Corporate Responsibility for Climate Change: Litigation and Other Grievance Mechanisms - By Elisa Chiaro

Editor’s Note: Elisa Chiaro is a legal consultant focussing on Business and Human Rights and International Criminal Law. In 2016 she completed an LL.M. at SOAS, University of London. Before that she worked for five years as international corporate lawyer both in Italy and UK. She is admitted to the Bar in Italy.

1.      Introduction

According to the Intergovernmental Panel on Climate Change (“IPCC”) climate change is real: “[h]uman influence on the climate system is clear, and recent anthropogenic emissions of greenhouse gases are the highest in history.”[1]

From a scientific point of view, it is well established that the concentration of greenhouse gases (“GHGs”), which are present in nature and essential for the survival of human beings and plants, is linked to the Earth’s temperature, which has been rising steadily since the Industrial Revolution. From the perspective of public health, according to the WHO, an effect of climate change will be an increase of approximately 250,000 deaths per year between 2030 and 2050 due to malnutrition, disease (such as malaria and diarrhoea) and heat stress.

As will be explained in the following section many international agreements and initiatives have emerged to tackle the problem. However the main goal of this post is to analyse some examples of civil judicial and quasi-judicial means that have been used to hold companies accountable for the effects of climate change. The first category under scrutiny will be litigation brought against private companies, such as in the case Lliuya v. RWE AG brought before the German Court and in American cases brought by public institutions (cities or counties) against oil companies. The second category encompasses other grievance mechanisms, such as the notification to the OECD National Contact Points of violation of the OECD Guidelines for Multinational Enterprises (“OECD Guidelines”) by corporations (Dutch NGOs v. ING Bank).


2.      Climate Change: International Legal Framework

One of the first steps towards acknowledging the importance of environmental sustainability was the 1992 Rio de Janeiro summit, which led to the United Nation Framework Convention on Climate Change (“UNFCCC”) ratified by 197 countries, which was followed by the inclusion of environmental sustainability among the Millennium Development Goals, in 2000.  

The Kyoto Protocol, also linked to the UNFCCC, is an international agreement that binds State parties to emissions reduction targets under the principle of “common but differentiated responsibilities,” which puts a heavier burden on developed countries which have largely been responsible for over a century of industrial activities and consequent GHG emissions. The Kyoto Protocol entered into force in 2005, and was amended in 2012 (Doha Amendment). During the second period (2013-2020), parties committed to an 18 per cent reduction of GHG emissions below 1990 levels. The Kyoto Protocol, which has not been ratified by the USA, has not brought a significant change to global emissions, and as such has been considered a failure, even if still constitutes “an important first step in global climate diplomacy.”[2]

The commitment to “take urgent action to combat climate change and its impact” is also one of the Sustainable Development Goals (“SDGs”) set in 2015, in the context of the UN General Assembly 2030 Agenda for Sustainable Development.

Finally, the adoption of the Paris Agreement, which entered into force on 4 November 2016 and has been ratified (as of December 2017) by 171 countries, constitutes a leap forward, directly contributing to the fulfilment of numerous SDGs, particularly SDG 13 on climate action. Despite the US government’s announced withdrawal from the Paris Agreement[3] in 2017, the agreement has since been signed by both Nicaragua and Syria, which initially did not join the climate accord.[4] The Paris Agreement’s main goals are to keep the global average temperature increase “well below 2°C above pre-industrial levels” (Paris Agreement, Art. 2.1(a)), and to “foster climate resilience and low greenhouse gas emissions development” (Paris Agreement, Art. 2.1(b)). The Paris Agreement has been welcomed as a great success, especially in light of the high number of signatory parties.[5] However its goals seem modest. Firstly, according to a 2017 study it is unlikely that global warming will remain below the threshold of 2°C by 2100.[6] Moreover, the fossil fuel era is far from being over,[7] while the Paris Agreement appears to be weaker in certain respects in comparison to previous instruments, such as the Kyoto Protocol. For instance, under the Paris Agreement, the Parties submit voluntary pledges on how to address climate change, and, unlike with Kyoto Protocol, “would not have to submit to emission cuts […] dictated by United Nations negotiators.”[8]

Leaving international agreements aside, other climate change initiatives are spreading. At the COP23 held in Bonn last November 2017, it was announced that at least a dozen countries (led by the UK, Canada and the Marshall Islands) have agreed to phase out coal from power generation by 2030.[9] Moreover, at the national level, the Commission on Human Rights of the Philippines is leading a national enquiry into fossil fuel companies’ responsibility for climate change as of December 2017, following the recent typhoon that hit the country.[10]  

Finally, it is worth noting the EU's commitment to the environment and the fight against climate change in particular, which is visible from, for instance, the inclusion of environmental and climate change-related objectives in the Treaty on the Functioning of the European Union (Arts.191-193) and the EU’s participation in the Paris Agreement and second phase of the Kyoto Protocol. Moreover the EU has its own emission trading system and, among numerous other measures, the EU Commission adopted an Adaptation Strategy to Climate Change in 2013, which supports and coordinates the actions of Member States.

3.      Civil Litigation against Private Companies

The mechanisms analysed in the previous section encompass important steps towards tackling climate change but do not necessarily lead to strong accountability.[11] Instead, litigation may constitute an important path to hold specific companies accountable for their contributions to climate change and its damaging consequences. Thus, the following section will analyse how multinational enterprises have been sued before civil courts, not only by citizens, but also by cities, counties or local communities, who are increasingly playing a pivotal role in advancing climate change litigation.

Lliuya v. RWE AG

Lliuya v. RWE AG is an example of a case brought against a private company in relation to climate change issues. In November 2015 the Peruvian farmer Saul Luciano Lliuya filed a lawsuit against RWE AG, a German electricity producer, before the District Court in Essen, Germany with the aim of “determin[ing] that the respondent is liable, proportionate to its level of impairment […] to cover the expenses for appropriate safety precautions in favour of the claimant’s property from a glacial lake outburst flood from Lake Palcacocha.”[12] Lliuya lives in Huaraz (Peru) where he owns a property which is allegedly threatened by glacial melting, a direct consequence of climate change.[13] According to the plaintiff, RWE, as parent company of the companies operating in South America, contributed for decades to GHG emissions in Europe, along with the GHG emissions released by its subsidiaries.[14] It was argued that, although GHG emissions are not legally prohibited, they do lead to “interference with the property of the claimant”. Lliuya claimed to be “entitled to removal of the interference with his property” according to § 1004 of the German Civil Code BGB (Claim for removal and injunction).

Lliuya claimed that while in the 1930s water volume of Lake Palcacocha (in the proximity of the village of Huaraz) was around 12 million m3, in 2009 the volume increased to 17.3 million m3. He argued that the lake posed a flood risk, and that RWE had contributed to this situation due to its share of GHG emissions.[15] The plaintiff, among others, requested the court to determine that the defendant has an obligation to bear costs for adequate preventive measures to protect his property against possible flood, proportionally to RWE's contribution to the damage, based on § 287 of the German Code of Civil Procedure.[16] In December 2016 the District Court dismissed the case on the basis that the claim lacks an adequate degree of specificity.[17] The Court also specified that “the question whether an impairment of the claimant’s property in the form of a flood hazard actually exists is moot.”[18] Finally the Court stated that, according to the principle conditio sine qua non, “[t]he past and future greenhouse gas emissions by the defendant could not hypothetically be omitted from the equation without the supposed flood hazard being eliminated as a result.”[19]

The case is ongoing as the plaintiff has filed an appeal before the Higher District Court in Hamm, which ruled on 30 November 2017 that the case is admissible and ordered the parties to submit evidence.[20]

City of New York v. BP and others

Earlier this month, New York Mayor Bill de Blasio announced two impressive initiatives in the fight against climate change. Firstly, he said that the City aims to divest its five New York City Pension Funds (assets worth $189bn) from fossil fuel companies.[21] Secondly, he announced a lawsuit against five major oil companies (namely BP, Chevron, Conoco Philips, Exxon Mobil and Royal Dutch Shell) launched on the basis that the companies were allegedly aware that burning fossil fuels could cause climate change, but have been trying to hide their scientists’ results.[22] As stated in the claim, “climate change […] is injuring New York City. Because of the past and continuing conduct of Defendants […] and because recent and current emissions remain in the atmosphere for up to hundreds of years, more extreme and injurious impacts are unavoidable.”[23] As a result, the city has been expending large amounts of funds to protect itself and its residents from the effects of climate change, and will have to take “more robust measures” to tackle the threat at great cost.[24] The complaint, requesting compensatory damages,[25] was filed primarily for public nuisance in light of the fact that “Defendants’ conduct constitutes a substantial and unreasonable interference with and obstruction of public rights and property, including the public right to health, safety, and welfare […].”[26]

A similar approach has been taken by other public entities in the US. In 2008 oil companies were sued on climate change-related grounds, by an Alaskan community named Kivalina.[27] At the time the plaintiffs requested up to $400m to relocate the village from the Alaskan barrier, which was facing rising sea levels.[28] The case was dismissed, and the federal court held that, as stated by the Supreme Court any dispute involving a political question lie outside federal court jurisdiction.[29]

More recently, three communities in California (City of Imperial Beach, Marin County and San Mateo County) each respectively filed a lawsuit in July 2017 for public and private nuisance, among other complaints, against 37 oil, gas and coal companies before the Superior Court of California. The three plaintiffs, which have been facing continuous flooding, high tides and exceptional storms, with damages amounting to billions of dollars, claimed the defendants were responsible for around 20% of industrial carbon dioxide and methane pollution in the period 1965-2015, which allegedly caused the sea level to rise (among other effects).[30] The cities of San Francisco and Oakland have followed a similar path, suing oil companies for public nuisance in September 2017.


4.      Other grievance mechanisms

Dutch NGOs v. ING
Governments who adhere to the OECD Guidelines for Multinational Enterprises are required to set up National Contact Points (“NCPs”). The major function of the NCPs is to contribute to resolution of issues arising from the violation of the OECD Guidelines. NCPs have been particularly criticised for the lack of any review mechanism of decisions taken (either at the international level or at the domestic level) and for their overall ineffectiveness.[31] However, according to the OECD, between 2011 and 2016 around 47% of all cases accepted for examination have resulted in agreements among the parties. Around 37% of the cases accepted for further examination by NCPs have led to a change of policy by the company involved.

The Dutch NGOs v. ING Bank case was notified to the Dutch NCP in May 2017 by four NGOs (Oxfam Novib, Greenpeace, BankTrack and Friends of the Earth Netherlands) claiming that ING was violating the OECD guidelines.[32] In particular the NGOs claimed that ING’s core activity (financing projects and companies) could have a negative impact on climate change, adding that “[…] the bank does not collect or evaluate data on the climate impact of its financial investments […], nor does it disclose such information.”[33] Moreover the NGOs requested that the bank “[…] identifies and makes public its indirect greenhouse gas emissions and establish objectives which the company will pursue to align the bank’s indirect greenhouse gas emissions with the objectives of the Paris international climate agreement.”[34]

The Dutch NCP accepted the case, and released its initial assessment in November 2017, holding that “[u]nder the terms of the OECD Guidelines companies are expected to conduct a due diligence process in respect of their environmental impact, including climate impact.”[35] Despite the acknowledgment of the complexity of the subject, the Dutch NCP believed that the notification “could contribute to the purpose and enhance the effectiveness of the Guidelines, in the sense that it can clarify issues relating to climate change in the financial sector in respect of due diligence, and more particularly in respect of this specific instance.”[36] It is worth noting that ING announced in December 2017 its plan to get close to “zero exposure to coal power generation” by 2025.


5.      Conclusions

This blog has focussed on the recent trend towards holding multinational enterprises (and especially energy companies) accountable for the harm caused by climate change. The outcomes of the different cases discussed here could set crucial incentives for companies to mitigate their contribution to climate change and open a much-needed path for those harmed to get some type of compensation. From a more academic point of view, it is interesting to observe the variety of legal reasoning used by the claimants: some claims have focussed on property rights (Lliuya v. RWE AG), while others (for instance in City of New York v. BP and others) have based their claims on the right to health, safety and welfare.

[1] “Climate Change 2014 – Synthesis Report” (IPCC 2015), p. 2.

[2] Duncan Clark, “Has the Kyoto protocol made any difference to carbon emissions?” (The Guardian, 26 November 2012).

[3] Oliver Milman, David Smith and Damian Carrington, “Donald Trump confirms US will quit Paris climate agreement” (The Guardian, 1 June 2017). Please note that President Trump declared in late January 2018 that there could be a way back for the US in the Paris Agreement. See Graham Ruddick, “Donald Trump says US could re-enter Paris climate deal” (The Guardian, 28 January 2018).

[4] Brad Dennis, “As Syria embraces Paris climate deal, it’s the United States against the world” (The Washington Post, 7 November 2017). The Democratic People’s Republic of Korea has also signed and ratified the Paris Agreement.

[5] Fiona Harvey, “Paris climate change agreement: the world's greatest diplomatic success” (The Guardian, 14 December 2015).

[6] Adrian E. Raftey and Others, “Less than 2°C warming by 2100 unlikely” (Nature Climate Change, 31 July 2017).

[7] John Schwartz, “Paris Climate Deal Is Too Weak to Meet Goals, Report Finds” (The New York Times, 16 November 2016). See also “World Energy Outlook 2017 – Executive Summary” (OECD/International Energy Agency, 2017).

[8] Brad Plumer, “Stay In or Leave the Paris Climate Deal? Lesson from Kyoto” (The New York Times, 9 May 2017).

[9] Nina Chestney, Stine Jacobsen, “At least 15 states join global alliance to phase out coal by 2030” (Reuters, 16 November 2017).

[10] “World’s first human rights investigation into corporate responsibility for climate change intensifies”, Press release (Greenpeace, 8 December 2017).

[11] Sylvia I. Karlsson-Vinkhuyzen and others, “Entry into force and then? The Paris Agreement and state accountability” (Climate Policy, 2017)

[12] Lliuya v. RWE AG, Claim (Unauthorised English translation provided by Germanwatch e. V.) (District Court Essen – 23 November 2015), p. 2.

[13] Ibid.

[14] Ibid.

[15] Lliuya v. RWE AG, Decision (Unofficial English Translation) (District Court Essen – 15 December 2016), p. 3.

[16] Ibid, p. 3-4.

[17] Ibid, p. 4-5.

[18] Ibid, p. 5.

[19] Ibid, p. 6.

[20] Lliuya v. RWE AG, Indicative Court Order and Order for the hearing of Evidence (Unauthorised English translation provided by Germanwatch e. V.) (Higher Regional Court of Hamm, 30 November 2017).

[21] Attracta Mooney, Ed Crooks, “New York sues big oil companies over climate change” (The Financial Times, 11 January 2018).

[22] William Neuman, “To Fight Climate Change, New York City Takes On Oil Companies” (The New York Times, 10 January 2018).

[23] City of New York v. BP and Others, Complaint (US District Court, Southern District of New York, 9 January 2018), para. 33.

[24] Ibid, paras. 100-110.

[25] Ibid, p. 63.

[26] Ibid. para 119. The second and third causes of action are private nuisance and trespass.

[27] Native Village of Kivalina v. ExxonMobil Corp., Complaint for damages (US District Court, Northern District of California, 26 February 2008).

[28] Ibid, paras. 1, 186.

[29] Native Village of Kivalina v. ExxonMobil Corp., Order Granting Defendants’ motions to dismiss for lack of subject matter Jurisdiction (US District Court, Northern District of California, 30 September 2009), p. 6-7, 24. According to the “political question doctrine” which is “a species of the separation of powers doctrine”, certain questions are political as opposed to legal, and thus, must be resolved by the political branches rather than by the judiciary.” Ibid, p. 6.

[30] The City of Imperial Beach v. Chevron and Others, Complaint (Superior Court of the State of California, 17 July 2017) paras. 13(c), 14, 75; The County of Marin v. Chevron and Others, Complaint (Superior Court of the State of California, 17 July 2017) paras. 13(b), 14, 75; The County of San Mateo v. Chevron and Others, Complaint (Superior Court of the State of California, 17 July 2017) paras. 7, 13(c), 75.

[31] Scott Robinson, “International Obligations, State Responsibility and Judicial Review Under the OECD Guidelines for Multinational Enterprises Regime” (Utrecht Journal Of International And European Law – 2014), p. 79-80.

[32] Dutch NGOs v. ING, Initial Assessment (Dutch Ministry of Foreign Affairs, OECD National Contact Point – 14 November 2017).

[33] Ibid., p. 2.

[34] Ibid.

[35] Ibid., p. 4.

[36] Ibid., p. 5.

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