In the context of climate change, conflicting legal claims are being articulated and adjudicated about who is owed reparations. Vulnerable individuals and states, primarily from the Global South, have advanced arguments in various forums that they are owed reparations or compensation for the harms caused by excessive emissions of high-emitting states or corporations. Yet concurrently, fossil fuel companies are utilizing international investment law and arbitration to seek compensation for government policies that promote a transition away from fossil fuels.
This essay reads two climate cases to interrogate who is considered to be entitled to what reparations for which harms: firstly Luciano Lliuya v. RWE AG, in which a Peruvian farmer sued Germany’s largest energy producer; and second, Rockhopper v. Italy, in which a British company sued Italy for banning oil production concessions of its coastline. While there are many differences between these cases—including forum, causes of action, actors, and applicable law—it is also instructive to read them together. Together, these cases demonstrate the asymmetry in available legal mechanisms—where fossil fuel companies are entitled to protection under legally binding treaties, but climate-affected communities must rely on politically contingent and legally fragile avenues for redress. The international legal order thus reflects a structural bias that prioritizes corporate compensation over climate justice, protecting fossil fuel companies’ expected profits while creating legal and procedural barriers for climate victims seeking reparations.
The Case for Climate Reparations
Climate change is already having devasting effects around the world. The projected economic cost of climate-related loss and damage is estimated to be US$290–580 billion annually by 2030, with the vast majority of these impacts effecting communities in the Global South.Footnote 1 This has prompted strong calls for climate reparations.Footnote 2 Within the international climate regime, demands for climate reparations were persistently resisted, evaded, and avoided for decades. Years of advocacy has led to the operationalization of a loss and damage fund;Footnote 3 however, the amounts pledged remain manifestly insufficient.Footnote 4
Unsurprisingly, impacted communities and climate justice activists are increasingly turning to international, domestic, and transnational climate litigation to seek reparations for climate-related loss and damage.Footnote 5 Such legal claims for reparations face formidable legal, evidentiary, and practical barriers due to inequalities in power, financial resources, and specialist expertise. There are also significant challenges in demonstrating jurisdiction, justiciability, standing, causation, and in attributing specific harms to individual polluters.Footnote 6 For example, many climate-vulnerable states have made submissions to the International Court of Justice (ICJ) arguing that its advisory opinion on the Obligations of States with Respect to Climate Change should recognize climate reparations.Footnote 7 Yet, these claims have been rejected by major emitters, who as Anne Orford and Lavanya Rajamani show, have sought to limit the applicability of general principles of international law.Footnote 8
The challenges in legally pursuing climate reparations, despite their compelling moral basis, demonstrates how liberal international law has “erected barriers against reparations for historical injustices that persist in present-day racial and ecological discrimination.”Footnote 9 Antony Anghie has drawn attention to how there are actually “two systems of law dealing with reparations.” He has shown how one such system, the “Third World system” of reparations, remains “nascent and uncertain,” while in contrast, the less-recognized “Western law of reparations” is “established and operating with great effect and consequence.”Footnote 10 This creates a structural bias, where reparations are continually paid by the Third World to the First World, while Third World claims for reparations stemming from historical harms are persistently blocked and denied. This essay explores this structural bias by examining reparation claims against and the reparations claims made by large corporate emitters, the so-called “carbon majors.”
Climate Reparations and “Carbon Majors”
Climate science is unequivocal about the need to stop fossil fuel expansion and urgently and equitably phase out fossil fuels.Footnote 11 There is a growing wave of litigation targeting the “carbon majors.” Over eighty climate lawsuits have been filed against the largest oil, gas, and coal producing corporations, with 38 percent of those cases seeking damages.Footnote 12 There is a strong moral case for demanding reparations from these companies, given that they have made staggering profits from polluting activities while also promoting misinformation and influencing policy to protect their interests.Footnote 13 There have been various efforts to quantify the corporate reparations owed, with one recent study, based on a “social cost of carbon” analysis, concluding that the twenty-one largest fossil fuel companies owe US$5.4 trillion in reparations between 2025–2050, or US$209 billion annually.Footnote 14
Simultaneously, however, fossil fuel companies are already utilizing international investment law mechanisms to seek compensation if governments implement climate policies that might impact their future profits. This has sparked growing concern that international investment law might delay and obstruct a rapid and equitable transition.Footnote 15
Luciano Lliuya v. RWE AG
Due to the challenges in seeking climate reparations in international law, plaintiffs from the Global South are currently seeking compensation from “carbon majors” in domestic courts of the Global North. The first of these transnational tort cases to be finalized is Luciano Lliuya v. RWE AG, brought by Peruvian farmer, Saúl Luciano Lliuya, against Germany’s largest energy producer, Rheinisch-Westfälisches Elektrizitätswerk Aktiengesellschaft (RWE AG). The plaintiff sought damages from RWE to cover the costs of urgent protective measures for his home in the city of Huaraz, which lies in the flood path of the glacial lake, Lake Palcacocha. He alleged that the volume and surface area of the lake has significantly increased due to climate-induced glacier melt and that a new dam and drainage system, costing US$4 million, is needed to mitigate these risks. He argued that RWE should pay a pro rata basis of these costs based on its contributory share to global emissions—namely, 0.47 percent of global emission between 1751 to 2010—amounting to compensatory damages of €17,000 (US$8,239). A similar legal theory underpins two other pending climate accountability cases, Hugues Falys et al v. Total Energies in Belgium and Asmania et al v. Holcim in Switzerland.
Lliuya initially filed for declaratory judgment and damages in the District Court of Essen, Germany in 2015. His claim is based on Section 1004 of the German Civil Code (BGB), which states that “[i]f the ownership is interfered with by means other than removal or retention of possession, the owner may require the disturber to remove the interference.” In December 2016, the District Court Essen dismissed the claim, finding that RWE could not be considered a “disturber” due to the lack of clear causation and that claims about greenhouse gas emissions were insufficient to establish legal causality.
In November 2017, the Higher Regional Court of Hamm, in a historic decision, upheld Lliuya’s appeal and found the lawsuit to be both admissible and conclusively justified and that there was “sufficient legal interest to bring proceedings.”Footnote 16 The court noted that “[i]t comports with the principles of the legal system that even a party who acts lawfully must be liable for property damage caused by him.”Footnote 17 At that stage, the judge suggested an out-of-court settlement, which was turned down by the plaintiff and his lawyers, who insisted “[t]his is a matter of precedent.”Footnote 18 The case thus entered an evidentiary phase.
The first set of evidentiary questions related to whether: (1) there is a “real and imminent risk” of serious threat of harm from flooding and/or mudslides to the plaintiff’s house; and (2) whether potential or existing safely measures on the house are suitable to avert the danger in the event of flooding. In 2020, the court decided not to rely solely on the party’s expert witnesses, but to appoint its own. In May 2022, judges from the Hamm Regional Court, legal advisors, and court-appointed experts went to Peru for a “strategic visitation.”Footnote 19 Between March 17 and 19, 2025, hearings were held on the preliminary evidentiary questions. On May 28, 2025, the court dismissed the plaintiff’s appeal because it found that there was no concrete danger to his property.Footnote 20
Although his case was dismissed, the plaintiff and his legal team celebrated the ruling as “mak[ing] legal history” because the “judges confirmed that major emitters can be held liable under German civil law for the consequences of climate change.”Footnote 21 The court’s legal reasoning affirmed that Section 1004 BGB can apply transnationally in climate cases, that RWE’s emissions are globally significant, that civil liability can arise from lawful polluting activity, and that holding emitters liability does not create a competitive disadvantage but reflects a value-based legal system. While Lliuya v. RWE has created a powerful climate accountability precedent by “expand[ing] the legal conception of neighbourliness to encompass relations across the planet,”Footnote 22 it also starkly shows the structural barriers, financial costs and evidentiary burdens faced by climate-vulnerable individuals seeking climate reparations through climate litigation.
Rockhopper v. ItalyFootnote 23
One of the first investment law arbitrations that implicates climate policy is Rockhopper v. Italy.Footnote 24 In April 2017, UK company Rockhopper filed a request for arbitration against the Italian Republic, alleging breaches of the fair and equitable treatment standard in Article 10(1) and the obligation not to unlawfully expropriate in Article 13 of the Energy Charter Treaty.Footnote 25 The case arose because Italy introduced a categorical ban on oil extraction within twelve nautical miles of its coast. As a result, Italian authorities denied Rockhopper’s permit application. In August 2022, the International Centre for Settlement of Investment Disputes (ICSID) tribunal awarded Rockhopper €240 million in damages.Footnote 26
A key question was whether there had been an expropriation. Rockhopper argued that Italy’s decision to deny the production concession application amounted to an expropriatory measure. Rockhopper’s argued that, according to Italian law, they should have been awarded a production concession fifteen days after the Italian Ministry of the Environment issued a decree on August 7, 2015 affirming that the project had duly satisfied the requirements for “environmental compatibility.” Thus, they claimed that from August 29, 2015, they had a “vested right to the subsequent grant of a production concession.”Footnote 27 In response, Italy argued the claimant’s “extractive business” had never started and thus “could not be expropriated.” The Tribunal found in Rockhopper’s favor.
Damages were also contentious. The Tribunal considered three approaches for quantifying damages. Italy argued that damages should be calculated using either a “sunk cost approach” (€2 million) or a “market-based approach” (€36 million). Rockhopper argued instead that a discounted cash flow approach, based on future returns on investment, should be used, as this was the dominant methodology for valuation in the oil and gas sector. Italy opposed using a discounted cash flow approach, arguing that any such valuation would be “inherently speculative,” especially because the project was still at the appraisal stage. The Tribunal acknowledged the problems with using a discounted cash flow approach but adopted a modified discounted cash flow model without mentioning the broader context of the climate crisis. Yet, as Toni Marzal has argued, “the climate emergency makes the case against discounted cash flow even more compelling” given that future risks are “of a radically incalculable nature.”Footnote 28 Problematically, the Tribunal’s calculations of damages seemed to assume the continued future extraction of fossil fuels, even though such a projected future is fundamentally incompatible with a safe climate.
Conclusion
There are many differences between the two cases discussed, including forum, cause of action, actors, and the applicable law. These differences arise because the international legal order provides very limited legal avenues to climate-vulnerable individuals seeking reparations from corporate emitters compared to the legal avenues available to corporate emitters seeking compensation from states. Reading these cases together thus illuminates a persistent structural bias in the international legal order that exacerbates, rather than redresses, existing climate injustice. Ultimately a climate polluter was granted compensation while a climate-vulnerable individual was not.
One of the elements that reproduces this structural bias is the way some claims or arguments are deemed “political” while other claims or arguments are deemed simply a “technical” application of the law. In Rockhopper, the Tribunal was careful to stress that the arbitration was not concerned with questions about whether offshore oil should be drilled and the broader “environmental debate, which is of a civic or political character.”Footnote 29 Rather, it emphasized that the arbitration was simply concerned with the “legal issue at hand, namely, whether compensation is due to a foreign investor in respect of its investment.”Footnote 30 Thus, the award of compensation to Rockhopper was presented simply as a technical application of established principles of law, even though both the characterization of the right and the calculation of damages involved highly political assumptions.
In contrast, plaintiffs in climate accountability litigation persistently encounter the political questions doctrine and arguments that only lawmakers, not the judiciary, should make laws about climate harms. Lliuya insisted he is seeking only the application of established principles of law to the novel, transnational context of climate change. However, RWE objected that climate change is a “global political issue that requires solutions at national and international levels” and that because it is impossible to file a suit against every emitter, a “pro rata claim” is not appropriate.Footnote 31
Reading these cases together also highlights the centrality of the global political economy of property—and the violent colonial histories of racialized dispossession that produced it—to debates on climate reparations. Unlike many other climate-vulnerable people in the Global South, Lliuya had standing to bring his case because he had formalized evidence of ownership of his home. However, because his property interests are threatened by the actions of a multitude of actors, any claim for contributory damages will only award him a fraction of the costs of taking emergency action to prevent immediate harm to his property. In contrast, the Tribunal in Rockhopper did not just protect existing property rights but arguably “constituted new rights for the fossil fuel company” by “equating an alleged right to obtain a production concession to property rights that could be expropriated.”Footnote 32 Anghie has argued that discussions of reparations “must begin by engaging with the process by which the world was transformed into property and by confronting the historical fact of the unprecedented dispossession that followed.”Footnote 33 Similarly, a climate justice-oriented approach to reparations in the climate context must not take the global political economy of property—with its racialized inclusions and exclusion—as given, but must also interrogate how legal regimes of property produce and reproduce climate injustice.
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