Legal action puts NZ greenhouse polluters on notice

WHAT IS THIS PRESS RELEASE ABOUT?

Lawyers for Greenpeace are today serving legal notice on 20 New Zealand companies over their contribution to climate change.

WHY DOES IT MATTER?

Because climate change could become the next tobacco/asbestos legal frontier. This action means the companies cannot plead ignorance in any future proceedings.

Auckland June 28th 2007: The directors of 20 major greenhouse-polluting New Zealand companies have been warned of possible litigation if they don't take action on climate change.

Australian law firm Maurice Blackburn Cashman, acting on behalf of Greenpeace, "served notice" (1) on the companies that they could be held liable for their contribution to the damage and costs of climate change, especially if they refuse to change current practices.

Serving notice means the companies and their directors won't be able to "plead ignorance" in any future climate-related litigation.

Greenpeace Climate Campaigner Vanessa Atkinson said all 20 companies targeted today were major polluters, and it was time they took action on climate change.

"We're trying to open doors for these companies, by saying positive action on climate change is the best way forward, but, we're also firmly "closing the back door" so they can't evade prosecution in the future," said Ms Atkinson.

Cases around the world show climate change litigation is being increasingly used to deal with major greenhouse offenders.

Recent landmark cases won by plaintiffs against government agencies include the Anvill Hill decision in Australia, and Massachusetts v EPA in the USA (2). In California, six major car companies are being sued for damages resulting from their past and ongoing contributions to global warming (3).

Ms Atkinson likened climate change to tobacco and asbestos cases in terms of potential company liability. Companies in both these industries have had to pay out huge sums of money in compensation.

Rebecca Gilsenan, Principal, Maurice Blackburn Cashman (4) said companies engaging in activities that result in greenhouse gas emissions need to consider whether they're risking litigation, including damages claims or regulatory prosecution. "Once the directors are aware of climate change related risk, failure to address that risk may amount to a breach of directors' duties."

The 20 companies include key players in all the major greenhouse polluting sectors – electricity generation, transport, industrial processes and agriculture. Many of the companies are considering new projects that would increase their pollution levels. In addition, some have been reluctant to fully disclose their potential climate-related liabilities to shareholders, investors and the public.

Companies include: Genesis Energy (the electricity generator), Solid Energy (coal miner), New Zealand Refining Company (oil refiner), Fulton Hogan (roading), Fonterra (dairy) and Landcorp (the country's biggest farming company).

Greenpeace's Vanessa Atkinson said responsibility for addressing climate risk did not lie just with business. "The New Zealand government should be setting targets to cut emissions, putting a price on greenhouse pollution, kick-starting a switch to clean, renewable energy sources and boosting energy efficiency and conservation."

Briefing papers outlining potential climate risks for companies in New Zealand, and a brief history of similar climate change litigation in New Zealand and globally are available on the Greenpeace website at:

http://www.greenpeace.org/new-zealand/notice-served

Contacts

Australia: Rebecca Gilsenan, Principal, Maurice Blackburn Cashman, +61 2 82670959
New Zealand: Vanessa Atkinson, Climate campaigner, Greenpeace, 021 565 165
Kathy Cumming, Communications officer, Greenpeace, 021 495 216

Notes to the Editor

(1) "Serving notice" is a mechanism by which companies and their directors are informed of their exposure to Climate Risk and their responsibility to address it. The notification makes it more difficult for companies to assert, in any future climate change-related litigation that they were ignorant of the risks associated with their activities.

(2) Anvil Hill coal mine: (Gray v The Minister for Planning [2006] NSWLEC 720:
The judge in this case ruled that the impacts of climate change had to be taken into account in relation to a major development. (This time a large new open-cut coal mine at Anvil Hill, near Newcastle, capable of producing up to 10.5 million tones of coal a year over 21 years.)

State, local and administrative authorities could now face similar proceedings if they "unreasonably fail" to take account of the effects of global warming when making decisions.

Mass.v.EPA.USSC (Massachusetts, et al. v. Environmental Protection Agency, et al)
In the most significant court decision on climate change so far, the US Supreme Court ruled in April 2007 that carbon dioxide is an air pollutant under the Clean Air Act. The Court held in favour of a coalition including 12 US States, 4 local authorities and 13 non-government organizations against the Environmental Protection Agency.

(3) The lawsuit is the first of its kind to seek to hold manufacturers liable for the damages caused by greenhouse gases that their products emit. The case has been brought by California's Attorney General against leading U.S. and Japanese auto manufacturers: Chrysler Motors Corporation, General Motors Corporation, Ford Motor Company, Toyota Motor North America, Inc., Honda North America, and Nissan North America.

(4) Maurice Blackburn Cashman is Australia's leading class actions law firm. It has successfully brought cases for tens of thousands of victims of corporate malpractice. In 2003, Maurice Blackburn Cashman "served notice" on 146 Australian companies regarding their climate risks.

Q and A

1) What is "Serving Notice"?

"Serving Notice" is a mechanism by which companies and their directors are informed of their exposure to Climate Risk and their responsibility to address it. It makes it difficult for companies to assert, in any future climate-change-related litigation or prosecution that they were ignorant as to risks presented by their activities. In other words, they won't be able to argue that they did not know about risks presented by climate change, or the damage they were causing.

2) What is "Climate Risk"?

Climate Risk describes the range of financial risks that climate change presents to a company. Examples include: disruption to operations; the introduction of a "cost on carbon"; damage to reputation, or climate litigation (where legal action is taken against a company on the basis of its contribution to climate change). The extent to which a company is exposed to Climate Risk will depend on that company's operations and future plans.

3) Who's involved in this action?

Greenpeace Australia Pacific, Greenpeace New Zealand, Australia's Maurice Blackburn Cashman Lawyers and New Zealand's worst greenhouse gas emitters from all the major greenhouse gas polluting sectors – electricity, transport, industrial processing and agriculture. (Maurice Blackburn Cashman has been Australia's leading law firm in bringing successful "class actions" on behalf of victims of corporate malpractice. In 2003, they "served notice" on 146 Australian companies. Because we're using an Australian law firm, Greenpeace's Australia-Pacific office is also involved in this process.)

4) What is the legal basis for possible climate litigation? Who could be liable and who could claim?

There are at least three ways a company and/or its directors could be liable.

i) It is a basic principle of law that if a person suffers harm – for example, as a consequence of the greenhouse pollution caused by a company – then the person may be entitled to compensation from the company who harmed them.

The companies who have received the notices are major polluters. Pollution causes damage and those who suffer damage may be entitled to compensation.

Damage could be anything from floods, to sea-level rise, to hurricanes and crop failures, so there is a wide range of potential plaintiffs – from individual home owners whose homes are flooded, to industries like wine-makers and ski resorts.

ii) Company directors could also be sued by shareholders and other affected persons under the NZ Companies Act 1993, which requires them to:
• act in good faith and in the best interests of the company (s131);
• not agree to, or cause or allow reckless trading that involves the business of the company being carried out in a manner likely to create a substantial risk of serious loss to creditors (s135);
• not agree to the company incurring obligations unless there are reasonable grounds to believe that the company will be able to perform them (s136);
• exercise reasonable care, diligence and skill (s137); and
• disclose relevant interests to the board (s140).
In other words, directors have a legal obligation to reasonably assess business risks and then minimize them. If climate change presents a high level of risk to a company – and the directors fail to fulfill their duties and take action to reduce that risk, the directors could be liable.

iii) In addition, under the Markets Securities Act 1988 and the NZX Listing Rules, publicly listed companies are required to disclose material information to the share market, to ensure a transparent and fair share trading environment. "Material information" includes a change in a company's financial forecast or expectation.

In an environment of increased attention on dangerous climate change, regulatory changes, such as carbon taxes or the closure of climate-damaging industries may have a serious impact on companies' bottom lines. Directors who do not consider and disclose such effects where they in fact diminish financial forecasts may be prosecuted.

5) Why is Greenpeace doing this?

Climate Change is real and happening. These companies are major contributors to the problem. Climate change won't just affect the environment; it will also have a major impact on the economy. Business must take some responsibility and act.

We are giving these companies a clear message that a "wait and see" approach to climate change just doesn't cut it any more. We're opening the door for them to do the right thing and get on with the job of addressing climate change, but we're also "closing the back door" so they can't in the future try to evade prosecution by pleading ignorance.

6) Which companies have been targeted?

(in alphabetical order):
Air New Zealand
Carter Holt Harvey
Contact Energy
Fonterra
Fulton Hogan
Genesis Energy
Greymouth Petroleum
Holcim
Landcorp
Mighty River Power
New Zealand Aluminium Smelters
New Zealand Oil and Gas
New Zealand Refining Company
New Zealand Steel
Norske Skog Tasman
Pan Pacific Forest Products
Shell New Zealand
Solid Energy
Todd Energy
Vector

7) Why THESE companies?

These are companies that are engaged in activities which emit significant amounts of greenhouse gases and/ or have a significant proportion of their capital tied up in greenhouse gas emitting activities. They may even be increasing their greenhouse pollution, when they should be reducing it. They may also have obstructed, or be obstructing, efforts to reduce measures which would require them to reduce their pollution (eg they may plan to build more roads, or they may actively oppose Government regulation/ carbon charges).

They include companies which are involved in fossil fuel industries (coal, oil, natural gas) or road transport, which consume large amounts of energy or which emit greenhouse pollution through manufacturing or through agricultural practices. It will be these sorts of companies that will be most vulnerable to regulatory or litigation risk.

Companies that take a particularly obstructive role - for example lobbying against regulatory action on climate change - could end up facing an increased risk of litigation. It's well known that one of the main reasons tobacco companies have been liable for health damage in the US and Australia, is that they actively covered up scientific studies and lobbied against controls on smoking.

8) Have there been any climate change cases fought and won overseas?

Climate change litigation (ie- where legal action by citizens or governments is taken on the basis of climate change and its impacts) is becoming increasingly common around the world and there are positive indications that courts are prepared to embrace legal arguments around climate. It is entirely possible that climate change will become the next asbestos or tobacco in the eyes of the law. A history of similar climate change litigation is available on the Greenpeace here:

http://www.greenpeace.org/new-zealand/notice-served

10) Is this just a stunt?

No. First, Greenpeace is not afraid to go to court to protect the public and the planet. In New Zealand, we've already been to court to fight Marsden B, and to support renewable energy projects such as West Wind.

Second, we see this as a serious and constructive initiative. We've put a lot of time and effort into putting together a discussion paper, which accompanies the serve notice letter, and which gives companies a complete overview of the problem, and what they need to do – for the benefit of both their company, and the planet.

The threat of climate change is extremely serious and all parts of our society need to take responsibility. Our business and industrial sectors have particular responsibility due to the type of activities they engage in and their power to influence government policy. They need to be aware of their responsibilities, and made accountable. Serving notice on these companies is the first step in achieving more accountability.

11) What did the Australian Serve Notice action achieve?

The Australian Serve Notice drew a line in the sand and helped sort out the wheat from the chaff. Some companies responded positively, with new initiatives that helped reduce their exposure to climate risk. Others responded negatively or not at all – which only exposed them to further scrutiny.

It's now 4 years down the track, and expectations on our business leaders are much higher in relation to climate change. So we're hoping that all the New Zealand companies we've written to will respond positively.

12) What do you want these New Zealand companies to do?

We don't want to tell each company exactly what they have to do – directors are paid big money to do that. But obviously, the best way to reduce potential and future liability is to reduce the amount of damage you're doing – and that means reducing the amount of pollution you're pumping out. Companies will also have to be much more careful about new developments – to make sure they're not investing in something that might make a quick buck, but end up being a liability a few years down the track. And last of all, there's no longer any justification for companies trying to block government programs that reduce pollution.

It's got to be more than window-dressing – i.e. it's not good enough to simply say "we agree climate change is a problem and will do our best" but then go on with business-as-usual.

ENDS

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