Environmental Law News Update

July 31, 2023

High Court refuses permission for claim against Shell’s Directors

Following judgment on 24 July, the High Court, in an oral hearing, confirmed its decision on papers that ClientEarth, a non-profit environmental law organisation, with a minority shareholding in Shell Plc, a multinational oil and gas company, failed to establish a prima facie case in its derivative claim against Shell’s Directors regarding the company’s climate change risk management strategy.

ClientEarth held 27 shares in Shell Plc. It sought to bring a derivative claim in relation to alleged breaches of duty by the Directors of Shell regarding the organisation’s climate change risk management strategy. Those duties included the duty to promote the success of the company under s.172 of the Companies Act 2006, and the duty to exercise reasonable care, skill and diligence under s.174. ClientEarth sought declarations that the Directors had breached their duties and a mandatory injunction requiring them to adopt and implement a strategy to manage climate risk in compliance with their statutory duties. In addition, ClientEarth also sought a requirement for Shell Plc to comply with an order made by the Dutch court which imposed a 45% emissions reduction obligation to be achieved by 2030.

The key conclusions of the High Court were:

  • The test for a prima facie case required the court to take the evidence adduced by the claimant not at its “highest” but at its “reasonable highest”. This did not mean that the court was bound to assume that the facts alleged by the claimant were true.
  • The law respected the Director’s autonomy of decision making on commercial issues and their judgements as to how best to achieve results which were in the best interests of their members as a whole.
  • The management of business of the size and complexity of Shell Plc required the Directors to take into account a range of competing considerations, the proper balancing of which was a classic management decision with which the court was ill-equipped to interfere.
  • The mandatory orders sought by ClientEarth would have required constant supervision. Such orders were considered to be too imprecise to be suitable for enforcement and it was difficult to see how the court could be satisfied that the disruptive impact that disputes over compliance would have on the conduct of Shell’s business would not of itself have a serious adverse impact on the success of Shell Plc.

The court commented that it considered that there was substance in a submission made by Shell Plc that ClientEarth’s motivation was driven by something quite different from a balanced consideration as to how best enforce the multifarious factors which the Directors are bound to take into account when assessing what was in the best interests of Shell and that rather than concentrating on how a Director might be criticised for a bad faith refusal to balance those factors properly, ClientEarth had adopted a single-minded focus on the imposition of its views and those of its supporters as to the right strategy for dealing with climate change risk. This pointed strongly towards a conclusion that ClientEarth’s motivation in bringing the claim was ulterior to the purpose for which a claim could properly be continued and Mr Justice Trower did not consider that ClientEarth had adduced sufficient evidence to counter the inference of a “collateral motive”.


Transport and the environment

On the 14th July 2023 Transport Secretary Mark Harper MP wrote to the National Highways Agency to confirm that he was making the Development Consent Order for works to the A303, known as “the Stonehenge bypass”. This idea for a tunnel at Stonehenge has been explored since at least 2002, and has been through two planning enquiries and a successful challenge to the previously confirmed DCO of late 2020 (see R (on application of Save Stonehenge World Heritage Site Limited) v SoS Transport and others [2021] EWHC 2161 (Admin)). Mr Harper’s letter is a redetermination of that 2020 application. It cites a reduction in community severance (road traffic inhibiting access and amenities), from “rat running” in local villages, and broadly, an improved environment as important reasons for granting the application. This is despite opposition to the scheme suggesting it would be contrary to a range of environmental legislation, including the Conservation of Habitats and Species Regulations 2017, EIA requirements, the Environmental Assessment of Plans and Programmes Regulations 2004 and other legislation. The letter is an engaging read, particularly for its forensic attention to detail and the way in which the planning balance is determined given the finely competing requirements of legislation. Section 104 of the Planning Act 2008 requires the SoS to have regard to a wide range of considerations in determining an application for an order granting development consent, and the letter states in concluding (at paragraph [271]) that “all other relevant matters” have been considered.

The Stonehenge decision is of course open to challenge in the usual way, but it is interesting to consider another judgment recently handed down on 07 July 2023, regarding a challenge to the SoS Transport’s consent for three road schemes on the A47 in Broadland, Norfolk. In R. (on the application of Boswell) v Secretary of State for Transport [2023] EWHC 1710 (Admin), Mr Boswell argued that the grant of consent was unlawful because the Secretary of State failed to meaningfully assess the combined carbon emissions of the three schemes. The Court determined otherwise, citing that the Court was not to get drawn into “the acceptability of an effect identified by environmental information. That is a matter of judgement for the decision maker, not a hard-edged point of law” (at [84]). “Dr Boswell’s case is, on analysis, a challenge to the acceptability of the carbon impacts from the three road schemes. Acceptability of impact is not a matter for the Courts, who must be astute to avoid being drawn into the arena of the merits of climate decision making” (at [6]). The Court found that the SoS’s assessment did not breach the Infrastructure Planning (Environmental Impact Assessment) Regulations.


Highly Protected Marine Areas

On 05 July 2023, the first three Highly Protected Marine Areas (“HMPA”) came into being.

The three HMPAs are Allonby Bay in Cumbria (28km2 in size), an offshore area east of the Northumbrian coast called “Northeast of Farnes Deep” (492km2 in size), and an offshore area south of Portsmouth in the English Channel called “Dolphin Head” (466km2 in size).

While there are 178 Marine Protected Areas (“MPA”) in English waters, “covering 51% of inshore and 37% of offshore waters”, according to the Government[1], critics have argued these have been inadequate to effect proper marine protection. Extractive and depositional activities, including commercial fishing, are allowed to continue in MPAs, although conditions can be imposed and licensing requirements put in place. The Government’s “Benyon Review” of 2022 acknowledged that “these MPAs do not allow ecosystems to fully recover or deliver the full range of ecosystem services[2]”.

HMPAs, by contrast, will prohibit extractive, destructive and depositional activities, including commercial and recreational fishing, dredging, construction and anchoring.

There is no single umbrella legislation for all MPAs. Rather, the MPA network is made up of sites designated through a number of familiar processes, including SACs under the Habitats Directive, SPAs under the Birds Directive, SSSIs under the Wildlife and Countryside Act 1981, and sites under the Ramsar convention. A particularly key piece of legislation is the Marine and Costal Access Act 2009. This provides, at section 116, for the designation of Marine Conservation Zones (“MCZs”). It also established by section 1 the Marine Management Organisation, which is responsible for offshore sites, and established by section 149 Inshore Fisheries and Conservation (“IFC”) districts and authorities, who have a duty to manage the exploitation of their local resources in a sustainable way. Other legislation provides for licencing requirements for specific activities at sea, for example the Fisheries Act 2020 makes provision for licensing requirements for fishing boats, and such licences can exclude MPAs. The Government’s intention is that HMPAs are to have lawful effect after being designated Marine Conservation Zones under the 2009 Act[3], and simply there shall be no licences for extractive, destructive or depositional activities within them.