Case Commented On: Luciano Lliuya v RWE AG (2025) Hamm Higher Regional Court, 5 U 15/17 OLG Hamm / Case No. 2 O 285/15 Essen Regional Court (see here for an unofficial translation of the decision)
PDF Version: Luciano Lliuya vs. RWE AG: Corporate Climate Liability Through the Lens of the Polluter Pays Principle
This post briefly examines the recent and long-awaited decision rendered by the German Higher Regional Court of Hamm in the Lliuya case. This judicial decision is the first to recognize the potential liability of a large greenhouse gas (GHG) emitter from the energy sector for actual climate-related risks. The decision could have significant practical implications for other large GHG emitters, which have contributed to the climate crisis over the last decades while profiting from their polluting activities. The Lliuya decision signals that legal accountability of carbon majors for the climate-related damage is increasingly likely, and large GHG emitters – not only in Germany but also here in Canada and elsewhere – should consider factoring the risk of legal liability into their business models in the future.
Introduction
In Lliuya, the plaintiff is a Peruvian farmer and mountain guide, who lives in Huaraz, Peru. He filed his suit almost ten years ago, seeking the proportional payment of protective measures against the risk of flooding from a glacial lake located above his property. The defendant RWE, a German energy company, is Europe’s largest CO2 emitter and has contributed to approximately 0.5% of historical global CO2 emissions. The plaintiff grounded his claim on Section 1004 (I) of the German Civil Code (see here):
If the property is interfered with by means other than removal or retention of possession, the owner may require the disturber to remove the interference. If further impairments are to be feared, the owner may seek an injunction. The claim is excluded if the owner is obliged to tolerate the interference.
He argued that RWE’s emissions contributed to global warming and, ultimately, to the impairment of his property. In 2016, the Regional Court of Essen dismissed the claim on causation grounds. The plaintiff appealed the decision. On November 30, 2017, the Hamm Higher Regional Court (an appeal court in Germany) ruled that the claim was conclusive (or legally correct), affirming that RWE could, in principle, be held liable for protective measures under the German Civil Code. The case advanced to its evidentiary phase to prove (i) the risk of property impairment (evidentiary question 1), (ii) the attribution of climate change to the situation and the contribution of the defendant to the impairment (evidentiary question 2). However, on May 28, 2025, in its final judgement, the Appeal Court ruled that the plaintiff had not succeeded in proving a future, imminent impairment of his property. The risk of flooding from the melting glacier was found to be below a 1% probability threshold.
Although the Appeal Court dismissed the plaintiff’s claim, its judgment is considered a milestone in the pursuit of climate accountability for major GHG emitters (see Francesca Mascha and John Peters, “Climate Case, Saul v. RWE, New Era of Accountability”). The judgment not only affirmed that major GHG emitters could, in principle, be held liable for the consequences of the climate crisis but also clearly rejected the key arguments typically put forward by the major GHG emitters to oppose liability in the context of climate change litigation. Furthermore, the Court’s lengthy legal reasoning on these points is significant in advancing a corporate liability theory for climate-related loss and damage under the polluter pays principle.
The decision does not expressly refer to the polluter pays principle. However, the recognition of (i) the potential legal causality between a company’s individual emissions and specific climate damages or impacts, (ii) the foreseeability of major GHG emitters about the negative impact of their activities on the climate system since at least the mid-1960s, and (iii) the possibility of corporate legal liability for climate-related loss and damage from lawful emission activities sets the stage for justifying the accountability of major GHG emitters based on the rationales of the polluter pays principle.
The implications of the Higher Regional Court of Hamm’s decision for corporate climate liability will be analyzed from the perspective of the polluter pays principle as a foundation for holding corporations liable for climate-related loss and damage from their past emissions (known as the backward-looking version of the principle). While elaborating on its legal reasoning, the decision provides important answers to the main limitations of the polluter pays principle in its backward-looking version, often raised by scholars and major GHG emitters in climate litigation. The analysis will focus on the limitations known as the causation objection, the excusable ignorance objection and the justified emissions objection.
Causation Objection
Causation remains the most significant hurdle for a plaintiff to overcome in climate litigation. In climate liability cases seeking adaptation or compensation for loss and damage, the bar is even higher to demonstrate factual and legal causation. In order to hold emitters liable for climate-related loss and damage under the polluter pays principle, plaintiffs must establish a clear causal link between a particular emission activity and a specific damage or impact. Although the fast evolution of climate attribution science is enabling the establishment of several lines of causation from emissions to impacts (in what is called “end-to-end full scope” attribution), there remain some challenges.
In the Lliuya case, the plaintiff argued that RWE’s emissions contributed to the overall concentration of GHGs (source attribution). He also claimed that the higher concentration of GHGs in the atmosphere contributed to global warming (physical attribution) and the faster melting of the glaciers above Lake Palcacocha (event attribution), ultimately increasing the risk of a glacier-lake outburst flood against the plaintiff’s property (damage or impact attribution).
Notably, the Higher Regional Court of Hamm did not advance to thoroughly discuss climate attribution and the key steps in the “end to end” attribution chain (evidentiary question 2). As explained above, the Court dismissed the appeal when addressing evidentiary question 1, concluding that the plaintiff failed to prove a sufficiently concrete and immediate danger to his property (at 95). Notwithstanding, the Court expressly addressed the causation issue, recognizing that causation between RWE’s GHG emissions and the impairment of protected rights is possible to establish in law. It affirmed that RWE is directly responsible for the imminent impairment of the plaintiff’s property through its own action, consisting of the release of CO2 in the process of its energy production (at 55). The decision made it clear that the defendant’s direct responsibility persists regardless of the long causal chain and the fact that it leads to a natural event, such as the glacial lake outburst flood (at 55). In its legal reasoning, the Appeal Court highlighted that “this final natural event does not occur by chance but is to be expected according to the laws of atmospheric physics,” and therefore, it should be predictable (at 55).
The Court also made some important statements in relation to corporate governance and climate liability. The Court acknowledged that RWE, as the parent company, has complete control over the corporate policies of its subsidiaries and, thus, is responsible for the scope 1 emissions originating from the direct combustion of oil and gas from their plants (at 43). As stated in the decision, “as the parent company, it not only knew, knows and approves that the subsidiaries under its control generate energy from fossil fuels and thereby emit large quantities of CO2, but it also caused its subsidiaries to do so through its corporate management decision.” (at 45)
In addition, the decision advanced the discussion of causation in the context of climate change by recognizing that RWE’s GHG emissions and contribution to climate change are significant. Taking a comparative approach, it concluded that the defendant’s alleged share of 0.38% of industrial CO2 emissions worldwide does not appear low (at 52). Under the principle of materiality, the decision emphasized RWE’s prominent position as Europe’s largest single CO2 emitter, whose emissions are comparable to those of industrialized countries such as Spain or Sweden (at 52).
Finally, the decision acknowledged the individual partial liability of major GHG emitters, such as RWE, even though multiple emitters contribute to climate change. The Court affirmed that the plaintiff could claim solely against the defendant as the interferer, even if the defendant is one emitter in a series of industrial CO2 emitters (at 64). It also clarified that the cumulative, remote and long-term nature of the climate-related damage (or risk) does not exclude its liability (at 59).
Excusable Ignorance Objection
The second limitation to the application of the polluter pays principle in the context of climate liability is the excusable ignorance objection, which states that emitters should not be held liable for climate-related loss and damage if they were unaware of the adverse effects of their past emissions.
The Court’s legal reasoning in Lliuya rejoined this objection. The decision makes the important finding that major emitters could reasonably foresee that their anthropogenic GHG emissions would contribute to global warming. In this regard, the decision remarkably drew a line to determine the exact moment these major emitters acquired that knowledge. The Court determined that the foreseeability of the consequences of fossil fuel business models dates back to 1965, according to scientific measurements of global carbon dioxide concentration (commonly known as the “Keeling Curve”) and scientific evidence from the late 1950s linking the combustion of coal, oil, and natural gas to the undesirable consequences of global warming (at 49). Based on these determinations, the Court stated that RWE could have recognized that the CO2 emissions from its coal-fired power generation were and are capable of contributing to the melting of glaciers because of anthropogenic climate change (at 50).
The Court also emphasized that companies the size of the defendant are required to continuously monitor the progress of scientific and technological developments in the relevant field (at 50). Furthermore, in its decision, the Court also affirmed that, as a large industrial operator of coal-fired power plants with scientific and legal expertise, the defendant is capable of assessing and controlling the risk of violating legal interests and should bear responsibility for the risk if it materializes (at 56).
Justified Emissions Objection
The Court’s decision also addressed the arguments underpinning the justified emissions objection to an application of the polluter pays principle. This objection argues that justified or necessary emissions do not trigger duties of compensation under the polluter pays principle. The Court offered three responses to this position.
First, the Court affirmed that the permits and approvals from public authorities for the operation of the defendant’s power plants, as well as the certificates under the Greenhouse Gas Emissions Trading Act (TEHG) do not exempt the defendant from liability (at 79). The German TEHG implements the EU Directive on the European Emissions Trading Scheme at a national level. According to the Court, this regulatory approval for the defendant’s emission activities does not prevent affected third parties (such as the plaintiff) from seeking liability, as they are not required to tolerate a significant threat to their property (at 79). In addition, the Court concluded that to protect endangered legal interests, higher demands – other than the ones in public law provisions – are required (at 80). On a temporal perspective, the decision clarified that the TEHG had no legal effect prior to its entry into force in 2004 (at 79). Thus, emissions from 1965 and 2004 cannot be justified under the TEHG.
Second, the Court found that section 1004 (I) of the German Civil Code does not require fault on the part of the emitter (at 66). As stated in the decision, the defendant’s view wrongly focuses on the wrongfulness of the action rather than on the (unlawful) result brought about by the action – in this case, the impairment of the plaintiff’s property (at 79).
Third, the Court rejected the typical argument of major GHG emitters that their emitting activities are necessary to supply energy to consumers and serve the common good. The Court recognized that it is true that an adequate energy supply is of the greatest interest to Germany and its inhabitants. However, it does not mean that energy must be generated by the defendant or by burning fossil fuels (at 81). Moreover, it does not imply that the plaintiff, a Peruvian citizen, is obliged to tolerate an imminent and significant impairment of his property in Peru, especially when he has no share in the energy generated in Germany (at 81).
Conclusion
The Higher Regional Court of Hamm’s decision in the Lliuya vs. RWE case is indeed a historic ruling. Even though the Court dismissed the claim on evidentiary grounds, it reinforced some important legal principles regarding the potential climate accountability of carbon majors. Overall, the judgment offers a significant opportunity to advance theories of corporate liability for climate-related loss and damage. More specifically, the decision sheds light on the polluter pays principle as a legal basis to justify the liability of carbon majors either for damages or risks associated to climate change.
While the Court provides substantial legal reasoning to respond to key limitations typically raised against the polluter pays principle in the literature and case law, the decision does not entirely address the problems associated with applying the polluter pays principle in the context of corporate climate liability. For example, it does not address the intergenerational objection nor provide a detailed resolution to the question of the responsibility of existing corporations for their past emissions (scope 1, 2 and 3 emissions).
Nonetheless, the Higher Regional Court of Hamm’s judgment is a landmark step and hopefully is the basis for future judicial decisions which fully implement the polluter pays principle as a meaningful legal and policy tool for fairly allocating liability for the costs of climate change among the largest GHG emitters.
This post may be cited as: Flavia Vieira de Castro, “Luciano Lliuya vs. RWE AG: Corporate Climate Liability Through the Lens of the Polluter Pays Principle” (19 August 2025), online: ABlawg, http://ablawg.ca/wp-content/uploads/2025/08/ Blog_FC_Luciano.pdf
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