An environmental law charity has lost an attempt to revive a lawsuit against Shell over its climate strategy after the high court in London refused permission to bring a case against the energy company.
ClientEarth, which holds 27 shares in Shell, argues that the company cannot achieve its aim of net zero carbon emissions by 2050 with its current climate transition strategy, and its directors are therefore breaching their duties to shareholders.
Its lawsuit was initially rejected in May by Judge William Trower, who again refused permission to bring the case in a written ruling on Monday.
The judge said ClientEarth’s case “ignores the fact that the management of a business of the size and complexity of that of Shell will require the directors to take into account a range of competing considerations”, in which the courts should not interfere.
If the lawsuit had been allowed to proceed, it could have opened the door for investors in other companies to sue boards that allegedly fail to adequately manage climate-related risks.
A Shell spokesperson said: “This is the right outcome. The court has reaffirmed its decision that this claim is fundamentally flawed and has, once again, dismissed it.
“We believe our directors have always complied with their duties and acted in the company’s best interest. This claim entirely ignores how directors of a business as large and complex as Shell must balance a range of competing considerations.”
Paul Benson, a senior lawyer at ClientEarth, said the charity was disappointed with the decision and intended to pursue an appeal.
He said Shell’s “refusal to take decisive action to prepare the company for the fast-advancing energy transition puts Shell’s future commercial viability at risk and, we maintain, is in breach of the board’s duties”.
Elaina Bailes, at law firm Stewarts, said: “Significantly for future climate cases, the judge [said] that in this situation where ClientEarth is an activist organisation with only a very small number of shares, there is a clear inference that its real interest in bringing the claim is not for all [shareholders]. That is potentially significant for the future use of shareholder claims alleging breach of directors duties, as it appears the court will have to assume an ulterior motive if the claimant is a climate activist group.
“It may not be all bad, as the further expansion of the discussion around how the courts will assess similar claims will be helpful to future activists considering how to bring claims involving directors’ duties and boards’ approach to climate change with a better chance of success. There are also interesting comments regarding there being no duty for English company directors to ensure they obey a foreign court order, which could impact activists’ ability to allege English companies’ climate strategy breaches foreign law.”
