On 23 February 2023, three NGOs, Oxfam France, Friends of the Earth France and Notre Affaire à Tous (the “NGOs”), announced the start of legal proceedings against BNP Paribas before the French courts, challenging the bank’s energy loans policy under the French Duty of Vigilance Act, in what is said to be the first climate litigation in the world involving a commercial bank.
Several days later, two NGOs launched a second legal challenge against BNP Paribas in the French courts under the same French law, claiming that the bank’s duty of vigilance plan would not provide enough safeguards to prevent deforestation and human rights violations. A decision from the French courts is also expected imminently in a climate case brought against TotalEnergies under the Duty of Vigilance Act.
This goes to show that NGOs are willing to flex their muscles and test the limits of the French Duty of Vigilance Act, but it may also embolden NGOs in other jurisdictions to bring similar challenges against banks and corporates.
As reported in our previous blog post, on 26 October 2022, the NGOs formally put BNP Paribas on notice to stop supporting the development of fossil fuels and abide by its legal obligations under the French Duty of Vigilance Act (Law No. 2017-399 of 27 March 2017) within three months, under the threat of legal action. According to the NGOs (see press release of 23 February 2023), by financing and investing in major oil and gas companies, BNP Paribas would be “Europe’s leading funder of the development of fossil fuels and the world’s fifth largest one, with financing worth $55 billion that were granted between 2016 and 2021”.
The legal basis invoked in the NGOs’ letter of formal notice was the Article L. 225-102-4 of the French Commercial Code (inserted in 2017 by the French Duty of Vigilance Act). This provision requires companies to establish, effectively implement, and publish a vigilance plan to allow for risk identification and for the prevention of (among other things) severe violations of human rights and environmental damage resulting directly or indirectly from the operations of the company and of the companies it controls, as well as from the operations of subcontractors and suppliers. The NGOs also referred to soft law instruments, namely the OECD guides on Due Diligence for Responsible Corporate Lending and Securities Underwriting for BNP Paribas’ funding activities and on Responsible business conduct for institutional investors for its investment activities.
In a nutshell (for more details, see our previous blog post), the NGOs claimed that BNP Paribas is in breach of its duty of vigilance by failing to provide a robust plan to identify, mitigate and prevent environmental and human rights risks arising from its activities.
The NGOs argued that:
- the bank’s risk mapping is incomplete, vague and deficient;
- the bank’s procedures for regular assessment of the value chain in view of the risk mapping is weak;
- the bank’s actions to mitigate risks or prevent serious harm is neither reasonable nor appropriate in view of the urgency of global warming; and
- there is no monitoring of the measures implemented and no evaluation of their effectiveness.
The NGOs demanded that BNP Paribas stop financing the fossil fuel industry and adopt “an oil and gas exit plan” which adequately meets the requirements of Article L. 225-102-4 to the French Commercial Code.
BNP Paribas’ answer to the formal notice and NGOs’ reaction
On 24 January 2023, the BNP Paris group announced that it still has extensive outstanding loans for oil projects, but that the group was already committed to reducing outstanding financing for oil extraction and production by 25% by 2025. The French group explains that it has not financed any oil projects since 2016. It announced that it is now entering in a “new phase of rapid acceleration” and further commits to reduce its outstanding oil extraction and production financing of more than 80% by 2030 (from the current 5 billion euros to less than 1 billion euros), and to reduce its outstanding gas extraction and production financing by 30% by 2030.
The NGOs considered that BNP Paribas’ “public promises” would not be enough to meet the scientific community’s concerns and the 1.5°C target under the Paris Agreement.
In a press release of 23 February 2023, the NGOs announced their legal action against BNP Paribas, dismissing the bank’s response on the following grounds:
- “BNP is overlooking science”: the NGOs contend that the French bank’s answer would not address the climate question and scientific basis of the NGOs’ demands;
- “BNP is ignoring its important responsibility as a funder of the climate crisis”: the NGOs believe that BNP Paribas does not sufficiently recognise their responsibility – through its financing and investment activities – in the worsening of climate change and in maintaining the global economy’s dependence on fossil fuels;
- “BNP is trying to avoid facing its legal obligations”: the NGOs argue that the commitments would be too weak to effectively mitigate the bank’s responsibility in the climate crisis and that BNP Paribas’ duty should be extended beyond its sphere of influence;
- “BNP is hiding unwillingness to take action right now behind a new announcement”: the NGOs are not satisfied with BNP Paribas’ plan to gradually phase-out its outstanding financing for oil extraction and production, and for gas. They require the French bank to immediately halt its financing of fossil fuel.
NGOs’ legal challenge
In the legal challenge, the NGOs have made five requests to BNP Paribas:
- a clear plan that is regularly updated and which presents, analyses and prioritises the serious risks which might result from BNP’s activities in the fossil fuel sector;
- a concrete quantification of the impact of its activities on the risks identified, analysed and prioritised, including an exhaustive account of the greenhouse gas emissions;
- appropriate measures to prevent serious harm and to mitigate risks, in line with BNP Paribas’ commitment to comply with the Paris Agreement objective to limit global warming to a 1.5°C increase, and to reach carbon neutrality by 2050, which include:
- putting an immediate end to their support of the companies that are responsible for the development of new fossil fuel projects;
- the adoption of a plan to exit the oil and gas sectors, in alignment with scientific requirements to reduce fossil fuel production by 2030, with a final exit by 2050;
- a shareholder policy that requires the companies that are active in the fossil fuel sector to refrain from developing new fossil fuel projects and, if they fail to do so within a reasonable timeframe, to divest from these companies;
- a mechanism for the periodic monitoring of the plan’s implemented measures and for the regular assessment of their effectiveness; and
- the establishment of an appropriate alert and reporting mechanism.
The day after the NGOs’ announcement, 600 scientists (including authors of the IPCC reports) wrote to the bank’s board of directors, calling its members to “assume their responsibilities in the face of the current ecological disaster by ceasing all support for the opening of new oil and gas fields”.
The case has been formally launched and a procedural timetable for the next steps in the proceeding will now have to be adopted. The court’s decision is not expected for several months, or even years.
On 27 February 2023, two NGOs (Brazilian NGO Comissão Pastoral da Terra (CPT) and the French association Notre Affaire À Tous) filed a new legal claim in the French courts against BNP Paribas under the Duty of Vigilance Act – this time alleging that the bank has provided financial services (for example, to the Brazilian meat industry) without adequate due diligence of corporations engaged in deforestation, forced labour and indigenous rights violations (see NGOs' press release).
TotalEnergies is also facing another landmark case in the French courts under the Duty of Vigilance Act (see our previous blog post), which was started in January 2020 and a decision is expected imminently, possibly today (28 February).
The court’s decision in the TotalEnergies case will no doubt influence the NGOs’ actions against BNP Paribas, and probably also a number of other climate litigation under other due diligence or civil liability regimes in other jurisdictions.
As mentioned above, this goes to show that NGOs are not only willing to test the limits of the French Duty of Vigilance Act, but it may also embolden NGOs in other jurisdictions to bring similar challenges against other banks and multinationals. In our ESG Outlook 2023, we predicted that climate litigation and greenwashing would be a key global theme this year, and 2023 has already gotten off to a turbulent start in the courts, not just in France.
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