AabarHoldings S.à r.l. v Glencore plc & Ors [2024] EWHC 3046 (Comm)

Background

Aabar Holdings S.à.r.l. ("Aabar") is a shareholder having brought claims against Glencore plc ("Glencore") (and a number of former directors in respect of some of the claims) pursuant to s.90 and/or s.90A, Sch. 10A of the Financial Services and Markets Act 2000 ("FSMA"). Aabar alleges it has suffered loss as a result of misstatements and/or omissions in Glencore's prospectuses / published information, or its dishonest delay in publishing such information. The claimants, including Aabar Holdings, alleged losses resulting from misstatements and omissions in Glencore’s prospectus and disclosures, particularly regarding the activities of its mining subsidiaries abroad.

Aabarargued that Glencore could not rely on privilege because of the Shareholder Rule. Historically, this rule was said to prevent a company from asserting privilege against its shareholders, on the theory that shareholders had a proprietary or joint interest in legal advice taken for the benefit of the company as a whole, except in respect of documents created for the dominant purpose of actual or threatened litigation between the company and the shareholders.

Issues

The Court was asked to determine:

• whether the Shareholder Rule survives in English law;
• if so, whether it covers legal advice, litigation and without prejudice privilege;
• whether it could apply to beneficial or indirect shareholders such as Aabar; and
• whether it could extend to privileged documents of subsidiaries within a mining group.

Reasoning and Decision

The Court concluded that the Shareholder Rule is “unjustifiable and should no longer be applied”. The proprietary rationale underpinning the early cases collapsed once Salomon v Salomon [1897] AC 22 established that companies have a separate legal personality and shareholders have no property rights in corporate assets. The Court also rejected the argument that the rule could be maintained as a species of joint interest privilege, holding that joint interest privilege is not a free-standing doctrine but a descriptive label for specific circumstances.

For completeness, the Court observed that if the rule had survived, it might have applied to legal advice and litigation privilege, but not to without prejudice privilege. In principle, it could have extended to beneficial shareholders and subsidiary documents.

Significance

The judgment provides authoritative confirmation that privilege may be asserted against shareholders. For mining and natural resources companies—frequently exposed to group securities actions in London and elsewhere - the decision will be particularly welcome. It ensures that companies can continue to rely on the protections of privilege when defending investor claims concerning disclosures about global operations, ESG risks or compliance matters.