Europe and the US

A working paper published by the Grantham Institute has found a direct causal link between climate litigation and share prices for carbon major companies listed in the US and Europe. The paper found that court filings and unfavourable judgments reduced firm value by 0.41% on average, relative to expected values, and that the market reacted the most strongly to cases filed against carbon majors, with an average drop in firm value of 0.57% following court filings and an average drop of 1.50% following unfavourable judgments. See our blog post here. 

On 29 June 2023, the Grantham Research Institute on Climate Change and the Environment published its fifth annual ‘Global Trends in Climate Change Litigation: 2023 Snapshot’ Report. The report focuses on developments in global climate change litigation over the period May 2022 to May 2023. Key takeaways include that although the growth rate in climate change litigation is slowing, the diversity in cases is still expanding, with an increasing number of cases filed against corporates based on a more complex range of legal arguments. See our blog post here.

France

Crédit Agricole, BNP Paribas and BPCE on formal notice to stop financing the coal industry

On 23 May 2023, three French banks, Credit Agricole, BNP Paribas and BPCE, were given formal notice by a Colombian NGO, Tierra Digna, under the French Duty of Vigilance Law, to stop financing Glencore (and its subsidiary Prodeco) because of its involvement in coal mines exploitation in Columbia. 

The Colombian NGO accuses Glencore of illegal or irregular activities, including in relation to coal dust that allegedly did not comply with the standards set by the WHO and contamination of water sources.

BNP Paribas stops financing development of new oil and gas fields

Four months after announcing a reduction in its financing of oil extraction and production activities, and three months after being brought before the Paris Civil Court (addressed in our ESG Disputes Bulletin of March 2023, available here), BNP Paribas has announced that it is definitively stopping, with immediate effect, all financing allocated to the development of new oil and gas fields. The NGOs have welcomed this decision but consider that these commitments are still insufficient.

TotalEnergies sues Greenpeace for allegedly publishing misleading information

In November 2022, Greenpeace published a report stressing that TotalEnergies had underestimated its CO2 emissions (addressed in our ESG Disputes Bulletin of December 2022, available here).

Following this publication, in May 2023, TotalEnergies decided to take Greenpeace to court, claiming that the report in question disseminated false and misleading information based on "a questionable methodology with multiple errors, double counting and approximations, leading to an inconsistent result". TotalEnergies is asking Greenpeace to pay a symbolic one euro.

French state ordered to compensate victims of air pollution for the first time

In two rulings handed down on 16 June 2023, the Paris Administrative Court ordered the French government to pay €3,000 and €2,000 to the parents of two children who suffered from repeated cases of bronchiolitis and ear infections during their early years in the Paris region.

The administrative judge ruled that "some of the symptoms" they suffered were "caused by the State's failure to comply with health standards, as a result of exceeding pollution thresholds".

To establish the causal link, the Court noted in particular that on several occasions, the symptoms coincided with episodes of pollution over certain thresholds, and the fact that the two children's health improved after they moved outside the Paris region.

Grande Synthe – The Conseil d'Etat imposes two new injunctions on the French State to meet its greenhouse gas emissions’ objectives

On 1 July 2021, the Conseil d'Etat, France's supreme administrative court, ordered the French state to take all necessary measures to curb carbon emissions and reach the objectives of the 2015 Paris Agreement (something we addressed in our ESG Disputes Bulletin of April 2022, available here). The French state was given until 31 March 2022 to implement the measures.

One year later, in a new decision dated 10 May 2023, the Conseil d'Etat considered that the French government took additional measures, but that these measures are still insufficient to reach the greenhouse gas emissions’ objectives.

The Conseil d’Etat therefore imposed two new injunctions ordering the French government to take new measures by 30 June 2024, and to submit, by 31 December 2023, a progress report detailing these measures and their effectiveness.

Complaint filed against clothing companies allegedly involved in forced labour of Uyghurs

On 16 May 2023, four French NGOs, Sherpa, Collectif Ethique sur l'étiquette, Institut Ouïghour d'Europe, and a Uyghur plaintiff filed a civil party complaint against Uniqlo, SMCP, Inditex and Skechers USA, based on the offence of concealment of four crimes: crimes against humanity, genocide, aggravated reduction to servitude and trafficking in human beings in an organised gang. The associations are calling for a judicial inquiry to be opened so that an examining magistrate can investigate and "shed light on the possible responsibilities of multinational clothing companies that are allegedly profiting from the forced labour of Uyghurs to manufacture their products".

This complaint follows the dismissal of an initial complaint lodged in April 2021 with the National Anti-Terrorism Prosecutor's Office because it lacked jurisdiction.

Chemical company sued for pollution

On 25 May 2023, 37 victims and 10 organisations filed an environmental penal summary procedure (“référé penal environnemental”) against chemical company, ARKEMA France, before Lyon Civil Court. 

Plaintiffs are seeking ARKEMA to limit its discharging of PFAs (so-called eternal pollutant because neither human bodies nor the environment can eliminate them) in the water, and are requesting for a study analysing the impact of the discharged pollutants on the environment and food.

Germany

New supply chain law has teeth

We have seen the first regulatory steps toward enforcement action under the German Supply Chain Due Diligence Act, which applies to in-scope companies with more than 3,000 employees on 1 January 2023 (read more here). 

The authority in charge of watching over companies’ implementation of the Act, the Bundesamt für Wirtschaft und Ausfuhrkontrolle (“BAFA”), has sent requests for information to companies in a variety of economic sectors. Read more in our blog post. Various NGOs have supported garment workers in filing a complaint with BAFA concerning the working conditions in factories in Bangladesh (see further detail below). Read more in our blog post.

Italy

First Italian climate litigation against a private corporation

ReCommon, Greenpeace Italy and 12 citizens v. ENI corporation

On 9 May 2023 ReCommon, Greenpeace Italy and a group of twelve Italian citizens filed a lawsuit against ENI S.p.A. (“ENI”), the Italian state-controlled energy corporation, alleging a violation of the Paris Agreement. The claim is also brought against ENI’s shareholders, Cassa Depositi e Prestiti (“CDP”) and the Ministry of Economy and Finance (“MEF”), who own 30% of ENI’s shares. The claimants are seeking orders that:

• ENI reduce its annual greenhouse gas emissions, and in particular CO2 emissions, by at least 45% at the end of 2030 compared to 2019 levels; 
• MEF and CDP adopt a policy which set out climate objectives to be implemented by ENI; and
• require MEF and CDP to monitor and guide their future investments as shareholders in corporations.

The claimants also seek an order for the defendants to pay a punitive monetary sanction if ENI does not comply with or delays these requirements.

Legal action against Ultima Generazione climate activists

The Vatican v. Ultima Generazione

On 12 May 2023, the first hearing in the trial of three Ultima Generazione activists was held in Rome. The activists are accused of inflicting aggravated damage on the façade of Palazzo Madama (the seat of the Senate of the Italian Republic, the upper house of the Italian Parliament), a crime which is punishable by a maximum sentence of five years imprisonment. The hearing has been adjourned to 18 October 2023.

On 13 June 2023 the Vatican Court sentenced two Ultima Generazione activists to nine months imprisonment and ordered the activists to pay fines. The two activists glued themselves to the marble base of the Laocoon statue in the Vatican Museums in August 2022 with the aim of putting pressure on the government to take more action in relation to climate change

(Ultima Generazione is an Italian NGO which joined the international ‘A22 network’, a network of campaigns that use non-violent civil disobedience to demand their respective governments concrete commitments to face the ecoclimatic crisis.)

United Kingdom

UK High Court rules that derivative action against Shell plc’s Board in relation to its management of climate risk cannot proceed, but grants ClientEarth’s request for oral hearing to reconsider its decision

The High Court has ruled that ClientEarth’s proposed derivative action against the Board of Shell plc (“Shell”) in relation to its management of climate risk will not be permitted to proceed on the basis that the NGO has failed to establish a prima facie case that Shell’s directors were not acting in the best interests of shareholders. 

The decision has emphasised that the High Court is reluctant to interfere in relation to directors’ management and commercial decision-making. The Court will generally take the approach that it is for the directors themselves to determine how best to promote the success of the company. This is one of the first climate-related derivative actions against a Board of Directors under the Companies Act, and the first English case targeting corporate directors personally for a company’s energy transition strategy. See our blog post here.

The decision was reached on the papers with no oral hearing. The High Court granted ClientEarth’s request for an oral hearing for the High Court to reconsider its decision, which took place on 12 July 2023. At the hearing, ClientEarth challenged the Court’s finding that it had failed to establish a prima facie case, but the Court reiterated its hesitancy to interfere with the commercial decision-making of large corporate entities. Shell argued ClientEarth had failed to give the Court any persuasive reason to reverse its decision. The Court’s final decision has not yet been handed down.

Supreme Court finds that Nigerian oil spill limitation period is not indefinite 

Okpabi v Royal Dutch Shell [2021] UKSC 3

The UK Supreme Court has handed down a judgment in relation to the limitation period started running following a 2011 oil spill off the coast of Nigeria.

The court found that the limitation periods began when the oil reached the relevant land. It rejected the claimants’ argument that the limitation periods would continuously restart until the contaminant was cleaned-up. The consequence of this finding is that the Jalla claims are likely time-barred and will not continue to trial. See our blog post here.

Supreme Court grants OEP permission to intervene in appeal for the first time

R (Finch) v Surrey County Council

In April 2023 the Supreme Court granted the Office for Environmental Protection (“OEP”) permission to intervene in the appeal against the Court of Appeal’s decision in R (Finch) v Surrey County Council CA (Civ Div) [2022] EWCA Civ 187, concerning oil drilling near the Surrey Hills Area of Outstanding Natural Beauty. This is the first time the OEP, a new regulator created in 2021, has intervened in another party’s court hearing. 

The appeal concerns whether Surrey County Council (the “SCC”) acted lawfully by not including the impact of indirect greenhouse gas emissions (scope 3 emissions) in the Environmental Impact Assessment of the oil drilling. The OEP is intervening on the basis that the SCC has failed to comply with environmental law. The matter was heard by the Supreme Court on 21 and 22 June 2023 and could possibly set a precedent for the legality of approving new fossil fuel developments. 

Judicial review challenges in relation to oil, gas and coal projects continue

This quarter the High Court granted permission for a number of judicial review challenges to proceed to trial and the High Court in Belfast has heard the first judicial review of this kind in Northern Ireland. 

In April, the High Court granted Greenpeace permission to proceed with its legal challenge against the British government’s invitation last year to oil and gas explorers to apply for licences in the North Sea. Greenpeace alleges that the government failed to take into account the environmental effect of consuming oil and gas in this new licensing round, which involved fossil fuel companies submitting over 100 licences. 

Similarly, in May the High Court granted Friends of the Earth and South Lakes Action permission to proceed to a three day hearing in respect of a controversial new coal mine in West Cumbria. The claimants allege that the Secretary of State, Mr Gove, unlawfully gave the project planning permission in December 2022 without accounting for the significant climate impacts of the mine. In particular, it is alleged that Mr Gove should have considered whether carbon credits were able to offset the mine’s emissions and the impact of opening the mine on the global coal market.   Friends of the Earth and South Lakes Action’s cases will now be heard in a 'rolled-up hearing' in the High Court between 24 and 26 October 2023.

In May, the High Court in Belfast heard a judicial review brought by No Gas Caverns and Friends of the Earth Northern Ireland seeking to overturn a decision by the former Department of Agriculture, Environment and Rural Affairs minister to grant a marine licence and gas storage construction rights in sea areas off the coast at Islandmagee. Friends of the Earth believe the case is the first of its kind in Northern Ireland where the courts have had to grapple with the implications of climate change in the context of government decisions. The decision is reserved.

UK Government’s climate action plans challenged again

ClientEarth, Friends of the Earth, and Good Law Project have filed papers at the High Court requesting another judicial review of the UK Government over inadequate climate action plans (see our previous blog post here with details of the High Court’s ruling in relation to a previous challenge). The claimants argue that the Carbon Budget Delivery Plan published on 30 March is unlawful on the basis that it provides no real information on the government's assessment of the risk of the proposals and policies not being delivered and not meeting legally binding climate targets. At the same time, the information that the plan does include confirms that many of the technologies being relied on to deliver substantial emissions savings are high risk, raising serious questions about the government’s assumption that they will be delivered ‘in full’. ClientEarth argues that this approach is so clearly flawed that it is unlawful and fails to comply with central provisions of the Climate Change Act.

High court refused permission for judicial review in relation to the Financial Conduct Authority’s approval of prospectus 

Earlier this year, ClientEarth sought to challenge the decision by the UK’s financial regulator, the Financial Conduct Authority (“FCA”), to approve the prospectus of a UK-incorporated oil and gas operator in the North Sea (as further explained in our ESG Disputes Bulletin of March 2023, available here). In May 2023, the High Court refused permission to apply for judicial review, finding that there was no arguable basis to say that the FCA had erred in law by approving the prospectus, or that the FCA's decision was irrational. The High Court also noted that the FCA has a "considerable margin of discretion" when approving prospectuses.

United States of America

Greenwashing litigation

Greenwashing litigation continues to rise in the U.S., with private plaintiffs bringing several claims in federal courts to challenge companies’ sustainability claims. 

• In March and April 2023, two lawsuits were separately filed in New York in relation to alleged greenwashing on the packaging of  laundry detergent manufacturers. One complaint alleges that the manufacturer misrepresented its detergent by “making use of nature-evoking elements to artificially enhance its ecological image” despite the product containing high levels of toxic chemicals. The other complaint alleged that the manufacturer was misrepresenting by marketing with environmentally friendly phrases like “Naturally Fresh” and “The Standard of Purity” despite the product containing high levels of a toxic chemical. 
• In May 2023, a complaint was filed in a U.S. federal district court for the Eastern District of Missouri against a major shoe manufacturing company, claiming that it is misleading consumers by marketing a “Sustainability Collection” as “made with recycled fibers” which it claims “reduce waste” and its “carbon footprint” despite its products being predominantly made out of virgin synthetic materials. 
• In May 2023, a U.S. federal district court for the Eastern District of Missouri dismissed greenwashing claims against a large clothing company for lack of personal jurisdiction and for failure to show that a “reasonable consumer” would be misled by the defendant’s claims. 
• Later in the month, a class action complaint was filed in a U.S. federal district court for the Central District of California against a major airline, alleging that it grossly misrepresented the total environmental impact of its business operations through its marketing materials and public announcements. In particular, the complaint alleges that the airline misstated the actual carbon reduction produced by its carbon offset portfolio and falsely represented that it is “the world’s first carbon-neutral airline,” despite its operations causing significant net carbon emissions to be released into the atmosphere
• In June 2023, a U.S. federal district court for the Southern District of New York dismissed a greenwashing suit against an alternative milk manufacturer, with leave to re-plead, advising plaintiffs to remove "superfluous verbiage, unnecessary allegations, puzzle pleading inactionable statements of opinion, and mere puffery” from the complaint.

Anti-ESG investment litigation

Workers’ rights group allege retirement systems’ commitment to net zero breaches fiduciary duties

On 11 May 2023, four New York City workers and a workers’ rights non-profit filed a lawsuit in New York state court against the New York City Employees’ Retirement System, the Teachers’ Retirement System of the City of New York, and the Board of Education Retirement System of New York for their divestment of holdings in companies involved in the extraction of fossil fuels. The plaintiffs claim that the defendants are pursuing an agenda prioritizing climate goals over the retirement security of plan participants and beneficiaries, which is evidenced by the defendants’ commitment to Net Zero Implementation Plans (“NZIP”), in breach of their fiduciary duties. For more information on the NZIP, see our May 2023 Newsletter. 

Class action launched against major airline

On 2 June 2023, a class action complaint was filed in a U.S. federal district court for the Northern District of Texas against a major airline, alleging the airline violated its fiduciary duties under the Employee Retirement Income Security Act (“ERISA”) by investing employees’ retirement savings into funds that “pursue leftist political agendas through environment, social and governance strategies” instead of maximizing financial benefits in the sole interest of the plan participants. 

Braun v. Walsh 

In May 2023, 26 Republican state attorneys general filed a motion for summary judgment in a U.S. federal district court for the Northern District of Texas against the U.S. Department of Labor (the “DOL”), challenging a new DOL rule that allows retirement plan managers to consider ESG factors when choosing their investments. The suit argues that the new rule violates ERISA because it prioritizes “progressive activism” over the fiduciary duty to protect and build retirement savings. The lawsuit, if successful, would restrict the ability of financial institutions managing US retirement accounts to take climate change into account when making investment decisions.

U.S. Federal Aviation Administration challenge, patent dispute, employment discrimination litigation and U.S. Environmental Protection Agency settlement 

In May 2023, several environmental non-profit organizations filed a complaint in a U.S. federal district court for the District of Columbia against the U.S. Federal Aviation Administration (the “FAA”), challenging its authorization of a privately owned rocket launch program in Boca Chica, Texas. The groups claim the FAA violated the National Environmental Policy Act by failing to analyse the significant environmental and community impacts of the rocket launch program and propose adequate mitigation measures to offset those impacts. 

In March 2023, a major multinational conglomerate reached a settlement with a renewable energy provider with respect to all wind turbine technology patent disputes in the U.S. and Europe. This settlement follows a decision by a U.S. federal district judge for the District of Massachusetts ordering the conglomerate to pay royalties to the renewable energy provider for a portion of the wind turbine disputes. In the decision, the judge criticized the companies for being controlled by “corporate self-interest” and “inhibit[ing] efforts to combat climate change world-wide.”

In April 2023, in a continuing legal battle, counsel for a major U.S. bank filed a motion to dismiss in a class action lawsuit alleging security fraud based on reports of “fake interviews” conducted for diverse candidates in order to meet the bank’s widely publicized “Diverse Search Requirement.” The bank argued that plaintiffs failed to adequately plead that the challenged public statements were materially false or misleading, and that the alleged false statements were made “knowingly” or with “deliberate recklessness.” 

On 2 March 2023, the U.S. Environmental Protection Agency (“EPA”) announced settlements resulting from several enforcement actions against hydrofluorocarbons importers for failing to report their imported quantities in violation of the Clean Air Act’s Greenhouse Gas Reporting Program.  The three settlements totalled USD 905,074.

Asia-Pacific

Australia

ASIC releases report on its greenwashing interventions

In May 2023, ASIC released a report in which it observed that its intervention in greenwashing between 1 July 2022 and 31 March 2023 had resulted in 23 corrective disclosure outcomes, 11 infringement notices and the commencement of one civil penalty proceeding. ASIC acknowledged that its focus to date has been on managed funds and companies raising capital from retail investors, and that its next focus will be superannuation funds and the wholesale green bond market. ASIC's report has been referenced in two recent speeches by ASIC Chair, Joseph Longo, in which the Chair reiterated ASIC's ongoing focus on greenwashing, its enforcement approach and its view that 'greenhushing' is another form of greenwashing. Read more about ASIC's report in this article prepared by our colleagues at Allens.

ASIC issues infringement notice against Future Super

We have seen an uptick in ESG regulatory actions. For example, on 2 May, ASIC issued infringement notices against superfund Future Super for Facebook posts it made about the Future Fund in May 2019. The post stated, 'Naysayers don't join together to move nearly $400 million out of fossil fuels'. ASIC alleged that Future Super made a false or misleading representation in that the post conveyed that the Fund had moved nearly $400 million out of fossil fuels. The total funds under management held by the Fund at the time was approximately $400 million. ASIC alleged that Future Super had no basis to represent that the entirety of the funds under management had been invested in fossil fuels prior to being invested in the Fund, and that the Facebook post overstated the positive environmental impact of the Fund.

Greenwashing complaints to ASIC and ACCC

We have also seen an uptick in strategic litigants making complaints relating to greenwashing. For example, in June 2023, the Environmental Defenders Office submitted a complaint to ASIC alleging that NeuRizer, a fertiliser manufacturer, has engaged in misleading or deceptive conduct in relation to environmental claims made about its products. The complaint targets particular representations made by NeuRizer, including that its urea fertiliser is carbon neutral, that it is a certified carbon neutral organisation, that the technologies it relies on to be carbon neutral are rigorous and reliable, and that it is developing responsible products. Similarly, in April 2023, two activist groups, Lock the Gate Alliance and GetUp, lodged a complaint with ASIC and the ACCC, alleging that Tamboran Resources engaged in misleading or deceptive conduct in relation to statements it made in response to the Australian Government's changes to its safeguard mechanism policy. In particular, the complaint focusses on Tamboran's claims that it supports net-zero carbon emissions in connection with certain of its gas development projects.

Human rights grievances sent to banks and super funds in relation to financing and investment activities

In April 2023, Equity Generation Lawyers submitted grievances on behalf of certain First Nations peoples in the Tiwi Islands against a number of banks, alleging (among other things) that they failed to respect Indigenous people’s human rights (including rights relating to free, prior and informed consent) in line with the banks’ own policy commitments when financing Santos’ projects in the Barossa gas fields. Equity Generation Lawyers has framed the complaint using the UN Guiding Principles on Business and Human Rights, and are seeking remedies including (among other things) that the banks exit the loans. Following on from the grievances submitted on behalf of First Nations peoples to several Australian banks, Equity Generation Lawyers has since submitted similar complaints to 20 superannuation funds in Australia regarding their investments in Santos’ projects. The correspondence was sent jointly by superannuation fund members who requested information from the funds under the Corporations Act 2001 (Cth). Parts of these complaints are framed in terms of the duties of the funds’ trustees to act with care, skill and diligence, and to act in the best financial interests of beneficiaries. These complaints are indicative of strategic litigants' focus on bluewashing and human rights.

Japan

Supreme Court rejects challenge to government’s approval for establishment of coal power plants 

On 9 March 2023, the Supreme Court of Japan rejected a request for final appeal in Citizens’ Committee on the Kobe Coal-Fired Power Plant v. Japan. Twelve residents of the city of Kobe filed a challenge in the Osaka District Court seeking cancellation of the government’s decision to approve the construction and operation of two coal-fired power plant units by Kobe Steel and Kansai Electric Power Co. The plaintiffs alleged that the power plants would emit 7 million tonnes of CO2 annually. 

The claim was rejected by the District Court in March 2021, and by the High Court in April 2022. The High Court found that while the citizens had some interest in relation to air pollution, an interest not to be harmed by CO2 emissions belonged to the general public and could not be regarded as an individual interest sufficient to ground standing under current laws and social conditions. However, the High Court did observe that there was potential for change in the social situation, which could warrant the recognition of legally protected individual interests in this regard. The Supreme Court rejected the plaintiffs’ request for appeal of the High Court’s judgment.

Bangladesh

Fact-finding research by Bangladeshi garment workers union results in complaint to German authority

A March 2023 fact-finding exercise by a Bangladeshi labour union, National Garments Workers Federation, revealed several deficiencies in the working conditions of factories of Tom Tailor, Amazon and IKEA. This research has formed the substance of a complaint to the German regulator, BAFA, under the new German Supply Chain Due Diligence Act (see above). The complaint alleges that the companies were repeatedly informed about the risks to health and safety in factories in Bangladesh and other manufacturing countries, but the companies’ factories have not been adequately monitored, endangering workplace safety for employees. None of the companies have signed the Bangladesh Accord on Fire and Building Safety, which as per the complainants, constitutes deliberate avoidance of the responsibility to prevent known human rights risks within the textile industry and is in breach of the companies’ due diligence duties under the supply chain law.