Press release: 24 July 2023
ClientEarth to appeal High Court decision in case against Shell’s Board
ClientEarth will appeal the dismissal of its landmark lawsuit against Shell’s Board of Directors over climate risk mismanagement.
In an oral hearing on 12 July 2023, ClientEarth asked the Judge to reconsider his dismissal of the claim, which is the first derivative action worldwide to argue that corporate directors should be held personally liable for their failure to prepare for the energy transition.
In a judgment today, the Judge maintained his decision issued on the written papers in May. In light of the importance of the issues raised by this case, ClientEarth will now request permission to appeal.
ClientEarth senior lawyer Paul Benson said: “We are disappointed that the Judge has declined to reconsider his decision. The hearing was the first step towards appeal, which we will now pursue.
“The Court has accepted that climate change poses significant and foreseeable risks to Shell. We firmly stand behind our claim that the Board is currently neglecting to address those risks adequately, to the detriment of its shareholders.”
ClientEarth alleges that Shell’s Board’s flawed climate strategy is inconsistent with the Paris Agreement and jeopardises the company’s future commercial success, in breach of its legal duties under English company law. Institutional investors with over 12 million shares in the company came out in support of the claim, including Nest, the UK’s largest workplace pension fund.
The Board has since doubled down on fossil fuels, dropping its plan to reduce oil production by between one and two percent each year until 2030. It has claimed that to cut production would be “dangerous and irresponsible”, notwithstanding that every energy transition scenario from the International Energy Agency now forecasts a decline in demand.
Benson added: “The Board’s strategy to manage the risks of the energy transition was fundamentally flawed as it was. Now the Board seems to be dropping even any pretence that it will take meaningful action.
“The Board’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 under English law.”
Notes to editors:
- In accordance with standard practice, ClientEarth will initially request permission from the High Court Judge to appeal his decision; if that permission is refused, the decision may be challenged in the Court of Appeal, with the Court of Appeal’s permission.
- London-headquartered boutique litigation firm Pallas Partners is acting pro bono for ClientEarth on the claim. The firm specialises in high stakes litigation, international arbitration and investigations. The firm litigates cutting edge and complex cases, including securities litigation in the UK and Europe. Pallas launched in February 2022.
- ClientEarth filed a lawsuit against Shell’s Board of Directors on 9 February 2023 for failing to manage the material and foreseeable risks posed to the company by climate change.
- The claim argued the Board had breached its legal duties under the Companies Act 2006 by failing to adopt and implement an energy transition strategy that aligns with the Paris Agreement. Although the Board claims its strategy is fully in line with the Paris Agreement, analysis from respected third party institutions (including the Transition Pathway Initiative, World Benchmarking Alliance and Global Climate Insights) does not support this.
- In June, Shell announced plans to keep investing in new oil and gas production as it remained “committed” to its fossil fuel divisions.
- Following the announcement, the Church of England Pensions Board said it would offload its stake in Shell, citing failure to address climate risk.
ClientEarth is a non-profit organisation that uses the law to create systemic change that protects the Earth for – and with – its inhabitants. We are tackling climate change, protecting nature and stopping pollution, with partners and citizens around the globe. We hold industry and governments to account, and defend everyone’s right to a healthy world. From our offices in Europe, Asia and the USA we shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive together.