Climate litigation becomes the new cost of doing business
The oil and gas sector is increasingly the focus of litigation related to environmental degradation, human rights violations, corruption, and climate inaction. Mounting regulatory pressure, stakeholder activism, and legal risks have made non-financial risks a central factor in operational viability and investor confidence.
Key Risks
Strategic Climate Litigation
In 2021, the District Court of The Hague ordered Royal Dutch Shell to cut its carbon emissions by 45% by 2030 compared to 2019 levels, citing Shell’s duty of care under Dutch civil law and international human rights principles. This was the first time a court imposed a legally binding emissions target on a private company.
Corruption in Access to Resources
In 2022, Glencore paid over $1.1 billion USD to resolve investigations by the U.S. DOJ and UK’s Serious Fraud Office for widespread bribery in Nigeria, Venezuela, Cameroon, and other jurisdictions.
Bribes were used to secure oil trading contracts — a practice that now triggers global enforcement under anti-corruption laws like the FCPA and UK Bribery Act.
Sanctions Compliance and Political Risk
The sector’s operations in sanctioned or politically unstable regions (e.g., Russia, Iran, Venezuela) create ongoing compliance risks.
After the U.S. reinstated sanctions on Iran in 2018, TotalEnergies was forced to abandon its South Pars project, losing billions in investment.
.avif)
Health, Safety & Environmental Incidents
The BP Texas City refinery explosion in 2005 caused 15 fatalities and over 170 injuries. OSHA fined BP $21 million USD, and the company paid hundreds of millions in civil claims.
Such cases highlight the importance of robust HSE (Health, Safety & Environment) systems.
Sector Trends
Climate-Related Lawsuits on the Rise
Shareholders and NGOs are suing oil majors for misleading climate claims and failing to align with Paris Agreement goals. In 2023, ClientEarth filed suit against Shell’s board for breach of fiduciary duty (case dismissed at first instance).
Mandatory ESG Disclosure
Under the CSRD, EU-based oil and gas firms must disclose emissions across all scopes (1, 2, 3), transition plans, and risks linked to global warming scenarios.
Investor and Insurance Withdrawal
Major funds (e.g. BlackRock) and insurers (e.g. AXA) are divesting from high-risk fossil projects (e.g. Arctic drilling), increasing the cost of capital and access to coverage for non-aligned companies.
What This Means for Your Business:
Legal exposure is no longer confined to pollution or labor issues: climate strategy is now a matter of legal compliance.
Litigation or divestment based on ESG failures can challenge your license to operate.
Building a credible, auditable climate transition plan is now as essential as financial solvency.
Sources
Milieudefensie v. Royal Dutch Shell, District Court of The Hague, Case No. C/09/571932, May 2021
U.S. DOJ, “Glencore to Pay $1.1 Billion for Foreign Bribery and Market Manipulation,” May 2022
OSHA Report, “BP Texas City Refinery Explosion,” 2005
European Commission, Corporate Sustainability Reporting Directive (CSRD), 2022
OFAC, “Sanctions Compliance for the Energy Sector,” 2021
ClientEarth v. Shell Board, UK High Court, Decision 2023
TotalEnergies Investor Disclosures, 2018–2022
Reclaim Finance, “Finance and Fossil Fuels Tracker,” 2023