Global Trends in Climate Litigation

Key takeaways from the ‘Global Trends in Climate Change Litigation: 2024 Snapshot’ Report

On 27 June 2024, the Grantham Research Institute on Climate Change and the Environment published its sixth annual ‘Global Trends in Climate Change Litigation: 2024 Snapshot’ Report (the “Report”). The Report focusses on developments in global climate change litigation over the period May 2023 to May 2024. The key takeaways were as follows:

• While the growth rate of climate litigation is slowing, the global footprint continues to expand (with cases in 55 different jurisdictions). There is an increasing number of “climate-washing” cases, with the majority of cases (70%) being decided in favour of the claimant.

• Human rights-related arguments are increasingly prominent in climate change litigation.

• The unprecedented European Court of Human Rights judgment in Verein KlimaSeniorinnen Schweiz v Switzerland may establish an important precedent for future claims challenging governments’ climate ambitions and responses.

• While the majority of cases identified pursue “climate-aligned” outcomes, there is an increase in “non-climate-aligned” litigation (looking to delay or obstruct climate action), and in litigation intended to challenge the manner in which climate action is taken (“just transition” litigation and “green vs green” litigation).

• As climate litigation continues to drive shifts in thinking and behaviour among many stakeholder groups, it remains crucial for businesses to be aware of and engage with the complex landscape of climate litigation and ESG litigation more broadly.

Find out more about the Report in our recent blog post.

France

NGOs and individuals file a criminal complaint against major French energy company’s directors and main shareholders

On 21 May 2024, three NGOs and eight individuals filed a criminal complaint with the Paris public prosecution office, targeting the board of directors of a major energy company, including its CEO, and its main shareholders. The claimants argue that the company’s strategic direction contributed to climate change by expanding fossil fuel extraction, alleging that the company is among the top emitters of greenhouse gases. The alleged offences mentioned in the complaint include deliberate endangerment of lives, involuntary manslaughter, failure to address a disaster, and damage to biodiversity. For further information, read our blog post on the topic.

Two claims based on the duty of vigilance declared admissible

On 18 June 2024, for the first time, the Court of Appeal of Paris declared admissible two out of three claims based on the duty of vigilance against major French corporations. The newly created Chamber within the Paris Court of Appeal clarified the procedural requirements under the French Duty of Vigilance Law and paved the way for judicial examination of the merits of both cases. The defendants have two months to appeal to the French Court of Cassation, failing which the cases will continue before the Judicial Court of Paris on the merits. For further information, read our blog post on the topic.

French oil and gas major does not appeal the decision of the Paris Court of Appeal dismissing its claim against Greenpeace France for alleged false and misleading information

On 28 March 2024, the Judicial Court of Paris annulled the writ of summons served by a major French energy company on Greenpeace France and a consulting firm, based on the alleged dissemination of misleading information in relation to a publicly traded company. The civil complaint sought a judicial order to withdraw the publication of a report published in November 2022 claiming that the company underestimated its 2019 greenhouse gas emissions. The Court found the summons to be too vague, thus preventing the defendants from effectively defending themselves on the merits, and declared the summons null and void for failure to meet the procedural requirements under French law.

On 2 May 2024, the oil and gas major announced that it has decided not to appeal the decision, explaining that it “does not wish to engage in a procedural debate”. For further information, read our blog post on the topic.

Legal complaint filed by environmental organisation against Canadian sportwear brand for greenwashing

On 24 July 2024, the environmental organisation Stand.earth filed a legal complaint with the French Directorate General for Competition Policy, Consumer Affairs and Fraud Control (“DGCCRF”) against the Canadian team’s official outfitter at the 2024 Summer Olympics. According to Stand.earth, the ‘Be Planet’ marketing campaign, launched in 2020 and featuring images of rivers, healthy forests and nature, sells a “vague” message that the company contributes to a “healthy” planet, and this is alleged to be in contradiction with the company’s actual operations and climate record. The complaint requests the authorities to investigate and order the company to repeal its ‘Be Planet’ slogan and align its marketing with its actual environmental impact. The status of the complaint is still unknown.

Germany

Federal Court of Justice rules on 'climate neutral' claim

Following contradictory decisions by lower courts, the Federal Court of Justice (Bundesgerichtshof – “BGH”) has ruled on the advertising of a product as 'climate neutral' for the first time (see press release in German). The Court held that, in principle, ambiguous environmental claims such as ‘climate neutral’ (klimaneutral) are only permissible if the specific meaning of the claim is explained within the advertisement itself. According to the BGH, an explanation of the term ‘climate neutral’ was particularly necessary in the case at hand because the defendant's advertising might have been interpreted as suggesting the products were produced in a carbon-neutral process, when in fact the neutrality was also achieved through offsetting.

Regional Court prohibits misleading textile advertising claims

Deutsche Umwelthilfe (an environmental NGO) has successfully sued Lidl for misleading advertising regarding the environmental benefits of some of its textile products. The Regional Court of Heilbronn ruled that Lidl must cease promoting certain garments as being made from ‘biologically valuable materials’ (biologisch wertvolle Inhaltsstoffe) and safe for biological cycles. According to press reports, Lidl admitted to a labelling error in a one-off advertisement and highlighted that the Court's decision aligns with previously agreed upon terms during out-of-court negotiations.

Further car manufacturer wins appeal in climate change lawsuit

On appeal, the Higher Regional Court of Braunschweig upheld the decision of the Regional Court of Braunschweig to reject a civil action against Volkswagen regarding the reduction of CO2 emissions (on the Regional Court’s decision, see our previous newsletter). The plaintiffs sought to prohibit Volkswagen from manufacturing combustion engine vehicles from 2030 and to reduce emissions from already produced vehicles, claiming these actions contributed to global climate change and infringed constitutional rights. The Court considered the claims unfounded as Volkswagen complied with applicable statutory climate protection requirements (see press release in German). The decision is in line with other Higher Regional Court rulings (see for example previous newsletter), but not yet final and may be challenged at the Federal Court of Justice.

Netherlands

Greenpeace v Netherlands: judgment in preliminary relief proceedings on nitrogen deposition policies

On 6 June 2024, the preliminary relief judge of the District Court of The Hague rejected Greenpeace's request to compel the Dutch State to develop and implement a nitrogen deposition reduction plan, finding that there was insufficient basis for such an order. Interestingly, the judgment confirms that climate litigants may initiate preliminary relief proceedings to enforce specific climate actions, even alongside ongoing main proceedings. This may open the door to similar preliminary relief proceedings in future climate cases. For further information, read our blog post on the topic.

Spain

Greenpeace et al v Spain: Plaintiffs file an application for amparo with Spanish Constitutional Court based on State’s inaction on climate policy

In September 2020, Greenpeace and other NGOs sued the Spanish Government for failing to take adequate action on climate change and breaching its obligations under Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action. In July 2023, the Supreme Court dismissed the claim, stating that the National Energy and Climate Plan approved by the Government (“PNIEC”) did not violate any law, nor did it create a situation contrary to legal order.

In June 2024, the same plaintiffs filed an application for amparo (a remedy for protection of constitutional rights) with the Spanish Constitutional Court. The application relies, inter alia, on the European Court of Human Rights’ judgment in Verein KlimaSeniorinnen Schweiz v Switzerland, arguing that the State has human rights obligations to undertake sufficient climate change mitigation.

United Kingdom

UK Supreme Court decision rules that grant of planning permission for oil wells was unlawful for failing to assess scope 3 emissions

On 20 June 2024, the UK Supreme Court ruled that the grant of planning permission for oil wells was unlawful for failing to assess the downstream greenhouse gas (“GHG”) emissions (i.e., scope 3 emissions).

Legislation in the UK requires an environmental impact assessment (“EIA”) to be carried out before planning permission can be granted for a project which is likely to have significant effects on the environment. In this case, a developer applied for planning permission to expand oil production from a well site. The Council accepted it was sufficient for the developer to assess only direct releases of GHG at the project site over its lifetime (and not the climate impact of the combustion of the oil extracted).

The claimant challenged the Council’s grant of planning permission. She argued that the decision was unlawful because the EIA was required to include an assessment of downstream emissions from combustion of the oil extracted. The challenge failed in the High Court and Court of Appeal but succeeded in the Supreme Court.

The majority of the Supreme Court (three-to-two) allowed the appeal, finding that the Council’s decision was unlawful because, on the facts, it was inevitable that the oil extracted would be burnt and the resulting scope 3 emissions are an effect of the project, so must be included in the EIA. This does not mean the project cannot proceed. Rather, the new information on scope 3 emissions in the EIA will be a factor for the Council to take into account when it reconsiders the planning application. See our blog post for further analysis.

UK fashion retailer sued for £100m for allegedly misleading ESG disclosure

On 17 May 2024, institutional investors in Boohoo Group Plc, a UK-based fashion retail company (“Boohoo”), filed a claim against the company seeking compensation for allegedly misleading disclosures relating to its ESG responsibilities, which were said to have resulted in a financial loss for its shareholders. This is one of the first claims of its kind in the UK.

In July 2020, a media report was published revealing multiple allegations of labour rights violations at Boohoo’s suppliers’ factories in Leicester (the “Report”). Following the Report, we understand that Boohoo’s share price dropped significantly, reducing the company’s valuation by more than £1.5 billion.

The claim filed on behalf of 49 of Boohoo’s institutional investors is brought under sections 90 and 90A of the Financial Services and Markets Act 2000 (“FSMA”), which enable investors to claim compensation for losses resulting from untrue or misleading statements, a dishonest delay in disclosing information and a failure to disclose information. We understand that the claim is based on allegations that Boohoo breached these obligations under FSMA in respect of the matters subject to the Report (see our blog post).

UK Government concedes approval of new Cumbria mine was unlawful

On 16 July 2024, the English High Court heard two legal challenges to the previous UK Government’s decision to approve a new coal mine in Cumbria in December 2022. The proceedings were brought separately by Friends of the Earth and South Lakes Action on Climate Change (“SLACC”) but were heard together.

In the week before the hearing the UK Government conceded that the decision to grant the mine approval was unlawful. This followed the landmark Supreme Court decision on 20 June 2024 in the Finch case (see above). Despite this, the hearing still went ahead as the developer of the mine continued to defend the challenge.

SLACC and Friends of Earth argued that the Government did not consider the climate impacts of the mine, especially in light of the use of carbon credits to offset the emissions of the mine. In withdrawing its defence, the Government asked the Court to quash the decision to approve the mine, which would return the planning application back to the Government to re-assess. The High Court has reserved its judgment.

English Court of Appeal instructs National Crime Agency (NCA) to reconsider its refusal to probe the trade of imported cotton with links to forced labour

On 27 June 2024, the English Court of Appeal handed down its judgment in R (on the application of World Uyghur Congress) v National Crime Agency. This decision clarified the effect of the “adequate consideration” exemption on the status of “criminal property” in the UK’s Proceeds of Crime Act 2002 (“POCA”) and has important potential implications for businesses with supply chains that may be “tainted” by wrongdoing (for example, human rights abuses or environmental risks), who may now need to reconsider how to manage these risks.

The Court of Appeal held that both reasons given by the NCA for declining to exercise its investigatory powers under POCA in relation to the trading of cotton imported from the Xinjiang region of China (where human rights abuses are alleged to have occurred) were incorrect. The NCA had argued that: (i) specific criminal property must be identified before a POCA investigation could be commenced; and (ii) if “adequate consideration” is paid for goods in a supply chain the goods are “cleansed” of their character as criminal property (pursuant to the exemption in section 329(2)(c) of POCA). However, the Court of Appeal held that reliance on the exemption to the section 329 offence (under which it is an offence to acquire, use or possess criminal property) does not in and of itself change the criminal status of the property. This opens the door to businesses potentially committing criminal offences under POCA (including offences relating to dealing with or facilitating the acquisition of criminal property, among others) in similar cases, if tainted goods are imported with knowledge or suspicion of wrongdoing in the supply chain. It should be noted that the judgment does not compel the NCA to launch an investigation into the trade in cotton in this particular case; the agency is considering next steps and may decline to do so for other reasons.

We have published a blog post with further analysis of this case.

Water companies may face legal challenges after UK Supreme Court confirms a right of action in nuisance for water pollution

On 2 July 2024, the UK Supreme Court handed down judgment in The Manchester Ship Canal Company Ltd v United Utilities Water Ltd (No 2). The decision has implications for (waste)water companies as it may lead to an increase in group litigation in relation to the discharge of untreated sewage.

The case arose from United Utilities’ practice of discharging untreated sewage into the Manchester Ship Canal during periods of high inflow, allegedly without the necessary consent. The canal company sought to show it had an action in private nuisance against United Utilities, which would mean they would not need to establish negligence or deliberate misconduct.

The Supreme Court held that the relevant legislative scheme (the Water Industry Act 1991) did not exclude such a common law claim in nuisance. In doing so, it distinguished an earlier House of Lords case on similar facts (Marcic), confining it to cases where a sewerage authority has failed to drain a district effectually (i.e. a lack of infrastructure), as opposed to having discharged sewage from infrastructure designed to carry it away (i.e. a failure of infrastructure).

UK Advertising Standards Authority finds Virgin Atlantic advertisement misleading due to unqualified claim of “100% sustainable” aviation fuel

On 7 August 2024, the UK Advertising Standards Authority (the “ASA”) upheld five complaints against a radio advertisement by Virgin Atlantic, finding that the advertisement’s unqualified claim referring to “100% sustainable aviation fuel” gave a misleading impression of the fuel’s environmental impact.

The ASA considered that consumers were unlikely to be aware of the extent to which fuels described as sustainable aviation fuel still have negative environmental impacts, particularly in light of the claim that the fuel was “100% sustainable”. According to the ASA, the advertisement omitted to explain that sustainable aviation fuel produced reduced, but still significant, emissions over its full lifecycle, including in-flight emissions, and failed to explain the ways in which the fuel otherwise significantly adversely impacted the environment – for example, through the diversion of biofuels from other sectors which might then revert back to fossil-derived fuels and the impact of direct and indirect land use changes. These deficiencies meant that a significant proportion of consumers exposed to the advertisement were likely to overestimate the fuel’s environmental benefits.

The ASA has directed Virgin Atlantic to ensure that future advertisements which refer to the use of sustainable aviation fuel include qualifying information which explains the environmental impact of the fuel.

English High Court grants permission to appeal in supply chain claim against Dyson

Permission has been granted to appeal the English High Court’s October 2023 judgment in Limbu v Dyson Technology Ltd, in which the High Court decided that Malaysia was the proper forum to hear the claim.

The claimants, a group of migrant workers, allege forced labour and dangerous working and living conditions against two Dyson UK companies and a Dyson Malaysian company (for more on the case, see our previous blog and our November 2023 bulletin). According to lawyers for the claimants, the English Court of Appeal will hear the appeal in late November 2024.

United States of America

United States of America Recent reduction in the power of US regulatory agencies

On 28 June 2024, in Loper Bright Enterprises et al v Raimundo, the US Supreme Court overturned the long-standing Chevron doctrine and thereby drastically reduced the power of the U.S. Environmental Protection Agency (“EPA"). Under the Chevron doctrine, if Congress had not directly addressed the question at the centre of a dispute when writing a statute, courts were required to uphold an agency’s interpretation of the statute provided it was reasonable. These interpretations often took the form of administrative rules and guidance, allowing agencies to use their specialised expertise to fill in gaps in legislation. Following the Supreme Court’s decision, courts will no longer have to give deference to the rules created by federal agencies in such circumstances, including the expansive body of rules developed by the EPA. This has opened the floodgates for indirect challenges to US environmental regulations in the coming months, by litigating claims requiring judicial interpretation of federal environmental law.

Also in June, a US Supreme Court ruling stayed implementation of the EPA’s ‘Good Neighbor Plan’, pending review of the Plan in the US Court of Appeals for the DC Circuit. The Plan aimed to reduce ozone-forming emissions in 23 ‘upwind’ states that the EPA identified as impacting air quality standards in ‘downwind’ states.

On 18 July 2024, the US Court of Appeals for the Fifth Circuit vacated a decision of the US District Court for the Northern District of Texas that upheld the US Department of Labor’s final rule, which permits retirement plan fiduciaries to consider ESG factors in investment decisions. The Fifth Circuit held that since the District Court had relied upon the Chevron doctrine in finding that the rule was properly promulgated, the case must be remanded for reassessment.

Greenwashing

On 31 May 2024, a class action was filed against an energy company in Massachusetts State Court, relying on state consumer protection and false advertising laws. The plaintiffs claim that the company’s natural gas advertisements impermissibly disregard the emission of harmful chemicals into the homes of residential gas users, and do not accurately represent the company’s harmful environmental practices.

On 19 July 2024, an environmental NGO filed suit in the DC Superior Court against a French multinational, alleging false and deceptive marketing of its bottled water products. The complaint argues that the company promotes its bottled water as “sustainable, natural, healthy, and environmentally friendly” despite containing microplastics and other toxins and contributing to plastic pollution.

Also in July, a putative class action was filed in the US District Court for the Southern District of Florida against a global apparel retailer, alleging that the company’s marketing campaigns are “unfair, false, deceptive, and misleading” to consumers. The plaintiffs argue that the company markets its business practices, actions, and products as environmentally positive and sustainable despite its responsibility for “significant greenhouse gas emissions, landfill waste, and release of microplastics into the environment.”

Youth climate litigation

On 8 May 2024, the US District Court for the Central District of California dismissed (with leave to amend) a putative youth-led class action against the EPA, finding that the claims lacked redressability in federal court, and the youth plaintiffs therefore lacked standing. The plaintiffs allege that the EPA’s promotion of fossil fuel use deprives them of their “right to a climate system capable of sustaining human life”. The plaintiffs have since moved quickly to file an amended complaint, arguing that declaratory relief would redress the controversy.

On 20 June 2024, the parties in Navahine v Hawaiʻi Department of Transportation, the world’s first youth-led constitutional climate case seeking to address climate pollution from the transportation sector, announced that they had reached a settlement. Under the settlement, approved by Hawai’i state court, state government entities have agreed to work with the plaintiffs to address constitutional concerns arising from climate change and implement specific plans and programs. The settlement requires that the Hawaiʻi Department of Transportation (“HDOT”) create a plan to decarbonise Hawaiʻi’s transportation system within the next 20 years, establish a youth council to advise HDOT on climate policy, and dedicate at least US$40 million to expand the public electric vehicle charging network by 2030.

Pollution

On 13 May 2024, a Californian non-profit brought suit in the US District Court for the Northern District of California against an American automotive multinational known for electric vehicles, asserting that the company’s local factory failed to comply with the Clean Air Act (“CAA”). The plaintiff alleges that the factory has emitted harmful pollution into the surrounding neighbourhoods, threatening the health of residents and factory workers.

On 13 June 2024, the US Department of the Interior, the State of Washington, and a coalition of Native American tribes filed a civil complaint in the US District Court for the Western District of Washington against the current and previous owners of a sawmill facility in Port Gamble Bay. The plaintiffs allege that the facility’s operations led to discharges of hazardous substances adjacent to and directly into the Bay from approximately 1853 to at least 2015. The plaintiffs seek, inter alia, monetary damages for injuries to natural resources and wildlife.

PFAS litigation

PFAS litigation continues to rise in the US. In May 2024, a German chemical producer reached a US$316.5 million settlement with multiple US public water systems to resolve claims that PFAS detected in public water were caused by the company’s aqueous film-forming foam products. See our June 2024 ESG newsletter for more about the case. During June, further claims were filed in respect of alleged PFAS contamination (see e.g. here and here, and read more about these cases in our July 2024 ESG newsletter).

Environmental activists are also targeting the EPA for its role in allegedly failing to prevent PFAS pollution. In June 2024, farmers and ranchers filed claims against the EPA in the US District Court for the District of Columbia, alleging that it had failed to identify and regulate PFAS in sewage that contaminated their land and water, killed their livestock, injured their health, threatened their livelihoods, and devalued their properties (see more in our July 2024 ESG newsletter). On 25 July 2024, environmental NGOs sued the EPA in the US District Court for the District of Columbia, alleging that it had failed in its duty to prevent and reduce risk of harm to humans posed by the formation of perfluorooctanoic acid during the fluorination process of plastic containers. Also in July, a group of NGOs and farming associations represented by the Center for Food Safety filed a petition urging the EPA to take regulatory action to address the presence of PFAS in pesticides and pesticide containers.

Challenges to federal agency action

On 5 July 2024, one of the world’s largest oil producers – and the largest owner of exploration leases in Alaska – filed a complaint in the US District Court for the District of Alaska against the US Department of the Interior and Bureau of Land Management. The complaint seeks the vacation of the 7 May 2024 rules governing the management of the National Petroleum Reserve in Alaska, alleging that they “effectively turn the Petroleum Reserve into a de facto wilderness area in which development is outright prohibited”.

On 24 July 2024, a coalition of environmental NGOs brought suit against the US Bureau of Ocean Energy Management (“BOEM”), challenging its 5 June 2020 Air Quality Control, Reporting, and Compliance Final Rule. The plaintiffs argue that the rule maintains outdated air pollution regulations first promulgated in 1980 and rejects necessary changes to ensure compliance and fulfil the BOEM’s “legal duty to regulate air emissions from offshore oil and gas operations”.

Oil and gas

US states, territories and cities continue to bring lawsuits against major oil and gas companies. On 10 June 2024, California filed an amended complaint in California state court against oil and gas companies for harms related to climate change. Also on 10 June 2024, the US District Court for the District of Oregon granted the County of Multnomah’s motion to remand its case against fossil fuel companies to state court. For more about these cases, see our July 2024 ESG newsletter.

On 15 July 2024, Puerto Rico filed a lawsuit in the Court of First Instance of San Juan against major oil and gas corporations, alleging that they have deceptively marketed their products to consumers for decades. Puerto Rico argues that the companies have failed to warn consumers about the environmental risks associated with burning fossil fuels and have conducted disinformation campaigns to discredit scientific consensus on climate change.

Challenges to regulatory action

There was significant movement in lawsuits involving regulatory action in May 2024. On 10 May 2024, the US Court of Appeals for the Fifth Circuit dismissed a lawsuit filed by four states seeking review of the US Securities and Exchange Commission’s final rule requiring funds to disclose their votes on ESG matters, finding that the plaintiffs lacked standing.

On 13 May 2024, over a dozen US states filed a complaint in the US District Court for the Eastern District of California against the Executive Officer of the California Air Resources Board and the Attorney General of California, challenging a Californian regulation that bans internal-combustion engines in medium- and heavy-duty vehicles, with the result that internal-combustion trucks must be exchanged for battery-electric trucks before entering California. The plaintiffs claim that the ban contravenes controlling law and will disrupt the supply chain and raise prices for goods, slow down interstate transportation, and impose costs on taxpayers and state governments.

On 21 May 2024, Republican Attorneys General from 20 US states filed a complaint in the US District Court for the District of North Dakota against the Council on Environmental Quality, challenging a new rule that would change certain procedures under the National Environmental Policy Act (“NEPA”). The rule, which took effect in July 2024, seeks to improve implementation of NEPA by enhancing its clarity, efficiency, effectiveness, consistency and management of risk. Read more in our June 2024 ESG newsletter.

Lawsuits involving ESG considerations in investments

On 20 June 2024, the US District Court for the Northern District of Texas denied a motion for summary judgment filed by a major airline in a ESG-related class action. The plaintiffs allege that the airline breached its fiduciary duty by investing employees’ retirement savings with funds that pursue ESG strategies, proxy voting and shareholder activism – activities which the plaintiffs claim do not maximise financial benefits in the sole interest of the plan participants.

On 2 July 2024, a New York state court dismissed a lawsuit brought by four New York City employees and a nonprofit against three New York City pension funds. The plaintiffs alleged that the funds breached their fiduciary duties and abused their control over plan assets by divesting their respective pension plans of approximately US$4 billion of holdings in companies involved in fossil fuel extraction. The Court held that the plaintiffs lacked standing because they had not suffered any injury.

Challenges to EPA actions

There have been notable developments in litigation challenging EPA action. On 2 May 2024, the US Court of Appeals for the Third Circuit denied the State of Pennsylvania’s petition for review of the EPA’s federal implementation plan that establishes emission limits for coal-fired power plants in Pennsylvania, finding that the EPA acted in accordance with the Clean Air Act.

On 14 May 2024, the US Court of Appeals for the District of Columbia denied a petition for review of the EPA’s Final Rule implementing the CAA’s Renewable Fuel Standards Program, which was designed to promote energy independence and curb greenhouse gas emissions. Further lawsuits seeking review of final rules implemented by the EPA were filed in the same Court this quarter, including claims filed:

• on 18 June 2024 by three trade associations and a nonprofit, challenging the EPA’s final rule, “Greenhouse Gas Emissions Standard for Heavy-Duty Vehicles – Phase 3”, which sets vehicle emissions standards for the years 2027-2032;

• on 13 July 2024 by an environmental organisation, challenging the EPA’s final rule, “Renewable Fuel Standard (RFS) Program: Standards for 2023-2025 and Other Changes)”, which sets fuel volume requirements for corn ethanol and certain biofuels; and

• on 15 July 2024 by a coalition of non-profits, challenging the EPA’s final rule, “New Source Performance Standards for the Synthetic Organic Chemical Manufacturing Industry and National Emission Standards for Hazardous Air Pollutants for the Synthetic Organic Chemical Manufacturing Industry and Group I & II Polymers and Resins Industry”.

For more on these and numerous other recent lawsuits against EPA final rules, see our June 2024 ESG newsletter and July 2024 ESG newsletter.

Japan

Japan Japan’s first youth climate lawsuit against thermal power companies

On 6 August 2024, 16 Japanese youths filed Japan's first youth climate lawsuit in the Nagoya District Court against ten domestic thermal power companies. The plaintiffs claim that (i) the ongoing carbon dioxide emissions by these companies is a breach of duty of care under Japan’s Civil Code and a violation of the younger generation’s right to live under a stable climate; and (ii) the emission reduction measures of these companies are insufficient and inconsistent with international targets, taking account of their emissions records and medium-term reduction measures. The plaintiffs seek an injunction to compel the defendant companies to reduce their CO2 emissions by 48% in the next 30 years and achieve up to 65% reduction by 2059, in alignment with the 1.5°C target of the Paris Agreement.

Australia

Australia Australian banks facing ongoing activist scrutiny

Financial institutions continue to face activist pressure over their management of climate change and biodiversity risk and lending to high emitters, as well as related performance on human rights.

Following the release of a report in July 2024 by the Australian environmental advocacy organisation Market Forces, lending by Australia's financial institutions to high emitters remains a focus of stakeholder scrutiny. Market Forces has coordinated campaigns (including shareholder resolutions) against Australian banks, superannuation funds and other companies on ESG issues.

Key topics from the report include:

• banks' exposure to general corporate finance and bond markets, which the report labels as “backdoor financing options”;

• scrutiny of banks' exposure to diversified mining and metallurgical projects as well as thermal coal;

• expanded scrutiny of banks' disclosures regarding their assessment of clients' transition plans to a whole-of-value-chain approach; and

• financing of specific projects relating to gas supply to the Asia Pacific region.

The new report also comes amidst recent strategic shareholder litigation that has focussed on seeking disclosure of information concerning banks' internal policies and financing of specific projects. These claims have been framed in terms of alleged shareholder concerns about potential 'greenwashing' and regulatory requirements, as well as allegations of failure to undertake adequate human rights due diligence.

Continued regulator focus on greenwashing

Consistent with trends discussed in our May 2024 ESG bulletin, greenwashing remains an enforcement priority for Australian regulators. Since our last update:

• In April 2024, the Australian Competition and Consumer Commission ("ACCC") commenced proceedings in the Federal Court against Clorox Australia Pty Ltd for allegedly false or misleading representations that their GLAD kitchen and garbage bags were made of 50% recycled 'ocean plastic', with the ACCC alleging that they were instead partly made from plastic collected up to 50 kilometres from the shoreline in Indonesia. The case marks the first greenwashing enforcement court proceeding by the ACCC since the publication of its 'eight principles' to guide businesses in making environmental marketing and advertising claims in December 2023.

• In June 2024, Fertoz Ltd paid AU$37,560 to comply with two infringement notices issued by the Australian Securities & Investments Commission ("ASIC") for alleged false or misleading statements regarding a reforestation project in the Philippines. ASIC alleged that Fertoz, an ASX-listed entity specialising in fertiliser mining, manufacturing and supply, had made false or misleading statements to the ASX that the project would obtain an offtake partner or receive funding to begin planting the initial hectares by the end of 2023.

• Also in June, the Federal Court handed down its judgment in enforcement proceedings against the trustee of a superannuation fund in relation to misleading representations concerning ESG-related investment exclusions and restrictions. The latest judgment follows the Court's earlier ruling for ASIC in enforcement proceedings against Vanguard Investments Australia (discussed in our May 2024 ESG bulletin).

• Most recently, on 2 August 2024, the Federal Court also approved the proposed settlement terms in ASIC's first 'greenwashing' civil penalty proceeding, against Mercer Superannuation (Australia) Ltd ("Mercer"). As discussed in our March 2023 and January 2024 ESG bulletins, ASIC alleged that Mercer made misleading or deceptive statements and engaged in conduct that could mislead the public about the sustainable nature of certain of its superannuation investment options. The Court ordered Mercer to pay a pecuniary penalty of AU$11.3 million and publish a notice to be displayed on the sustainable investments page of its website for a period of 6 months, describing the misleading representations and conduct admitted by Mercer. ASIC commonly seeks such adverse publicity orders in its greenwashing proceedings.

ASIC has also foreshadowed that Australian companies may face greater scrutiny in future over AI-related representations. While Australian regulators have not yet taken enforcement action on this issue, ASIC Chair Joe Longo commented in June 2024 that the corporate regulator is closely monitoring AI regulation overseas and is on the lookout for Australian companies engaging in 'AI washing' by overstating their AI capabilities. For further information, see this article by Allens.

Human rights – cultural heritage and sacred Indigenous sites in the spotlight

The protection of cultural heritage and sacred sites also continues to be a consistent theme in recent litigation and law reform trends in relation to Indigenous persons' rights in Australia. Since our last update:

• In May 2024, it was reported that the Federal Director of National Parks (a Commonwealth statutory authority established to administer, manage and control Commonwealth reserves) would plead guilty in criminal penalty proceedings brought by the Aboriginal Areas Protection Authority ("AAPA") under section 34 of the Northern Territory Aboriginal Sacred Sites Act 1989 (NT) ("Sacred Sites Act") in relation to damage to a sacred site in Kakadu National Park that allegedly occurred during construction work in 2019. The AAPA is a statutory authority that oversees the protection of Aboriginal sacred sites across the Northern Territory. The guilty plea follows a unanimous High Court decision earlier in May that the Federal Director of National Parks could not claim Crown immunity for breaches of the Sacred Sites Act.

• In June 2024, the Northern Territory Local Court also heard the first mention of an alleged breach of section 34 of the Sacred Sites Act by the McArthur River Mine, with the AAPA alleging that the mine carried out works on the Damangani sacred site without a valid authority.

• In June 2024, Commonwealth Attorney-General Mark Dreyfus launched an inquiry into the operation of Australian native title laws by directing the Australian Law Reform Commission ("ALRC") to undertake an inquiry into the future act regime of the Native Title Act 1993 (Cth) ("Native Title Act"). The ALRC’s review will investigate any inequality, unfairness or weaknesses in the current regime, which governs how development projects can occur on land subject to native title. This includes whether the Native Title Act appropriately provides for new and emerging industries.

The protection of sacred sites and First Nations cultural heritage in Australia has also been the subject of scrutiny by international organisations, including the United Nations Committee on the Elimination of Racial Discrimination ("CERD"). In April 2024, CERD expressed concerns that the reversal of changes to Western Australia’s cultural heritage legislation may have breached the International Convention on the Elimination of All Forms of Racial Discrimination.

Sasol and Eskom granted leniency for non-compliance with air emissions limits

Sasol has been granted permission by the Department of Forestry, Fisheries and the Environment ("DFFE") for an alternative sulphur dioxide (SO2) minimum emission standard ("MES") for its boilers in Secunda. Sasol had previously been granted a once-off postponement in respect of its Secunda operations. The National Air Quality Officer refused a subsequent application by Sasol to measure its SO2 emissions using a load-based limit, as opposed to the legislated concentration-based limit. Sasol appealed this decision and the DFFE Minister upheld Sasol’s appeal, stipulating that alternative emissions must be granted for a limited period within which to comply with the MES and not be granted in perpetuity.

Eskom has also won an appeal to suspend the MES limits at five of its coal-fired power plants, due to be decommissioned by 2030. Under South Africa's air quality laws and regulations, Eskom's coal power stations must meet the limits by a certain time, or they will be non-compliant and unable to operate legally. Eskom has previously sought exemptions from the MES and been granted a once-off suspension of the compliance timeframes. The appeal decision allows these five power stations to continue to operate at the existing MES plant limits until 2030. Eskom has also been directed to submit decommissioning plans within 12 months of the decision to facilitate the closure of these stations by March 2030.

Both the Sasol and Eskom appeal decisions were informed by recommendations from an expert panel appointed to advise the DFFE Minister on the appeals. As South Africa faces the significant challenge of transitioning away from coal, amidst an energy crisis plagued by rolling power-cuts, decision makers are tasked with having to strike a balance between competing interests, which include energy security, the energy crisis facing South Africa, commitments to reducing greenhouse gas (“GHG”) emissions and adverse socio-economic impacts of coal plants that continue to operate in non-compliance with emission standards.

Environment Minister opens the way for controversial Karpowership project

In July 2024, the newly appointed DFFE Minister dismissed an appeal by environmental justice groups against the DFFE's decision to grant an environmental authorisation to Karpowership to moor two powerships in Richards Bay harbour to supply “emergency power” to the Eskom grid. The Karpowership deal has faced pushback from communities and environmental justice groups over the years, mainly due to concerns that the powerships will impact surrounding aquatic ecosystems and emit an enormous amount of the GHG, methane. The Karpowership deal emerged as a response to South Africa's energy crisis. In April 2021, the Risk Mitigation Independent Power Producer Programme was introduced to procure 2,000 MW of new capacity and Karpowership secured three of the eight bids.

Shell's ongoing court battle over South Africa's Wild Coast exploration

The Supreme Court of Appeal ("SCA") recently dismissed an appeal by Shell (and others) against the Makhanda High Court's judgment, which set aside Shell's exploration right and subsequent renewals. Importantly, the SCA suspended the setting aside of the exploration right until Shell's final renewal application on the right is finalised. The Makhanda High Court's ruling had the effect of prohibiting Shell from conducting seismic survey operations along the Wild Coast of South Africa on the basis that Shell and Impact Africa had failed to engage in a meaningful and fair public participation process and, in doing so, infringed the rights and interests of affected Wild Coast communities. Despite agreement with the findings of the High Court, the SCA declined to set aside the right and renewal decisions in their entirety, favouring what it termed a more “pragmatic” approach “in crafting just and equitable remedies in the exercise of its wide remedial powers.” In doing so, the SCA clearly showed its concern with the potential “chilling effect on foreign investment” and what it called the “sterilising effect” of the High Court’s ruling. As a result, it held that, while the exploration right was granted unlawfully, a renewal of the unlawfully granted right may yet be granted.

The SCA directed that, in relation to the third renewal application, “a further public participation process be conducted to cure the identified defects in the process already undertaken, especially as the parties who claim to have an interest in the matter have now been identified…”. The ruling is important in its potential to shape the future of energy exploration and community rights in South Africa.

Chemical spill class action

During July 2021, amid riots taking place in KwaZulu-Natal and other parts of South Africa, a leased warehouse was torched and the products stored inside seeped into the environment. The incident had disastrous consequences for nearby residents and the environment. Following this, a multi-departmental team investigated the incident and recommended further investigations, finding various instances of non-compliance by UPL South Africa (Pty) Ltd ("UPL") in relation to the warehouse and the products stored therein.

A class action was subsequently instituted against UPL by the South Durban Community Environmental Alliance and 13 Durban representative residents, seeking damages as a result of the incident. The class action envisages different classes of plaintiffs including those who suffered economic harm due to the spill hampering their ability to harvest marine resources and residents of local communities who lost their ability to grow and sell vegetables, over and above those who suffered physical harm due to the spill. UPL have publicly expressed their intention to oppose the application for certification, which is at a very early stage and will likely take months (if not years) to be heard.

Human Rights Commission probes mining activities in Limpopo

In June 2024, the South African Human Rights Commission ("SAHRC") conducted an inquiry into the impact of mining activities on human rights in communities in South Africa's Limpopo province. The inquiry aimed to address ongoing complaints about human rights violations, particularly concerning environmental and socioeconomic rights. The issues raised included damages caused by blasting, air pollution, water pollution and food security, given that mining can impact the community's ability to plough its fields. Those identified to give evidence at the inquiry included mining companies, complainants, government departments and municipalities.

The SAHRC has not yet released its findings or published a report on this matter, but it has indicated that "the outcome of the inquiry is expected to facilitate the formulation of findings and recommendations towards achieving redress for human rights concerns". The SAHRC also reported in a media briefing that the Office of the Premier in Limpopo "has committed to holding departments that oversee mining activities accountable for human rights violations in mining communities".

South Africa's first greenwashing case launched against TotalEnergies

A network of South Africans calling for divestment from fossil fuel lodged what it called South Africa's first 'greenwashing' claim against TotalEnergies with the Advertising Regulatory Board (“ARB”), objecting to an advert on TotalEnergies' website, which asserted: “We’re committed to sustainable development and environmental protection. That’s why we’ve partnered with Sanparks for over 60 years, so that South Africans can appreciate our country’s natural heritage and pass on a love for the environment to their children.” The complainant argued that these statements were misleading the public with respect to TotalEnergies' environmental impact. On 14 August 2024, the ARB ruled that TotalEnergies' partnership with SANParks was indicative of a commitment to environmental protection and was therefore not misleading. However, with respect to the question of whether TotalEnergies' support of SANParks amounted to a commitment to sustainable development, the ARB held that there was "no evidence that there is a link between the support of SANParks, and any definition of sustainable development." Given this, the claim of "sustainable development" in the context of SANParks support was misleading and a contravention of the Code of Advertising Practice. The ARB instructed its members not to accept any advertising from TotalEnergies with the wording "committed to sustainable development", relating only to its support of SANParks.