Thursday, September 28, 2023
HomeLIFESTYLEClientEarth loses climate strategy court case against Shell | Shell

ClientEarth loses climate strategy court case against Shell | Shell

The environmental law charity failed in its attempt to revive a lawsuit against Shell over the energy company’s climate strategy after the London high court denied permission to sue Shell.

ClientEarth, which owns 27 shares of Shell, argues that the company cannot achieve its goal of net zero carbon emissions by 2050 with its current climate transition strategy, and therefore its directors are in contravention of their fiduciary duties to shareholders.

Judge William Trower initially denied permission to file the lawsuit in May, and on Monday he denied permission to do so again in a written ruling.

The judge stated that ClientEarth’s case “ignores the fact that the management of a business of Shell’s size and complexity will require the directors to consider a variety of competing considerations,” in which the courts should not intervene.

If the lawsuit had been permitted to proceed, it could have paved the way for investors of other companies to sue boards that allegedly fail to manage climate-related risks adequately.

A Shell spokesperson stated, “This is the appropriate result. The court reaffirmed its conclusion that this claim is inherently flawed and dismissed it once more.

“We believe that our board members have always fulfilled their responsibilities and acted in the best interest of the company. This assertion completely disregards the fact that directors of a company as large and complex as Shell must balance a variety of competing considerations.”

Paul Benson, a senior attorney at ClientEarth, stated that the organization was dissatisfied with the ruling and intended to file an appeal.

He stated that Shell’s “refusal to take decisive action to prepare the company for the rapid energy transition jeopardizes its future commercial viability and, we maintain, is a breach of the board’s responsibilities.”

Elaina Bailes of the law firm Stewarts stated, “It is clear that ClientEarth’s real interest in bringing the claim is not for all [shareholders] in this situation, where it is an activist organization with a very small number of shares.

This may have implications for the future use of shareholder claims alleging breach of directors’ duties, as it appears the court will need to presume an ulterior motive if the claimant is a climate activist group.

“It may not be all bad, as the expansion of the discussion regarding how the courts will evaluate similar claims will be beneficial to future activists contemplating how to bring claims involving directors’ duties and boards’ approach to climate change with a higher likelihood of success.

There are also intriguing comments regarding the absence of a requirement for English company directors to ensure compliance with a foreign court order, which could affect the ability of activists to assert that the climate strategies of English companies violate foreign law.



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