Client Earth Challenges UK Court Dismissal of Shell Climate Lawsuit

Client Earth Challenges UK Court Dismissal of Shell Climate Lawsuit

Environmental rights charity- ClientEarth, turned activist Shell investor, is set to contest a London Court’s decision to dismiss its new lawsuit against the energy giant’s board over alleged mismanagement of climate risks.

ClientEarth’s case- filed in February with unprecedented support from institutional investors holding over 12 million shares in the company – was the first to challenge corporate directors over their failure to prepare for the energy transition.

Last week, the High Court of England and Wales had refused to grant permission for the lawsuit to proceed.

The group said it would ask the High Court to reconsider the decision at an oral hearing about the case – the first notable investor lawsuit against directors over the alleged failure to properly prepare for a shift from fossil fuels.

The lawsuit alleges that the Board’s flawed energy transition strategy puts the company’s long-term commercial viability at risk – in breach of its duties under English company law.

Paul Benson, ClientEarth Senior Lawyer said, “This claim is about Shell’s Board adopting a strategy that is fit to manage the serious and significant climate risks facing the company – in line with its legal duties. We respectfully disagree with the terms of the Court’s decision, and in light of the importance of the issues raised by this case will ask the Court to reconsider.”

Shell, which has increased spending on renewable energy and low-carbon technologies, defended by stating that the claim was ‘utterly misconceived’ and that it ignored how directors of complex businesses had to balance competing considerations.

A group of European institutional Shell investors, which owns about 12 million of Shell’s 7 billion shares, has written letters of support for the case.

However, ClientEarth alleged that Shell’s 11 directors have failed to manage the ‘material and foreseeable’ risks climate change poses the company – and that they are breaking company law.

ClientEarth’s underlying claim is to sought an order from the High Court which requires Shell’s Board to adopt a transition strategy that is genuinely Paris-aligned to manage climate risk in line with its duties under the Companies Act. In other words, it is seeking a Court Order requiring the board to adopt a transition strategy aligned with the Paris climate agreement on curbing global warming, and its duties under the UK Companies Act.

The Shell Board is defending the action.