31 March 2022
Disputes Quick Read – 32 of 78 Insights
Disputes Quick Read: ClientEarth v Shell – climate change litigation shifts focus to UK companies
In January 2022, we anticipated that while governments and public authorities have so far been the primary targets for climate change litigation in the UK, companies could be next in the firing line. That shift in focus now appears to be taking place: earlier this month, ClientEarth announced it intends to take legal action against Shell's Board of Directors, by way of a 'derivative' claim on the company's behalf.
In its capacity as a shareholder of Shell, ClientEarth alleges that the directors are mismanaging the risks of climate change through an inadequate energy plan and that this leaves Shell's long-term commercial viability and competitiveness in danger due to the government's Net Zero Strategy. ClientEarth say that this is in breach of the directors' statutory duties to: (i) promote the success of the company; and (ii) exercise reasonable care, skill and diligence (sections 172 and 174 of the Companies Act 2006).
ClientEarth will need the UK court's permission to bring its claim against Shell's directors. In the absence of obvious egregious conduct on the part of the directors, ClientEarth may struggle to get that permission. For example, the court might decide that the question of Shell falling behind in the transition to net zero is a matter for commercial judgement for the directors, rather than a matter justifying the court's intervention.
Despite this, climate change activism by litigation in the UK is clearly stepping up a gear. ClientEarth's proposed action is the first (notable) attempt in the UK courts to hold directors personally liable for failure to properly prepare for transition to net zero. Their announcement could be the start of a shift in focus for climate activists and shareholders alike.
All companies facing climate-related financial risks should bear in mind that activist shareholders will be watching how these risks are managed and may consider a similar kind of derivative claim against the directors if the company's strategy falls short.
This also isn't the first example of climate change activists becoming shareholders of some of the world's 'carbon majors' in order to then bring a shareholder action against the company in whom they hold shares: ClientEarth brought a successful shareholder action in Poland against energy company Enea in October 2018.
In that claim, they challenged Enea's intention to build a new coal-fired power plant, arguing that the new plant would quickly become a stranded asset and was therefore an unjustifiable financial risk to shareholders. The Polish Court agreed and, in August 2019, the resolution authorising construction of the plant was held to be legally invalid.
Whether or not ClientEarth is granted permission, its latest claim has already seen a measure of success through wide-spread press coverage. This coverage has:
- promoted ClientEarth's own climate change agenda
- brought Shell's net zero strategy into public scrutiny
- acted as an example of shareholder activism challenging the strategies and actions of UK companies.
ClientEarth is also using the proposed claim to actively seek support from other shareholders in Shell, particularly institutional shareholders, which ClientEarth suggests are themselves under a fiduciary duty to support the claim and compel Shell to change its strategy. Regardless of the legal merits on which the claim might be based, the reputational impact could be enough to push Shell's Board to act in a way which vindicates ClientEarth's objectives.
Reach out to a member of our Disputes and Investigations team if you want to know more about what this might mean for you.
In this series
Failure to prevent fraud – a new offence?
14 August 2023
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Supreme Court rules that APP fraud victims cannot rely on Quincecare Duty
4 August 2023
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The Law Commission's Consultation Process on the Arbitration Act 1996 – taking stock
21 July 2023
What does the latest decision of the CAT in the Mastercard/Visa proceedings mean for class actions?
10 July 2023
Disputes Quick Read: ClientEarth refused permission to pursue directors of Shell
1 June 2023
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Disputes Quick Read – developments in the fixed costs regime
3 May 2023
by James Bryden
Disputes Quick Read: Service by email – are the rules any clearer?
20 April 2023
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Disputes Quick Read - What do practitioners think about making alternative dispute resolution (ADR) compulsory?
8 March 2023
Disputes Quick Read: What are the litigation trends for 2023?
2 March 2023
Disputes Quick Read: further guidance on witness statement preparation rules
14 February 2023
Disputes Quick Read: A cautionary tale – settlement agreement (un)wittingly releases all claims for fraud
13 February 2023
Disputes Quick Read: Why the UK should join the Hague Judgments Convention 2019
8 February 2023
Disputes Quick Read: extensive information orders granted against crypto exchanges following hack
19 January 2023
Disputes Quick Read: A new approach to giving evidence? WhatsApp with that?
3 October 2022
Disputes Quick Read: Ethereum Merge - what legal issues arise?
22 September 2022
by Ben Jones, Emma Allen
Disputes Quick Read: New obligations on cryptobusinesses to report under the UK sanctions regime
9 August 2022
by Nick Maday
Disputes Quick Read: Disclosure - What information can be redacted?
25 July 2022
Disputes Quick Read: what claims exist when a smart contract is breached?
6 July 2022
by Emma Allen
Disputes Quick Read: New gateway for serving Norwich Pharmacal Orders and Bankers Trust orders out of the jurisdiction
Welcome news for those pursuing fraud claims in the English Courts
28 July 2022
Disputes Quick Read: Defining the duty - the limits of the responsibility assumed by professionals
27 July 2022
by Stuart Broom
Disputes Quick Read: Climate change litigation – successful challenge to government's Net Zero Strategy
29 July 2022
Disputes Quick Read: Judicial Review and Courts Act 2022 – now in force
17 June 2022
Disputes Quick Read: an important reminder of the duty to disclose electronic documents in native format
13 June 2022
Disputes Quick Read: ENRC prevails in claim against former solicitor
26 May 2022
Disputes Quick Read: Climate change litigation update – McGaughey v Universities Superannuation Scheme Limited
31 May 2022
by Multiple authors
Don't lose your keys: Bitcoin developers do not have a duty to assist owners in recovering lost cryptocurrency
4 April 2022
Disputes Quick Read: The new witness statement preparation rules – a year on
5 April 2022
Disputes Quick Read: ClientEarth v Shell – climate change litigation shifts focus to UK companies
31 March 2022
by Multiple authors
Disputes Quick Read: High Court rules that failure to provide adequate data security is not a positive act
21 September 2021
by Multiple authors
Disputes Quick Read: Key changes to the Disclosure Pilot Scheme
13 September 2021
Disputes Quick Read: Judicial Review and Courts Bill – unpacking the UK government's proposed amendments
6 September 2021
Disputes Quick Read: Will litigants be compelled to participate in alternative dispute resolution?
2 August 2021
Disputes Quick Read: Freezing injunctions – maximum custodial sentence imposed for breach
21 July 2021
Disputes Quick Read: The online future of civil justice – the end of the legal profession or the end of legal drudgery?
15 July 2021
Disputes Quick Read: Will the courts change forever post-COVID?
26 May 2021
Disputes Quick Read: One Blackfriars administrators cleared of misfeasance
5 May 2021
Disputes Quick Read: Not your prerogative – the Independent Review of Administrative Law reports its recommendations on judicial review
21 April 2021
Disputes Quick Read: Amendments to the Disclosure Pilot Scheme – a step in the right direction
31 March 2021
Disputes Quick Read: UK Supreme Court rules on the territorial extent of the SFO's powers
26 February 2021
Disputes Quick Read: No dropping anchor – parent company liability for environmental claims
24 February 2021
Disputes Quick Read: What lawyers need to know about new witness statement preparation rules
20 January 2021
Disputes Quick Read: Should you still choose the English courts to have jurisdiction in your international contracts after Brexit?
12 January 2021
by Tim Strong
Disputes Quick Read: Privilege lost in the EU post-Brexit (with exceptions)
23 November 2020
Disputes Quick Read: Law on interest applicable to US dollar awards reaffirmed
16 October 2020
Disputes Quick Read: Care required when drafting SPA claim notices
23 September 2020
by Multiple authors
Disputes Quick Read: Why the modernised LCIA rules are a welcome update
7 October 2020
by Nick Storrs
Disputes Quick Read: COVID-19 and supply chain disruption – key issues
9 April 2020
by Multiple authors
Disputes Quick Read: High Court orders parties to explore options for 5-week remote trial
15 April 2020
Disputes Quick Read: Tomlin Orders – ensuring the confidentiality of settlement terms
27 April 2020
by Multiple authors
Disputes Quick Read: UK's OFSI fines Standard Chartered Bank £20 million for sanctions breaches
21 April 2020
Disputes Quick Read: A different approach to witness evidence
11 March 2020
by James Bryden
Disputes Quick Read: Coronavirus - a growth in virtual courts?
17 March 2020
by Stuart Broom
Disputes Quick Read: Embracing remote hearings – the experience to date
26 March 2020
by Multiple authors
Disputes quick read: climate change activism by litigation
26 February 2020
Disputes Quick Read: Commercial Court's arbitral power shift
21 February 2020
Disputes Quick Read: Court stays evictions during COVID-19 – is this lawful?
2 June 2020
Disputes Quick Read: Will the civil justice system change forever post COVID-19?
16 June 2020
Disputes Quick Read: Retailers reign supreme in Visa and Mastercard proceedings
9 July 2020
Disputes Quick Read: The contra proferentem rule reconsidered?
21 July 2020
Disputes Quick Read: Scope of duty and the SAAMCo counterfactual following Manchester Building Society
3 December 2021
Disputes Quick Read: Facilitating transactions in cryptoassets - Lord Leggatt and the point of commercial law
24 November 2021
by Stuart Broom
Disputes Quick Read: Privy Council clarifies the law on freezing injunctions in aid of foreign proceedings
8 October 2021
Disputes Quick Read: Climate change litigation – what's the latest?
10 January 2022
Disputes Quick Read: Court decisions on the Disclosure Pilot Scheme – the 2021 roundup
20 January 2022
Disputes Quick Read: Assumption of responsibility - tax schemes and investors
22 March 2022
Disputes Quick Read: Dealing in crypto? Be careful what you call it
7 April 2022
by Multiple authors
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