In a judgment with serious international ramifications, the Dutch Court of Appeals in The Hague found that Articles 2 and 8 of the European Convention on Human Rights contain a positive obligation to combat climate change. As a result, the Court of Appeals ordered the Dutch state to reduce the Dutch greenhouse gas emissions by 25 percent in 2020, compared to 1990. The decision is likely to result in more, and more successful, climate change actions against states and companies, not only in the Netherlands but also in Europe and globally. The Netherlands will also have to expedite its energy transition, and investors suffering damages resulting from that transition should be aware of their rights to claim compensation before the Dutch courts or in arbitral proceedings.
The Court of Appeals decision is the latest step in a legal saga that has cause substantial legal and political turmoil in the Netherlands. Urgenda, an environmental NGO, had started proceedings against the Dutch state in 2015, arguing that the Dutch climate change policy (with a reduction target by 20 percent in 2020) was in breach of the international soft-law target of 25 percent (the Paris Agreement had not yet been signed) that developed countries should adhere to in order to keep global warming below 2°C. The district court, to the surprise of many, sided with Urgenda in finding that a reduction target of 20 percent violated the state's duty of care under Dutch tort law.
Given the ground-breaking application of Dutch tort law by the district court, many expected the decision to be overturned by the Court of Appeals. However, the Court of Appeals upheld the district court judgment, yet followed a line of reasoning based on international human rights obligations that has potentially much wider impact, also internationally.
As a matter of Dutch law, a party commits a tort if it breaches a duty imposed by law. The Court of Appeals turned to article 2 (right to life) and and 8 (right to family life) and found that these rights, pursuant to standing case law of the European Court of Human Rights, also imposes the duty upon the state to actively protect its citizens against real danger. Climate change is generally perceived, also by the Dutch state, as a serious danger, and there is international consensus that in order to prevent this danger from materializing, global warming should not exceed 2°C. Consequently, the Dutch state is obliged to take action to prevent worse. By reference to the IPCC contiuous recommendations for 25 percent to 40 percent reduction in order to achieve that goal, the Court found that the 20 percent reduction policy violates the Dutch state's duties imposed articles 2 and 8 ECHR, and thus qualifies as a tort. In order to remedy this unlawful behaviour, the state is ordered to reduce emission levels by at least 25 percent on 1 January 2020.
Interestingly, the state argued that the Netherlands is only a very small contributor to global greenhouse gas emissions, resulting in a lack of causality between the unlawful Dutch reduction policy and global warming. The Court of Appeals dismissed the argument as an attempt to evade responsibility, allowing states to put the blame somewhere else instead of taking concrete action.
Consequences (1): More climate change suits will follow, against states as well as companies
The decision bolsters climate change litigation globally The Court of Appeals decision is unique in finding that international human rights law mandates a very concrete reduction target for developed states. Because of this reasoning, the judgment will certainly have broader international relevance. Although other state parties to the ECHR are not obliged to follow findings of national courts on its provisions, ground-breaking national court decisions are often relied upon by other national courts that wish to follow the same reasoning. It is certainly to be expected that climate change litigation plaintiffs all across the globe will refer to the decision. The decision - as unique as it may be - perfectly fits within a trend of 'greening' human rights, a trend whereby human rights - in particular the right to life - are considered to entail positive obligations for the state to combat climate change.
Climate change actions against companies will follow The finding that article 2 and article 8 ECHR encompass a duty to protect against hazardous climate change also has repercussions for non-state parties. In many jurisdictions, international human rights can shape obligations that private parties have towards each other, either by incorporating these human rights in the applicable private law standards, or by directly applying them. For example, when a company discriminates amongst its employees in violation of the human right to equal treatment, it may be found to (i) violate its duty of care under tort law, or to (ii) directly violate the applicable human rights standard. In the same vein, when citizens have the human right to be protected against the hazardous consequences of climate change, then others have a duty not to breach that right.
We may expect NGOs and public interest groups to target energy companies in particular, but also investors that invest in fossil fuels, claiming that such activities amount to a breach of citizens' right to be protected against climate change. The Court of Appeals decision lends authoritative support to such a claim. Especially in the Netherlands, where the decision must now be considered valid case law until overturned by the Supreme Court. In addition, the Court of Appeals also clarified that public interest NGOs have standing in Dutch courts to bring an action based on human rights.
It is therefore safe to say that the decision will lead to more climate change actions against companies, and that such suits are likelier to succeed. Certainly in the Netherlands, most likely in Europe and possibly around the globe.
Consequences (2): An expedited energy transition results in compensation of affected parties
The political and economic consequences of the decision can hardly be underestimated. Although the State is considering appealing the decision to the Dutch Supreme Court, it has also confirmed that it will comply with the judgment. This effectively means that the Dutch greenhouse gas emissions will have to be reduced by the same amount in the coming 14 months as in the last 28 years. Achieving such reduction requires bold and unprecedented action by the government and parliament. The state will likely focus its reduction efforts on the coal-fired power plants still active in the Netherlands, which it had already planned to close by 2030. Closing them by 2020 would go a long way in achieving the 25 percent reduction target. In order to do so, the government would have to draft a law and make sure it is approved in parliament within the next 14 months.
Any party that suffers damages as a result of such legislation should be compensated, pursuant to the principle of egalité devant les charges public. Preferably, the law itself contains provisions on compensation for the power plant owners. However, given that this is a sensitive political issue and in light of the serious (financial) interests involved, discussions will undoubtedly emerge on the scope and size of the compensation offered. We consider it unlikely that the law will provide for full and adequate compensation that includes lost profits. Possibly, time constraints or the lack of political support may even result in no compensation arrangement at all.
If no or no adequate compensation is provided, it is to be expected that the compensation claims will be litigated or arbitrated. The power plant owners can bring a damages action for wrongful acts by the Dutch state before the Dutch courts. In addition, the applicable investment protection regime, in particular the Energy Charter Treaty, provides foreign investors in the power plants with an avenue to claim compensation.