Environmental lawsuits against Shell pick up speed

ClientEarth announced that it has filed a lawsuit against the board members of Shell's parent company at the High Court of England and Wales, in what it has called the world’s first shareholder action against the directors of a company in which it invests. The claim seeks a declaration that the board is not fulfilling its legal duty to adequately manage the company's risks. The claim says that Shell's business model is threatened by climate change and the necessary shift to a low-carbon economy.

Chris Dryland of Pinsent Masons said: “Although ClientEarth has previously brought a claim against the UK government in relation to its net zero strategy, this is the first claim in the UK which it has brought against an organisation such as Shell, and the claim demonstrates that activist groups, particularly ClientEarth, are increasing the pressure on directors and companies.”

ClientEarth is seeking an injunction requiring Shell's board to "adopt a strategy to manage climate risk in line with its duties under the Companies Act." According to ClientEarth, the lawsuit is supported by a group of institutional investors who hold over twelve million shares in the company.

“It was in March 2022 that ClientEarth first indicated that it was bringing a claim against the directors of Shell,” said Michael Fenn, an expert in commercial and corporate litigation at Pinsent Masons. “As expected, it has issued what is called a ‘derivative’ action, where ClientEarth is acting in its capacity as a shareholder to bring a claim against the directors of the company for alleged breaches of duty. However, because derivative actions can be used to bring speculative claims, ClientEarth will need permission of the court before it can proceed with the claim.”

In the UK last year there was a similar derivative claim brought by two university lecturers against the directors and former directors of their pension scheme. “The claim also alleged that the directors were in breach of their duties under the Companies Act 2006, in part because of the scheme’s continued investment in fossil fuels,” Fenn said. “That claim was unsuccessful, and permission of the court was refused. It will be interesting to see whether ClientEarth has more success in gaining permission of the court to continue with its claim. The only thing for certain is that there will be many lawyers and company directors who will be carefully monitoring the outcome.”

The lawsuit against Shell’s board is not the only claim currently brought against the oil company in the UK. Nearly 14,000 people from the Niger Delta areas of Ogale and Bille have also filed a lawsuit against Shell in the London High Court for damage allegedly caused by environmental pollution.

Now the legal dispute has taken a step forward after the Ogale Group's register of claims was filed in the High Court in London at the beginning of February.

The clamaints are trying to hold the oil company responsible for polluting their water sources and destroying their livelihoods. Rivers, lakes and drinking water in the region are polluted with oil. Forests and farmland are also affected. The class action lawsuit alleges that Shell or its Nigerian subsidiary knew about the pollution, but did not take the necessary measures against it.

The 13,652 individuals, churches and schools from Bille and Ogale are calling on the oil company to clean up the oil pollution they believe its operations have caused. They are also demanding compensation for the fact that fishing and farming - the main source of livelihood for many residents of Ogale and Bille - are no longer possible.

According to The Guardian, Shell said it had "done cleanup work and remediation of affected areas, and was working with the relevant Nigerian authorities to prevent sabotage, crude oil theft, and illegal refining which were, it said, the main source of pollution"

In February 2021, the Supreme Court overturned a 2017 decision by the Court of Appeal, making it possible for the lawsuits to be brought in England in the first place. The 2017 ruling had stated that the class actions would have to be heard in a Nigerian court.