Implications for Private Actors – IndiaCorpLaw

Understandably, the ruling is steeped in the obligations of the States to address climate change matters. In doing so, the opinion imposes a due diligence obligation on States to “prevent significant harm to the climate system”, which the ICJ recognises as a “stringent” duty (¶ 138). It requires States to not only come up with substantive measures to deal with climate change, but also to enforce them effectively. In that sense, it recognises the role of States to regulate players over whom it has jurisdiction to ensure the prevention of significant environmental harm resulting from the adverse effects of climate change. 

The obligations of States are primarily threefold: (i) mitigation measures based on nationally determined contributions (NDCs); (ii) adaptation; and (iii) cooperation through mechanisms such as technology transfer and capacity building. When it comes to mitigation, the ICJ observed that a State’s obligation is based on the due diligence it ought to exercise in adopting domestic mitigation measures, which encompasses the activities of private actors (¶ 252). In other words, the State’s obligation under international law is either discharged or violated depending on the extent of diligence it employs in exercising oversight over private actors.

Some of the sticking points in curbing anthropogenic climate change have related to the narrowness of the principles of causation and attribution, as it is often difficult to identify a specific private actor as being responsible for GHG emissions or the adverse effects of climate change. Rather it is a cumulative effect of the activities of a number of actors that causes harm to the environment. However, the ICJ eases the burden of causation for climate victims by observing that “the diffuse and multifaceted nature of various forms of conduct which contribute to anthropogenic climate change does not preclude the application of the duty to prevent significant harm to the climate system and other parts of the environment.” (¶ 279), thereby refuting an argument “that the identification of a causal link is impossible in the climate change context”. (¶ 438)

Even more interesting in the context of private actors in the manner in which the ICJ addresses the issue of attribution under international law. It seeks to extend the ramifications of its advisory opinion to modulate the conduct of private actors by imposing specific obligations on States to regulate the activities of private actors within their jurisdiction. Failure of States to so act would invite adverse consequences. The extent to which the ICJ endeavoured to be specific regarding the conduct of private actors bears assimilation using the Court’s own language:

Failure of a State to take appropriate action to protect the climate system from GHG emissions — including through fossil fuel production, fossil fuel consumption, the granting of fossil fuel exploration licences or the provision of fossil fuel subsidies — may constitute an internationally wrongful act which is attributable to that State. The Court also emphasizes that the internationally wrongful act in question is not the emission of GHGs per se, but the breach of conventional and customary obligations …  pertaining to the protection of the climate system from significant harm resulting from anthropogenic emissions of such gases. (¶ 427).

The ICJ formulates the principle of attribution in an indirect way. As discussed earlier, the Court has foisted the duty of due diligence on states to regulate the conduct of private actors in the context of climate change. Extending the principle of attribution from this due diligence duty, the Court observed: “Therefore, attribution in this context involves attaching to a State its own actions or omissions that constitute a failure to exercise regulatory due diligence.” (¶ 428). In that sense, the actions of the private actors are not attributed to the state, as one would contemplate in the convention sense of the concept of attribution, but the failure of the State to compel private actors to fall in line with its climate obligations under international law would make the State itself responsible. Given the explicit references in the advisory opinion to the role of private actors in anthropogenic climate change, the ICJ has sought to rein in GHG emitters and other polluting companies, albeit indirectly by imposing oversight duties on the State through the duty of due diligence.

Effect on Corporate Law in the Indian Context

Recognising that the ICJ advisory opinion is relevant essentially as a matter of international law, the magnitude of its observations can have at least tangential effect on domestic laws, depending upon how individual States act upon the ruling. First, from a more substantive perspective, the opinion reaffirms the recognition of various principles such as sustainable development, common but differentiated responsibilities and respective capabilities, equity, intergenerational equity and the precautionary principle, although it exercised restraint by not recognising the “polluter pays” principles as part of the law for purposes of the advisory opinion. This bears some resonance with the Indian context, as the Supreme Court has already recognised several of these principles (including the polluter pays principle) as part of domestic law applicable to the state (referred to as the vertical effect) and to private players such as individuals, companies and other legal persons (the horizontal effect). 

Second, the Indian Supreme Court has already taken giant strides in recognising both constitutional and private law rights in the context of climate change. In its landmark ruling in MK Ranjitsinh v Union of India (2024), the Supreme Court recognised a “right against the adverse effects of climate change” as a fundamental right under the Indian Constitution. An earlier ruling in M.K. Ranjitsinh v Union of India (2021) is also salient because the Supreme Court seized the opportunity available to it under a public law dispute to expound on the duties of directors of Indian companies in protecting the environment (and, by implication, in climate mitigation and adaptation). The ICJ ruling will likely provide further impetus to the Supreme Court’s efforts in both public law as well as private law.

Third, the ICJ’s opinion could have an effect on how domestic legal principles are interpreted in the climate context. Its observations on the issues of attribution and causation are apt illustrations. Other areas could include the nature and scope of duties of directors of companies to address climate risk. As Lord Sales had remarked, directors’ duties under corporate statutes are not merely “bald” statements of the law. They ought to be interpreted in the light of legal developments and must “take account of the general environment of expectation created by initiatives by regulators and in civil society.” Apart from domestic developments such as the aforesaid rulings of the Supreme Court, this ICJ advisory opinion will have the effect of expanding the tone and texture of directors duties in the context of climate change, not just in India (where such duties are codified in section 166 of the Companies Act, 2013), but possibly around the world.

Fourth, given that the advisory opinion seeks to extend its arm to rein in private actors through the medium of the State, one can only expect greater efforts in domestic law and regulation to deal with matters of climate change and, in particular, measures to address mitigation, adaptation and cooperation.

Finally, commentators have noted that the principles laid down by the ICJ could be relied upon by claimants in climate litigation, both under international law as well as domestic law, against States and polluting corporations.

In conclusion, the ICJ advisory opinion on climate change is likely to have enormous implications on the field. Its reverberations are bound to be felt not just in the corridors of governments, regulators, and the courts, but also within corporate boardrooms.

– Umakanth Varottil