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Shell and the Climate Case: Is the Shell Group the “Cheapest Cost Avoider”?

Published online by Cambridge University Press:  29 February 2024

Arnald J. Kanning*
Affiliation:
Rotterdam, The Netherlands

Abstract

The Hague District Court in the Netherlands faced a novel tort law issue in 2021 in Milieudefensie et al v Royal Dutch Shell plc – namely, whether Shell is liable in tort for the reduction costs of carbon dioxide produced in the end use of energy-carrying Shell products. The civil lawsuit aims to make Shell (re)search for adequate substitutes so as to enable Shell’s customers to reduce their consumption of energy-carrying Shell products. It is argued here that Shell’s liability should be assessed within Guido Calabresi’s “cheapest cost avoider” framework.

Type
Case Notes
Copyright
© The Author(s), 2024. Published by Cambridge University Press

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References

1 Milieudefensie et al v Royal Dutch Shell plc, The Hague District Court (The Netherlands), Judgment of 26 May 2021. An English version of the court ruling is available at ECLI:NL:RBDHA:2021:5339, Rechtbank Den Haag, C/09/571932/HA ZA 19-379 (engelse versie) <https://uitspraken.rechtspraak.nl/details?id=ECLI:NL:RBDHA:2021:5339>.

2 It goes beyond the scope of this Case Note to provide a full overview of all recent climate change litigation. For global trends in climate change litigation, the reader is referred to the websites of the Sabin Center for Climate Change Law in New York and the Grantham Research Institute on Climate Change and the Environment in London. See also, eg, G Ganguly, J Setzer and V Heyvaert, “If at First You Don’t Succeed: Suing Corporations for Climate Change” (2018) 38 Oxford Journal of Legal Studies 841–68.

3 For example, Deryugina et al discuss the Coase theorem in extenso, with a focus on practical applications in environmental policy. T Deryugina, F Moore and RSJ Tol, “Environmental applications of the Coase Theorem” (2021) 120 Environmental Science and Policy 81–88.

4 Art 162, Book 6, Dutch Civil Code (Definition of a “tortious act”) reads as follows:

  1. –1.

    –1. A person who commits a tortious act (unlawful act) against another person that can be attributed to him, must repair the damage that this other person has suffered as a result thereof.

  2. –2.

    –2. As a tortious act is regarded a violation of someone else’s right (entitlement) and an act or omission in violation of a duty imposed by law or of what according to unwritten law has to be regarded as proper social conduct, always as far as there was no justification for this behaviour.

  3. –3.

    –3. A tortious act can be attributed to the tortfeasor [the person committing the tortious act] if it results from his fault or from a cause for which he is accountable by virtue of law or generally accepted principles (common opinion).

5 See also OHCHR | Climate Change and the UNGPs: “The UN Guiding Principles on Business and Human Rights (UNGPs) do not address climate change explicitly. Nevertheless, the UNGPs are relevant to climate mitigation efforts on the part of States, businesses, and other stakeholders.” <https://www.ohchr.org/en/special-procedures/wg-business/climate-change-and-ungps>.

6 See, cf., G Calabresi and JT Hirschoff, “Toward a Test for Strict Liability in Torts” (1972) 81 Yale Law Journal 1056.

7 RH Coase, “The Problem of Social Cost” (1960) in RH Coase, The Firm, The Market, and the Law (Chicago, IL, University of Chicago Press 1988) pp 95–156.

8 As an aside, it is worth noting that the district court’s ruling in para 4.1.3 is in line with the intent of Art 22 (Civil Liability) of the proposal for an EU Directive on Corporate Sustainability Due Diligence (CSDD Directive) and Section 3.2.6 (Civil action) of the proposal for a Dutch (revised) Bill on Responsible and Sustainable International Business Conduct (RSIBC Bill).

9 G Calabresi, The Costs of Accidents: A Legal and Economic Analysis (New Haven, CT, Yale University Press 1970) p 155. (“[T]he search for the cheapest avoider of accident costs is the search for that activity which has most readily available a substitute activity that is substantially safer. It is a search for that degree of alteration or reduction in activities which will bring about primary accident cost reduction most cheaply.”)

10 See, eg, H-B Schäfer and A Schönenberger, “Strict Liability versus Negligence” in B Bouckaert and G De Geest (eds), Encyclopedia of Law and Economics, vol. II (Cheltenham, Edward Elgar Publishing 2000).

11 Calabresi and Hirschoff, supra, note 6.

12 See also G Calabresi, “Concerning Cause and the Law of Torts: An Essay for Harry Kalven, Jr.” (1975) 43 University of Chicago Law Review 84. (“[T]he chosen loss bearer must have better knowledge of the risks involved and of ways of avoiding them than alternate bearers; he must be in a better position to use that knowledge efficiently to choose the cheaper alternative; and finally he must be better placed to induce modifications in the behavior of others where such modification is the cheapest way to reduce the sum of accident and safety costs. The party who in practice best combines these not infrequently divergent attributes is the ‘cheapest cost avoider’ of an accident who would be held responsible for the accident costs under the market deterrence standard.”)

13 Calabresi and Hirschoff, supra, note 6, 1063.

14 See, cf., Calabresi and Hirschoff, supra, note 6, 1071, footnote 57.

15 See, cf., ibid, 1071.