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Clifford Chance

Clifford Chance

Business & Human Rights Insights

Climate change-litigation and 'greenwashing' – a Luxembourg situational analysis and outlook

With climate change-related litigation on the rise, and increased regulatory and public focus on 'green-washing’, what is the state of play in Luxembourg?

Climate change-related litigation is on the rise, with prominent cases having been brought e.g. in The Netherlands, Germany, the U.S. and Australia. Cases brought against governments and/or public authorities are paving the way for cases against private defendants, i.e. companies from the energy or natural resources sectors, emissions-intensive businesses, or global operators generally. Cases are often litigated in tort, and/or based on fundamental rights and human rights violations.

In parallel, the regulatory and public eye (private and institutional investors, 'activist' shareholders, …) is increasingly on the look-out for 'green-washing', i.e. instances of overstatement of companies' or businesses' eco-friendliness, sustainability or carbon-neutrality. An emerging trend is starting to form, focusing on public pension funds and the actions they are taking to address climate change risk within their portfolios. Sometimes triggered by whistleblowers, regulators have begun to investigate financial investors for making false ESG-related statements. Activist shareholders have questioned companies' production processes, supply chains and natural resources consumption, causing historic declines in stock prices, and prompting investor class-actions.1

Climate change cases are starting to be brought in Luxembourg

Using disclosure risks to apply pressure on pension funds to re-evaluate their portfolios (evident in cases such as McVeigh v REST ) is also starting to get traction amongst activists in Luxembourg. In what may be regarded as the most significant climate change-related Luxembourg case to-date,2  GREENPEACE LUXEMBOURG A.S.B.L. ("A.S.B.L.") challenged an (implicit) refusal by the Minister supervising the Luxembourg Fonds de compensation commun au régime général de pension, or 'FDC’,3  to address its request for information on climate change-related risks associated with the fund's investments, and on how the fund intended to align its investments with the targets of the Paris Agreement. The A.S.B.L. had previously criticised the fund's strategy of investing into fossil energies (such as carbon, petrol and gas) largely responsible for climate change. The A.S.B.L. required the Luxembourg administrative judge to order the Minister to answer its request, with the aim of enabling the A.S.B.L. and the public to evaluate the fund's investment strategy and risk exposure. Questions included the fund's and its portfolios' carbon footprint over the years 2013 to 2018.

Overring the government's challenge of the A.S.B.L.'s capacity to bring the recourse, the Luxembourg administrative judge deemed the information requested by the A.S.B.L. to be 'environmental information', which Luxembourg law requires to be made available to any applicant party by the public authority/ies holding said information.4

Notwithstanding this, the administrative judge went on to rule, however, that the information request actioned by the A.S.B.L. was/is merely meant to grant access to information, and not to question a public authority on its administration, or elicit statements or justifications from a public authority. The judge further ruled that the Minister addressed by the A.S.B.L. was only in charge of the supervising the fund, with no active role in determining the fund's investment strategy, and was not required, by law, to monitor the fund's compliance with any objectives of environmental or climate protection.

The judge eventually rejected A.S.B.L.'s request on the grounds that the Minister did not 'in a traceable manner' hold the information requested.

What does the future of climate change litigation in Luxembourg look like?

Due to Luxembourg's proximity in legal system (including in civil liability law) to France and Belgium, French or Belgian cases5 forecast with reasonable reliability how similar cases could be tried in Luxembourg.

As foreign litigation cases have shown, climate change-related liabilities and ESG issues more generally are whistle-blower topics, and harbour the potential of collective legal action.

While there is no general provision on whistleblowing under Luxembourg law yet, there are specific laws in various sectors, including in the financial sector, and for private-sector employees. Luxembourg is to implement the 'Whistleblowing Directive' ((EU) 2019/1937) by 17 December 2021 (the material scope of which includes the protection of persons signalling breaches of E.U. law relating to the protection of the environment), but no draft bill is available yet.

Similarly, there is no defined legal framework for class actions and group litigation in Luxembourg, yet. The question has been addressed on a case-by-case basis.6 Not-for-profit organizations have been recognized as being able to bring legal action in a collective interest, including in environmental matters, if defined conditions are met.7 The solutions and admissibility criteria vary depending on whether criminal, administrative or civil action is at stake.

A draft bill (n° 7650) intending to introduce collective recourse procedures in consumer law,8  was submitted on 14 August 2020, and constitutes a significant step towards the adoption of a legal framework for group actions in Luxembourg.

Conclusion

Given the foreign precedents, and the Luxembourg legal tools available or to come, climate change-related litigation may very well turn into a developing legal trend also for Luxembourg.

1. See e.g. the case of vegan milk-maker Oatly Group AB (NASDAQ: OTLY) and activist investor Spruce Point Capital Management, and the class action lawsuit Jochims v. Oatly Group AB, No. 21-cv-06360 commenced in the United States District Court for the Southern District of New York in July 2021 (for securities laws violations).
2. Source for our description of the case: Administrative Tribunal of Luxembourg, 17 December 2019, docket n° 43.604 (link). We are disregarding, for the purpose of the present contribution, greenhouse gas emissions trading-related litigation, of which there are quite a few Luxembourg examples.
3. The FDC was established by an amended Luxembourg law of 6 May 2004 on the administration of the assets of the general pension insurance scheme. Its aim is to 'prudentially manage the compensation reserve of the general [Luxembourg] pension insurance scheme and to achieve an effective return while diversifying risks' (Source: link).
4. Per article 3 (1) of the Luxembourg law of 25 November 2005 regarding the public's access to environmental information (provided that the application for access is well-grounded, and no legal derogation applies) (link).
5. See e.g. First-instance court (French-speaking) of Brussels, Civil section, 17 June 2021, docket n° 2015/4585/A.
6. See e.g. Luxembourg District Court, 13 December 2005, docket n° 87.208 and 90.719: damages claims brought by 28 gas station operators in connection with the occupation and blocking by members of a not-for-profit organisation which occurred in 28 different locations, but during the same protest rally. These claims have been ruled to be separate claims.
7. As for the possibility to challenge an individual authorization granted by the Luxembourg Environmental Minister: 'national importance' status; legal personality; and habilitation, by a specific legislation, to exercise the rights of the civil plaintiff in case of infringement(s) to the relevant legislation (see the case-law and excerpts cited in Pasicrisie bleue, p. 68, n° 123, Procédure contentieuse).
8. The draft bill is available using the following link. The collective recourse can be either a cessation lawsuit or a liability lawsuit.