IM-MEDIATE NOT LITIGATE

The use of ADR to resolve intellectual property (IP) conflicts is a subject that “lies at the intersection of two rapidly growing branches of law.” IP comprises exclusive rights to novel ideas as contained in tangible products of cognitive effort, which, due to its complexity and need for expert evidence, creates a lengthy and expensive litigation process. Mediation has the potential to offer an inexpensive, faster and more user friendly solution for the protection of IP rights and also for the defence against claims that can be brought or threatened by larger corporations against SME’s or individuals, by way of intimidation due to the threat of extensive legal costs and it should be mandatory.

The evolution of the Intellectual Property Enterprise Court (IPEC) in london, has gone some way to reducing the burden of IP litigation, since its inception. The court is run by a specialist IP judiciary, who manage the cases, so that discovery and the use of expert evidence is kept to a minimum. There are three case Tracks, the Multi-Track (MT) for cases with a value in excess of £50,000, a Fast Track (FT) for cases valued between £25,000 and £50,000 and a Small Claims Track (SCT), for cases worth £10,000 and £25,000. Damages and costs are capped. The SCT in particular, is of particular benefit to holders of IP rights that are valuable to the holder, but which do not have extensive commercial value, as there are fixed costs of £260 and IP owner can conduct the case as a litigant in person. The IPEC also sits on circuit in a number of court centres around the country, where the specialist judges hear these cases. The weakness in the SCT is that injunctive relief is not yet available, unlike in the MT and FT. This undermines the benefit of these reforms to IP litigation, as the Claimant in an IP case is more often seeking an injunction than an award of damages, the object being to bring the infringing act to a conclusion.

An alternative way to bring a swift end to infringing activity is to mediate. In a global world where the markets are chasing ‘The Next Best Thing’ most businesses cannot afford to litigate, either time wise or cost wise. Once a product is successful in getting to market, other creators are looking to cash in on that success by creating something newer and better. IP must be enforced in an efficient, effective and proportionate way. When a report to evaluate the IPEC was published in June 2015, all respondents stated that litigation was typically a last resort, but there were a number of negative comments on the usefulness of ADR/mediation and the Report did not find strong support for expanding its role. There was however, a view that the Allocation Questionnaire could be redesigned to force parties to take further steps to convince the court that they had engaged in settlement or mediation negotiations before commencing litigation. This is insufficient and shortsighted and contrary to the findings of the 2006 Gower’s Review which focused on the use of alternative methods of dispute resolution, which not only provide a low cost alternative to litigation but could help to avoid the negative aspects of conflict, such as damage to reputation, lost customers, damage to company morale, as well as the large costs implications.

At the date of the Gower’s Review, the cost of mediating was £3,000 with a high proportion of cases, 70%, referred to mediation, going on to reach settlement. The World Intellectual Property Organisation (WIPO) established the WIPO Arbitration and Mediation Centre in 1994 on a not for profit basis. This has been recognised as an international and neutral forum and the Centre also works as a resource centre to raise awareness of the valuable role that ADR can play in different sectors. As the Gower’s review pointed out, mediation and other ADR methods are currently poorly used and understood for IP. The old Department for Constitutional Affairs (DCA) promoted the use of ADR for years, but some judges were reluctant to encourage parties to mediate and large companies were also reluctant to engage, in case they were perceived as being weak. The Gower’s Review recommended strengthening the Practice Directions to provide greater encouragement for parties to mediate, which would raise the profile of mediation with the judiciary. The Review hesitated to impose further incentives to mediate, such as mandatory mediation as individuals have a right of access to the courts under Article 6 of the Human Rights Act 1998. This view does not bear scrutiny because mediation does not prevent access to the court system, it is an alternative method or resolution or an early step in the overall litigation process.

A working example can be found in the Philippines, where the Intellectual Property Office (IPOPHL) has taken steps to establish a strong and balanced IP regime that is conducive to business and industry. One of the challenges to the enforcement of IPR’s in the Philippines was the speedy disposal of cases and to address that concern, a number of reforms were introduced and implemented. One of these reforms was the introduction of the mandatory referral of IP cases for mediation. Once a case had been filed in the Originating Office, it was referred to ADR Services and the parties can choose between IPOPHL or WIPO mediation. Amongst the Best Practices in Mediation identified by the IPOPHL, was the mandatory referral for mediation, which gives the parties an opportunity to explore their own option for settlement without necessarily limiting their position in the litigation process. There is also the benefit that as the mediation is mandatory, parties such as large corporations will not see themselves as being weak by participating in it, as they have no choice.

Mediation has been described as the ‘sleeping giant of IP disputes’ and in the US, its use in patent disputes has been lauded. In addition to the many benefits that ADR provides to the parties, judges are seriously looking for new ways to reduce their caseloads and are turning to ADR to assist with case management, as referring a case to ADR means that between 60 to 80% of the time, the case will settle, thereby relieving the judges caseload. In the UK, the use of mandatory mediation may be the best method of early case management for IP judges, who then have the benefit of taking the case once the issues have been narrowed down, prior to the pleading stage. The Gower’s Review and subsequently, the Hargreaves Review in 2011 both missed a valuable opportunity to encourage this scheme in the UK.

Whilst the IPEC may be less overburdened than other sections of the legal system after the Covid 19 lockdowns, there will undoubtedly be a backlog of cases. On a positive note, the use of remote hearings has proliferated in the last 18 months and this cannot be underestimated in the overall reduction of costs. The UK Intellectual Property Office (IPO) which has long offered a mediation service, now offers that service online. The IPO website sets out details of the service, but the cost of mediation is about £250 per person for an eight hour mediation session, with the price reduced accordingly for shorter sessions. This compares to just over £400 per person plus room hire, for the same period of time.

The IPO mediation service represents a particularly cost effective way for individuals and SME’s in particular, to settle IP disputes with the assistance of an experienced IP mediator. The IPO has the independence, expertise and resources to provide mediation in a cost effective way, if the Government were to make it mandatory. This would reduce the burden on the IPEC and the judiciary and ensure that IP right holders could obtain maximum benefit from their IP. There is no detriment to the parties from engaging in this process and there is everything to gain. There will still be cases that proceed to litigation, but early independent intervention has the potential to take the heat out the situation and identify what exactly the parties are hoping to achieve, whether that is injunctive relief or a financial settlement.

JANE FOULSER MCFARLANE © 2021

Grant Shapps and ‘The Commitments’. UK sets out its plans for decarbonising shipping.

Hot on the heels of the bumper 581 page communication from the EU Commission on its decarbonisation plans comes a mere 221 page communication from the Department for Transport Decarbonising Transport: A Better, Greener Britain.

This deals with various sectors, and contains various commitments as regards the domestic maritime sector.

Commitment. “We will plot a course to net zero for the UK domestic maritime sector, with indicative targets from 2030 and net zero as early as is feasible We will establish, following public consultation in 2022, an ambitious ‘Course to Zero’. This consultation will explore the technical, operational and policy options available for Government to accelerate decarbonisation in this sector to achieve net zero by no later than 2050 or earlier if possible. Following consultation, we will establish ambitious indicative targets for the domestic maritime sector recognising that we have ground to make up, covering 2030 and onwards. These targets will guide the design and enable us to measure the success of future policy interventions. We will embed this course in our Clean Maritime Plan (CMP), as part of a planned review and refresh which is due to start in 2022 and include within the CMP the long term interventions needed to achieve full decarbonisation.”

Commitment. “We will consult on the potential for a planned phase out date for the sale of new non-zero emission domestic vessels Following the conclusion of the current Clean Maritime Demonstration Competition and the Course to Zero consultation, we will consult in mid-2022 upon the potential for long term decarbonisation to be accelerated through carefully designed, well signposted measures to phase out the sale of new, non-zero emission domestic vessels, building on the experiences of the steps being undertaken today in other modes of transport.”

Commitment. “We will accelerate the development of zero emission technology and infrastructure in the UK We have recently launched a £20 million funding package – the Clean Maritime Demonstration Competition (CMDC) – to support and accelerate research, design and development of zero emission technology and infrastructure solutions for maritime and accelerate decarbonisation.”

Commitment. “We will consult this year on the appropriate steps to support and, if needed, mandate the uptake of shore power in the UK

We will consult in winter 2021 on how government can support the wider deployment of shore power, including consideration of regulatory interventions, for both vessels and ports, that could drive deployment as we transition to a net zero world, and bring forward appropriate measures.”

 Commitment. “We will extend the Renewable Transport Fuel Obligation (RTFO) to support renewable fuels of non-biological origin used in shipping We consulted in March 2021, on a potential expansion of the RTFO to include some advanced maritime fuels in order to support their deployment.109 The RTFO mandates that a certain proportion of road fuel must be from a sustainable renewable source. Maritime fuels currently have no equivalent system, which we aim to change. We recently announced that we will make renewable fuels of non-biological origin used in shipping eligible for incentives under the RTFO.”

Commitment. “Internationally, the UK will press for greater ambition during the 2023 review of the International Maritime Organisation Initial Greenhouse Gas Strategy and urge accelerated decarbonisation.

The IMO will review its strategy in 2023 and as set out in the recent G7 Climate and Environment Communique112 the UK will be seeking to increase ambition to ensure that international shipping plays its part in delivering decarbonisation. We will promote close alignment with the Paris temperature goals and challenge the international community to deliver on the IMO initial strategy commitment to ‘phase out’ emissions from the international sector as soon as possible.”

Commitment. “We will ensure we have the right information to regulate emissions, and to judge the effectiveness of the steps we are taking in the UK and at the IMO We will review, and if appropriate amend, the operation of the UK’s existing monitoring, reporting and verification system for greenhouse gas emissions from international shipping, to ensure it is fit for purpose and delivering the information we need to decarbonise the maritime sector. We will keep the measurement approach to the UK’s international shipping emissions under review and consider the appropriateness of fuel or activity-based measures. Additionally, we will consider how similar information can be collected for the domestic fleet, in order to provide a better evidence base for future policy interventions.

We will include the UK international aviation and shipping emissions in the Sixth Carbon Budget The Government has set the Sixth Carbon Budget to include the UK’s share of international aviation and shipping emissions, as recommended by our independent climate advisors, the Climate Change Committee (CCC). This allows those emissions to be accounted for consistently with other emissions included within the Sixth Carbon Budget. In line with the CCC’s recommended method for CB6 and UNFCC reporting, the projections for international shipping emissions represent the estimated emissions from fuel sold in the UK for use in international shipping.”

It is noteworthy that shipping is not included in the UK’s ETS and international shipping enters the stage only in the last of the above mentioned commitments.

Liquidated damages and the ticking clock

Time to get back to the drawing-board, perhaps, if you’re a construction contractor. Suppose you you agree to do work and include this liquidated damages term:

“If CONTRACTOR fails to deliver work within the time specified and the delay has not been introduced by EMPLOYER, CONTRACTOR shall be liable to pay the penalty at the rate of 0.1% of undelivered work per day of delay from the due date for delivery up to the date EMPLOYER accepts such work. …”

Things drag on: there’s some work you never actually do at all, and in the end the employer terminates the contract. Can the employer claim liquidated damages for the period between the due date and termination, on the basis that the meter started ticking when you should have finished the work and only ground to a halt when he walked away and put an end to the whole arrangement? Or is he limited to proving his loss in the ordinary fashion, on the argument that if work is never accepted (ex hypothesi the case where it was never done in the first place), the clause makes no sense and therefore has to fall away?

In Triple Point Technology, Inc v PTT Public Co Ltd [2021] UKSC 2 the Supremes, reversing the Court of Appeal, chose the former solution. It was, it said, more commercial that once the meter had begun to tick the accrued rights to payment that arose de die in diem as a result should be preserved, and would not be liable to disappear in a puff of legal smoke if at some time in the future it became clear that the work would never be done. Furthermore, said the court, the opposite answer would create a perverse incentive: assuming the liquidated damages clause was more profitable to the employer that his right to damages, it might be in the interests of the contractor not to tender performance at all.

This is arguably right, though not incontrovertibly so (one could equally well contend that if the parties had intended that the clause should apply in the case of non-performance it would not have been difficult for them to say “up to the date EMPLOYER accepts such work, or the Contract is terminated by EMPLOYER, whichever shall be the sooner”.) But for future contracts this does not matter to much, since the ball is in the court of contract draftsmen.

Nevertheless, one thing might be worth contemplating for contractors. Having shied away from creating a perverse incentive in the contractor to drag his feet, the UKSC has arguably created an equal and opposite one in the employer. What if, after relations have de facto broken down without the work being done, such that there is now no practical chance of their completion and acceptance, the employer smugly writes to the contractor saying he continues to hold the contract open? True, the courts would no doubt find a way to prevent the clock potentially ticking on until the last trump (see MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2016] EWCA Civ 789, noted here in this blog). But a couple of months or so of foot-dragging at 0.1% per day would be distinctly profitable if they led to a windfall claim for 6.1% of the relevant price with no questions asked. Indeed a lawyer who didn’t raise this possibility with his clients might face some awkward questions later.

There is, however, a possible straightforward answer. There is much to be said for contractors arguing for the insertion of a bespoke provision applying whenever a right to terminate had arisen in the employer, allowing the contractor to put him to his election and in the absence of an election to terminate to put an end to the running of liquidated damages for delay.

Two other issues arose in the case about the drafting of the damages limitation clause. But these turned very much on the interpretation of the wording used, and are of little general interest. Meanwhile, however, if they don’t like the result in PTT lawyers are on notice to get out their word-processors and go over their precedents.

“Ever Given” on its way at last.

On Wednesday 7 July the Ever Given was finally released following a ceremony at Ismailia with the signing a settlement of the Suez Canal Authority’s claims for the salvage operation, costs of stalled canal traffic, and lost transit fees for the week the Ever Given had blocked the canal. Local reports suggest that the shipowners will also present the authority with a tug boat.

The amount of the settlement is undisclosed but is thought to be rather less than the $900m initially claimed, which included $300,00 for ‘loss of reputation’. It is possible that the ship may still face tort claims from cargo carried on ships delayed by the incident, particularly if perishable cargo sustained damage due to the delay.

The British horticultural sector will be particularly delighted to receive a much delayed consignment of garden gnomes carried on the vessel.

Bastille Day. EU Commission’s present to the shipping industry.

Today the EU Commission has issued a 581 page document with a proposed directive amending the 2003 ETS Directive. This is considerably less extensive that the proposed amendment to the 2015 MRV Regulation which is what the EU Parliament voted for last October.

Maritime transport will now fall within the Directive (inserted articles 3g to 3ge) which will apply in respect of: emissions from intra-EU voyages; half of the emissions from extra-EU voyages and; emissions occurring at berth in an EU port. This rows back from the Parliament’s proposed amendments to the 2015 MRV Regulation which would have included all emissions from extra-EU voyages which started from or ended within the EU. The same rules that apply to other sectors covered by the EU ETS should apply to maritime transport with regard to auctioning, the transfer, surrender and cancellation of allowances, penalties and registries (Article 16).  Shipping will enjoy phased entry into the ETS. Shipping companies shall be liable to surrender allowances according to the following schedule: (a) 20 % of verified emissions reported for 2023; (b) 45 % of verified emissions reported for 2024; (c) 70 % of verified emissions reported for 2025; (d) 100 % of verified emissions reported for 2026 and each year thereafter: somewhat different from the inclusion in the ETS as of 1.1.2022 proposed by the EU Parliament. The current MRV Regulation applies only to CO2 emissions and the Commission leaves extension to other gases to a later phase, once the monitoring approaches and emissions factors of these gases has been agreed.

The proposed amending directive includes new definitions for “shipping company” and “administering authority in respect of shipping companies” in Article 3(v) and Article 3(w) respectively.  The person or organisation responsible for the compliance with the EU ETS should be the shipping company, defined as the shipowner or any other organisation or person, such as the manager or the bareboat charterer, that has assumed the responsibility for the operation of the ship from the shipowner and that, on assuming such responsibility, has agreed to take over all the duties and responsibilities imposed by the International Management Code for the Safe Operation of Ships and for Pollution Prevention. This definition is based on the definition of ‘company’ in Article 3, point (d) of Regulation (EU) 2015/757, and in line with the global data collection system established in 2016 by the IMO. This is good news for time charterers who would have become responsible under the Parliament’s proposed amendment to the MRV Regulation.

Still, half a loaf is better than what is currently being served up by the IMO on its GHG reduction menu for international shipping.

The proposed Directive can be found here: https://ec.europa.eu/info/sites/default/files/revision-eu-ets_with-annex_en_0.pdf

Recap term in sale contract prevails over printed incorporated terms.

Septo Trading Inc v Tintrade Ltd (The Nounou) [2021] EWCA Civ 718 (18 May 2021) involved a dispute under an international sale contract of fuel oil as to the effect of a quality certificate issued by an independent inspector at the load port  and whether it was intended to be conclusive evidence of the quality of the consignment.

The recap email of confirmation of the sale said that the certificate would be binding on the parties in the absence of fraud or manifest error, but it also provided for the BP 2007 General Terms and Conditions for FOB Sales (“the BP Terms”) to apply “where not in conflict with the above”. Those terms say that the quality certificate will be conclusive and binding “for invoicing purposes”, but without prejudice to the buyer’s right to bring a quality claim. The quality certificate issued by the independent inspector certified that the fuel oil was in accordance with the contractual specification at the load port.

Teare J, [2020] EWHC 1795 (Comm), found as a fact that it was not and held that the BP Terms qualified the Recap term. Had this stood alone, it would have excluded the buyer’s quality claim, but there was no conflict between Recap term and the BP terms which could be read together so as to give effect to both of them. The buyer’s claim succeeded and damages of US $3,058,801 were assessed.

The Court of Appeal, for whom Males LJ gave the leading judgment, have now overruled Teare J and found that there was inconsistency between the two sets of terms and that the Recap term prevailed. Applying the approach adopted by the Court of Appeal in Pagnan SpA v Tradax Ocean Transportation SA [1987] 3 All ER 565, the starting point was the meaning of the Recap term and a provisional view of its meaning needed to be formed, without taking account of the term which is alleged to be inconsistent. The Recap term provided that the quality certificate issued by the mutually acceptable independent inspector is binding on the parties, so that (assuming always that the certificate shows the product to be on-spec) the buyer cannot thereafter bring a claim on the ground that the quality of the product is not in accordance with the contract. Nobody would think, reading the Recap term, that the word “binding” meant “binding for invoicing purposes”.

Next the BP terms had to be considered and Section 1.2 provides that the quality certificate is to be “conclusive and binding on both parties for invoicing purposes” and that the buyer is obliged to make payment in full, but that this is “without prejudice to the rights of either party to make any claim pursuant to Section 26”, that is to say a claim that the product is not in accordance with the specification. This conflicted with the Recap term and the two provisions cannot fairly and sensibly be read together. The printed term did not merely qualify or supplement the Recap term, but rather deprived it of all practical effect.

Similarly, section 1.3 of the BP Terms which provided for a fundamentally different testing regime from that set out in the Recap term was held to have no application. The Recap provided for the independent inspector’s certificate of quality to be binding, with the parties free to agree (as they did) what instructions should be given to the inspector which will lead to the issue of that binding certificate. Section 1.3 undermined this regime by insisting that if the parties agree that the certificate of quality should be based on shore tank samples, it is nevertheless a condition of the contract that the seller must provide the same quality of product at the vessel’s permanent hose connection as set out in the certificate of quality.

US Companies win aiding and abetting ATS case in US Supreme Court; but ATS not dead yet.

Nestle Inc v Doe & Others. Certiorari to the US Court of Appeals for the Ninth Circuit. 17 June 2021. Slip opinion.

Six individuals from Mali claimed that they were trafficked into Ivory Coast as child slaves to produce cocoa. They sued Nestlé USA and Cargill, U.S.-based companies that purchase, process, and sell cocoa. The companies did not own or operate farms in Ivory Coast, but did buy cocoa from farms located there as well as provided those farms with technical and financial resources—such as training, fertilizer, tools, and cash—in exchange for the exclusive right to purchase cocoa. The plaintiffs alleged that this constituted a violation of the law of nations under the Alien Tort Statute, in that the companies had thereby aided and abetted slavery in that they “knew or should have known” that the farms were exploiting enslaved children yet continued to provide those farms with resources and also had economic leverage over the farms but failed to exercise it to eliminate child slavery. Although the resource distribution and the alleged slavery occurred outside the United States, it was argued that suit under the ATS was possible because the companies allegedly made all major operational decisions from within the United States.

Justice Thomas gave the majority opinion in Part I & II of his judgment. Even if all these disputes were resolved in respondents’ favour, their complaint would impermissibly seek extraterritorial application of the ATS. Nearly all the conduct that they say aided and abetted forced labor—providing training, fertilizer, tools, and cash to overseas farms—occurred in Ivory Coast. Although the Ninth Circuit let the suit proceed because respondents pleaded as a general matter that “every major operational decision by both companies is made in or approved in the U. S.” allegations of general corporate activity—like decision making—cannot alone establish domestic application of the ATS.

Justice Thomas also gave an alternative reason for his judgment in Part III by finding federal courts should not recognize private rights of action for violations of international law beyond the three historical torts identified in Sosa. He was joined by Justices Gosruch and Kavanaugh.

 Justices Sotomayor, Breyer, and Kagan agreed with Justice Thomas in Parts I & II of his judgment but not as regards Part III.

Justice Alito agreed with Part I of Justice Soyomayor’s judgment that if a particular claim may be brought under the ATS against a natural person who is a United States citizen, a similar claim may be brought against a domestic corporation. dissented because the complaint sought extraterritorial application of the ATS, a question tied to the question whether the plaintiffs should be allowed to amend their complaint so as to reach the question of extraterritoriality. Justice Alito would vacate the judgment below, and remand these cases for further proceedings in the District Court.

UK IPO invites IP Wales to explain new trade secrets law for SMEs

Image by VIN JD from Pixabay

Shh! The importance of keeping your trade secrets, secret
We receive many customer queries on patents, trade marks, copyright and designs, but we find less is known about trade secrets. We asked Andrew Beale OBE of IP Wales, an award-winning SME business support initiative, to explain what a trade secret is, how it applies to businesses and how it can be protected.” (UK IPO Blog 5th July 2021)

IP Wales is indebted to the UK Intellectual Property Office for this invitation, as an “industry expert from the world of IP”, to explain on its blog for its readers these important matters.

The introduction into UK law of the Trade Secrets (Enforcement etc.) Regulations 2018 has proved a useful reminder to all firms, whatever their size, that trade secrets can be a valuable business asset.

Questions addressed for businesses during the course of the article include:-

How do I recognise my trade secrets?

What constitutes the “reasonable steps” now demanded of business in order to protect their trade secrets?

How does a business legally preserve its trade secrets?

Why is it important to educate and train staff about trade secrets?

How does my business risk manage its cybersecurity?

The online threat to trade secrets during the current pandemic has never been greater, which is why IP Wales has developed free guidance to help SMEs better manage their IP cybersecurity (see www.ipcybersecurity.com).

Hit the targets. Climate change litigation in Belgium and Germany.

On 17 June 2021, the Brussels French-Speaking Court of First Instance (the “Court”) released a  ruling that the four Belgian governments were in breach of Article 1382 of the Belgian Civil Code and Articles 2 and 8 of the European Convention on Human Rights (“ECHR”) by failing to take all necessary measures to prevent the impacts of climate change on the Belgian population. However, as opposed to Dutch courts in Urgenda, the Court refused to order an injunction to meet stricter targets for the reduction of greenhouse gas emissions due to the principle of separation of powers. The case was brought on behalf of 58,000 Belgian citizens and by an NGO,Climate Change. The Court was asked to recognise the failure of the governments to decrease by 2020 the global volume of annual greenhouse gas emissions originating on Belgian territory by 40% (or at least 25%) compared to the 1990 level. They also sought an injunction to compel have the Belgian governments to make further reduce greenhouse gas emissions originating on the Belgian territory: by 48% (at least 42%) compared to 1990 by 2025; a reduction by 65% (at least 55%) compared to 1990 by 2030 and zero net emissions reached in 2050.

The Court acknowledged the standing of the 58,000 Belgian Citizens in holding governments liable under Article 1382 of the Belgian Civil Code due to the real threat of dangerous climate change, which poses a serious risk to current and future generations living in Belgium and elsewhere that their daily lives will be profoundly affected. The NGO also had  standing due to case the case law of the Belgian Supreme Court according to which an environmental protection association has the personal and direct interest required by Article 17 of the Belgian Judicial Code to bring a claim for compensation on the basis of Article 1382 of the Belgian Civil Code, if it believes that damage has been caused to the environment whose defence it has set itself as its statutory object.

The Court found that the federal government and the governments of the three Belgian regions failed to comply with their duty to exercise due caution and diligence in pursuing their climate policy. The Court noted that in 2019 the overall volume of annual greenhouse gas emissions from the Belgian territory had not decreased by 20% compared to the 1990 level. Therefore, Belgium does not comply with the objective set by the 2012 Doha Amendment to the Kyoto Protocol. Nor had it complied with the EU 15% reduction target for 2020 as targets in EC Decision 406/2009  because Belgium, as of October 2020, had only achieved a reduction of 11% compared to 2005. Looking to the future, the reduction of greenhouse gas emissions by 35% compared to 2005 levels imposed by the EU Regulation 2018/842 on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 would not be met. Further experts were of the view that the federal government’s target of reducing the emissions by 80 to 95% by 2050 compared to 1990 levels would also not be met.

As regards the ECHR Articles 2 and 8 imposed on public authorities a positive obligation to take necessary measures to repair and prevent harmful consequences of global warning which threatens their life and private and family life – which, at this time, the four governments do not. However, the Court could not infer from Articles 6 and 24 of the UNCRC any positive obligation on the part of the signatory states, as the text leaves the authorities full latitude to meet the objectives they set out.

So far so good for the applicants, but the Court did not grant the requested injunction. Belgium was not required under European or international law to meet the targets referred to by the Applicants, and the only binding target is the one established by the EU Regulation 2018/842 which imposes a reduction of 35% by 2030 compared to 2005 levels. Second, the jurisdiction of the Court was limited to the finding of a deficiency on the part of the public authorities, but did not extend to setting itself  Belgium’s targets for the reduction of greenhouse gas emissions, as this would violate the principle of separation of powers. This is in contrast to the position of the Dutch Supreme Court in Urgenda.

The Belgian decision follows hot on the heels of a decision on April 30 2021 by Germany’s Constitutional Court  that that Germany’s Climate Action Law was partly unconstitutional in that it postponed the decision for emissions reduction targets post-2030 to a later date.The German legislator was ordered to regulate the continuation of the reduction targets for the post-2031 period by 31 December 2022 at the latest.

Things go better for Shell? Not in the Netherlands (again).

Judgment has recently been given by a first instance court in the Netherlands in an action brought by various NGOs in which Royal Dutch Shell has been ordered to take as a guideline that the Shell group’s CO2 emissions (Scope 1, 2 and 3) in 2030 must be net 45% lower relative to 2019 levels, with net referring to the sum of the reduction of CO2 emissions of the Shell group’s entire energy portfolio (Scope 1, 2 and 3).

The Judgment covers three sources of emissions. Scope 1 concerns direct emissions from sources that are fully or partly owned or controlled by the organisation (such as a refinery). Scope 2 is for indirect emissions from third-party sources from which the organisation has purchased or acquired electricity, steam, or heating for its operations. Scope 3 includes all other indirect emissions resulting from activities of the organisation, but occurring from greenhouse gas sources owned or controlled by third parties such as other organisations or consumers, including emissions from the use of third-party purchased crude oil and gas. Scope 3 includes the emissions from cars using the fuel purchased from companies of Shell and the court took as a basis that 85% of Shell group emissions were in this category. Emissions.

The court decided, and that class action was appropriate for the suits brought by NGOs on account of the interests of current and future generations of Dutch residents and (with respect to the Waddenvereniging) of the inhabitants of the Wadden Sea area, a part of which is located in the Netherlands. Class action was not appropriate for the suits which looked to that the interests of current and future generations of the world’s population. The interest served with the class action must align with the objects stated in the articles of association and must also actually be promoted. Milieudefensie, Greenpeace Nederland,Fossielvrij NL, Waddenvereniging, Both Ends and Jongeren Milieu Actief met this requirement, but not that of ActionAid as it did not promote the interests of Dutch residents sufficiently for its collective claim to be allowable

The Court held that Dutch law applied, under art. 7 of the Rome II Regulation. Every contribution towards a reduction of CO2 emissions may be of importance, and these distinctive aspects of responsibility for environmental damage and imminent environmental damage must be included in the answering the question as to what in this case should be understood as ‘event giving rise to the damage’ in the sense of Article 7 Rome II. Although Article 7 Rome II refers to an ‘event giving rise to the damage’, i.e. singular, it left room for situations in which multiple events giving rise to the damage in multiple countries can be identified, as is characteristic of environmental damage and imminent environmental damage. When applying Article 7 Rome II, RDS’ adoption of the corporate policy of the Shell group therefore constituted an independent cause of the damage, which may contribute to environmental damage and imminent environmental damage with respect to Dutch residents and the inhabitants of the Wadden region.

RDS’ reduction obligation derived from the unwritten standard of care laid down in Book 6 Section 162 Dutch Civil Code, which means that acting in conflict with what is generally accepted according to unwritten law is unlawful. This standard of care entailed that when determining the Shell group’s corporate policy, RDS had to observe the due care exercised in society. The interpretation of the unwritten standard of care called for an assessment of all circumstances of the case in question, and the court considered fourteen factors.

 (1.) the policy setting position of RDS in the Shell group, (2.) the Shell group’s CO2 emissions, (3.) the consequences of the CO2 emissions for the Netherlands and the Wadden region, (4.) the right to life and the right to respect for private and family life of Dutch residents and the inhabitants of the Wadden region, (5.) the UN Guiding Principles, (6.) RDS’ check and influence of the CO2 emissions of the Shell group and its business relations, (7.) what is needed to prevent dangerous climate change, (8.) possible reduction pathways, (9.) the twin challenge of curbing dangerous climate change and meeting the growing global population energy demand, (10.) the ETS system and other ‘cap and trade’ emission systems that apply elsewhere in the world, permits and current obligations of the Shell group, (11.) the effectiveness of the reduction obligation, (12.) the responsibility of states and society, (13.) the onerousness for RDS and the Shell group to meet the reduction obligation, and (14.) the proportionality of RDS’ reduction obligation. The court went on to weigh the policy, policy intentions and ambitions of RDS for the Shell group against RDS’ reduction obligation

RDS’ responsibility was defined by the influence and control it can exercise over the Scope 1 through to 3 emissions of the Shell group and what is needed to prevent dangerous climate change. The most disputed aspect was in relation to Scope 3 emissions. RDS did not contest that it could exert control and influence through its energy package, and the composition thereof, produced and sold by the Shell group. This was not altered by the circumstance, emphasized by RDS, that the Shell group has contractual obligations as well as obligations ensuing from long-term concessions, which may limit its freedom of choice as regards the Shell group’s energy package. Rather surprisingly, the court noted that “it is internationally endorsed that companies bear responsibilities for Scope 3 emissions. The court has included this widely endorsed starting point in its interpretation of the unwritten standard of care.”

RDS was subject to an obligation of results as regards the Scope 1 emissions of the Shell group as well as a significant best-efforts obligation as regards the business relations of the Shell group, including the end-users, whereby RDS may be expected to take the necessary steps to remove or prevent the serious risks ensuing from the CO2 emissions generated by them, and to use its influence to limit any lasting consequences as much as possible.

The Court went on to note: “Moreover, RDS has insufficiently contested the standpoint of Milieudefensie et al. that RDS’ planned investments in new explorations are not compatible with the reduction target to be met. The Shell group’s policy, as determined by RDS, mainly shows that the Shell group monitors developments in society and lets states and other parties play a pioneering role. In doing so, RDS disregards its individual responsibility, which requires RDS to actively effectuate its reduction obligation through the Shell group’s corporate policy.”

The reduction made was provisionally enforceable but the claim 1(b), pertaining to the future actions of RDS, was rejected as it was not an established fact the RDS would act unlawfully in the future, and there were no indications that RDS would not comply with the order and not meet its obligations.

The judgment is very much an ‘Urgenda moment’ for RDS Shell, although the judgment will almost certainly end up being appealed and then proceeding to the Dutch Supreme Court. However, the prospects for any similar claim in tort against English companies in the oil and gas industry look far less promising. The decision of the New Zealand court in Smith v Fontera Co-Operative Group Ltd and Ors  [2020] NZHC 419 https://iistl.blog/2020/03/11/a-new-climate-change-tort-in-new-zealand/ looks a far more likely bet on the issue of liability in negligence and in public nuisance.