Publication
Government Investigations in Singapore 2025
We have contributed the Singapore chapter of Getting the Deal Through, Government Investigations 2025.
United Kingdom | Publication | November 2023
The English High Court has now twice refused permission to allow a claimant to bring a shareholder action (known as a derivative claim) on behalf of Shell plc (Shell) against its directors - once in May then again in July 2023. ClientEarth applied for permission to appeal the July 2023 High Court judgment with the Court of Appeal, but in November 2023 the Court of Appeal refused permission.
What is the claim about?
The claim was brought by ClientEarth, an environmental organisation, which holds a small number of shares in Shell. ClientEarth claims that Shell's strategy to manage its climate change risk is insufficient, including in relation to the company's emissions reduction targets.
What is the legal basis of the claim?
The claim was brought as a derivative action under Part 11 of the Companies Act 2006 (the Act). Section 260(3) of the Act allows shareholders to bring a claim on behalf of a company against its directors in relation to actual or proposed unlawful acts or omissions, such as breaches of their statutory directors' duties.
There is a two-stage process to derivative claims: a court must first grant permission for the claim to continue before a substantive assessment of the merits. This process reflects the fact that derivative claims are only permissible in limited and restricted circumstances, given the foundational company law principle that a company's directors - not its shareholders - are charged with corporate decision making.
The legal basis for ClientEarth's claim is that Shell’s directors allegedly have six specific legal duties in relation to climate change mitigation which are incidental to their general duties under the Companies Act 2006 (specifically ss. 172 and 174: to promote the success of the company, and to exercise reasonable care, skill and diligence). ClientEarth also alleges that the directors are subject to a duty under English common law and Dutch law to ensure that the orders of domestic and foreign courts are obeyed.
ClientEarth contends that the directors have breached these duties in three ways: (1) by allegedly failing to set an appropriate emissions target; (2) by allegedly failing to put in place a strategy to achieve net zero targets; and (3) by allegedly failing to ensure compliance with a Dutch Court order in the landmark Milieudefensie v Royal Dutch Shell case (see our previous briefing on this case).
What has the claimant asked the court to do?
ClientEarth is seeking the following remedies:
What did the High Court decide?
In its May 2023 decision, the Court concluded that ClientEarth had not put forward a prima facie case for permission to continue its derivative claim and dismissed the claim subject to ClientEarth's right to apply for a separate oral hearing:
The 24 July 2023 High Court judgment consolidates, and repeats to a significant extent, the original May 2023 judgment. However, there are a few key points worth noting:
Takeaways
In its decisions, the Court did not accept arguments that directors owe specific, climate-related, legal duties to the company arising from their statutory duties. In so doing, and in keeping with relevant case law, the Court demonstrated a reluctance to interfere in strategic corporate decision making, particularly in the context of a global corporate group with highly complex operations where directors are required to weigh up many competing considerations. This approach was affirmed by the Court of Appeal when it declined to grant ClientEarth permission to appeal the High Court decision in November.
Nonetheless, the case is demonstrative of a global trend of ESG-related claims against companies. Claimants continue to examine how existing legal frameworks in jurisdictions across the globe may be used to determine liability for companies and directors alike to ultimately influence corporate strategy. This trend is unlikely to abate given the continued prominence of ESG in legal and political discourse globally.
The full judgments are available here (May 2023) and here (July 2023).
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We have contributed the Singapore chapter of Getting the Deal Through, Government Investigations 2025.
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