Climate litigation review 2023: disputes heat up (no cool change ahead)

Rossiter v ANZ – Discovery application over bank’s internal risk management documents – ongoing

On 9 November 2023 proceedings were filed in the Federal Court by ANZ shareholder, Catherine Rossiter. Ms Rossiter seeks discovery over documents under section 247A of the Corporations Act relating to ANZ’s internal risk management framework for the purpose of determining whether the bank’s governance systems adequately deal with climate change and biodiversity risks.

Munkara v Santos – Assessment of Indigenous cultural heritage in environmental plan for fossil fuel project – dismissed

On 30 October 2023, Simon Munkara, a member of the Jikilaruwu clan and a Tiwi Island Traditional Owner, applied for an urgent injunction to prevent Santos from beginning works on its Barossa Gas Project export pipeline. Mr Munkara argued that Santos failed to properly assess submerged cultural heritage along the underwater route of the export pipeline in its environmental plan. The injunction was granted on 2 November 2023 but was discharged on 15 January 2024, with Justice Charlesworth dismissing Mr Munkara’s claim.

Australian Parents for Climate Action (AP4CA) v EnergyAustralia – Misleading or deceptive conduct – ongoing

In August 2023, AP4CA filed proceedings against EnergyAustralia, alleging that the way in which it marketed its ’carbon neutral’ product line amounted to misleading or deceptive conduct.

ASIC v Active Super – Civil penalty proceedings (greenwashing) – ongoing

In August 2023, ASIC filed civil penalty proceedings in the Federal Court against Active Super alleging that it engaged in misleading conduct and made misrepresentations to the market regarding its ethical and responsible investment principles.

Cooper v NOPESMA – Consultation of Traditional Owners in seismic blasting project – plaintiff successful

In August 2023, Mardudhunera Traditional Custodian Raelene Cooper instituted proceedings in the Federal Court against the National Offshore Petroleum Safety and Environmental Management Authority (NOPESMA), seeking judicial review of its decision to approve seismic blasting in the Scarborough offshore gas project in Western Australia. The Court set aside the seismic blasting plan on the basis that Traditional Owners were not sufficiently consulted. This case follows the Federal Court’s 2022 judgment in Tipakalippa v NOPSEMA, which found that consultation with Tiwi Islands Traditional Owners in relation to an environment plan concerning the Barossa gas field was insufficient (an appeal before the Full Court of the Federal Court upheld this decision).

Jubilee Australia Research Centre Ltd v Export Finance and Insurance Corporation (EFIC) – Disclosure requirements under EPBC Act – ongoing

Jubilee, a human rights organisation, filed a claim in July 2023 against EFIC and the Northern Australia Infrastructure Facility, alleging that the Commonwealth statutory corporations failed to disclose the true effect of their activities, which include fossil fuel subsidies, on the environment in contravention of the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act).

ASIC v Vanguard – Civil penalty proceedings (greenwashing) – ongoing

In July 2023, ASIC instituted civil penalty proceedings against Vanguard Investments, alleging that it made false and misleading statements by offering an “ethically conscious” index fund without conducting appropriate ESG screening and research. The fund was marketed to investors seeking securities with an ethically conscious screen to exclude bond issuers with significant business activities in certain industries, including fossil fuels. A hearing is set for 8 March 2024.

ASIC v Mercer – Civil penalty proceedings (greenwashing) – ongoing, settlement pending

In February 2023, ASIC commenced its first civil penalty proceedings in relation to alleged greenwashing conduct against Mercer Superannuation. ASIC alleges Mercer made misleading statements about the sustainability of one of its superannuation products, including that it excluded investments in companies involved in carbon intensive fuels, alcohol and gambling. The court is considering whether it will approve an AU$11.3m settlement offer made in December 2023.

Gomeroi People v Santos – Impact of fossil fuel project on Traditional Owners – ongoing

In January 2023, the Gomeroi People of New South Wales lodged an appeal in the Federal Court against a decision of the National Native Title Tribunal. Before the Tribunal, the Gomeroi People submitted that Santos’ Narrabri Gas Project would contribute to climate change and have grave consequences for their culture, land and waters. The Tribunal held (among other things) that the Gomeroi People had failed to justify their assertions. That decision is now under appeal before the Full Court of the Federal Court.

Other key cases

O’Donnell v Commonwealth – Misleading or deceptive conduct – settled

In July 2020, Kathleen O’Donnell commenced a class action against the Australian Government alleging that the Government engaged in misleading or deceptive conduct by not disclosing the risks of climate change to sovereign bond investors and was settled in August 2023 The settlement was approved by Justice Murphy of the Federal Court on 11 October 2023. Under the terms of settlement, the Australian Government agreed to publish a statement (on the Department of Treasury’s website) acknowledging that climate change is a systemic risk that may affect the value of government bonds.

Pabai Pabai v Commonwealth – Duty of care to take steps to protect Torres Strait Islanders from climate change harms – ongoing

Gudamalulgal First Nations leaders from the Torres Strait Islands argue that the Commonwealth Government owes Torres Strait Islanders a duty of care to take reasonable steps to protect them from harms caused by climate change arising out of the terms of the Torres Strait Treaty, and that the Commonwealth breached that duty of care. The Federal Court held on-Country hearings in June 2023, and scientific experts gave evidence in November 2023. Further hearings are set to commence on 29 April 2024. The outcome of these proceedings will test whether Australian courts will recognise a climate change duty of care.

Australian Centre for Corporate Responsibility (ACCR) v Santos -- Misleading or deceptive conduct (greenwashing) – ongoing

In this case, the ACCR alleges that Santos engaged in greenwashing in relation to representations as to its net zero plan and its claims that natural gas is ’clean fuel’. This is the first case globally to challenge the veracity of a company’s net zero targets as being ’misleading’ rather than ‘inadequate’.

Australian Conservation Foundation (ACF) v Woodside Energy – Whether fossil fuel project required to gain approval under EPBC Act – ongoing

These proceedings were commenced by the ACF in 2022 and relate to Woodside’s proposed Scarborough gas project. The ACF claims that the emissions from the Scarborough project would cause an adverse impact on the Great Barrier Reef and therefore requires approval under the EPBC Act. A hearing is set to commence on 2 September 2024.

Other activity

ASIC issued a number of infringement notices during the course of 2023 in relation to greenwashing activities, having brought its first enforcement action in 2022. In the nine months to March 2023, ASIC issued 11 infringement notices and reached 23 corrective disclosure outcomes – most in relation to managed funds.

Activist groups, non-government organisations and other bodies also continue to make complaints to ASIC, the Australian Competition and Consumer Commission, other regulators, and to corporations directly in relation to claims of green and bluewashing.

Foreign jurisdictions

Courts in foreign jurisdictions are demonstrating a willingness to make important factual findings regarding the existence and impacts of climate change.

These cases demonstrate that the growing focus on greenwashing in the domestic sphere is playing out in other jurisdictions, relying on novel and diverse causes of action. We may see similar claims commenced by domestic litigants.

Climate change disputes are litigated in a growing number of jurisdictions. The UNEP observed that the number of jurisdictions involved in climate change disputes has grown from 24 in 2017 to 65 in 2022. Landmark case developments include:

Belgium

The Brussels Court of Appeal handed down its decision in the so called ’Climate Case’ on 30 November 2023. The Court ordered that the Belgian Federal Government, along with the governments of the Flemish Region and Brussels Capital Region, expedite their 2030 greenhouse gas emissions reductions to at least 55% from 1990 levels. The Court held that the Belgian authorities had, thus far, taken insufficient measures to protect the human rights of its citizens, with the basis of its decision being, in part, breaches of articles 2 and 8 of the European Convention on Human Rights. The claim was brought in 2014 against various Belgian government authorities commenced by Klimaatzaak (a not-for-profit climate activist organisation).

Europe

In September 2023, a group of six Portuguese claimants, aged between 11 and 24, appeared before the European Court of Human Rights (ECtHR) and argued that the climate change policies of 32 European nations (including all 17 members of the European Union) are inadequate and therefore in breach of human rights obligations. These rights include the right to life, privacy, family life and to be free from discrimination. The claimants seek a binding ruling from the ECtHR forcing the defendant nations to expedite their emissions reductions.

Montana, United States

In August 2023, the 1^st District Court of Montana held that the state constitution, which guarantees residents “the right to a clean and healthful environment”, created an obligation on the State of Montana to consider climate change when determining whether to approve fossil fuel projects. The landmark decision in Held v Montana is likely to set the scene for similar lawsuits in other jurisdictions. The State of Montana filed a notice of appeal on 29 September 2023.

Netherlands

In 2022, climate campaigners belonging to the Fossielvrij NL (Fossil Free Netherlands) movement instituted a greenwashing suit against the Dutch flag carrier, KLM, alleging that its “fly responsibly” advertising campaign gave false impressions over sustainability and climate harm. (KLM has since discontinued the advertising campaign). In June 2023, the District Court of Amsterdam found that non‑government organisations were competent to bring greenwashing proceedings under Dutch class actions law, paving the way for the matter to proceed to a full hearing.

England

As we previously reported, ClientEarth, an environmental law charity, sought to bring a derivative action against each of the directors of Royal Dutch Shell, alleging that their statutory duty to exercise reasonable care, skill and diligence imposed on directors duties to the company in relation to climate change (including to adopt strategies to mitigate climate risk, to make judgments regarding climate risk that are based upon a reasonable consensus of scientific opinion, and to implement reasonable measures to mitigate risk to Shell), which they allegedly failed to accord. In May 2023, the High Court rejected ClientEarth’s claim, finding that it has not made a prima facie case that the directors were in breach of their duties or that the Court should grant relief. ClientEarth’s application to appeal the judgment was refused.

These cases are just a small sample of the growing number of climate change disputes commenced or heard over 2023 in various jurisdictions.

International courts and tribunals

2023 was the most significant year thus far for climate change disputes before international courts and tribunals.

Cases relating to the obligations of States under international law with respect to climate change are currently pending before the International Court of Justice (ICJ), the International Tribunal for the Law of the Sea (ITLOS), and the Inter-American Court of Human Rights (IACHR). Hearings in the ITLOS proceedings were heard last year with a judgment expected early this year. Hearings are set to take place before the ICJ and IACHR over the course of 2024.

These cases are likely to result in a clarification as to the measures States are required to take to comply with their obligations with respect to climate change and may foreshadow future legislative and regulatory change in Australia and abroad. The UNEP found that international and regional courts, quasi-judicial bodies and other adjudicatory bodies represent 19% of all climate disputes. Their decisions and judgments, as well as the submissions made by States in those cases, are important to watch. They may trigger domestic proceedings by litigants seeking to enforce these international obligations in Australia against governments, companies, or both.

Climate change arbitrations and investment disputes are also continuing to ramp up. Clive Palmer’s Singapore-based mining company has instituted an investor-State arbitration against Australia, claiming A$41 billion in damages in connection with Queensland’s refusal to grant the company a mining licence on, among other grounds, the climate change and human rights impacts of the proposed mine. Last year’s decision of the High Court of Australia in Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2023] HCA 11 considered key questions relating to sovereign immunity arising out of European renewable energy investment disputes involving Spain.

International arbitration as a mechanism for resolving climate disputes

The unique features of international arbitration make it a particularly suitable mechanism for the resolution of climate related disputes.

The science, technicality and complexity often characterising climate change disputes, particularly those involving carbon reduction technologies and carbon accounting, make the ability of parties to select arbitrators and experts with specialised knowledge a unique advantage of arbitration over other dispute resolution forums.

The maintenance of confidentiality and restrictions on public access to arbitration proceedings is a key benefit, especially considering the commercially sensitive information usually associated with climate related disputes.

Climate change disputes involve several different jurisdictions and are likely to involve government parties. Arbitration overcomes concerns as to the independence of local courts in these kinds of disputes.

The flexibility of the arbitral process (including accommodating the legal traditions and cultural diversity of the parties, counsel and arbitrators, and the ability to expedite proceedings where necessary) makes arbitration a good choice for resolving climate related disputes that involve cross-border contracts with multinational entities as parties.

Climate change disputes take place in the context of States adjusting their model bilateral investment treaties to include carveouts for environmental harm and climate impacts.

For investors concerned about the legal risk of carbon intensive investments, it has never been more important to keep track of the changing landscape of international investment law.

We will continue to monitor climate change disputes in Australia and abroad. Stay tuned for our upcoming climate ligitation heatmap.