Clifford Chance

In an important decision concerning the interplay between climate policy and law, the District Court in The Hague (the Netherlands) has ruled that the Dutch State cannot be obliged to impose specific targets on KLM to reduce its CO₂ emissions as part of aid packages in the context of the Coronavirus outbreak.

Background

As a result of the Coronavirus outbreak and given the importance of KLM for the Dutch economy and the international hub at Schiphol, the Dutch government granted State aid to KLM. The State's financial support consists of (i) a guarantee on loans provided by a consortium of banks of up to EUR 2.4 billion and (ii) a subordinated loan to the company of up to EUR 1 billion. The Dutch government imposed certain conditions on KLM for the aid relating to profit allocation, working conditions and sustainability (including a reduction of KLM's CO₂ emissions in international aviation in line with the existing national targets). The European Commission approved this in July 2020.

On 7 October 2020, Greenpeace Netherlands ("Greenpeace") initiated legal proceedings against the Dutch government to force the Dutch State to impose stricter climate conditions on KLM, including a cap on its CO₂ emission, for the ongoing and any new financial support. Greenpeace based its claim on the Urgenda case (see our briefing here), where the Dutch Supreme Court ruled that the Dutch State has a positive duty of care to protect its citizens against the "real and immediate" risks of climate change. By not imposing any binding climate requirements on KLM, including a reduction of its CO₂ emission up to 3.9 megatons, as part of the EUR 3.4 billion Dutch aid measure, the Dutch State's climate policy for aviation is inadequate, Greenpeace argued.

The decision

Greenpeace is an NGO that promotes a green world and strives to stop climate change. It instituted its claim pursuant to Article 3:305a DCC, which enables representative entities to bring class actions (see our briefing here).

Greenpeace argued that the current measures taken by the Dutch State are insufficient to meet the international and national environmental targets. In its view, the Dutch government should have required KLM as a major polluter in the Dutch aviation sector to reduce its CO₂ emissions and to set an emission cap as a condition for the State's financial support. Greenpeace relied to a large extent on the findings in Urgenda arguing that the Dutch aid to KLM infringed Articles 2 (right to life) and 8 (right to respect for private and family life) of the ECHR. Greenpeace argued that (i) the Dutch government breached its obligations pursuant to the ECHR by not imposing any binding climate conditions on KLM when giving financial support to it and that (ii) the Dutch government breached its duty of care under Article 6:162 DCC by not taking sufficient measures to mitigate the effects of climate change when it granted the Dutch aid to KLM.

On 9 December 2020, the preliminary relief judge of the District Court in The Hague ruled in summary proceedings that the Dutch State is not legally obliged to impose climate change related obligations on KLM to reduce its CO₂ emissions further as part of the State aid to KLM. The Court stressed that the Dutch government has a large degree of discretion to take into account political considerations that are necessary to support the Dutch economy in the context of the Coronavirus outbreak. When examining the political decisions taken by the government, the Court must exercise restraint.

According to the Court, the relevant instruments (the United Nations Framework Convention on Climate Change, the Paris Agreement and the Urgenda judgment) do not impose any obligation on the Dutch State to reduce the emissions in international aviation because the Dutch State can only be held responsible for CO₂ emissions within the Netherlands. As KLM's CO₂ emissions are the result of the international flights, Greenpeace's claim cannot be based on these instruments. Moreover, the emission cap of 3.9 megatons as claimed by Greenpeace goes further than the climate goals for the aviation sector which have been agreed internationally. In this respect, the Court emphasized that such a national target would harm the international position of KLM.

In any event, the Court found that the primary policymaking to reduce CO₂ emissions in international aviation should be done at the international level by the International Civil Aviation Organisation.

Implications for corporations and businesses

The class action of Greenpeace filed against the Dutch State, confirms that class actions in the field of climate change are here to stay. This case emphasizes this increased activism and is another example of litigation being used as a tool to force governments, as well as businesses, to live up to or even reconsider their public commitments and to effectively address climate change.

This case illustrates the increasing pressure on States to enforce existing laws and to adopt stricter laws to tackle the adverse effects of climate change. It is crucial for businesses to focus on these developments as these are likely to result in new legislation, compliance obligations and higher business standards affecting their conduct and performance of (contractual) obligations. The case also illustrates that the courts are cognisant of the line between their role and the role of politicians, which is a recurring theme in climate change litigation cases across the Globe.