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Freshfields Risk & Compliance

| 5 minutes read

The EU’s New ‘Ecocide’ Directive and Corporate Liability for Environmental Offences

On 16 November 2023, the European Parliament and the Council provisionally agreed on a new directive tackling environmental crimes. Following the Commission’s proposal from 2021, the directive is now expected to be formalised in Spring 2024 and will grant member states two years to implement a far-reaching catalogue of offences. Compared to the currently applicable 2008 directive it will not only broaden the scope of environmental crimes but place significant focus on corporate liability and sanctions. 

This comes as the latest in a series of developments that give rise to environmental issues among the primary risks in corporate compliance. While the draft directive would already aggravate the existing structures in the member states’ jurisdictions, there is more to come for environmental compliance both from the governmental and non-governmental side: Some member states appear to be approaching a ‘corporate climate liability’, holding corporations directly accountable for excessive greenhouse gas (‘GHG’) emissions resulting from their operations or even their supply chains. Simultaneously, climate activists and NGOs are becoming increasingly resourceful in using legal action. Criminal complaints against corporations based on environmental criminal law could become a common occurrence. Taken together, these latest developments bear significant compliance risks that demand businesses to act. 

Increasing focus – environmental criminal law on the rise 

Environmental criminal law is not a new discipline. The German Criminal Code, for example, has long included a division for specific offences against the environment, such as water, soil or air pollution. Nevertheless, Germany’s criminal statistics indicate the relative insignificance of environmental criminal law: The offences make up only half a percent of overall crime and have slightly receded between 2010 and 2020. 

However, this statistic must be put into perspective as in Germany not all offences detrimental to the environment are labelled ‘environmental offences’. Worldwide environmental offences mark the fourth largest organized criminal activity with an annual growth rate of five to seven percent (as estimated by the European Commission). Unsurprisingly we see an increased scrutiny from regulators and public prosecutors. In September 2023, three Hamburg shipowners were charged with unauthorised waste management for ‘beaching’, the harmful practice of dismantling decommissioned ships on foreign shores. Prosecuting beaching is a relatively new trend in law enforcement and has been highly debated within Europe. Additionally, more typical corporate offences are being enforced (more decisively) in reference to the environment as well. One such example is the capital market law on emissions trade: According to the German Greenhouse Gas Emissions Trade Act – which implements a 2003 EU Directive – certain industrial operators face EUR 100 in fines for each tonne of CO2 not covered by carbon allowances. 

Investigation and prosecution pressure from law enforcement is also increasing with a different angle. Not only actual violations of environmental criminal law, but also false claims about environmental commitments or the sustainability of business activities are subject to criminal prosecution as ‘greenwashing’. Businesses and their managers can be liable of (capital investment) fraud, criminal advertising or incorrect presentations in business reporting.

The upcoming EU directive would raise the significance of core environmental offences across all industries, not only in Germany but the EU in general. The law is set to broaden offences from its 2008 predecessor and introduce new crimes, such as a type of environmental product liability. Moreover, the directive would require that the offences apply to legal persons, which could face uncapped fines in proportion to their worldwide annual turnover in case of violations. Also, the draft directive has been likened to the definition of ‘ecocide’ drafted by a legal expert panel in 2021

One step further: Corporate climate liability?

Although significantly broadened, the new EU directive would still attach corporate liability to specific pollutant behaviours. However, no (criminal) liability arises from overall GHG emissions – yet. But there is a growing tendency among different stakeholders to entertain the idea of changing this. Until recently, liability for GHG has only been contemplated for states: The constitutional courts of Germany and the Netherlands have found the states’ emission reduction plans insufficient. Furthermore there are three separate climate complaints currently pending before the European Court on Human Rights ('ECtHR'). Individual contributions to climate change by natural or legal persons, by contrast, seemed long too insignificant and immeasurable to incur liability.

This assumption was challenged by the 2021 judgment of the District Court of the Hague in Milieudefensie et al. v. Royal Dutch Shell. Drawing on a conglomerate of legal sources, including the Dutch Civil Code, the European Convention on Human Rights and the 2015 Paris Climate Accord, the court concluded that the defendant had a duty of care to reduce its GHG emissions by 45 % by 2030 relative to 2019 levels. Individual responsibility for climate change was established. According to the court, the duty includes the GHG emissions of all group entities as well as end-consumers. The decision, while under appeal, is provisionally enforceable.

Although the proceedings are neither final nor criminal in nature, it is obvious that this might change quickly. In certain jurisdictions, a violation of a corporate duty to reduce GHG emissions (if established) could amount to a criminal or administrative offence. Such liability could derive from the growing number of corporate human rights due diligence acts such as the German Lieferkettengesetz (Supply Chain Act). These acts usually apply to the entirety of a company’s international supply chain and provide injunctive, administrative or criminal fines in case of international human rights violations. Businesses should therefore pay close attention to the relationship between climate change and human rights that is currently being shaped by courts such as the ECtHR.

New cases – climate criminal complaints as a strategic tool?

This shift in legal standards has already caught the attention of climate activists and NGOs. They are becoming increasingly resourceful in their use of legal actions, as exemplified by the case ‘the Planet v. Bolsonaro’ before the International Criminal Court (‘ICC’). The NGO ‘All Rise’ filed a landmark case before the ICC in October 2021 concerning the deforestation and related activities in the Amazon rainforest during former Brazilian president Bolsonaro’s administration. Their complaint is based on the reasoning, that the alleged ‘crimes against nature’ also constitute ‘Crimes Against Humanity’.

However, climate criminal litigation cases are neither limited to government officials nor to international courts. As with civil lawsuits alleging individual responsibility of companies for climate change criminal complaints can also be brought directly against companies and their officers. Especially Germany could find itself in the focus of activists wanting to file criminal complaints once the new EU directive is formalised. Anyone who becomes aware or has a suspicion of a criminal offense can file a criminal complaint, regardless of any personal injury suffered or being personally affected. German law enforcement authorities are then legally obliged to investigate, if there is any indication of a crime. And ‘indication’ is a low threshold and a professionally phrased criminal complaint can be sufficient to overcome it. While opening an investigation means neither responsibility nor criminal consequences for companies, the media coverage of the investigation can already cause considerable reputational damage. It seems plausible that activists could exploit such effects systematically.

Call to action – environmental compliance as the key

The significance of environmental criminal law is constantly growing. Even without the upcoming EU directive as a driving force, climate (criminal) litigation has been on the rise. The report of the United Nations Environment Programme in July 2023 recites approximately 2200 climate change litigation processes worldwide in 2022. In comparison: In 2017 there were only around 900 cases. Paying close attention to environmental compliance is already key but will be even more so once the new EU directive is put into place. Corporate liability and sanctions will follow – which demands companies to thoroughly prepare as it goes without saying: an ounce of prevention is worth a pound of cure.


climate change, corporate crime, corporate governance, europe