Shell's Legal Troubles: Breaking Laws For Profit?

In 2021, Royal Dutch Shell was taken to court by Friends of the Earth Netherlands and several other NGOs and citizens, who accused the oil giant of violating its duty of care under Dutch law and human rights obligations. The Hague District Court ruled that Shell must reduce its carbon emissions by 45% by 2030, relative to 2019 levels. However, in 2024, Shell won an appeal against this ruling, with the court deciding that there was no societal standard of care to enforce specific emissions reductions. This case has been highly significant in the field of environmental law and has set a precedent for future environmental lawsuits against large corporations.

Shell's emissions reduction obligations

The court's ruling applied to both the emissions from Shell's operations and the emissions from the products it sells, including end-use emissions. This meant that Shell was required to reduce its Scope 1, 2, and 3 emissions, which cover direct emissions from the company's owned or controlled sources, indirect emissions from the generation of electricity, and all other indirect emissions that occur in a company's value chain, respectively.

Shell appealed the ruling, and in November 2024, the appeals court in The Hague dismissed the previous ruling. The appeals court acknowledged Shell's responsibility to reduce greenhouse gas emissions under human rights but did not impose a specific reduction target. The court found no "societal standard of care" to enforce a particular emissions reduction percentage on Shell.

Despite the legal challenges, Shell has made commitments to reduce its emissions and transition to lower-carbon energy sources. In 2021, Shell replaced its previous climate targets and set new goals for reducing the carbon intensity of its operations and energy products. By 2030, Shell aims to reduce carbon intensity by 20% and by 2035, it aims for a 45% reduction. Shell has also maintained its target to halve emissions from its own operations (Scope 1 and 2 emissions) by 2030 and has already achieved more than 60% of that goal. Additionally, Shell introduced an "ambition" to cut overall emissions from oil products by 15-20% by 2030 compared to 2021 levels.

However, critics argue that Shell's targets and pledges fall short of what is needed to address climate change effectively. Shell's plans include growing its fossil gas business, and the company has been accused of "greenwashing" its activities by emphasizing its climate pledges while continuing to invest primarily in fossil fuel exploration and production. There are concerns that Shell is not aligning its investments and business operating plans with the goals of the Paris Agreement, which aims to limit global temperature rise to 1.5°C above pre-industrial levels.

Shell's human rights and international law obligations

The court acknowledged that while individuals and civil society organisations cannot directly invoke international and European human rights obligations against companies, these entities still have a responsibility to respect human rights and apply the relevant standards. The court decided that Shell has an obligation to comply with international human rights obligations, the UN Guiding Principles on Business and Human Rights (UNGP), and the goals of the 2015 Paris Agreement, in accordance with the unwritten standard of care under Dutch tort law.

The unwritten standard of care, as laid out in Book 6 Section 162 of the Dutch Civil Code, implies a duty of care for individuals and companies to act in accordance with generally accepted norms of social conduct. Additionally, the right to life and the right to family life, protected under Articles 2 and 8 of the European Convention on Human Rights (ECHR), were also cited in the ruling. The court also referenced the UNGP, which outlines the responsibilities of states and businesses in relation to human rights, and the Urgenda judgment, a climate litigation case against the Dutch government, which established that Articles 2 and 8 of the ECHR offer protection against the impact of dangerous climate change caused by CO2 emissions.

The decision by the Dutch district court has significant implications for future climate litigation cases against large oil companies. It sets a precedent for holding multinational companies responsible for reducing their CO2 emissions in accordance with international human rights obligations and environmental law. The application of international human rights standards and soft law instruments in interpreting the unwritten standard of care provides an approach to hold companies accountable under international law.

Shell's business operations and sold energy-carrying products

Shell's business operations and energy-carrying products have been at the centre of a landmark ruling in environmental law related to climate change. In May 2021, the district court of The Hague ordered Shell to reduce its global carbon emissions by 45% by 2030 compared to 2019 levels. This ruling was significant as it pertained not only to the emissions from Shell's operations but also those from the products it sells.

As one of the largest oil and gas companies in the world, Shell's business operations have a significant impact on global emissions. The court's ruling acknowledged this, stating that Shell's emissions were greater than those of most countries. In addition to its business operations, Shell also sells energy-carrying products such as electricity and gas, which contribute to global emissions.

The court's ruling was based on the argument that Shell had a duty of care to address climate change and reduce its emissions. This duty of care is outlined in Book 6 Section 162 of the Burgerlijk Wetboek (Dutch Civil Code) as well as articles 2 and 8 of the European Convention on Human Rights. The court found that Shell's current sustainability policies were not sufficient to meet this duty of care and ordered the company to take more concrete action to reduce its emissions.

The impact of the ruling on Shell's business operations and energy-carrying products is expected to be significant. Shell has been ordered to reduce its emissions by 45% by 2030, which will likely require the company to make substantial changes to its business model and operations. Shell has stated that it is committed to transitioning to net-zero emissions and that it will continue to provide the energy that people around the world need.

Shell's business operations in the energy sector include providing electricity and gas to commercial and industrial customers. Shell Energy, for example, offers business energy solutions and innovation across a portfolio of gas, electricity, environmental products, and energy productivity tools. Shell also has operations in India, where it is working to provide reliable and affordable access to energy for its customers.

Shell's legal name and headquarters

The legal name of the company is Shell plc, a change from its previous name, Royal Dutch Shell plc. The name change was registered in the Companies House on 21 January 2022.

Shell plc is a British multinational oil and gas company with its headquarters in London, England. The company's registered office is in London, and it has a primary listing on the London Stock Exchange (LSE) and secondary listings on Euronext Amsterdam and the New York Stock Exchange.

The company's name and headquarters have undergone several changes over the years. From 2005 to 2022, the company's headquarters were in The Hague, Netherlands, with a registered office in London. During this period, the company operated as a dual-listed company, with the British and Dutch companies maintaining their legal existence and separate listings but functioning as a single-unit partnership.

In January 2022, the company merged its dual share structure, moved its headquarters to London, and changed its legal name to Shell plc. This change came after the company lost a landmark climate change litigation case in the Hague District Court in 2021, which ordered Shell to reduce its global carbon emissions.

The Royal Dutch Shell Group was initially formed in April 1907 through the amalgamation of two rival companies: the Royal Dutch Petroleum Company of the Netherlands and The "Shell" Transport and Trading Company of the United Kingdom. The name "Shell" is linked to The "Shell" Transport and Trading Company, which was founded in 1897 by Marcus Samuel, 1st Viscount Bearsted, and his brother Samuel Samuel. Their father had owned an antique company that expanded in 1833 to import and sell seashells, after which the company "Shell" took its name.

Shell's history and formation

The Royal Dutch Shell Group was formed in 1907 through the merger of two separate companies: Royal Dutch Petroleum and the Shell Transport and Trading Company. The groundwork for these entities began with the creation of the Royal Dutch Company for the Exploitation of Oil Wells in the Dutch East Indies in 1890.

The Shell Transport and Trading Company was founded in 1897 by a London merchant named Marcus Samuel, who started his career in the 1830s selling boxes made from shells brought from the East. The business gradually expanded the number of commodities in which it traded. After Marcus Samuel Sr. died in 1870, his son Marcus continued to be involved in the Far Eastern trade. In 1878, he and his brother Samuel established a partnership known as Marcus Samuel & Co. in London, and Samuel Samuel & Co. in Japan, which became a leading shipping and trading enterprise in the Far East. During the 1880s, the Samuels, through intermediary Fred Lane, began selling Russian oil from the Rothschilds to the Far East, breaking the monopoly previously held by Standard Oil. In 1892, the Suez Canal Company was persuaded to allow oil tankers to pass through the canal, which lowered the cost of Russian oil in the Far East and allowed the Samuel partnership to rapidly increase its market share. Later in the 1890s, fears that Russian supplies might be reduced led Samuel to search for a secure source of oil nearer his Far Eastern markets, and in 1898 a major oil field was discovered in Dutch Borneo, a year after the launch of "Shell" Transport and Trading Ltd.

Royal Dutch, meanwhile, was established in The Hague in 1890 after receiving a concession to drill for oil in Sumatra, in the Dutch East Indies. It had the support of King William III, hence the name Royal Dutch. The promoters of this venture had found oil in 1885 but needed funds to exploit their discovery. In the early years, the firm was directed by J.B. August Kessler, under whom, in 1892, it exported its first oil. In 1896, a 30-year-old bookkeeper, Henri Deterding, joined the company and in 1901 he became its chief executive. Deterding was one of the great entrepreneurial figures of the 20th century. He combined remarkable strategic vision with acute financial awareness, born of his early training as a bookkeeper. His ambition was to build a company to rival the world's largest oil enterprise, John D. Rockefeller's Standard Oil Company of the United States. Deterding preferred to achieve this ambition through alliances and agreements rather than competition. In 1903, as part of this strategy, he formed a marketing company, the Asiatic Petroleum Company, owned jointly by Royal Dutch, Shell, and the Paris branch of the Rothschild family, the latter of which had substantial Russian production interests.

The merger of Royal Dutch and "Shell" Transport in 1907 created a powerful entity in the oil industry. By 1935, the group employed around 180,000 people worldwide. The combined strengths of both companies propelled them into significant markets, and their commitment to innovation helped shape their legacy as an industrial empire in chemical manufacturing and fuel production. The newly formed entity operated under a shared vision that facilitated major developments in energy production while navigating challenges associated with expanding operations across various markets.

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