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Speaker
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Transcript
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Jessica Evans, Partner, Burges Salmon
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[Music]
Hello everyone, my name is Jess Evans and I am a partner in the Energy Disputes team here at Burges Salmon and I'm also your host for this very special episode of Risk Rewired: The Energy Disputes podcast. Our topic for today is emerging legal trends in the energy sector. Now you're probably saying to yourself, well I know that Risk Rewired always delivers invaluable insights for managing risks and resolving disputes in energy projects, but what makes this episode of the podcast so special? Well, I have a couple of reasons for you, firstly our topic today it's so expansive that in an attempt to do it some justice we have decided to split the episode into two parts. This is part one, where building on some of the discussions we had in episode five of the podcast we are going to take a further look at climate change litigation, particularly with reference to other sovereign courts. You can then join us in a fortnight for part two of this episode where we are exploring the emergence of the duty of good faith in some energy contracts.
Secondly, and far more importantly, I am delighted to confirm that we have two very special guests on the podcast today, both of whom really are renowned legal practitioners and experts in the field of commercial and energy disputes. Firstly, we have Serena Cheng, King's Council at top tier set Atkin Chambers. Serena's practice focuses on technically and legally complex energy, engineering and infrastructure disputes, both in the UK and also internationally. In 2023, Serena was nominated for Silk of the Year at the Legal Business Awards and in the same year she was also named as one of Business Today's 'Top 10 Most Influential Arbitration Lawyers'. She is highly ranked in all of the leading legal directories, among the client testimonials in those directories is the following "Superb advocacy, excellent advice and trusted by clients. She's a pleasure to work with". Having worked with Serena a number of times over the years I can absolutely attest to the accuracy of that statement. We are also delighted to be joined today by the Honourable James Allsop AC. After initially acting as Counsel, James was appointed as a judge of the Federal Court of Australia in 2001, he was then appointed as President of the New South Wales Court of Appeal in 2008, before then becoming Chief Justice of the Federal Court of Australia in 2013. Last year, James was awarded Companion of the Order of Australia (AC) for eminent service to the judiciary and to the law. After a long and highly stellar career at the bench, James stepped down from the judiciary last year to join Atkin Chambers as a door tenant and Sydney Arbitration Chambers as a member. [Music]
So Serena, James, a very big welcome to you both. So, we're looking at emerging legal trends in the energy sector and when we are future gazing, looking at sort of issues that we might start to see in the sector, the development of climate change litigation it's a really obvious area of focus. In fact, in episode five of this podcast, we touched on some of the types of claims, some of the types of cases, that we're starting to see in the UK, and it's probably fair to say that the sovereign courts they have been grappling with the extent to which legal liability for emissions, for carbon and related greenhouse gas emissions, how should that play out? So James, if I perhaps turn to you in the first instance, are you able to tell us a little bit about the approach that the Australian courts have been taking when we're looking at these sort of issues?
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The Hon James Allsop AC, Atkin Chambers
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Yes thanks Jessica, and thank you for the invitation to come on this and it's great pleasure to be here. There have been a number of cases in Australia over the years, many of them have taken the form of judicial review of decisions of ministers or states, territories or the Commonwealth, or making public law decisions under statute under the usual kind of considerations of manifest unreasonableness etc. Recently there was in the federal court a tort case brought in Sharma and the Minister for the Environment. And it's probably James, fair to say James, interrupting you immediately, that you're better place to talk to this case than most, given your involvement. Yeah, well I was in on the appeal court and there was, it was, a case whereby, where in the Commonwealth, that is the national government and the relevant state, that was New South Wales. Both had a part to play in making decisions about the giving of permission for the extension of a very, of a large coal mine to increase its production of coal, and the plaintiffs in a class action, who were children with their tutor, sought to impose a common law duty of care on the politician on the minister, in the exercise of her power to authorise under the Environmental Planning Act the extension of the common. It was a joint decision between the state and the Commonwealth, the state had responsibility under its legislation to actually look at emissions under the Paris Agreement, which provided for Australian domestic responsibility for what I called what stage one and scope one and two emissions, which is effectively the mining of the coal, but scope three emissions under the Paris Agreement and under Australian Policy, State and Commonwealth policy were for the buyers, because it was all export coal. So it was for the South Koreans, the Chinese and the Japanese basically, to worry about in their carbon budgets. And notwithstanding that the first instance judge found that there was a duty of care owed by the Commonwealth, by the minister to act not negligently in the damage that might be caused to the children in the future, by the exacerbation of greenhouse gases and what was said to be the climatic change that would occur by reference to that. The full court of the federal court unanimously overturned that, for a different group of reasons, and for relevant purposes, I think for today, my reasons were fundamentally there were all sorts of reasons why I said the duty couldn't arise but I said this was not a matter for the courts to deal with in private litigation, this was the absolute core public policy of the Parliament and the executive. Now as well as the incoherence and almost meaninglessness of framing a duty of care that a politician makes a decision which goes against, or is contradicted by, the policy of that government formed in cabinet pursuant to and in accordance with the Paris Agreement. The gist of the case was the danger was far past the Paris Agreement and you were negligent if you didn't realise that Paris was outdated and I just said this is not for us. But there have been all sorts of cases around the world where the courts have grappled with what are the foundations of a court as a guardian of the law and as a dispute resolution state sovereign dispute resolution for. What is its role? The Dutch courts have been very active but in fairness to them they don't have a choice because the Dutch Constitution makes the European Human Rights Convention and the European Court of Human Rights necessarily followed in the Netherlands, and the European Court of Human Rights and the European Convention deals with relevant human rights that have been found authoritatively to be potentially infringed by climate change damage and weather and rising sea levels and the like. So the Dutch courts have embarked in quite a remarkable group of cases, ordering the government to change its policy as to emissions reduction and most latterly, and it's still ongoing up the appeal chain, a Court ordering Royal Dutch Shell to reduce its investment in hydrocarbons. That is, as you say, a remarkable that the implications of that decision for industry, for investors, for developers you can see it could be quite considerable. The other case that's winding its way through an appeal court, an appeal chain, is the Fonterra case in New Zealand, where the largest group of emitters in New Zealand from industrial companies to agricultural companies were sued in relation to their responsibility for emissions. The Court of Appeal reacted to this as much as I had reacted, right, I later reacted in Sharma because I cited them and they said this is just not for us, this is high public policy. The Supreme Court overturned that so it goes back to trial. Yeah. That the laws of standing, of public nuisance, of causation are all up for re-examination in the existentially different framework of this the climate science. So it reveals how the courts are going to have to grapple with, how they deal with, this problem and navigate between the rocks and the whirlpool as it were. That they are criticized for exceeding and leaving the judicial task and becoming climate heroes by doing things judges shouldn't do but at the same time not develop the principle to accommodate the forces of change in society that courts have done over the centuries as they've developed new causes of action with industrialisation and the expansion of nuisance and the like Rollins and Fletcher So it's going to be a very interesting few years in which the courts have to reconcile what they do as courts with the ever more strident call for governmental action and viewing them as a tool of government.
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Jessica
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Serena, if I can perhaps bring you in at this stage, what is the general approach that we're seeing in the English courts when faced with claims coming out of climate change?
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Serena Cheng KC, Atkin Chambers
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It's a much more cautious approach. I think that the Supreme Court in Finch, in its application of the European Council EIA directives probably have it right in that. I quite agree with you James, that it's not the place of the courts to direct government policy at all and that it is not the place of the courts to tell a private company answerable to its shareholders how it should invest its money, but the way that's been approached by the Supreme Court in England, and I'm thinking here of R on the application of Finch on behalf of the Weald Action Group, is to simply look at the European directives, which tells us that environmental impact assessments should consider the indirect effect of a project on the climate. And the way that the courts have looked at that is to say scope three emissions to pick up the issue in Sharma fall as a matter of construction of the regulation, or construction of the directive, clearly within the scope of the environmental impact assessment but then to say it is a matter for the government to look at that, and it seems to me that that is a rational way of looking at things because it puts climate change, which is a population wide global issue, back in the hands of the government which is able to, and obliged to look at, population wide and indeed global wide issues within the wider domestic policy. I don't think with you that it's the place of the courts to be the climate crusaders, but in order for climate change issues to work there therefore has to be some kind of worldwide regulation, European regulation that gives the government clear steps that it has to go through, clear issues that it's got to consider and puts clear tram lines down as to what it should be allowing in terms of planning going ahead.
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James
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But I think where it's really going to be interesting for the courts is looking forward there are a number of areas of principle that might be re-examined so that conditional injunctions can be given, that you won't be allowed to make your steel if you make it in a dirty way, if you won't invest in ameliorating or adaptive technology, rather you choose to increase the dividends to your shareholders, at the cost of using someone else's property, the other person's property is the rest of the world as it were, you know quoting notions of damage with user you, as in IP, you know user damages, where you don't cause any damage but you just someone's property, you have to pay in effect a license fee.
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Serena
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What I'm interested in James, would you be comfortable with the court being the person who drafted the terms of the injunction to start with, with the court being the one that says you know Royal Dutch Shell will have an injunction that prevents you from doing X if you pay your shareholders or unless you do Y as well?
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James
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What's fascinating I mean the Urgenda case which was the case that went to the Hoge Raad which is the Dutch Supreme Court, that was kind of straightforward in its architecture of rights and obligations because they said look we understand you say it's political, of course it's political, we're not going to tell you how to do it, but it's in our Constitution that we have to take note of the European Court of Human Rights and the European Convention on Human Rights. Now looking at that you are, you are contributing to the to a problem by backsliding on your targets for, that is the government, but the targets for greenhouse gas reductions and you've got to reel them, you've got to tighten up on that. The one that's interesting is, to an Australian, is Milieudefensie, which is the the action by the environment defence Milieudefensie against Royal Dutch Shell, and the technique of the Court in the applying the code not to unreasonably damage people, was very similar to how in Australia we impose a novel duty of care on someone, in that there's no major premise, you look at all the surrounding factors and you gather them together in a big basket and you say from an examination of those whether it's reliance, whether it's the type of damage that's caused, whether it's your knowledge and for given that collocation of factors we are going to impose on you a duty of care. And from those factors they applied, and one of them was, you say in your you know public face that you're concerned with climate change, well we're going to make you concerned with climate change.
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Serena
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Yeah
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James
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And extraordinarily in effect issued an injunction to not, to Royal Dutch Shell, not to invest in new mining lessons.
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Serena
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But that's also within the ordinary four walls of a duty of care and it's applying the law as it's always applied to duty of care to the fact as they're changing under it, and again that seems to me to be intellectually honest, in the same way as, I suspect with the tobacco industry and with OxyContin and Mundipharma in the States, if you use the existing system of deciding when a duty of care is owed and you allow the climate change situation to catch up with that, then what you're doing is simply applying in a standard way the law as it always has been, but I'm interested with you that the idea that there could be an injunction granted as part of the relief that's claimed, rather than financial recompense for what's already happened, but I think you're saying an injunction to stop it happening in the future really interesting.
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James
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If you can impose the duty to make your steal in a non-negligent way, you can probably injunct.
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Jessica
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It sounds to be both of you consider that the courts do have a role to play in terms of tackling climate change, but it has to be driven by policy and it has to be driven by the decisions of government.
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Serena
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But I think that's just the nature of how law should work.
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James
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And it really isn't an answer to say well the politicians in the international position is so hopeless therefore we've got to enlist the judges into saving, it brings the judiciary into a role, or potentially brings the judiciary into a role, that of high policy making. I mean there can't be any higher policy making if the science is right.
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Jess
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[Music]
Okay that is probably a good time as any to end part one of this bumper episode of Risk Rewired: The Energy Disputes podcast. A big thank you to Serena Cheng KC, and also the Honourable James Allsop AC for their insights today. Do be sure to catch part two of this episode where James and Serena will look at some further emerging legal trends in the energy sector, but for now thank you very much for listening.
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