to note that the way that the Court enforced human rights is interesting. It did not directly enforce them; rather, it found that one must ensure the application of the unwritten ‘standard of care’. [14]


The Court also looked to existing international environmental law and found that corporations must refer to existing agreements to regulate their emissions, and these were also used as a basis for the unwritten standard of care. [15] The Court also indicated that there is international consensus that climate change cannot be regulated without the cooperation of corporations. [16] Hence, although RDS and other companies did not ratify big environmental conventions, because of that standard of care and respect to human rights, RDS must respect the goals found within these international treaties. [17]


Ultimately, through the Dutch unwritten standard of care, the Dutch District Court was able to find that RDS must reduce its 2019 emissions by 45%, by 2030. [18] This was not due to a result of RDS being in direct breach of existing obligations it had to fulfil but, rather, because of the unwritten ‘standard of care’ and the company’s vague policy. Consequently, the Court believed that a breach of obligations was unavoidable and, hence, imposed emission reduction targets onto the corporation. [19]

Effects of this finding: can this have broader impacts on international law?


Although this finding comes across as being revolutionary for the accountability businesses can incur in the fields of human rights and environmental law, it might not have had the pivotal impact upon international law that many may have hoped. The Netherlands were able to come to such a conclusion through their national laws, and due to it being a Monist system, making it possible for the Court to directly apply international law without the need to integrate it into national laws. This does not mean that it would be impossible for other States’ judicial systems to facilitate similar reasonings; however, such conclusions are dependent on national laws rather than international ones. Although such a ruling is ground-breaking for environmental and human rights law, such a result remains dependent on how states integrate international law into their national legal systems.


Despite such an outcome being contingent on national laws and how a national legal system functions, this finding may have still set the stage to hold corporations accountable in the international law sphere. Indeed, international law can be created through custom and, hence, if national courts find private entities such as corporations to be liable under national laws, this could affect international law. Notably, various legal systems reaching the same result could potentially create new customs.


It is increasingly recognised that climate change is not the product of one actor but, rather, all actors are a piece of the puzzle; there is shared responsibility regarding this issue. [20] This means that with the rise of climate litigation, a rise of corporate liability in this domain is also expected worldwide. [21] Although this case does not directly alter international law, it may be the first brick laid down to build a wall.


Concluding remarks


The Dutch Court’s finding has had an important impact within international law academia as it has led many to question whether international law could have been affected as a result. Although it may have opened a floodgate in court decisions on the concept of corporate legal personality, for the time being, it remains too early to make a definite conclusion. One thing is certain; this case has had an important impact on the obligations companies may have regarding climate change and the importance of climate litigation more generally. Hopefully, this case will have opened the door for greater corporate liability within international law and will extend the duties of these actors.


Endnotes


[1] Friends of the Earth Netherlands et al v Royal Dutch Shell PLC C/09/571932 / HA ZA 19-379 accessed 29th January 2022.

[2] Ibid.

[3] Iva Lea Aurer, ‘Guest Commentary: An Assessment of the Hague District Court’s Decision in Milieudefensie et al. v. Royal Dutch Shell PLC’ (Climate Law Blog; Columbia Law School, 28th May 2021) accessed 29th January 2022.

[4] Loyens & Loeff ‘Dutch court rules in climate case: Friends of the Earth Netherlands et al. v Royal Dutch Shell’ (Lexology, 2nd June 2021) accessed 29th January 2022.

[5] Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11th July 2007 on the law applicable to non-contractual obligations (Rome II).

[6] Ibid.

[7] Dutch Civil Law Code, Article 6:162.

[8] [n1], [4.4.1] & [4.4.3].

[9] United Nations Human Rights Office of the High Commissioner, ‘Guiding Principles on Business and Human Rights: Implementing the “Protect, Respect and Remedy” Framework’ (2011) HR/PUB/11/04 accessed 29th January 2022.

[10] [n1], 4.4.11.

[11] [n9], Principle 11.

[12] [n1], 4.4.11.

[13] Ibid.

[14] Ibid.

[15] [n1], 4.4.18.

[16] [n1], 4.4.19.

[17] [n1], 4.4.26, 4.4.27.

[18] [n1], 4.4.55.

[19] [n4].

[20] André Nollkaemper, ‘Shell’s Responsibility for Climate Change: An International Law Perspective on a Groundbreaking Judgment’ (Verfassungsblog, 28th May 2021) accessed 3rd February 2022.

[21] Ibid.

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