DENMARK Trends and Developments Contributed by: Jacob Skude Rasmussen, Catherine Schutz and Alexander Højmark, Gorrissen Federspiel
Impact of ESG dispute trends on the insurance market There is an open question regarding how the insurance market in Denmark will respond to the rise in ESG disputes. Currently, it is not typi- cal to see ESG disputes explicitly included or excluded from coverage in, for example, a War- ranty & Indemnity (W&I) insurance policy. With the expected increase in these disputes, how- ever, insurance companies may have to adopt a strategy of either including these disputes in order to remain competitive and attractive to potential insurers, or excluding these disputes as they are too unpredictable or costly. There could also be a rise in ESG-related dis- putes involving insurance companies. Buyers who have purchased W&I insurance in connec- tion with a transaction may prefer to make an insurance claim if they believe an ESG-related warranty has been breached, rather than bring- ing a claim directly against the seller; if the claim is denied by the insurer, a dispute would most likely ensue. AI in Litigation Introduction As artificial intelligence (AI) continues to advance, its potential impact on litigation is gaining atten- tion in Denmark, as AI’s application within the legal field offers the possibility of streamlining various processes. The use of AI in litigation is not currently regulat- ed under Danish law. However, in recent years, Denmark’s legal system has seen a trend toward increasingly large and more complex civil cases. AI may help mitigate some of these challenges by automating tasks and optimising workflows, thereby potentially reducing litigation costs and improving efficiency.
These kinds of disputes are expected to increase over the coming years. At first, given that these ESG clauses are relatively new, there may be more disputes in court or arbitration because interpreting these clauses will be a new exer- cise subject to little precedent. Afterwards, these cases may increase as more and more prece- dent is developed. Furthermore, companies may interpret their new ESG obligations under the EU directive or otherwise as imposing a requirement on them to pursue claims when they believe ESG clauses have not been adhered to. Rise in shareholder and investor ESG suits In recent years, some NGOs have adopted a strategy to try and enforce improved ESG prac- tices within corporations, whereby NGOs pur- chase shares in companies to bring shareholder suits alleging that the companies are not meet- ing ESG obligations. One example is the NGO ClientEarth, which brought a derivative share- holder lawsuit in the UK against the board of Shell, arguing that the board breached its duty by failing to manage the risk posed by climate change. The UK High Court dismissed the case in May 2023, which was upheld on appeal in January 2024, but this does not mean that NGOs will stop trying this strategy to achieve ESG goals, and this type of litigation may be attempted by Danish NGOs as well. More generally, however, ESG investing is also becoming more and more widely accepted, particularly in Denmark, and investors with sig- nificant portfolios, such as pension companies, are increasingly building ESG funds into their strategies. These investors may be more willing to adopt model ESG clauses in their share pur- chase agreements and shareholder agreements, and may be more proactive in bringing suits if they allege these clauses have not been adhered to, given their overall mission.
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