German Court Dismisses Landmark Climate Case Against Energy Company

In May, a German appeals court issued a landmark decision dismissing a climate litigation claim against the parent company of a multinational energy group. Significantly, however, the Higher Regional Court of Hamm found that a company may, in principle, be liable for climate-related harms. The long-running proceedings in Lliuya v RWE have been watched closely by companies and climate/environmental groups alike as a novel attempt to bring a cross-border damages claim against a company for alleged climate-related harms.      

Key takeaways

• The German Court dismissed the claim finding on the evidence that the claimant could not establish a real and imminent risk of damage to his property. The decision is final and cannot be appealed. 
• However, the Court found that under German law, a high emitting company in Germany may, in principle, be liable for transnational climate-change related harms where a company will cause imminent damage. This is the case even where the claimant and the relevant harm are located outside of Germany. In such a situation, the Court held that a company may be obliged to pay for preventative measures in proportion to that company’s share of global emissions. 
• The decision could provide further impetus to the increasing number of strategic climate litigation claims being brought against companies, particularly high emitters, in courts across the world. Climate and environmental groups may attempt to deploy similar arguments that gained traction before the German Court, such as those relating to causation, and the Court’s acceptance of climate attribution science in future cases. 
• However, the decision is confined to German law and so it remains to be seen to what extent similar arguments would be successful in cases brought under different laws before courts in other jurisdictions. 

Background

In 2015, Saúl Luciano Lliuya, a Peruvian farmer and mountain guide, supported by NGO Germanwatch, brought proceedings in the Regional Court of Essen in Germany against the parent company of energy group, RWE. Lliuya sought a declaration that RWE was liable to bear part of the costs of implementing measures to protect Lliuya’s property in Peru from flood risk from the melting of a nearby glacier due to climate change. Lliuya argued that RWE was partially responsible through its contributions to greenhouse (GHG) emissions and that it should pay compensation in proportion to its share of those emissions or alternatively take action to reduce the risk or pay damages. At first instance, the Regional Court dismissed Lliuya’s claim finding that it was inadmissible due to a lack of certainty. Lliuya appealed to the Higher Regional Court of Hamm.

The Higher Regional Court decision

The Court dismissed Lliuya’s appeal:

• Corporate liability for climate harms. The Court found that, in principle, an emitter may be liable under property laws in the German Civil Code for harms caused by their contribution to climate change. The court held that where there is a threat of imminent impairment to property, for which CO₂ emissions are a contributory cause and can be linked to a single emitter, that emitter may be required to take measures to prevent that damage. If the emitter refuses to undertake those preventative measures, under German law the emitter may be obliged, even before actual costs are incurred, to pay for its proportion of those costs. 
• Materiality. Lliuya relied on climate attribution science to allege that RWE’s CO₂ emissions constituted 0.38% of worldwide industrial CO₂ emissions and just under 0.24% of all CO₂ worldwide emissions. The Court considered that these figures were significant enough to establish an adequate causal connection under German law. 
• Causation. The Court held that even where there are multiple links in the causal chain meaning that there is only an indirect connection between RWE’s actions and the impending harm caused by flooding, the essential requirements for attribution (e.g. causation, control of risk, benefit, existence of a duty to ensure safety or to act) would be met. In addition, in the Court’s view, liability was not excluded because of cumulative, distant and long-term consequential damage. The Court found that RWE has caused the emission of large quantities of CO₂ because the construction and operation of RWE’s power plants are based on RWE’s free will and entrepreneurial decision-making. RWE derives economic benefit from its operations and has sufficient scientific and legal expertise to assess and control the risk of violation of legal interests.  
• Parent company liability. Even though the claim was brought against the parent company of the RWE group, which did not itself operate emitting plants, the Court held that the emissions of its subsidiaries were attributable to the parent company as it manages and controls the group. 
• Foreseeability. The Court found that based on scientific opinion as to the effects of GHG emissions on global warming since the late 1950s, it was already reasonably foreseeable among energy producers in the mid-1960s that anthropogenic GHG emissions would lead to global warming and the associated consequences.
• No obligation on claimant to tolerate damage. The Court held that Lliuya was under no legal or factual obligation to tolerate damage to his property from RWE’s activities. The distance between RWE’s power plants and Lliuya’s property in Peru was irrelevant. In addition, RWE’s statutory energy supply mandate and the fact it was undertaking permitted activities did not exempt it from potential liability. 
• Role of the courts. The Court dismissed separation of powers-based arguments that through climate litigation the courts are being instrumentalised to enforce environmental policy goals that are a matter for the state. The Court considered such arguments were of a political nature and did not relate to the legal claims before the Court.
• No future imminent impairment. However, based on findings “currently established” by court experts, the Court held that Lliuya had not been able to show that there was a future imminent impairment to his property. As a result, Lliuya’s claim failed.

Relevance to English climate claims?

The Court’s decision is limited to German law. The German law cause of action in this case is in many respects different to English law. There is potentially some read across for English law tort claims, which have been mooted as a potential route for future English corporate climate litigation, such as the Court’s findings in relation to causation, foreseeability of harm and parent company liability. However, significant unresolved obstacles remain were such claims to be brought in the English courts, including, for example, the need to establish a breach of a duty of care (which was not required for the German law claims in this case).