Permission Refused For Climate-change Activist Shareholder To Bring Derivative Action On Behalf Of Shell Plc Against Its Directors

• Law Firm: Herbert Smith Freehills
• Subject Matter: Corporate/Commercial Law, Insurance, Corporate and Company Law, Directors and Officers, Insurance Laws and Products, Shareholders
• Author: Mr Alexander Oddy, Fiona Treanor and Greig Anderson
• Published date: 29 May 2023

In what is undoubtedly a significant decision for boards seeking to grapple with how to respond to the impact of climate change on their company's business as well as the D&O insurance market, the High Court has refused permission for ClientEarth, a minority shareholder in Shell plc, to continue a derivative action on behalf of the company against its directors (the Directors): ClientEarth v Shell plc & Ors [2023] EWHC 1137 (Ch).

The underlying claim brought by ClientEarth alleged the Directors breached their statutory duties owed to Shell as a result of acts and omissions relating to:

• Shell's Energy Transition Strategy published and updated between April 2021-2022; and
• the Directors' response to an order made by the Hague District Court (Dutch Order) on 26 May 2021 in Milieudefensie v Royal Dutch Shell plc CLI:NL:RBDHA:2021:5339.

As a shareholder seeking to bring a derivative claim in the name of the company, ClientEarth was required to apply for permission to proceed with the action. However, the court ruled...