Friends of the Earth v. UK Export Finance

Summary:

In September 2020, Friends of the Earth England Wales and Northern Ireland brought a legal challenge against UK Export Finance’s decision (the “Decision”) to provide over $1 billion of UK taxpayers’ money to help finance a liquefied natural gas (“LNG”) project off the coast of Mozambique. Through the project, the energy company Total (an interested party) aims to extract 43 million tonnes of LNG per year for 32 years. This will result in total combustion emissions of 4.3 billion tonnes of CO2e: more than the total annual emissions for all 27 countries within the EU.

This case is not concerned with whether, or the extent to which, the UK government should have considered the Paris Agreement in reaching its decision. Rather, it is concerned with whether, having concluded that both the project and its financing were compatible with the UK and Mozambique’s obligations under the Agreement, and having taken the decision on that basis, the decision was lawful.
In March 2022 the High Court issued a judgment with a split two-judge court. One of the judges ruled: (a) the government erred as it had no rational basis to conclude financing the project was consistent with article 2(1)(c) of the Paris Agreement; (b) government ministers approving the deal were misled; and (c) for finance flows to be aligned to the Paris Agreement, they must be demonstrably aligned with the Agreement’s temperature goals. The second judge ruled the decision was lawful. He held the court should give the government latitude in deciding for itself what enquiry to make, for example when quantifying climate impacts, and that the court should only scrutinise the government’s decision lightly. The claim proceeded to the Court of Appeal.

In January 2023 the Court of Appeal gave judgment, unanimously dismissing Friends of the Earth’s appeal. The court held:
1) On the standard of review, the government was only required to adopt a ‘tenable’ view of what the Paris Agreement meant. It was not required to adopt a correct view, as Friends of the Earth had argued (relying on the Vienna Convention).
2) In this case the government had adopted a tenable view.
3) It was not irrational to make the decision to fund such a project without quantifying its scope 3 emissions. The project would have gone ahead with or without finance from UK Export Finance, the absolute quantification of scope 3 emissions would not have answered the nuanced question of whether the financing was compatible with the UK’s obligations under the PA, and the obligations in question were not absolute requirements to restrict the increase in global average temperature and to make finance flows consistent with a low-emissions pathway and climate-resilient development, but rather, these were only some of the purposes of the PA.

Though the court declined to construct the PA’s precise meaning, it held that:
• The actions required by Articles 4, 7, 9, 10, 11 and 13 are not merely aims and aspirations, as one of the lower judges held, but are to be taken with the aim of strengthening the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty and for purposes including achieving the temperature goals and making finance flows consistent with a low-emissions pathway.
• The temperature goal in article 2(1)(a) is a clear objective of the PA, to which all parties committed.
• It was not clear to what extent the project would contribute to the fossil fuel transition, and it was not necessary for the respondents to take any firm view as to the precise nature of the UK’s obligations under the PA, only as to what was not required of the UK, namely that article 2(1)(c) does not create an obligation for the UK to show that its decision on overseas funding is consistent with a low-emissions pathway. Because the respondents were advised that the project could, in some scenarios, align with the UK’s obligations under the PA, the decision was not irrational.

Friends of the Earth have applied for permission to appeal to the UK Supreme Court.

At Issue: Whether the UK government's decision - that its financing of a liquified natural gas project in Mozambique aligned with its climate commitments - breached public law duties.