ICJ opinion raises the stakes on climate compliance

Elena Lambros:

Hello and welcome to ESG Matters at Ashurst. I'm Elena Lambros, a Risk Advisory partner specialising in sustainability and climate change. In today's episode, I am pleased to be joined by a panel of legal experts from across our global firm to discuss a truly historic development in international law: the International Court of Justice's landmark advisory opinion on climate change delivered on 23rd of July, 2025.

While not legally binding, the opinion marks a major shift and its influence is expected to be profound, shaping domestic litigation, guiding government policy, and setting new standards for both state and corporate conduct. The ICJ's findings build on a growing body of international rulings and signals increased scrutiny of climate action and inaction worldwide.

Today, we will discuss whether the ICJ's decision has established climate change duty of care. Joining me to explore this are:

• Arne Fuchs, partner and head of our global practice group for international arbitration based in Frankfurt;
• James Clarke, a partner in our dispute resolution practice based in Melbourne; and 
• Erin Eckhoff, senior associate in our international arbitration and disputes team based in Sydney. 

Welcome to the podcast everyone.

Erin Eckhoff:

Thanks, Elena, delighted to be here too.

James Clarke:

Really looking forward to this conversation. Thanks, Elena.

Arne Fuchs:

Thanks, Elena. It's great to be here.

Elena Lambros:

To kick off and set the scene, I thought we just might explain for our listeners what we're doing. Today, we're going to really discuss what do we mean by a duty of care in relation to climate change, talk through a little bit about how does this concept differ across different jurisdictions and legal systems, and then really delve into why this concept is so significant for corporates and their boards.

Given the depth of expertise that we have on here today, we'll kind of take it through jurisdiction by jurisdiction and just try to draw what this means for each one. Arne, I might turn to you first just to talk through the global and European perspective. What do you think are the key takeaways from the ICJ's 2025 advisory opinion on state obligations and climate change?

Arne Fuchs:

Thank you, Elena. The ICJ's advisory opinion sends a clear message. Climate obligations under international law are no longer aspirational. They're legally grounded and enforceable. States are required to prevent significant environmental harm, including that cost by greenhouse gas emissions. This obligation applies both to their own actions and to emissions from private actors within the jurisdiction. The court also stressed intergenerational equity. Governments must take decisions that protect not only present citizens, but future generations.

I think particularly important for in-house counsel and executives, this signals that states may come under increased international scrutiny. In response, climate regulations will likely tighten across sectors with a particular focus on carbon intensive industries. This could include emission caps, mandatory reporting, or even operating restrictions as tools for states to cope with the legal pressure to demonstrate compliance with their climate duties.

Elena Lambros:

Great, thank you. You think that these opinions are really addressing the responsibility of states to start regulating the private actors and the corporations and that's the way that this will ultimately influence what happens more on the ground, particularly over in Europe?

Arne Fuchs:

Yes, that's a crucial aspect of the opinion. It's clarification that states are legally obliged to regulate the conduct of private entities contributing to climate change. This means states cannot rely solely on voluntary action or corporate goodwill. They must actively legislate, monitor, and enforce climate-related standards. In effect, the opinion creates a legal pipeline from international obligations down to national enforcement and corporate liability.

Elena Lambros:

Then, do you think, just following on from that, in Europe are we actually seeing a move towards a legally recognised duty of care for climate change?

Arne Fuchs:

Yes, and that's despite some of the political developments we have been seeing on the global plane and that move is actually accelerating. Now courts across Europe are increasingly willing to impose climate duties of care both on states and private actors. A few particularly noteworthy cases: In the Netherlands we have seen the Urgenda and Shell rulings establishing that both governments and corporations can be held liable for failing to align with climate goals.

In Germany, the federal Constitutional court ruled that inadequate climate policy violates the basic rights of future generations. Most recently, we saw a key development for corporate liability in the RWE case where a German court held that major greenhouse gas emitters can in principle be held accountable for the impact of their emissions under the German civil law. Now that case was brought by a Peruvian farmer who sought damages for the contributory impact of RWE's emissions on glacial melting, which he alleged threatened his home.

Now while the higher regional court ceased with the matter, ultimately dismissed the claims, it did so on the basis that the claimant had failed to establish an imminent risk for his property. The court noted that if such imminent risk, if an imminent impairment were to exist, a single emitter in Germany could potentially be held liable. This case may still set precedent for transnational climate liability and really highlights the global emissions impact.

These rulings are reshaping the legal landscape and adapt, if you will, to the interconnectedness of global emissions. They set precedent for transnational climate liability based on global effects. Companies, particularly those with global supply chains or fossil fuel exposure must now factor in the risk of being sued by anyone and anywhere their emissions have foreseeable impact.

Elena Lambros:

The cases are really fascinating, particularly in the context of a lot of discussion globally around the regulatory environment and how far or not far certain jurisdictions are going in terms of regulating the emissions. Then, just particularly when we're thinking about that, and you've kind of started to touch on it, what do you think the implications are, particularly for corporate behaviour and risk management? How should people be shifting the way they think about these issues?

Arne Fuchs:

Significant implications on various different levels, including legal, financial, operational, a few examples with regard to regulatory compliance, what I said earlier, we expect more jurisdictions to impose binding climate disclosure requirements, emission caps, transition planning obligations. In the EU, especially in the context of CSRD, ESRS.

From a litigation perspective, climate-related lawsuits against corporations are on the rise whether from activists, investors, or impacted communities. This is no longer a fringe issue and I would expect to see even more of it. Investor expectations are also likely to be impacted. This could be a renewed boost for ESG considerations in the investment space driving capital towards companies with credible transition strategies. Of course, there's increased reputational risks.

How does this translate to corporate behaviour? Companies that anticipate stricter climate obligations will be better positioned to manage these risks. Waiting for regulation is no longer a viable strategy if you ask me. In-house teams should proactively assess how international climate norms may translate into binding domestic obligations in the jurisdictions where they operate and assess their exposure under the emerging climate litigation theories.

Elena Lambros:

Great, thank you. I'm just going to turn to James now because a lot of the things that you have been talking about, we've been seeing quite strongly in Australia for a while, particularly around the litigation and that focus. James, do you want to just start with giving an overview of what the current status of a climate change duty of care is in Australia?

James Clarke:

Absolutely, thanks, Elena. As you say, I think Australia's really been a bit of a hotspot for climate-related litigation over a number of years now. At the moment in Australia, there is no recognised climate change duty of care either for governments or for private companies. The key case in Australia on that issue from a few years ago now was Sharma and the Commonwealth Minister for the Environment.
In that case, Sharma had brought a class action on behalf of the children of Australia effectively alleging that the Commonwealth minister owed a duty care to the children of Australia generally to consider the potential impacts of climate change when deciding whether or not to approve an expansion to a coal mine in New South Wales.

In that landmark decision at the time, the Federal Court found at first instance that the minister did in fact owe the alleged duty of care, which was very significant. Then, on appeal that decision was overturned by the Full Federal Court and ultimately the applicant didn't seek to take it further to the High Court.

Elena Lambros:

Thank you. Then, there was a recent decision in the Federal Court in the Pabai vs Commonwealth. What sort of implications do you think this case now has following on from the Sharma case?

James Clarke:

Absolutely, I think the Pabai decision or the litigation was effectively round two after the Sharma decision a few years earlier. Pabai involved another class action against the Australian government this time on behalf of Torres Strait Islander communities. They were arguing that the Australian government is legally required to take reasonable steps to protect the Torres Strait Islands and their people from the impacts of climate change like rising sea levels and coastal erosion.

In that case, the Federal Court expressed a great deal of sympathy for the plight of the Torres Strait Islanders and the harms that were being caused to them by climate change, but ultimately the court found in favour of the Commonwealth. More specifically, the court found that the Commonwealth didn't owe a climate change duty of care to the applicants because decisions about emissions targets and adaption measures are matters of core government policy and in the court's view not suitable for determination by the courts under the law of negligence in Australia.

The court also said that even if a duty of care did exist and was breached, the applicants still couldn't prove that any breach materially contributed to the loss and the harm that they were suffering given the global nature of climate change. I think that decision along with the Full Federal Court decision a few years earlier in the Sharma case presents a pretty significant obstacle to future climate change duty of care cases in Australia against both governments and companies.

Elena Lambros:

Then, despite the outcome in both of those cases, do you think there are any signs that the legal landscape is actually shifting in Australia?

James Clarke:

Yeah, look, I think that is the case and certainly international developments like the ICJ advisory opinion, although they're not binding on Australian courts, they may very well be influential, particularly to the extent that they really demonstrate the consensus or the general acceptance of principles relating to the science of climate change. I think over time it's quite likely that Australian courts will move in a similar direction as that international sentiment, but any given claim ultimately will still need to be assessed through the lens of Australian legal principles.

We've seen cases like Sharma and Pabai fail despite the fact that there have been some similar cases succeeding overseas. That's not to say that climate litigation in Australia doesn't still have some serious legs. There's a range of other courses of action, legal avenues, that are very much still available and I think we'll continue to see bubbling up.

Elena Lambros:

I would think the trend in Australia is kind of showing that that's going to continue along. Then, one of my favourite topics is what sort of practical implications are there for Australian businesses? If you've got significant emissions or exposure to climate risk, how are you really preparing yourself, particularly when you think about the increased scrutiny, disclosure, potential litigation, all of the issues that we've spoken to so far?

James Clarke:

Yeah, I think as I said, the Pabai decision, the Sharma decision for it will make it more difficult to argue that companies owe a similar duty of care to communities in Australia. At the same time, that's not going to affect the whole range of other legal obligations on companies like obligations to make disclosure of climate risks, directors' duties to act with care and diligence and compliance with a whole range of other environmental regulations.

The ICJ opinion is only going to heighten that scrutiny that companies will be under when it comes to identifying, assessing, managing, and reporting on climate change risks. Taking some examples, I guess fossil fuel projects, they're particularly likely to be a focus of challenges given the ICJ's view that an intentionally wrongful act might arise where fossil fuel production or consumption or exploration is involved.

Then, on a slightly different note, we might also see companies bringing investment treaty claims against state seeking compensation for measures the states are taking to reduce emissions. There's a range of potentially significant practical implications for businesses in that respect and they're going to have to continue to invest and be diligent in this area.

Elena Lambros:

Then, if we just move over to kind of round out the discussion around different jurisdictions, we're going to talk about the UK and New Zealand. Erin, for the UK is there a recognised climate change duty of care either in statute or common law?

Erin Eckhoff:

The short answer is no. The slightly longer answer is that the UK is behind, if you like, Australia and New Zealand in the climate duty of care space, which is I think in part why there's so much attention on what's going on here down under. In the UK, there is not yet a recognised statutory or common law climate duty of care. There hasn't been that case that's been brought forward and progressed in the same way that we've seen with Sharma and Pabai.

We talk about Fonterra or even the Shell case in the Netherlands, which we're not talking about today, but of course is floating around in the background. Courts and regulators are I think increasingly focused on that corporate climate responsibility, particularly regarding the disclosure obligations and the greenwashing risks. It hasn't moved to the duty of care arena. It's really focused on greenwashing risks at the moment.

I think the courts are very much alert to the risks of companies overstating their environmental credentials or failing to disclose material climate risks to investors and stakeholders. There's sort of a growing willingness to look to international law and evolving ESG standards as persuasive authority, especially in cases where claimants allege that companies have failed to act in line with that best practice or have misled the market. I think there's quite a different landscape at the moment to what we're experiencing here in Australia and New Zealand.

Elena Lambros:

Then, now that you've mentioned New Zealand and down under was on my mind a little bit closer to home for you, what is the significance in New Zealand about the Supreme Court's decision in the Smithfield versus Fonterra case? Maybe just give a quick overview of what the case is as well.

Erin Eckhoff:

Yes, yes, let's go up 50,000 feet and give a bit of an overview here. The Fonterra and Smith case is a landmark piece of climate litigation in New Zealand that's attracted international attention because of its potential to reshape corporate liability for greenhouse gas emissions, particularly in the common law. Now the case was brought by a Māori elder, Mike Smith. He's a climate change spokesperson for the Iwi Chairs Forum in New Zealand.

Mr. Smith has a deep traditional connection to coastal land in New Zealand, which he argues is being threatened by climate change, specifically of course the rising sea levels and other environmental impacts. He's claimed that seven of New Zealand's largest greenhouse gas emitters, including Fonterra and Genesis Energy, have materially contributed to the climate crisis and as a result have damaged places of cultural, historical, and spiritual significance to Māori.

Now Smith's legal claims are ambitious because he's raised three causes of action in tort, one of which doesn't exist yet. We've got public nuisance, negligence, and a proposed new tort, which is what we're calling the climate change duty of care, the subject of this discussion, right? As we've already discussed, that duty of care in the common law is not yet recognised, but this is the case where it's being put forward against private entities squarely.

Now the companies, the respondents have tried to have the case struck out at an early stage saying, "It's not going to be made out. You can't bring this case. It's got no legs to it." They argue that climate change is a complex policy best left to parliament, not the courts, that parliament has already set up a detailed legislative response to climate change. Courts shouldn't be coming in here and dabbling, really the arguments that we saw the government making in Pabai as well.

Also, it would be impossible to link the company's emissions to the harm directly suffered by Smith and that's the causation challenge. The High Court initially struck out two out of those three claims. The Court of Appeals struck them all out. Then, it gets really interesting because the Supreme Court in an unanimous and highly significant decision overturned the Court of Appeals ruling and allowed all of the claims to proceed.

The Supreme Court said that parliament had not excluded common law claims for climate harm and that the law of torts could and really should evolve to meet the challenge of climate change. The court allowed all three of those claims to proceed to trial. We don't have a decision yet on those causes of action, but the Supreme Court has really signalled these claims have legs. They've got to now make good on those claims if they're going to succeed.

Elena Lambros:

Then, while we wait for the decision, what do you think the implications for businesses operating in or with exposure to New Zealand are?

Erin Eckhoff:

Look, if you are in the private sector, this decision signals that where governments may fail to act or legislate private sectors may be held directly liable for their contributions to climate harm. You'd be wise I think to be alive to that risk and be monitoring your own emissions and disclosure obligations and the like and really I think keeping abreast of this decision and understanding the implications that it will have.

That includes I think not just companies operating in New Zealand, but companies operating in other common law jurisdictions where this claim might be replicated. Although a big difference between Pabai and Fonterra is, I mean, first of all, in Pabai you had a government being sued and in Fonterra you had private companies being sued. It's not going to be a question of whether or not pinning a duty on a private company is a matter of high government policy in the same way that it was in Sharma and Pabai.

One aspect that is unique perhaps to New Zealand at the moment is that in Pabai the Federal Court regretfully said, "A breach of your customary rights is not a recoverable head of loss," whereas in New Zealand Tikanga rights very much are a recognised head of loss. I think again being mindful of the impact of corporate actions on Indigenous rights is also going to be something to watch in New Zealand and potentially Australia down the track.

Elena Lambros:

Thank you. Clearly, across all the jurisdictions we've been touching on, there is quite a lot happening and quite a lot to keep an eye out on. I might just kind of ask everyone for some final points and some kind of reflections around what this might mean. Arne, I'm going to start with you to talk about what's happening over in Europe and what would your kind of key takeaways be?

Arne Fuchs:

Look, I think the bottom line is this. The ICJ's opinion signals the paradigm shift from soft voluntary commitments to hard law and enforceable obligations. Climate change is no longer just an environmental issue. It's a governance, compliance, and liability issue with real legal consequences. While (I think James mentioned it earlier) the ICJ advisory opinion is not a decision within the meaning of the ICJ statute.

It does not have immediate binding effect on domestic courts or states. The message is clear. Act now, not later. Those who integrate climate risk into strategy and operations early on will not only manage those liability risks, but also create long-term value and resilience. In terms of practical tips for in-house teams, I would say conduct legal audits, embed climate governance at the board and senior management level, align disclosures with internal frameworks, build internal capacity to respond to whatever may come your way in the future.

Elena Lambros:

I really liked that point around integrating ESG and thinking about all of the different frameworks and all of those kind of practical tips that you did, including the one about value creation and making sure you're thinking about that while you think about your liability in this area. James, what are the reflections from you from our worldview in Australia?

James Clarke:

I absolutely agree with those earlier comments and I think from an Australian perspective, companies really shouldn't be lulled into a false sense of security off the back of the Pabai decision. This is going to remain a really important area and in a number of respects a really controversial area I expect.

Companies should be taking care to continue monitoring both legal and social developments very closely and considering how evolving standards might affect their operations, their strategy, and their stakeholder relationships. Companies are then going to need to actually act on that information, including ensuring that the decision-making and the public reporting is sufficiently robust to meet what is now a whole range of applicable legal obligations.

Elena Lambros:

That's a really great point around actually making sure you're acting on the information. Thank you. Erin, what are your reflections?

Erin Eckhoff:

My reflections, and just based on I think even the discussion today, hearing from a number of different jurisdictions, is that we're seeing really a spectrum of where different courts are sitting around the world in recognising a climate duty of care. Although we might be seeing courts at different places on that spectrum, there is overall a trend towards converging and recognising climate duty of care with international courts really pulling ahead and setting those new standards and domestic courts.

Are they going to follow that or are they going to go out on their own with their commentary? Will we see universal climate change duty of care in the next five years? Based on that, the trajectory suggests that there is definitely an increased pressure on that legal recognition and enforcement point. Fonterra is definitely the next case that I will be watching with a lot of interest.

Elena Lambros:

Great, thank you. Thank you all for joining me today. It's been an incredibly fascinating conversation to hear about the different aspects of this decision globally. Thanks again for joining.

Erin Eckhoff:

Thanks, Elena.

James Clarke:

Thank you for having us.

Arne Fuchs:

Thank you, Elena. It was a great discussion.

Elena Lambros:

Thank you for listening to this episode of ESG Matters at Ashurst. I hope you found this episode insightful. To learn more and for a full summary of the recent ICJ opinion, search "ICJ" on the Ashurst website. 

And to subscribe to future episodes of ESG Matters at Ashurst, click on the link in the show notes or search ESG matters at Ashurst on Apple Podcasts, Spotify, or wherever you get your podcasts. While you're there, please feel free to leave a rating or a review. In the meantime, thanks again for listening and goodbye for now.