Last month, the High Court of England and Wales dismissed a unique action brought against the directors of Shell plc (Shell). Filed in February by ClientEarth, an environmental NGO based in London, the action alleged that Shell's directors breached their fiduciary responsibilities under the U.K. Companies Act by not adopting an energy transition strategy consistent with the Paris Agreement.
The Court acknowledged that Shell faces material and foreseeable risks because of climate change. However, the Court concluded that ClientEarth did not show that the board's climate risk management demonstrated a prima facie case of an actionable breach of duty. As a result, it dismissed the application.
ClientEarth has been granted an oral hearing at which it will ask the Court to reconsider its decision.
The U.K. Court's decision is of course not binding on Canadian courts. However, under Canadian corporate statutes, the leave of a court is also required to pursue a derivative action in a corporation's name against its board. The decision may therefore discourage similar claims or influence similar litigation in Canada.
You can read the complete Osler Update on this decision and its potential implications for Canadian businesses, "Court dismisses claim against directors for company's climate strategy," in English and French on osler.com.
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