Latham has previously written about the Lliuya v. RWE AG case, in which a Peruvian farmer has sought damages from German energy giant RWE for climate change effects in his home country. The Higher Regional Court of Hamm indicated during oral hearings that it would likely proceed to take evidence. The court has since issued its decision, providing further insight and analysis of the case.

RWE claimed that it could not be held liable for damages, as the company held valid environmental permits under emission control regulations relating to the operations of its material CO2 emitting plants — and therefore the emissions were legal. However, the court rejected RWE’s claim, noting that Mr. Lliuya did not seek to shut down or limit RWE’s operation of business. The court further explained the fundamental legal principle that anyone who causes damages to third party property — even through lawful acts — generally may be liable. That RWE obtained, and presumably complied, with all required permits under German environmental law would therefore not preclude liability for the potential damage caused by the company’s lawful emissions.

The court has therefore decided to take evidence and commissioned an expert report on Mr. Lliuya’s asserted facts:

  1. There is a serious risk of flooding or mudslides to the plaintiff’s premises situated below the glacial lake in the city of Huaraz in Peru’s Ancash Region. This is due to significant increase in the size and water volume of Laguna Palcacocha.
  2. (a) The CO2 emissions from the defendant’s power plants rise into the atmosphere and, due to the laws of physics, increase the concentration of greenhouse gases in the earth’s global atmosphere.

(b) The concentration of greenhouse gas molecules reduces the earth’s radiation of heat and increases the global temperature.

(c) The melting of the Palcaraju Glacier is accelerated by the resulting (local) increase of average temperatures. The glacier loses volume and shrinks, and the water volume of Laguna Palcacocha rises to a level which the natural moraine can no longer contain.

(d) The share of the defendant’s contribution to the chain of causality identified in 2. (a)-(c) can be measured and calculated. To date, such share is 0.47%. If applicable, the expert is instructed to determine any deviation in the share of contribution.

The court has requested that parties recommend suitable experts.

Without further analysing the facts of the case, there appears to be a reasonable chance that the experts may affirm questions 1. and 2. (a)(c), as many experts support the opinion that CO2 emissions contribute to global warming in a verifiable way. Therefore, the central issue likely will be question 2. (d). In particular, the experts may have to consider other factors that could cause Laguna Palcacocha’s water level to rise, such as natural causes of climate change or particular local effects.

In any event, even if the experts establish factual causation, the court will still have to determine whether RWE’s contribution amounts to legal causation. While the court appears to lean in this direction, its judgment could yet be subject to final review by the German Federal Court of Justice. If upheld, a judgment against RWE would create significant liability risks for CO2 producers in Germany, possibly even in other industries.

This blog was prepared with the assistance of Tegan Creedy in the London office of Latham & Watkins.