What does the Klimaseniorinnen case mean for climate change in Europe and in the US?
The European Court of Human Rights (ECtHR) recently made headlines with their landmark decision concerning climate change in the Klimaseniorinnen case. The ruling will change how climate change is managed across Europe and its effects could reach as far as climate litigation in the United States.
The Klimaseniorinnen plaintiffs alleged that the Swiss government’s climate change policies were too lax and infringed on several of their rights under the European Convention on Human Rights (ECHR). The decision noted that climate change was already affecting people in profound ways and that many climate change policies in Europe were not science-based and would not suffice to meet the Paris Agreement goal of limiting global warming to 1.5°C. Most surprising to many commentators was that the court concluded that states party to the ECHR are required to “undertake measures for the substantial and progressive reduction of their respective GHG emission levels, with a view to reaching net neutrality within, in principle, the next three decades.” The court also endorsed the idea that European countries must set interim emissions targets that substantially reduce GHG emissions by 2030 to afford citizens’ rights the proper respect.
Experts widely believe that this ruling will have immediate effects in countries party to the ECHR.1 The ECtHR stated that while its member states have lots of leeway in determining how they get to net zero they have less leeway than previously in avoiding the obligation. This leads to the conclusion that governments will be forced by their citizens to strengthen climate change-related laws. More immediately relevant to insurance, European courts are required to uphold the ECHR in their tort-related rulings, under both civil and common law. This may not present new causes of action but it may change how courts view existing standards like the duty of care owed by a defendant or the reasonableness of their actions designed to mitigate the negative outcomes. Strict enforcement of the reporting and due diligence requirements could lead to significant increases in expenses for companies alongside the spectre of liability stemming from the now-expanded human rights law.
Corporate sustainability requirements may also be impacted by this ruling. Some sustainability laws/directives require companies to perform due diligence on human rights impacts alongside other environmental and global warming requirements. A European company or any international company doing sufficient business in Europe that is found to negligently or intentionally fail to comply with these rules can be found civilly liable under the Corporate Sustainability Reporting Directive and/or Corporate Sustainability Due Diligence Directive. Clearly this heightens the potential for administrative lawsuits but it also raises the likelihood that these companies could experience the sort of stock drops that commonly lead to securities class actions or derivative suits that could be covered under D&O policies.
While the effects on European companies or other multinational corporations with sufficient European business to trigger the requirements are clearly significant, it’s less clear what the effect of the ECtHR ruling could have on American cases and the interpretation of liability.
American courts have long held that they are not bound by any international precedents and are not even obligated to look at them or otherwise acknowledge their relevance. Furthermore, the ECHR is not operative in the United States nor are the rights relevant to this decision enshrined in the US Constitution.2 Nonetheless, a decision as broadly publicized as this one may still reverberate in the US. For example, plaintiffs in climate-related cases may use some of the logic of the Klimaseniorinnen decision to hone their arguments in existing public nuisance litigation targeting carbon emissions in the US. Particularly successful advocates may even persuade a court to adopt the reasoning behind the ECtHR’s decision or push courts toward interpreting existing rights as being infringed by climate change.
More likely, though, as some commentators have pointed out3, the most compelling effects of this ruling in the US may be political, cultural, and social. The increased scrutiny of corporate activities and their effects on climate change are all but certain to affect how consumers view their overall brand. It is also possible that the coming disclosures could lead investors to reevaluate a company’s worth and may also trigger securities class actions or derivative actions. In those circumstances plaintiffs would likely allege that the companies misled them for many years, leading to extended class periods and potential for greater losses.
Looking ahead to the third wave of climate litigation, the increased political and/or social pressure on companies to act and the awareness of this new conception of human rights could increase the likelihood that heatwave-triggered casualty events lead to litigation or that other third wave litigation scenarios we’ve modelled will get the extra impetus needed for litigation funders and the plaintiffs bar to band together and press these cases in court.
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