The environmental activist group ClientEarth has sued Shell’s management in response to the ongoing collective action lawsuits brought by two communities in Nigeria over the oil giant’s alleged role in the contamination of the environment. In what it has referred to as the very first shareholder action ever taken against the directors of a corporation that it invests. ClientEarth has revealed that it has initiated the claim at the High Court of England and Wales against the members of the board of Shell’s parent company. The action seeks a finding that the board is in breach of its obligation under the law to control the company’s hazards effectively. According to the complaint, climate change and the required transition to a low-carbon economy pose a threat to Shell’s business model.
Though the group had previously filed a lawsuit against the UK government owing to its net zero goal, Chris Dryland, a Senior Practice Development Lawyer at Pinsent Masons, noted that this is the first lawsuit the organization has filed in the UK against a company like Shell. This lawsuit highlights how activist groups are putting more pressure on board members and firms. The purpose of ClientEarth’s injunction request is to compel Shell’s board to implement a policy for dealing with climate risk in accordance with the company’s responsibilities under the Companies Act. The group claims that a group of investors owning over 12 million shares of the company’s stock supports the legal action.
Court’s approval will strengthen ClientEarth’s lawsuit against Shell.
According to Michael Fenn, a specialist in commercial and corporate litigation at Pinsent Masons, ClientEarth first proposed in March 2022 the possibility of filing a claim against the management of Shell. As was to be expected, it has initiated what is referred to as a “derivative” action, which means that ClientEarth is operating in its position as a shareholder to launch a claim against the company’s board of directors for alleged violations of duty. But, ClientEarth would require the court’s approval in order to move through with the claim since derivative actions may be utilized to pursue speculative claims.
In a similar derivative action last year, two university lecturers in the United Kingdom sued their pension fund’s current and past directors. According to Fenn, the claim also argued that the directors had failed to meet their responsibilities under the Companies Act of 2006 since the scheme invested in fossil fuel holdings. The court did not provide the requested authority. Hence the claim failed. It will be intriguing to see if ClientEarth succeeds more in getting the court to grant it permission to proceed with its claim. The only thing that can be said with certainty is that several attorneys and board members of companies will be paying close attention to the developments.
Community residents are also affected by environmental pollution.
Furthermore, the claim that is being launched against Shell’s board of directors in the UK is not the only one that is being brought against the oil company at this moment. About 14,000 residents from the Niger Delta communities of Ogale and Bille have allegedly been affected as a result of environmental pollution and have launched a dispute in the London High Court against Shell. Now that the Ogale Group’s record of claims has been submitted to the London High Court at the start of February, the ongoing legal battle has moved forward in a significant way.
Claimants are attempting to hold the oil company accountable for contaminating their water supplies and destroying their standard of living. Oil pollution in the area has contaminated the rivers, lakes, as well as drinking water. It also affects forests and farms. The class action lawsuit asserts that Shell or its Nigerian branch was aware of the pollution but failed to take the appropriate measures. About 13,652 people, churches, and schools from Bille and Ogale have asked the firm to clean up the oil wastes they reckon its activities have caused. They also wanted compensation because fishing and farming, which were the main ways that many people in the communities depended on, were no longer feasible.
Sabotage and crude oil theft are the source of pollution – Shell.
Moreover, in a conversation with The Guardian, Shell stated that it had cleaned up the damaged areas and also was negotiating with the appropriate Nigerian authorities to stop the primary sources of pollution, which are sabotage, illegal refining and crude oil theft. It suggested that more than legal action would be needed to solve the problem. A 2017 verdict by the Court of Appeal was reversed by the Supreme Court in February 2021, allowing the litigation to proceed in England. According to the 2017 decision, the class actions must be tried in a court in Nigeria.