The litigation recently launched in England by the NGO, ClientEarth, against the members of the board of directors of Shell plc has generated a significant level of interest from organisations who wish to understand the implications for directors more generally.  The claim raises novel issues regarding directors’ responsibilities for a company’s environmental impact, and questions about how environmental obligations should be implemented and enforced.

The background to the litigation is set out in our alert memorandum dated 22 February 2023, and here we set out some common questions:

1. What is the background to this claim?

In 2019, the (then Dutch) parent company of Shell was sued by an NGO, Milieudefensie, for breach of its duty of care towards Dutch nationals.

  • In May 2021, the District Court of The Hague ordered the group to reduce the group’s worldwide GHG emissions by 45% by 2030, in line with the Paris Agreement. Our analysis of the judgment is accessible here. The Dutch Court did not hold Shell liable for past damages, although failure to comply with the judgment will give rise to damages.
  • The ClientEarth claim argues that the members of Shell’s board breached their duty of care to the company by:
    • Failing to manage the physical and transition risks posed to the company by climate change;
    • Failing to protect the company and long-term shareholder value; and
    • Not being on track to comply with the Dutch judgment and align the group to the Paris Agreement’s transition goals.
  • ClientEarth is seeking a declaration that the directors are in breach of their duties, and an order that they adopt a strategy that includes targets aligned with Paris Agreement goals.

2. What is involved in bringing a derivative claim in England?

Who can bring a derivative claim?

  • Derivative claims can arise from an actual or potential act or omission by a company director, involving negligence, default, breach of duty or breach of trust.
  • The claim is brought by a shareholder or shareholders against the directors of a company, in the name of and for the benefit of the company. In most jurisdictions, the company (and not the shareholder(s) who prosecutes the claim) is entitled to any remedy obtained.
  • There is no minimum number of shares that must be held in order for a derivative claim to be brought in England and Wales. This is similar to most States in the US, which has resulted in the USA being a preferred jurisdiction for ESG activist derivative claims. Some other jurisdictions (for example, most EU member states) require a minimum percentage shareholding to bring such a claim. ClientEarth appears to have bought shares in Shell for the purpose of bringing the claim.
  • While they haven’t joined the lawsuit formally, several institutional investors in Shell (including large UK and French pension funds) have publicly voiced their support for the lawsuit.


  • In England, a shareholder must seek permission from the court to bring a derivative claim. A court must refuse permission to continue the claim if it is satisfied that (i) a person acting in accordance with section 172 of the Companies Act 2006 (the statutory duty to promote the success of the company) would not seek to continue the claim; and/or (ii) the proposed or past act or omission that is the subject of the claim was authorised by the company before it occurred or ratified since it occurred.
  • If those conditions are satisfied, the court has discretion over continuing such a claim, which involves considering factors such as whether the member is acting in good faith.
  • The court will deal with the permission application on paper at first. If the court decides on paper that the claim can continue, the company and directors will be served and there will be a full permission hearing in public where the directors can oppose the continuation of the claim.
  • If permission is given, the claim proceeds as a typical claim in the English court with the standard procedural steps (for example, disclosure, witness evidence, expert evidence).
  • Before filing a derivative claim, shareholders will almost always be expected to have raised the issue directly with the company’s board.

3. Have other, similar, cases have been launched in Europe? Are these cases on the rise?

  • Climate-related derivative claims are on the rise in the US although CE’s claim is reportedly the first derivative claim of its kind in England or the EU.
  • ESG related litigation more generally has been developing significantly in Europe, driven by the development of group litigation and class action litigation in several European jurisdictions, and increasingly availability of litigation financing.
  • We have also seen some activist investor platforms emerging – like “Tulipshare” and “Follow This” – that give retail and other investors the possibility to purchase small shareholdings and join activist initiatives.
  • There are also other regulatory developments that may encourage other types of ESG litigation.  For example, the proposed European Corporate Sustainability Due Diligence Directive (CS3D) aims to create an EU-wide corporate accountability regime for companies’ negative ESG impacts. If approved, CS3D would extend the responsibility of companies to the negative ESG impacts of their subsidiaries, their direct (and potentially also indirect) suppliers and other established business partners, both upstream and downstream, and wherever located, potentially increasing the litigation risks to companies in these areas.  In the UK, mandatory climate disclosure requirements for listed companies and other large businesses are now required, which can be expected to increase scrutiny and litigation risk for affected companies.

4. Could an NGO sue a private company (compared to public companies like Shell) for similar environmental concerns?

  • An NGO would unlikely be able to bring a derivative claim against a private company as only a shareholder can bring a derivative claim, and it would be more difficult for an NGO to obtain a shareholding in a private company.
  • Public companies are also subject to greater regulation than private companies and also have to publish/disclose a lot more information, which can be used to formulate a claim.
  • Beyond derivative claims, an NGO could seek to represent claimants in claims related to environmental, social and governance allegations involving a private company, including by leading or facilitating a class action.

5. What precautionary measures can companies consider to protect directors?

  • We set out below some (non-exhaustive) measures companies could take to protect its directors:
    • Companies should ensure they take a close look at their directors and officers’ (D&O) policies. D&O policies should cover liability arising out of some derivative actions, in particular directors’ costs of dealing with the action, although each policy should be checked as some jurisdictions do not cover settlements/damages arising of out derivative actions. Many D&O policies also typically exclude claims arising from pollution, although this is usually targeted at specific kinds of physical pollution, such as asbestos. Insurance companies are beginning to formalise their approach to incorporating ESG risk into their underwriting processes across lines of business.
    • Public statements and reports (whether mandatory or voluntary) regarding the company’s approach to reporting on ESG and its targets should be carefully considered, in particular ensuring the statements made are accurate and where appropriate capable of being backed by evidence.
    • Care should also be taken with regard to the supervision and control companies exercised over subsidiaries’ activities and policies, or it should be made clear responsibility is delegated to the subsidiaries.
    • Continuous education on these evolving topics for directors is key to demonstrate a level of sophistication during critical exchanges (for example, with underwriters, investors, etc.).