Companies and executives in court for climate change
Climate lawsuits are becoming a global trend, but are they successful?
The fight against climate change takes many forms: activists glue themselves to roads or bring airports to a standstill. ETH researchers are developing innovative methods to extract CO2 from the air. More and more often, courts are being involved to hold alleged climate offenders liable.
Over three thousand climate lawsuits have already been filed worldwide, and the number is growing every year. These lawsuits are no longer directed solely against states, but increasingly at companies or their executives.
Different claims
Climate lawsuits against companies often demand CO? emission reductions. For example, environmental organisations in the Netherlands are demanding that the gas and oil company Shell reduce its CO? emissions by 45 per cent by 2030 compared to 2019 levels. The court of first instance upheld the lawsuit, ruling that Shell had a human-rights-based obligation to reduce its CO? emissions. However, the court of appeal overturned this ruling on the grounds that there was no legally established obligation to reduce CO? emissions and that such an obligation could not be derived from a general clause in Dutch tort law. The case is currently under review by the highest court in the Netherlands – the same court that ordered the Dutch state to reduce greenhouse gas emissions in 2019.
However, other cases involve additional claims. This is demonstrated by the lawsuit pending before the Cantonal Court of Zug brought by four Indonesian citizens against the cement company Holcim. In addition to a reduction in CO? emissions, this lawsuit is seeking damages and compensation, as well as financial participation in flood protection measures such as the creation of mangrove forests and dams. The court will soon decide whether the claim is admissible.
Similar to the Holcim case, a Peruvian farmer demanded in Germany that the energy company RWE bear the costs of appropriate measures to protect his property from glacial flooding, based on its share of global greenhouse gas emissions. In May of this year, this lawsuit was dismissed in the second instance. The verdict is final.
Executives are increasingly having to defend themselves against allegations that they have violated their duties of loyalty and care towards their companies by failing to adequately disclose climate risks and take sufficient measures to manage them. This tension between corporate responsibility and climate risks is also evident in current court proceedings. In England, a Shell shareholder sued the board members. It asserted that the board of directors had failed to comply with the Paris Climate Agreement. This lawsuit was also unsuccessful due to a lack of proven breach of duty on the part of the board of directors.
The situation is different when it comes to greenwashing. Companies or executives may face lawsuits for unfair advertising if, for example, they falsely describe their goods or services as CO2-neutral or even climate-neutral. Anyone who uses such terms to describe their products may be held liable.
Prospects of success in Switzerland
As things stand today, the chances of success for climate lawsuits against companies or executives before Swiss courts applying Swiss law are extremely low. With regard to claims demanding CO? reduction, Swiss law lacks a strict statutory prohibition on emitting CO? above a certain level.
As far as claims for damages and compensation are concerned, there is generally no causal link between CO? emissions and the damage claimed, regardless of whether it is property damage, loss of earnings or emotional distress. A company's CO2 emissions are too remote in the causal chain to establish liability for such damages. In climate litigation, the plaintiffs would also have to prove that the extreme weather event that caused the damage was directly attributable to the defendant's CO2 emissions. This hurdle is usually too high.
In contrast, greenwashing lawsuits have great potential. Many entrepreneurs are unaware that a new provision in the Federal Act on Unfair Competition (UCA) came into force on 1 January this year. According to this provision, greenwashers are acting unfairly and can be held liable under civil and criminal law. Companies are therefore well advised to check whether their products or their consumption can be described as CO2-neutral or climate-neutral.
Are insurers obligated to pay?
Anyone who wants to transfer the liability for a climate lawsuit to an insurance company faces high hurdles. Liability insurance companies are only required to provide coverage if all elements of the risk description are met and if no exclusions apply.
Claims for CO2 reduction, omission and removal do not constitute liability claims and are therefore normally not covered. If the insured company or body has not been legally convicted to pay damages or compensation, no compensation claim exists against the insurer. In addition, it is customary in the market that obligations of a penal or quasi-penal nature – such as fines or penalties – are not insured. And in the case of greenwashing lawsuits, it should be noted that the general terms and conditions of insurance may exclude claims in connection with unfair competition.
Climate lawsuits therefore do not usually result in compensation payments from liability insurers – a reality that climate sinners must take into account when assessing their risks.