Dutch court rules on Rome II and applicable law in climate change cases

In what can be described as a truly historic judgment, the Hague District Court ruled yesterday in Milieudefensie et al. v. Royal Dutch Shell (Judgment of 26 March 2021) that Royal Dutch Shell must slash its CO2 emissions (by 45% by 2030 from 2019 levels).

Of course, the most interesting part of the judgment is the court’s analysis of the applicable law under article 7 of Rome II. This provision, which deals with “Environmental damage” (the meaning of which caused all kinds of problems in a recent English case), says this:

The law applicable to a non-contractual obligation arising out of environmental damage or damage sustained by persons or property as a result of such damage shall be the law determined pursuant to Article 4(1), unless the person seeking compensation for damage chooses to base his or her claim on the law of the country in which the event giving rise to the damage occurred.

Article 7 therefore gives a Claimant a choice of the law of the damage location (under article 4(1)) or the law of the country in which “the event giving rise to the damage” occurred. The Claimants argued that, on either basis, the applicable law was Dutch law.

The court started by noting that the parties were agreed that this was clearly a case concerning “environmental damage” within the meaning of the article:

The parties were right to take as a starting point that climate change, whether dangerous or otherwise, due to CO2 emissions constitutes environmental damage in the sense of Article 7 Rome II.

What they disagreed about was the “event giving rise to the damage”:

They are divided on the question what should be seen as an ‘event giving rise to the damage’ in the sense of this provision. Milieudefensie et al. allege that this is the corporate policy as determined for the Shell group by RDS in the Netherlands, whereby her choice of law leads to the applicability of Dutch law. RDS asserts that the event giving rise to the damage are the actual CO2 emissions, whereby the choice of law of Milieudefensie et al. leads to the applicability of a myriad of legal systems.

The court considered it significant in resolving this issue that every emission of CO2 and other greenhouse gases, anywhere in the world, contributes to environmental damage (or imminent environmental damage) in a particular location:

The underlying thought is that every contribution towards a reduction of CO2 emissions may be of importance. The court is of the opinion that these distinctive aspects of responsibility for environmental damage and imminent environmental damage must be included in the answer to the question what in this case should be understood as ‘event giving rise to the damage’ in the sense of Article 7 Rome II.

Royal Dutch Shell argued that its corporate policy was a preparatory act that fell outside the scope of article 7. The submission was in essence that the mere adoption of a policy does not cause damage. However, the court rejected this argument:

The court holds that this approach is too narrow, not in line with the characteristics of responsibility for environmental damage and imminent environmental damage nor with the concept of protection underlying the choice of law in Article 7 Rome II. Although Article 7 Rome II refers to an ‘event giving rise to the damage’, i.e. singular, it leaves room for situations in which multiple events giving rise to the damage in multiple countries can be identified, as is characteristic of environmental damage and imminent environmental damage. When applying Article 7 Rome II, RDS’ adoption of the corporate policy of the Shell group therefore constitutes an independent cause of the damage, which may contribute to environmental damage and imminent environmental damage with respect to Dutch residents and the inhabitants of the Wadden region.

The court also noted that the same result would have been reached under the general rule of article 4(1):

Superfluously, the court considers that the conditional choice of law of Milieudefensie et al. is in line with the concept of protection underlying Article 7 Rome II, and that the general rule of Article 4 paragraph 1 Rome II, upheld in Article 7 Rome II, insofar as the class actions seek to protect the interests of the Dutch residents, also leads to the applicability of Dutch law.

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