The consequences of the ruling in the Royal Dutch Shell case

14 June 2021
Knowledge Base

by Michel Klompmaker

“The power of the largest multinationals can therefore still be corrected outside the boardroom. That is encouraging and is an impulse for the further alignment of sustainability and compliance in terms of testing and reporting.” said Michael van Woerden of DeComplianceMonitor, who we asked for comments on the recent decision of the District Court of The Hague in the case against Royal Dutch Shell. This ruling has not only attracted the attention of Dutch lawyers and climate activists, but this court ruling is also subject to discussion abroad. The largest multinationals have come under fire in recent weeks and those who think that the multinational has been created forever to defend the interests of only its own shareholders will be disappointed. The G7 meeting that is currently taking place in London will push ahead with regard to a minimum taxation for internationally operating companies and the tax shortcuts for the multinationals will be limited. In fact, the risk of significant worldwide reputational damage is more present than ever, now that the multinationals (and their directors) are under the magnifying glass, in case there is no ‘reasonable’ tax payment that has been made public. What should ultimately be regarded as ‘reasonable’ is not yet certain and is subject to debate.

In any case, the verdict is certain, in which the District Court of The Hague orders the Shell group to reduce CO2 emissions by the end of 2030 to a net 45% compared to the level of 2019. The proceedings have been brought by seven foundations and more than 17,000 individual claimants. The Shell group, headquartered in The Hague, is one of the largest producers and suppliers of fossil fuels worldwide.

The CO2 emissions of the Shell group, its suppliers and customers are greater than those of many countries. Companies must respect human rights and this is an independent responsibility of companies, which is separate from what states do. Shell has a resulting obligation with regard to the group itself and with regard to CO2 emissions. With regard to its suppliers and customers, Shell has a serious best efforts obligation to set requirements via the group policy on, among others, its suppliers. The sacrifices demanded of Shell outweigh the interest served by combating the devastating effects of climate change.

The logical consequence of this ruling is that many multinationals will be approached by legal means if they cannot make it sufficiently clear that serious work is being done on the reduction of CO2 emissions.

For the enthusiasts, here’s the link to the full statement of May 26, 2021.

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