Germany, Australia and the US likely hotbeds for future climate-related litigation, says lawyer

A leading lawyer has named Germany, the US and Australia as the three jurisdictions where companies are most likely to face future climate-related litigation. Neil Beresford, a Clyde & Co partner in London, also warned that while such litigation around the world is mostly focused on energy companies and their use of petroleum, other sectors will likely be in the future firing line. Mr Beresford was speaking at Clyde & Co’s Climate Change Liability Risk Conference in London. He said the US is “very much the poster boy” for climate litigation currently, with more than 1,000 cases. But he noted that it is a worldwide phenomenon, with 275 claims against governments and 25 against corporations outside the US. The lawyer said there is a “bewildering variety of people currently being sued and likely to get sued” in climate litigation cases. There are claims against governments brought by public interest groups to try and change the world, based on the proposition that governments are not doing enough. But there are also claims against companies – predominantly in the energy sector – brought by cities and other interested parties. Mr Beresford said these climate cases are “probably the biggest causal claims ever, anywhere in the world” and seek future losses and costs that add up to “enormous amounts of money”. He warned that looking forward, there are likely to be certain jurisdictions where these types of claims will be more prevalent, with companies and their insurers more at risk. “My personal top three would be the US, Germany and Australia as the most high-risk jurisdictions for this type of litigation. Take Germany for example. You have a judiciary that is very academic and a lot of heavy industries. In Australia you have a lot of mining interests, a very developed plaintiff bar and very developed litigation funding,” said Mr Beresford. In contrast, he believes there will be other legal jurisdictions, such as the UK, where companies are less at risk from litigation. Mr Beresford said it is therefore very important for corporates and underwriters operating in potentially affected sectors to “start getting on top of jurisdictional risk”. And he made clear that although the majority of climate-related litigation is focused on oil and energy firms, other sectors are – and will increasingly be – at risk. “Not all sectors are born equal. Some sectors are going to be much higher risk than others. We are [currently] looking predominantly at claims against the energy sector... But is it not difficult to think of other sectors that are in the future firing line,” said Mr Beresford. The current spate of climate litigation amounts to products liability claims, similar to those brought against tobacco and pharma companies, on the basis that petroleum is a defective product. “The claims are really based on the notion that the oil industry marketed a defective product when it knew it was destroying the planet,” explained Mr Beresford. The allegations against the oil industry are all remarkably similar. They allege that it extracted a substantial percentage of raw fossil fuel and caused a quantifiable percentage of global CO2 emissions. The argument goes that the oil industry wrongfully promoted fossil fuel products and concealed hazards associated with the use of those products. Furthermore, oil companies are accused of championing anti-regulation and anti-science campaigns, and failing to pursue less hazardous alternatives available. Last June, a US judge threw out a big test case brought by two Californian cities – San Francisco and Oakland – against energy companies over the costs of dealing with climate change. In San Francisco’s Federal District Court, the judge and defendants – which included BP, Chevron, ConocoPhillips, Exxon Mobil and Royal Dutch Shell – acknowledged the science of global warming. But the judge ruled that the courts were not the proper place to deal with such global issues. “The problem deserves a solution on a more vast scale than can be supplied by a district judge or jury in a public nuisance case,” Judge William Alsup wrote. He said the issue would be better handled by the legislative and executive branches of government. The case is being appealed. Meanwhile, there are 14 other similar cases in the US all on slightly different procedural tracts, explained Mr Beresford. While the companies in the San Francisco case, and other energy firms, may have breathed a sigh of relief at Judge Alsup’s verdict, Mr Beresford suggested the battle has only just begun. “What we expect to see over the next few years in these cases is a very intense battle between the plaintiffs and the oil industry on where these cases should be heard, and whether they should be heard in a state court or federal courts. That will go on for some time. It will be several years, I think, before this litigation really gets going. But if in that time the world is less addicted to petroleum, will a judge looking at this in five or ten years be similarly restrained by saying ‘I can’t take a decisions on this’? Or will the duty of care have moved to where the judge looks back and says: ‘Well why were we using petroleum?’ I think it is one to watch because duty of care is not static and these claims could be looked at in hindsight very differently from the way they are being viewed now,” he said. Fellow speaker Jacinta Studdert, a Clyde & Co partner in Sydney, told delegates that there is a rapidly changing legal landscape to meet the targets set out in the Paris climate agreement. Businesses need to keep up to date with all the changes and monitor what is needed in different jurisdictions, she said. This can cause problems for multinationals that operate under different rules around the world. Ms Studdert said one response open to such companies is ensuring they are operating to the highest standards across the world. “Not all legislation has a transition to compliance. Sometimes it is a pretty sudden switch. Keeping up to date with the legislation is obviously important. One of the challenges when operating in numerous jurisdictions globally is: how do you manage your business across different jurisdictions and legal requirements? Do you try and focus on compliance per jurisdiction and ensure you behave accordingly? Or do you try and impose a practice and procedure that requires businesses across jurisdictions to behave consistently and sometimes to a higher standard?” she said. “That is something we suggest our clients consider when they make decisions about how they are going to operate globally. It is certainly the case that the public, shareholders and investors are looking at businesses and how they perform globally, and not necessarily just locally,” Ms Studdert added.

Germany, Australia and the US likely hotbeds for future climate-related litigation, says lawyer

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