Banning climate lawsuits could risk billions

Comment: On Monday morning, the window for public submissions on the Climate Change Response (Tort Liability) Amendment Bill closed. It had been open for barely a week.

Oral hearings were compressed into a single day of five- and ten-minute slots, and the Government is expected to advance the Bill under urgency. For a measure of this magnitude, the process itself tells a story: this is a law its promoters would rather not have examined.

The Bill would retrospectively extinguish Smith v Fonterra, the live proceeding that the Supreme Court unanimously allowed to go to trial, and grant greenhouse gas emitters blanket immunity from climate-related tort claims. The immunity extends expressly to overseas investors, offers no compensation for the rights it removes, and applies whether or not an emitter has complied with any other law.

We write this together from opposite ends of the world: one of us from Aotearoa, after decades analysing New Zealand’s trade and investment agreements; the other from the Netherlands, from inside the civil society bodies that monitor the European Union’s trade agreements.

Neither of us comes to this as a defender of the free trade agreement between New Zealand and the European Union – but it is very relevant to this climate torts bill that is now proceeding through Parliament.

One of us has given evidence to the Waitangi Tribunal’s climate change inquiry that the Crown’s actions fall far short of its Tiriti o Waitangi and trade agreement obligations; the other has spent years documenting how weakly the EU enforces the sustainability commitments in its agreements. We know this agreement’s flaws better than its cheerleaders do. 

That is exactly why New Zealanders should take what follows seriously: the one commitment in the deal with real consequences attached is the one the Government has chosen to test through this climate bill.

Seen from Aotearoa New Zealand, the bill is a constitutional event. It legislates executive fiat over both the courts and Te Tiriti o Waitangi, and it does so against the Government’s own advice. Ministry of Justice officials recommended keeping the status quo and found no evidence that the litigation causes the business uncertainty the Bill claims to cure.

The measure follows corporate lobbying that the Prime Minister’s Office tried to keep from the public record, handling the Chief Ombudsman has found unreasonable.

And it engages New Zealand’s trade commitments directly: the agreement with the European Union prohibits weakening environmental protection in order to encourage trade or investment, and the Government’s own regulatory impact statement and ministerial announcements state the bill’s purpose in exactly those terms.

Officials assessed the bill’s consistency with New Zealand’s trade agreements; those assessments were redacted from the published documents. That is telling in itself.

Seen from Europe, the risk is less abstract than New Zealanders may assume. Sustainability chapters in trade agreements were decorative for a long time. This one is different in a single, decisive respect: it is the first European Union trade agreement in which failures to uphold Paris Agreement commitments can ultimately lead to trade sanctions. Both governments signed it, ratified it, and have claimed credit for its benefits ever since.

The machinery around it is real. In May, the EU’s civil society advisory group under the agreement discussed whether New Zealand’s recent policy choices should be assessed against the non-regression provisions; the record of that meeting is public.

The European Commission operates a formal complaints channel, the Single Entry Point, through which civil society organisations can raise breaches by trading partners, and the EU has used such tools before, taking South Korea to a panel over labour commitments and winning.

Environmental civil society organisations in Europe may resort to that mechanism. The United Kingdom, meanwhile, is already reported to be examining whether New Zealand’s oil and gas measures breach its own free trade agreement.

What would happen if that path were taken? The agreement itself sets out the steps. Any organisation can lodge a complaint with the Commission’s Single Entry Point. If taken up, the matter goes to Wellington through the agreement’s committees, then formal consultations, and, failing those, an independent panel of experts whose public report the parties are obliged to act on.

Because this agreement treats the Paris Climate Agreement as an essential element of the trade relationship, a serious failure to meet climate obligations can ultimately lead to the suspension of trade concessions.

This is not a mere courtesy the Commission may quietly shelve: complaints are assessed against published criteria, complainants must be answered, and the Commission answers in turn to the European Parliament and the European Ombudsman. None of it is quick, and we will not pretend otherwise. But scrutiny begins the day a complaint is lodged: on the public record, in Brussels, attached to New Zealand’s name, until it is resolved.

At Monday’s hearings, the bill’s intended beneficiaries made the case for it themselves. Z Energy tabled an economic report, commissioned by the defendants for the litigation and kept behind legal privilege until this week, modelling what it would cost if the courts ordered an immediate move to net zero. The answer, unsurprisingly, was billions.

Three things should be said about that. First, the report prices a remedy no court has granted and none is obliged to grant; remedies in tort are discretionary precisely so that judges can weigh economic and social consequences, and the substantive hearing has not yet begun.

Second, it answers a different question from the one the bill poses: the bill does not moderate an extreme remedy, it extinguishes every climate-related claim, however modest, retrospectively and without compensation.

Third, it proves the point it was meant to bury. A defendant-commissioned study arguing that legal accountability threatens investor value, released in support of a bill whose stated purpose is certainty for investors, is further evidence of exactly the purpose New Zealand’s trade agreement prohibits.

And if billions are to be the measure, honesty requires counting both columns of the ledger: the modelled cost of a remedy that may never be ordered, against the real and present value of preferential trade access that the bill puts at risk.

This is where the larger picture comes in. The New Zealand Government measures its success in trade agreements and celebrates the EU agreement as delivering tariff savings to exporters every day. It is New Zealand’s compliance with that agreement, and the benefits that depend on it, that the bill now puts in question.

The contradiction runs deeper still. The bill is another regressive measure winding back the country’s commitments under the Paris Agreement, announced days before New Zealand voted at the United Nations to endorse the International Court of Justice’s opinion on states’ climate obligations. In Europe, the two acts are read together.

The bill only makes sense as a bet: that trade treaty partners will notice and do nothing.

Everything above suggests that bet is short-sighted.

New Zealanders deserve to know that the cost of this law will not be confined to the courtroom it empties.

A government that legislates immunity for its largest emitters does not just fail its own courts and communities. It spends the credibility on which its trade, and its word, depend.

And it takes the risk that Europe will test whether the trade agreement’s climate commitments have any teeth.