Policy and Regulation

Progress of New Zealand climate case sets far-reaching precedent

Logo on a Fonterra milk tanker in New Zealand. The dairy producer is one of seven companies being sued by Māori elder Mike Smith (Photo: Brendon O’Hagan/Bloomberg)

A recent Supreme Court decision to allow a Māori elder’s case against seven private companies to progress could have major implications for climate cases around the world

The Supreme Court of New Zealand has set new legal precedent in all common law jurisdictions by allowing a Māori elder to sue seven private companies for their role in climate change, citing damage to his people’s land, water and cultural values.

Plaintiff Mike Smith brought the case in 2019 against dairy producers Fonterra and Dairy Holdings, fuel infrastructure firm Channel Infrastructure, BT Mining, NZ Steel, Z Energy, Genesis Energy, and NZ Refining Company. Together, the defendants are responsible for one-third of New Zealand’s greenhouse gas emissions, says Smith.

According to experts, the judgment, which allows the case to proceed to a full trial in the High Court, paves the way for the development of climate-related tort-based litigation in New Zealand and in other common law jurisdictions.

“I think this case has implications for every jurisdiction in the common law world – this is the highest court saying that these are issues that need to be explored at a full hearing,” says Andrew Horne, a partner at law firm MinterEllisonRuddWatts who is representing Channel Infrastructure in the case.

“We don’t know whether appellate courts in other jurisdictions will follow that lead, but it will encourage, I think, activists everywhere in the common law world to bring these sorts of cases, and rely upon this case as precedent,” he adds.

Craig Weise, former head of New Zealand’s national green bank Green Investment Finance, says: “If this decision were to result in a win [for the plaintiff], it would radically shift the paradigm around the real economic cost of non-climate-friendly activity. These cases change the game around what gets rewarded. Companies would see their cost of capital change quite dramatically, and that’s big – in fact, it doesn’t get much bigger than that.”

Seeking a declaration

The Supreme Court did not consider the merits of Smith’s case, merely whether his claims had met the threshold required to proceed to trial. His team is not seeking damages, but a declaration that the defendants are in breach of their duty to not operate their business in a way that contributes to climate change, as well as an injunction requiring them to reduce their emissions over time.

Sam Bookman, rapporteur for New Zealand at the Sabin Center for Climate Change, a non-profit, says Smith will face a considerable challenge at trial, partly because New Zealand represents a very small proportion, just 0.09 per cent, of total global greenhouse gas emissions, making causation incredibly difficult to establish. And even if these seven companies stopped polluting today, the damage to coastal New Zealand would likely continue, given emission trends elsewhere.

“I think it’s different when you’re in a jurisdiction with very large emitters – Shell, for example, is a globally significant historical and ongoing emitter – and so showing a link between the actions of individual companies on individuals becomes a much easier exercise,” says Bookman. “Once you start looking at countries like the US where you have a lot of oil majors headquartered, this decision opens the door to other suits.”

Nonetheless, he hopes the case “provides a wake-up call to these companies that there is a degree of risk here” and the ultimate outcome of the case, which could run for years, does not change the precedent of the Supreme Court’s decision for other future plaintiffs. The primary aim of such claims is often not necessarily to win, but to draw attention to activities that contribute to climate change and build on existing precedent, adds Bookman.

Litigators around the world learn from each other about how to frame their claims, says Zoe Bush, senior solicitor at Australia’s Environmental Defenders’ Office, which is pursuing a misleading or deceptive conduct claim against domestic energy company Santos. “This is how common law works – this one might not be successful, but it will inform future cases, and they all build on each other,” Bush adds.

Rising tide of climate litigation

According to the Sabin Center’s climate law database, climate-related litigation has more than doubled globally in the past five years. While historically it has typically been governments in the dock, that trend is now shifting. Around 40 per cent of new cases filed in 2022 name either private companies or trade associations among the defendants.

As in the case of Smith v Fonterra, causation has long been a major hurdle, but attribution science is constantly developing, and judges have also become more open towards it in recent years, most notably in cases brought against the US government. Further, the public nuisance concept used by Smith’s legal team is broadly similar across the common law world, and there are more than 30 such suits underway against private companies in the US alone.

Bush believes the New Zealand case will be helpful to plaintiffs in those cases, particularly for the state of California, which is suing five of the world’s biggest energy companies – BP, Chevron, ConocoPhillips, ExxonMobil and Shell – claiming they deceived the public and downplayed the risks of fossil fuels. “I would expect that case to run into fewer causation issues than Fonterra,” she says.

One element of the New Zealand judgment that will be particularly helpful for others is the dismissal of the defendants’ claim that the country’s emissions trading scheme dealt with carbon emissions sufficiently and so the case should not proceed. The judgement established, however, that existing statute does not, as a rule, exclude climate-related litigation from proceeding. US-based litigators will benefit from this, says Bush, because the federal Clean Air Act is often cited by defendants in the same vein.

Another notably similar case to that against Fonterra and the other companies is the suit brought by Peruvian farmer Saúl Luciano Lliuya against German utility company RWE over its contribution to climate change, specifically the melting of mountain glaciers near his hometown of Huaraz, in the Andes. The suit has progressed to a pre-trial oral hearing in Hamm, Germany, to be held some time in 2024.

“I think there’s no question [for emissions-heavy companies everywhere] that there’s legal risk involved here,” says Bookman at the Sabin Center. “There’s at least one jurisdiction now where [companies] are going to face the possibility of trial. And a trial alone is something that they should really be trying to avoid.”

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