High Court confirms refusal of permission for ClientEarth derivative action against Shell directors

In the closely-watched proceedings brought by climate-change activist ClientEarth against Shell plc, the High Court yesterday confirmed its earlier decision to refuse ClientEarth permission to continue its derivative action: ClientEarth v Shell plc [2023] EWHC 1897 (Ch). ClientEarth, a minority shareholder in Shell, is seeking to bring a derivative claim in Shell's name, to challenge the directors’ response to the risks posed to Shell's business by climate change.

Mr Justice Trower dismissed the application on the basis that, in both its written and oral submissions, ClientEarth has failed to establish a prima facie case for granting permission, as required by s.261(2) of the Companies Act 2006 (CA 2006). Like the court’s initial decision (outlined in our previous blog post), the present judgment shows that it will be difficult for environmental and other campaign groups to use the derivative action procedure to challenge directors’ strategic and long-term decision making. The court will not generally interfere in company management decisions, particularly where they require directors to balance competing considerations. Nor is the court likely to grant permission where it considers that the action has been brought for an ulterior purpose – which may be a ready inference where the applicant is a campaign group with a small shareholding.

The earlier decision refusing permission was made on the papers. ClientEarth then exercised its right under CPR 19.15 to ask the court to reconsider the decision at an oral hearing. The present judgment was given following the oral hearing. It consolidates the original judgment and therefore repeats it to a significant extent. In this post we do not repeat all of the messages from the original judgment but instead focus on the additional points of substance or emphasis in the most recent decision.

ClientEarth has announced that it will seek permission to appeal the decision.

For a more detailed analysis of the decision, please see our Litigation Notes blog post.

Note: In September 2023, the claimant applied to the Court of Appeal for permission to appeal.

In November 2023, the Court of Appeal refused the claimant's application for permission to appeal.