Directors Of Shell Face Potential Shareholder Derivative Action In UK Court

• Published date: 29 March 2022
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Shareholders
• Law Firm: William Fry
• Author: Ms Lisa Carty and Hilary Rogers

Background

In 2019, the environmental group Milieudefensie took an action in the Netherlands alleging Royal Dutch Shell (Shell) violated its duty of care and human rights obligations by failing to take adequate action to curb contributions to climate change. In 2021, the Dutch Court found in favour of the claimants and ordered Shell to reduce its overall emissions by a net 45% by 2030. The court held the level of emissions from Shell, its suppliers and buyers should be brought in line with the Paris Climate Agreement. This potentially far-reaching judgment was the first time that the Paris Climate Agreement was found to impose obligations on private companies.

Potential Shareholder Derivative Action

ClientEarth, the environmental law organisation and a minority shareholder in Shell has taken initial steps in a potential shareholder derivative action against 13 directors of Shell, ClientEarth allege failure by Shell to manage climate risk by not implementing or devising a strategy to achieve the ambitions set out in the Paris Climate Agreement or preparing for the net zero transition.

ClientEarth is attempting to hold the Shell directors personally liable, by alleging breaches of the duty to promote the success of the company and the duty to exercise reasonable care skill and diligence under Section 172 and Section 174 of the UK Companies Act 2006 . Similar provisions can be found in the Irish Companies Act 2014 . ClientEarth is heralding this as the "first ever case of its kind".

Before a the case and proceed to trial, permission from the the UK Courts is required in order to bring a derivative claim on behalf of the...