New Zealand Law Society - Climate lawfare – Business in the firing line

Climate lawfare – Business in the firing line

In brief

Litigation is gaining traction as a new and promising means to force adequate corporate responses to the climate crisis. Legal activists view this as the climate equivalent of the moment when litigation began winning concessions from big tobacco.

The climate remains a new frontier of practice. Courts globally remain in a period of legal testing on climate grounds, with rapidly evolving subject matter and a case history accumulating in real time. These factors place us in the midst of a very exciting decade in legal history, with an undeniable thrill of the unknown.

For the businesses involved in defending, settling or positioning to avoid climate lawsuits, however, there can be no doubt about how dangerous litigation risk has quickly become.

The state of play

A survey in late 2019 counted a cumulative, global total of 1400 climate-related litigation cases, with annual case volumes experiencing a sharp uptick from 2007 and a further jump from 2016. More than 1000 of those cases have been filed in the United States, with – by this count – 18 here in New Zealand and another 104 in Australia (the second highest number globally).

The vast majority of these climate cases have targeted governments and their agencies. Some cases have been grandiose in scope, for example demanding that governments up their ambition in reducing national emissions. In 2015, Sarah Thomson, then a Waikato law student, made a Statement of Claim against the Minister of Climate Change Issues to do just that. It failed, but the case Ms Thomson’s mimicked – filed by Urgenda, a Dutch NGO, against the Dutch Government that same year – was ultimately successful. Just last month, in February 2021, a coalition of NGOs won a similar case against the French Government.

Other cases against government implicate business, however, by challenging the approval or consenting of particular projects. An iconic example is the legal challenge to the expansion of Heathrow Airport, which was upheld by the Court of Appeal in February 2020, then ultimately denied by the Supreme Court last December. (It is still not guaranteed that the project will proceed.)

Globally, by late 2019, there had been 135 cases where businesses were named as defendants. These came predominantly, though not exclusively, against mainstays of the energy industry, as well as extractors of other natural resources.

Strictly speaking, the legal success rate of these lawsuits has been relatively low, with many cases successfully defended. That in itself does not tell the whole story. Like all legal battles, these climate cases are costly to defend (financially and reputationally). Some cases are settled in favour of the claimants, creating a victory in all but the strict legal sense. And in the instances where cases do win a legal victory, the consequences can be severe.

A sign of the stakes comes via the Californian utility company, Pacific Gas and Electric, which in 2019 became widely regarded as the first ‘corporate casualty of climate change’, after it filed for bankruptcy in light of legal liabilities for its role in sparking various Californian wildfires between 2015-18. While it ultimately managed to resolve these liabilities with a $25.5bn payment in mid-2020, experts suggest the utility remains exposed to similar liabilities for future wildfires.

A case history accumulating

Claims against business are being launched by an expanding array of litigants, who tend to make one – or more – of four broad demands (see accompanying graphic). Several recent and current cases serve to illustrate the variety on show.

In 2018, Mark McVeigh launched a lawsuit against his Australian superannuation provider, REST, for ‘failing to have, and failing to disclose, strategies to deal with climate-related risks’ relevant to his retirement savings. This case was notable for the customer-provider relationship underpinning it. In November 2020, the case was settled out of court, with REST acknowledging climate change as a ‘material, direct and current financial issue’ for its activities, and promising alignment with global best practice in identifying, considering, mitigating and disclosing the climate-related risks to its portfolios.

Local and regional governments have also been active in litigating against business. In 2018, the Mayor and City of Baltimore sued 21 members of the oil industry, noting the City’s vulnerability to rising sea levels and flooding, and seeking damages for costs already borne and expected in future. Attorneys General from a host of other U.S. states, including California and New York, have signed an amicus brief in support of the lawsuit (as well as a comparable one filed by Rhode Island against the same defendants). The Baltimore case is currently before the Supreme Court, not on its merits but instead tangled up in a question over the appropriate jurisdiction to hear it.

Perhaps one surprising climate lawsuit is the case of Saúl Luciano Lliuya, a Peruvian farmer from Huarez, who sued a giant German energy company, RWE, for its share of cumulative historical emissions (calculated to be 0.47%). Those emissions have contributed to melting the Andean glaciers above his farm, threatening it with flood damage. The case is open and ongoing, currently awaiting Covid-19 restrictions to lift so experts can visit the plaintiff’s farm and adjacent area. However, an independent study by University of Oxford and University of Washington scientists recently supported the claim by concluding that human activity had caused ‘at least 85 percent’ of glacial melt above Huarez.

Closer to home, several NZ businesses have also begun to feel the scrutinising gaze of the court. The most high profile case comes courtesy of Iwi Chairs’ Forum’s climate spokesperson, Mike Smith. Mr Smith filed a claim – in his personal capacity – against seven NZ businesses with large emissions footprints, including Fonterra, Genesis Energy and Z Energy. In March 2020, the High Court struck out two of the three causes of action in the suit, but was unwilling to strike out the third, which proposed that the defendants had failed the plaintiff in a novel ‘duty of care’. If parties opt not to appeal the High Court’s decision, the merits of this third cause of action could be determined at trial.

Collectively, these cases illustrate how courts are testing legal arguments on climate grounds. Litigants are pursuing multiple potential business vulnerabilities in multiple jurisdictions. Successful cases seem likely to unleash a host of ‘chaser’ lawsuits leveraging any new precedents, as well as setting business scrambling to reposition their activities and strategies.

Implications for everyone

Business is under increasing pressure to account for its past activities and to publicly convince us of its compatibility with a carbon-affected, carbon-constrained, world. Any business that has not been paying heed risks a tightening noose. And the litigation risk is not only real, but urgent.

There is a clear intention from a wide range of stakeholders to use the law to challenge previous, current and future corporate activity. Some of these cases have resulted in legal victories, while others have been successful in other ways. Legal advisory services, including Lawyers for Climate Action here in NZ, have sprung up to deploy their skills in pursuit of future cases as they are needed. As a side-note, in February 2021, climate advocates – with the support of Lawyers for Climate Action – noted in a presentation to Auckland Council that the latter could face legal action for failing to adequately reduce the region’s emissions.

As New Zealand’s Chief Justice, Helen Winklemann, and colleagues articulated in their working paper ‘Climate change and the law’, climate is shifting from being an ethical issue to a financial issue. That shift triggers a variety of legal obligations for both companies and their directors, whose responsibilities go hand in hand with the material and financial risks of the companies they oversee. For businesses, the urgent challenge is to expand their thinking about, and augment their responses to, the variety of climate risks they face.

In closing, climate litigation’s role in altering our future course is currently unknowable. The ultimate verdict on business’ responsibilities on climate will emerge not just from the world’s courtrooms, but from the corner offices of financial stability agencies, the halls of government, and the boardrooms of business themselves. The waves of change in each of these places are running together to recalibrate business behaviour, both here in NZ and elsewhere around the world.

In that sense, it may not matter how much of the change in business behaviour will be attributed to litigation. There will certainly be headline-grabbing instances when it plays the hero role, and likely many others when the mere threat of litigation effectively shuffles business along the path to wiser, more future-oriented corporate behaviour. A safer climate than the one we’re currently headed for is the only real end game.

Lawyer Listing for Bots