Climate-related class actions are a real threat to Scottish businesses - ​​Joanna Fulton

Several sectors are at particular risk of a group action in Scotland, including energy, given Scotland’s role as a global energy hub, as well as financial services. Whether by virtue of a registered office, operational or manufacturing presence, or having Scottish customers, these all enable a group claim in Scotland.

Take for instance the case brought by more than 1000 Kenyan tea-pickers who sued a Kenyan tea plantation owner in Scotland, based simply on a registered office address.

As such, Scotland should be on the risk register for corporates who may face group or class action claims – for good reason. A large class of claimants can coordinate their firepower – including litigation funding – and their resolve. The process involves considerable time and expense.

Importantly, a negative outcome is multiplied by the number of class members, meaning potentially very significant exposure – in compensation, legal costs and reputational damage.

One type of group claim that we are likely to see more of in Scotland is climate-related litigation. Climate campaigners have already had success in other jurisdictions. A ground-breaking 2019 claim brought by a Dutch NGO, the Urgenda Foundation, succeeded in obliging the Dutch government to reduce, by the end of 2020, greenhouse gas emissions by at least 25 per cent over 1990 levels. More recently, a group of Swiss ‘elderly ladies’ celebrated their success in the European Court of Justice over inaction by the Swiss government on climate change.

Climate-related claims are broad, creative and evolving. They can have direct impact, like a change in the law or policymaking, rising above prevailing political winds. Litigation may also stall or prevent projects predicted to have an adverse impact on climate change, particularly in the planning sphere. In addition, campaigners see success in more indirect impacts such as raising public awareness, understanding and behaviour.

More recently there have been a growing number of cases directly against companies rather than governments and involving an increasingly diverse range of sectors. A decision is keenly awaited in an appeal by Shell of the claim brought by Friends of the Earth, other NGOs and more than 17,000 Dutch citizens, against an order to reduce emissions by 45 per cent by 2030 relative to 2019 levels.

The Grantham Research Institute (GRI) calculated in 2023 that more than 50 per cent of 549 cases identified had outcomes favourable to climate action. Another study by the Centre for Climate Change Economics and Policy/GRI looked specifically at the impact of an unfavourable court decision in a climate case and found a measurable reduction in company value. Whilst there is little research on the long-term impacts of climate-related claims, this sort of analysis and recent high-profile successes means companies and governments should consider climate litigation as a relevant financial risk.

With the new Labour government committed to increasing the pace of the UK’s transition to net zero, climate change litigation is likely to be an increasing area of risk as campaigners and litigants seek to capitalise on this new momentum.

Joanna Fulton is a Partner, Burness Paull LLP