Boies Schiller Flexner’s London office secured an important victory for its pro bono client, ClientEarth, an environmental law charity, in litigation before the Polish Courts. ClientEarth successfully challenged a board resolution in connection with the planned construction of Ostrołęka C, a €1.2bn, 1 GW, coal-fired power plant in northeastern Poland.
Enea S.A. – one of the two State-controlled joint venture partners of Ostrołęka C – adopted a resolution at its September 24, 2018, extraordinary general meeting that consented to Ostrołęka C's construction despite not having secured financing. ClientEarth holds a minority shareholding in Enea, and has been consistently vocal in its view that Ostrołęka C poses an indefensible financial risk to investors in the face of rising carbon and falling renewables prices. This view was echoed by, amongst others, Fitch Ratings, which warned that Enea could face “negative rating action” if it proceeded with the construction of Ostrołęka C without obtaining third-party financing.
ClientEarth launched legal action in October 2018 before the District Court in Poznań, Poland. BSF acted pro bono on behalf of ClientEarth, along with specialist Polish counsel Karasek & Wejman, to challenge Enea’s board resolution on the grounds that, inter alia: (i) it was an impermissible instruction to the management board of the company and therefore legally invalid; and (ii) proceeding with Ostrołęka C would harm the economic interests of the company and should therefore be annulled.
On July 31, 2019, the Poznań District Court handed down a landmark decision which found in ClientEarth’s favor on the first ground (i.e., the resolution was legally invalid). Consequently, the judge did not need to determine the second ground. This decision throws Ostrołęka C’s construction into doubt. It also serves as an important reminder to company directors of their legal duties to manage economic risks, including those arising from climate-related risks, at a time when commercial clients are closely scrutinizing climate issues – and highlights the power of shareholders to use litigation to force recalcitrant companies to do so.