ILMA Compoundings - Jul/Aug 2021 - 33

caused or contributed to an adverse
impact. The court found that Royal
Dutch Shell's value chain included
both members of the Shell Group over
which it had a policy-setting influence,
as well as the group's supply chain
and customer relationships. The court
did recognize that there are limits to
the company's ability to determine
its energy mix by virtue of existing
contractual commitments, but that
it was free to decide not to make
new investments in exploration and
fossil fuels and to change its energy
offerings to future customers.
I should mention that Royal Dutch
Shell argued to the court that the Shell
Group was taking concrete steps in the
energy transition and that its climate
policy, intentions and ambitions were
compatible with its reduction obligations.
However, the court rejected this
argument, finding the company's policy
and policy intentions to be " intangible,
undefined and nonbinding. " Shell said
it is appealing the court's decision.
There has been a great deal of speculation
as to whether the Dutch court's
decision has set a precedent for wider
climate litigation and claims against
other oil companies and businesses
with high carbon footprints. Some
observers believe that the case could
lead to other human rights claims
against corporations, not just those
that are climate-related. Until Shell's
appeal plays out in the Dutch courts,
and regardless of the court's legal
reasoning, it is safe to assume that
the case will serve as inspiration for
litigation in other countries.
For example, the courts in France,
Germany and Ireland have ruled that
their countries' climate targets are
insufficient to meet the Paris Agreement's
goals and need to be revised.
An Australian court recently held
that the government has a duty to
protect future generations of children
from emissions from certain mining
operations in the country.
Further, climate activists and their
lawyers are seeking their " tobacco
moment. " Recall that anti-smoking
activists and the families of cancerstricken
smokers in the U.S. lost
claims against Big Tobacco for decades.
State attorneys general eventually
turned the tide, garnering over $246
billion in settlements and changes in
how cigarettes are marketed and sold.
Is this that type of moment?
While the court's order is made
provisionally enforceable pending Shell's
appeal, noncompliance will not subject
the company to any penalty payments.
Therefore, it remains unclear as to how
Shell will comply with the judgment.
Further, because the court did not establish
that Shell is currently in violation
of its emissions reduction obligation,
any damages claims seem unlikely to be
successful for the foreseeable future.
Finally, ExxonMobil and Chevron
shareholders recently won significant
climate votes in the companies' annual
meetings. Investors, supported by
efforts by the Securities and Exchange
Commission and the Federal Reserve,
are making their interests heard in
public companies. More than 450
major investors signed a letter in midJune,
urging governments to set more
ambitious emission reduction targets,
detail " clear " road maps to decarbonize
pollution-heavy industries and implement
mandatory climate risk disclosure
requirements. The letter is the strongest
call yet from investors urging governments
across the globe to take bolder
steps to fight climate change.
So, has the " green dagger " finally
punctured the major oil companies,
or has the recent Shell decision and
investor activism simply given them
a better road map to address how to
make progress on climate objectives
while improving financial performance?
While carbon-heavy public
companies are constrained to deploy
investment capital in accordance with
shareholders' priorities, what about
state-owned oil companies, the interests
of which may not coincide with
society's objectives? If the world is to
transition to a low-carbon footprint,
where does the rest of the supply chain
fit in, and, importantly, who will bear
the costs? There are no easy answers
to these questions, but it is imperative
to be part of the discussion of them.
Leiter serves as general
counsel to ILMA, representing
the Association since 1981.
He may be reached at
202-466-6502 or jleiter@bmalaw.net.
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