Legal Update for Energy Lawyers - May 2024

This newsletter provides general information and is not intended to be comprehensive or to provide specific legal advice. Professional advice appropriate to a specific situation should always be sought.

Contents

1. The SEC's climate disclosure rules expand ESG reporting
2. High Court orders Shell to disclose documents in Niger Delta Group litigation
3. Valero Energy granted injunction restricting climate protests
4. High Court exercises discretion to bypass ADR provision
5. High Court emphasises narrow scope of exceptions to without prejudice rule 
6. UK Government seeks to bolster litigation funding
7. Consultation for further transparency in legal preceedings

1. The SEC's climate disclosure rules expand ESG reporting 

On 6 March 2024, the US Securities and Exchange Commission (SEC) adopted new rules to enhance and standardise public company disclosures associated with the risks and impacts of climate-related matters. Although the scope of the rules has been significantly scaled back from the original draft proposal, this constitutes one of the most significant changes ever to SEC disclosure requirements and is expected to face legal challenges.

The new rules include disclosures relating to climate-related risks and risk management, as well as the board and management’s governance of such risks. The rules also mandate the disclosure of the financial impacts of severe weather events and other natural conditions in audited financial statements. Larger registrants will also be required to disclose information about their greenhouse gas emissions.

This necessitates a dramatic change in the nature and extent of disclosures US companies must make regarding the impact of climate change. The gathering and reporting of these incremental disclosures may require significant modifications to a registrant’s systems, processes, and controls. 

2. High Court orders Shell to disclose documents in Niger Delta Group litigation 

On 8 March 2024, the High Court ordered Shell Plc together with its Nigerian subsidiary, Shell Petroleum Development Company of Nigeria Limited (SPDC), to disclose documents by way of specific disclosure together with any relevant joint investigation visit reports and documents that are “relevant to a consideration of contamination, consequences and causes in the Bille area”. 

In group actions against Shell, members of the Bille and Ogale communities have persistently sought access to Shell's records as regards oil pollution in the Niger Delta, in order to particularise the communities’ case on causation. Despite nearly a decade passing since the communities' claims emerged, Shell has so far resisted disclosure requests from the Claimants, arguing against any obligation to provide such documents unless and until a court orders that the documents are relevant, reasonably necessary or reasonably proportionate.

In its recent judgment however, the High Court ordered both Shell Plc and SPDC to undertake disclosure in respect of relevant categories of documents.

Notwithstanding the above, the judgment also warns that when it comes to disclosure “the tail must not be allowed to wag the dog”. This acts as a reminder that in cases where a claimant decides to pursue a claim with generalised allegations of breach and loss, the same must assist the court in providing clarity so as to “permit disclosure which is properly tethered to its issues”. The court is clear: defendants will not be allowed to undertake a ‘fishing exercise’ when it comes to disclosure.

3. Valero Energy granted injunction restricting climate protests 

In Valero Energy Ltd & Ors v Persons Unknown & Ors, the Claimants, forming part of the Valero Group, owned several petrochemical sites across the UK. They sought protection from unlawful activities by members of environmental protest groups, including “Just Stop Oil,” “Extinction Rebellion,” “Insulate Britain,” and “Youth Climate Swarm.” Following explicit threats and direct disruptive actions at the Claimants’ sites, the Valero Group sought a five-year injunction to restrain any future incursions. 

In reaching its decision, the court considered the appropriate approach to summary judgment applications involving absent named defendants, aiming to strike a fair balance between property rights, public safety, and the rights of protesters. In doing so, it granted Valero a quasi-final injunction with provisions for annual review against both named defendants and persons unknown who trespassed on or disrupted operations at the company’s premises.

The injunction banned damaging Valero's properties, burrowing beneath roads, occupying tunnels, and abandoning vehicles on access routes. Notably, it did not encompass blocking traffic or disregarding police directives. As such, the case on the one hand recognised Valero's legal standing to address trespass and public nuisance but equally established protestors’ rights and the procurement of compensation proportional to the disruption.

4. High Court exercises discretion to bypass ADR provision 

In Lancashire Schools SPC Phase 2 Limited v Lendlease Construction (Europe) Limited & Ors, the High Court opted not to strike out proceedings despite a breach of a mandatory alternative dispute resolution (ADR) clause. The agreement contained a provision requiring the parties to adjudicate as a pre-condition to litigation, however the Claimant had bypassed the contractual dispute escalation procedure and commenced legal proceedings to recover damages. The Defendant applied to the court to strike out on the basis that the court had no jurisdiction as proceedings had been commenced prematurely. 

The court said that the provision described a procedure that was “full and clearly enforceable”, meaning adjudication was either mandatory or a condition precedent to the contract. The court, therefore, had the power to stay or strike out the proceedings to encourage ADR. However, given the complexity of the dispute and the fact litigation would inevitably follow in any event, the court exercised its discretion and did not strike out the proceedings, as the further delay would impact the progress of the dispute. 

This decision reaffirms the court’s discretion in relation to the interpretation of ADR clauses. Whilst contractual provisions can expressly state a mandatory ADR method as a pre-condition to litigation, the court will use its discretion to ensure the effective resolution of a dispute.

5. High Court emphasises narrow scope of exceptions to without prejudice rule

In Ocean on Land Technology (UK) Ltd v Land, the High Court emphasised the narrow scope of without prejudice (WP) protection, affirming two key points: firstly, that the responsibility to prove an exception to the WP rule rests with the party claiming it, and secondly, that even if an exception is established for a portion of WP negotiations, it does not automatically strip protection from all related discussions. 

The Claimant applied for certain parts of the Defendant’s witness statements to be struck out on the grounds that they referred to WP correspondence. The Defendant accepted that the material was covered by the WP rule but asserted that it was admissible because it fell within an exception to that rule. The High Court granted the Claimant’s application on the basis that they were protected by the WP rule and held that the Defendant had not established that any of the recognised exceptions to that rule applied.

6. UK Government seeks to bolster litigation funding 

The government has published and put before Parliament the Litigation Funding Agreements (Enforceability) Bill (the Bill). The Bill is intended to reverse the effect of the Supreme Court’s decision in Paccar Inc v Road Haulage Association Ltd. 

In Paccar, the Supreme Court held that litigation funding agreements (LFAs) which handed funders a share of the damages are Damages-Based Agreements (DBAs) and therefore must comply with the relevant regulatory regime to be enforceable. The ruling meant that many litigation funding agreements in existence at the time were unenforceable.

The Bill, which only applies to England and Wales, would reverse Paccar and confirm that “an agreement is not a damages-based agreement if or to the extent that it is a litigation funding agreement”. Notably, the Bill has retrospective effect and so will apply to all LFAs, whether entered into before or after the Bill.  

The government has, also, publicly confirmed that it plans a broader review of third-party litigation funding. Further regulations may be forthcoming to enhance the UK litigation funding market.

7. Consultation for further transparency in legal proceedings

The Civil Procedure Rule Committee is currently consulting on a proposed revision to Rule 5.4C, which governs the supply of documents to a non-party from court records. 

The proposed drafting of the new CPR 5.4C would widen the scope of non-party access to court documents (without the court’s permission) to include skeleton arguments, witness statements, affidavits, and expert reports, unless certain criteria have not been fulfilled or an order has been made that restrains a non-party from obtaining access to such documents. 

As drafted, the proposed new CPR 5.4C suggests non-parties would be entitled to access a wider category of court documents, seemingly shifting the balance between confidentiality and publicity towards the latter. We await the outcome of the consultation.