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While it is apparent that such disputes are increasingly common, perhaps a more difficult realisation for businesses to grasp is that a climate-related dispute can come from a variety of angles and be pursued by various claimants – from regulators, contractual counterparties, suppliers and JV partners, consumers and class actions, lenders, investors and shareholders. Meanwhile, climate change disputes can arise in the context of finance, insurance, supply chains, shareholder relations, antitrust, employment and many more.
This variety in climate change-related disputes is already evident in some of the most high-profile examples arising to date, including Urgenda Foundation v The Netherlands, in which the Dutch Supreme Court held that the Netherlands had a duty to reduce greenhouse gas emissions. Other examples include Friends of the Earth Netherlands v. Royal Dutch Shell plc, in which a private company was ordered to cut its emissions; ClientEarth v Shell plc, in which a minority shareholder unsuccessfully sought to bring a derivative action alleging that the directors were in breach of their duties in relation to climate change issues; and several lawsuits brought by US states, cities and municipalities seeking billion dollar abatement funds from energy majors for the effects of climate change under public nuisance and other novel theories of tort liability. Claims have been brought under international investment treaties, before human rights bodies and constitutional courts, before advertising standards regulators and in competition and antitrust contexts, to name but a few. Companies are both defending and pursuing claims arising from their business as usual operations, such as with their suppliers about changing risk allocation or their joint venture partners about the increased costs of regulatory compliance, and in the context of M&A transactions where the green credentials of an acquisition may have been misrepresented. Businesses are both initiating and responding to claims arising as they undergo their energy transition transformations, with conflicts arising with regulators, government bodies, shareholders and investors.
We recognise these disputes can arise from all angles, and that many of them will manifest in novel forms which are unfamiliar to our clients, often arising as a different type of challenge to that which clients have been used to facing. Traditional business strategies may no longer be appropriate or comprehensive, particularly as claims increasingly arise from unfamiliar quarters. We can therefore expect to see, for example, energy companies caught up in intellectual property disputes, fashion brands in regulatory investigations, infrastructure companies in major insurance disputes, car companies facing class actions, financial regulators facing climate change-based judicial reviews and consumer brands grappling with challenges to their carbon offsetting strategies. In parallel, governments can expect continued and sustained challenges to an increasingly broad range of legislation, policies and decision-making in which private organisations are likely to be directly affected, such as Feedback Global's judicial review of the UK-Australia Free Trade Agreement on environmental impact grounds.
We also understand that as a truly global issue, the growth in climate disputes shows the contagion effect between jurisdictions and sectors. Regulators and litigants are watching closely what is being done in other jurisdictions and adopting practices and standards they see elsewhere. Meanwhile, groups seeking to bring claims against corporates are learning from tactics pursued against companies and governments in different parts of the world and replicating them.
Partner, New York
Professional Support Consultant, London
Senior Associate (Australia), London
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2023