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September 1, 2023

Why Montana climate trial win will worry polluters

Governments, companies and financials should not take lightly the US’ first successful constitutional climate trial held in Montana.

By Elizabeth Meager

Climate litigation, US, Montana
A long road ahead. Climate victory in Montana could spur more successful climate legal challenges in future. (Photo by EB Adventure Photography via ShutterStock)
  • In the first constitutional climate trial in US history, young residents of Montana won a case against the state on human rights grounds.
  • The climate litigation industry has long been waiting for such a result to set precedent in the highly litigious, heavy polluting country.
  • As seen in the Netherlands, plaintiffs are now likely to bring these same arguments to private entities.

A recent climate change lawsuit in the US state of Montana is arguably a warning sign of what’s to come for heavy polluting governments, companies and their financial backers everywhere.

In the first constitutional climate trial in US history, young residents of Montana accused the state of violating their right to a healthy environment by promoting pro-fossil fuel policies. Their lawyers argued that these policies violated the state constitution, which guarantees a “clean and healthful environment”. Judge Kathy Seeley, of the first judicial district court, agreed.

The plaintiffs’ lawyers have described the win, on 14 August, as a “game changer”.

While the effects of this case are limited to the state of Montana, population 1.1m – and there are no immediate direct financial consequences – much of the legal industry has long been waiting for such a decision. In nascent areas of litigation, legal precedent is essential – and that precedent has now been set.

Zaneta Sedilekova, consultant to the Commonwealth Climate and Law Initiative, an organisation applying existing company and securities law frameworks to climate change and biodiversity-related issues, says that when viewed in the context of global trends in climate litigation, the Montana decision “takes on a new dimension”.

“While the plaintiffs scored a victory against a government and not a corporation or a bank, it is possible to transpose the legal arguments used in the Montana case to a similar lawsuit with a corporate defendant,” she says. “This strategic precedent is readily available.”

For instance, in the Netherlands, Dutch climate litigants first tested their human rights-based arguments in a case against the government in the landmark 2015 Urgenda case, then later deployed them against Shell – and were successful.

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Montana: One of many

Lawyers have for some years now been saying that an outcome like this was inevitable, given the sheer number of similar cases making their way through the courts around the world.

As of May 2023, there were 2,341 cases captured by the Sabin Center’s climate change litigation database; 190 of these were filed in the preceding 12 months. More than 50% of those cases have direct judicial outcomes “that can be understood as favourable to climate action”, and many others have “significant indirect impacts on climate change decision-making beyond the courtroom”. The UN Environment Programme has concluded that lawsuits are a key tool in delivering climate justice around the world.

But the highly litigious US – with plenty of profit-hungry investors dedicated to litigation funding, extraordinarily active courts, and thousands of heavy emitters and their financiers headquartered there – has always been seen as the real nut to crack.

There are various tools available to plaintiffs. These include human rights and environmental laws and regulations at both the state and national level, as well as soft law instruments such as the UN Guiding Principles on Business and Human Rights, which domestic courts can use to aid interpretations of hard laws, and the Paris Climate Accord, signed by 194 parties in 2015.

And, in late August, the UN warned banks dealing directly with the world’s biggest corporate emitter Saudi Aramco that their financing activities could be in violation of international human rights law and standards, singling out BNP Paribas Citi, Goldman Sachs, HSBC and JPMorgan Chase.

“Businesses should avoid infringing on human rights by taking proactive steps to identify, prevent, mitigate and address adverse impacts with which they are involved, including impacts resulting from climate change,” read the letter dated 25 August.

“It is this background of multiple reinforcing factors that makes the impact of the Montana judgment potentially greater than it may seem,” adds Sedilekova.

The ripple effect

Even if a lawsuit against a corporate entity is unsuccessful, there are myriad other impacts. For example, a bad day in court has been found to hit a company’s share price. As a May 2023 study found, an unfavourable climate court decision cuts stock values by -0.41% on average, with shareholders especially skittish in novel cases involving a new form of legal argument.

Plus, each case – successful or not – creates or makes available materials for future plaintiffs, during discovery. This fact-finding phase of any lawsuit gives plaintiffs and their legal teams access to primary documents and current and former employees, which typically becomes public domain after the fact. This evidence, unlikely to have previously seen the light of day, can then be used in future cases, and of course can be accessed by journalists and politicians. Polluting companies do not want this.

Representatives for the state of Montana have already said it will appeal, and if the case makes it the whole way to the top, the Republican-heavy Supreme Court will almost undoubtedly opt for a pro-oil and gas ruling. But the precedent has now been set: US courts are now officially affirming climate science. The dozens of other climate-related cases ongoing across the US will be worth watching.

[Read more: How litigation influences ESG-linked finance]

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