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What if the Paris Agreement had simply reinvented Privateers 3.0?

By Jean-Marie Valentin, President of Legalcluster, President of the Association de la Filière des Services juridiques et du Droit

This is a new conceptual and strategic challenge for legal and compliance departments.

On September 3, two NGOs, Deutsche Umwelthilfe and Greenpeace, put Volkswagen, Mercedes-Benz, BMW and Wintershall Dea on notice.

They demand from them, on pain of legal action, a formal commitment by the end of September, to stop the production of all combustion vehicles by 2030, as well as gas and oil exploration by 2026.

They are basing their action on the recent success of the NGO Milieudefensie, which in May obtained from a Dutch court a formal demand that Shell reduce its carbon footprint by 45% by 2030.

A success that calls for many others since we are actually witnessing the emergence of a new industry.

If it is difficult to distinguish the causes from the consequences, we can observe two new systemic legal phenomena that feed each other, reinforcing even more the irresistibility of the injunction of responsible growth.

Sustainability has become an asset class...

By requiring investors and economic actors to report ever more strictly by applying imperative standards, the legislator - in the broadest sense of the term - is not only leading to the redirection of capital towards a more responsible economy in the direction of the common good. It leads to the creation of an asset class, to the financialization of ethical concepts and correlatively to their privatization.

Sustainability becomes an investment hypothesis on which every financial actor can bet and speculate.

In a world where norms are increasingly based on the transposition of standards previously agreed upon by private actors, it will become difficult to determine whether the rule we are being challenged with is actually aimed at saving the planet, or at maximizing the performance of certain financial bets.

The question here is not to debate or worry about it. The question is to be informed and to take one's place at the heart of the scrum, to participate in the elaboration of the norm in the direction that seems to us to be the most adapted.

...And litigation too

Another notable phenomenon is that litigation has itself become an asset class through the development of investment funds whose purpose is to finance lawsuits in the hope of making substantial gains. This financialization of litigation, initially driven by the altruistic desire to help group actions against powerful economic interests, has become a veritable industry whose ends are self-sufficient.

The latest report on this market (Global Litigation funding Investment Market report - Research Nester Pvt. Ltd), is particularly edifying. The size of this market is estimated in 2018 at 10.9 billion dollars and expected to reach 22.4 billion dollars in 2027.

And do you know what is the main lever of this announced growth? The expected systematization of NGO lawsuits against companies, on the basis of climate and vigilance regulations.

In short, private interests are speculating by financing NGO lawsuits against companies on the basis of norms that they themselves inspire (both in terms of goals and applicable standards), with the blessing of States that have taken care to recognize them beforehand as "of public utility" or as "having an interest in acting".

The way in which this market opportunity is structured will not make it easy to understand the true intentions of NGOs. And some will recall in this respect the proverb "Who pays the piper calls the tune" - where money, pipe and music are mentioned - which finds a new echo here.

A new « guerre de course » ?

Strangely enough, the only legal concept that comes to mind is the "race war" and its privateers. The latter, private actors, with their financial sponsors and their official letter of commission, made a profession of attacking any commercial ship flying the flag of enemy states, in order to appropriate their cargo. This perfectly legal activity was governed by international regulations so that a "race" could be arbitrated. This should not be confused with piracy.

Everyone will appreciate the significance of this undoubtedly risky comparison according to their own sensitivity. But everyone will agree that this is a new industry, a new economic model and a new risk structure, all of which are legal in nature.

It is essential that legal departments take hold of these issues and rapidly reinforce the sides of the ships for which they ensure security!

The measures to be implemented here are not only defensive, since on the one hand, it is the supposed or real non-compliance with regulations that exposes their "sides" to criticism, thus implying internal transformations. And on the other hand, because these regulations require them to organize, according to adapted modalities, visits of their ship by interested stakeholders, which implies the structuring of new communication channels and collaboration models. This is a subtle balance to be found, which will certainly be enlightened by future case law.

History buffs will be amused to know that the race war was abolished in 1856 by the "Treaty of Paris", signed by 52 States with the notable exception of... the United States!

Would the "Paris Agreement", 160 years later, have created de facto race war 3.0? History will tell us.

This article is an excerpt from the upcoming white paper "Legal and Compliance Functions Facing the Challenges of Sustainable Growth Strategies". To receive it, sign up here


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