Polish Energy Giant Sues Former Directors And Insurer Over Failed Coal Power Plant Investment

The company is seeking this as damages from former management and supervisory board members who had voted in favour of the investment, and from its insurers under its directors’ and officers’ (D&O) liability insurance.

87% of shareholders voting in an extraordinary general meeting approved the company’s filing of the lawsuit.

ClientEarth lawyer Marcin Stoczkiewicz said: “This case is a notable first and underlines board directors’ potential liability for ongoing fossil fuel investments in a rapidly shifting economic, policy and regulatory landscape. It is also highly relevant to directors’ and officers’ insurers, named as defendants in the company’s damages claim.”     

Ostrołęka C was a planned coal power plant – one of Europe’s last – set to be built in northeast Poland. Industry experts and independent economic analysts warned from the outset that the plant would be unprofitable, in light of rising carbon prices, competition from cheaper renewables, the impact of EU energy reforms and difficulties securing financing.

ClientEarth had sent legal letters to Enea’s board members in 2018, arguing the investment would breach board members’ fiduciary duties of due diligence and destroy shareholder value. But the company and its joint venture partner Energa pressed ahead with the project.

ClientEarth took legal action against the project in 2018 and won the case in 2019. The companies abandoned the project mid-construction in 2020 and the PLN 1 billion investment was ultimately written off.

In 2021, Poland’s Supreme Audit Office reported improper risk management by Enea and recommended action against its former board members. The company subsequently obtained legal advice finding former directors who voted in favour of the investment had “failed to exercise due diligence in the context of the Company’s affairs or supervision” and were liable to the company as a result.