Why 2022 Will Be a Banner Year for Climate Litigation in Europe

In January of this year, the European Commission started applying new state aid guidelines that make climate impact a central criterion for companies operating in Europe to receive aid. In February, Italy changed its constitution to elevate “protection of the environment for future generations” as a primary value of the country.

In March, a coalition of 11 nongovernmental organizations (NGOs) sued France’s largest supermarket chain, Casino, for violating France’s duty-of-vigilance law by supporting South America’s cattle industry, a major contributor to deforestation.

Even before the invasion of Ukraine focused attention on Europe’s dependence on fossil fuels from Russia—Russia is the source of 40 percent of the EU’s gas, 27 percent of its oil imports, and 46 percent of its coal imports—2022 was looking like a pivotal year for climate change law in Europe.

With global oil prices rising as energy sanctions against Russia take hold, and with new laws and regulations raising the stakes for European companies in all industries, lawyers involved in environmental, social, and governance (ESG) say that forces are converging that will lead to a sharp acceleration of climate-related work, starting this year.

In addition to corporate clients needing advice on how to comply with a shifting regional and national regulatory landscape, lawyers say the stage is set for more high-profile lawsuits holding European governments accountable for their action, or inaction, to combat global warming. Perhaps the most significant change is that environmental issues, previously an ancillary element of many lawsuits, will now be front and center, lawyers said.

“Environmental concerns used to be considered esoteric: They formed the background, rather than being addressed head on,” Stuart Bruce, formerly of Wilmer Cutler Pickering Hale and Dorr, and now director of climate risk and strategy at KPMG UK, said during a presentation at Paris Arbitration Week in late March, where the issue of the environment was addressed in multiple sessions.

The new laws and treaties, however, are bringing about a “mindset change,” where environmental issues are “integrated and addressed like any other issue,” rather than just an “aspect or an effect,” Bruce said.

Economic and Regulator Forces

The economic and regulatory forces favoring climate-conscious policies, not just in Europe but globally, were already gathering pace even before Russia’s invasion of Ukraine on February 24:

• A long-awaited report from the UN Intergovernmental Panel on Climate Change (IPCC), published Monday, underscored the panel’s previous warnings on the urgent need to limit or eliminate emissions that contribute to global warming.
• With the European Green Deal of 2020 and the recently introduced corporate due diligence bill, the European Union has staked out climate change as a key area in which it wants to show global leadership.
• The Paris Agreement on climate change, a global treaty that commits signatories to reducing emissions sharply by 2030, gained new heft with the re-entry last year of the United States, the world’s second-largest consumer of fossil fuels after China.
• The U.S. Securities and Exchange Commission’s (SEC’s) proposed new rules on climate disclosure for listed companies, introduced in late March, are expected to have wide ramifications for regulation outside U.S. borders.

Over the past two years, European courts have been the site of landmark cases that now form powerful precedents for new lawsuits by NGOs and activists against governments and corporates, lawyers say. Unlike earlier waves of climate litigation, which focused primarily on quantifying the actions of polluters through tracking emissions and other measures, many of these newer cases turn on a variation of fiduciary duty, duty of care, or duty of vigilance—principles enshrined in national law.

What is remarkable about the cases, lawyers say, is that they are taking established notions of fiduciary duty and extending them in the context of climate change.

A 2021 decision by a Dutch court against Royal Dutch Shell broke significant new ground, lawyers say, by holding that the British-Dutch energy giant had an “obligation of result” to reduce its carbon-dioxide emissions from activities, based on an unwritten duty of care in Dutch tort law.

In what has been dubbed the ”Case of the Century” in France, also from 2021, a high court in Paris accepted the argument that duty of care, which previously had applied mostly to corporations, also covered the government’s failure to meet its own climate targets.

In Germany, a case filed by a Peruvian farmer against the energy utility RWE is currently moving forward after a pandemic-related pause. The lawsuit, from 2015, seeks to extend duty of care for climate damage from emissions, even though RWE has no operations in Peru. It made legal history in 2017 when a high court in Germany ruled the case admissible, saying it was possible to hold major emitters accountable for their contribution to climate change worldwide.

The flood of data coming out of court judgments, and from global bodies like the IPCC, has the potential to strengthen plaintiffs’ climate change lawsuits, according to Michael Gerrard, director of the Sabin Center for Climate Change Law at Columbia Law School.

“‘Should have known’ will be a big issue going forward,” Gerrard said during a recent interview. “The body of scientific data will make it difficult for defendants to claim they didn’t know what the effects of their actions would be.”

And while quantifying damage to the environment will continue to be a key element of these cases, requiring legal teams to have advanced technical knowledge and expertise, lawyers say the broader issue of responsibility will start to take precedence. “Increasingly you will see a focus on holding decision-makers to account,” Nathalie Allen, director of international arbitration at Addleshaw Goddard in London, said during a presentation at Paris Arbitration Week. “Not all claims have succeeded, but claims are increasing.”

In the corporate sphere, in particular, companies facing the “reputational negativity” that can come from being sued “are assessing risk and worried about lack of certainty on what they must and must not do,” she added.

“Claims against the state are the first step,” Sylvie Gallage-Alwis, a partner at Signature Litigation in Paris and a specialist in torts, told Law.com International. “First you go after the regulations, [saying] they were not robust enough or didn’t meet the standards so the population was put at risk. Then you go after the companies.”

Laws and Litigation Bringing About Change

The pressure of new laws and new legal precedents is already having an effect.

In January, an $82 billion U.K. university pension fund said it would shift some $5 billion in assets to lower-carbon investments. The fund, Universities Superannuation Scheme Ltd., is being sued by shareholders alleging it is not doing enough to meet Paris Agreement, U.K., and its own targets to divest from investments in companies that contribute to global warming. The case is similar to a landmark Australian case, settled in 2020, in which shareholders accused the Rest superannuation fund of violating company law by failing to provide information related to climate change business risks and any plans to address those risks.

In February, the French government announced it would scrap a plan to expand Charles de Gaulle airport near Paris, saying the project to build a fourth terminal did not fit with national environmental goals.

And in March, several climate activist groups, including Greenpeace and Friends of the Earth, sued TotalEnergies of France, alleging the oil company broke EU consumer laws by making false claims about its climate commitment in a recent rebranding.

The TotalEnergies case, lawyers say, is typical of the “greenwashing” cases that will become more common under new laws coming into force, including the EU sustainability directive and the amended Italian constitution. These cases, they added, will affect a broad range of industries in Europe, not just those linked to energy.

“When you think of sustainability litigation, you tend to think of fuel-intensive industries,” Roberto Jacchia, a founding partner of the Italian firm De Berti Jacchia Franchini Forlani, said during a recent interview. “But any industry is vulnerable if it makes claims to the public.”

And, as evidenced by the new SEC proposed rules, which would require public companies to disclose extensive climate-related information in their SEC filings, transparency and communication are also becoming a central part of climate law—not just for the defendants, who are being asked to prove their bona fides, but also for plaintiffs who may be seeking publicity as a means of putting pressure on policymakers for change.

In the case against the French supermarket chain Casino case, for example, the NGOs who brought the suit are asking company management to develop a plan to meet duty of vigilance that would be made available to the public.

“Because NGOs can examine the plan and hold Casino accountable, this means duty of care is likely to extend even more,” said François-Xavier Mirza, managing associate in international arbitration at Addleshaw Goddard in Paris.

That, in turn, is likely to lead to more lawsuits, which, for now, will probably be resolved in the public sphere through litigation, rather than in private settlement through arbitration or other alternative means, lawyers said.

But given the time and cost of litigation—and the urgency to address climate issues—litigators and arbitrators say they are actively discussing how dispute resolution processes might be adapted to take into account the public’s right to know as well as the desire of litigants for confidentiality.

“We need smart solutions,” Marily Paralika, partner in charge of the arbitration practice at Fieldfisher in Paris, said. “We need to find a way to balance the parties’ interests with the greater good.”

From: Corporate Counsel