Why a judge’s dissent on funding for a foreign gas project could further push the boundaries of climate law

Two judges were left split on how far a government agency should have delved into climate impacts when deciding to grant support for a large liquefied natural gas project in Mozambique, an outcome which may have wider consequences.

Ned Westaway, barrister, Francis Taylor Building Ned Westaway, barrister, Francis Taylor Building

In what appears to be becoming a regular event, the latest climate change case to be considered in the UK split judicial opinion, further widening the battleground for legal debate in this area.

R (Friends of the Earth Ltd) v SSIT and others ([2022] EWHC 568 (Admin)) was an unusual case in that it was not based on whether a government agency had a statutory duty to have regard to climate change but whether it had delved deeply enough into climate impacts when deciding to provide financial support to a large liquefied natural gas (LNG) project in Africa.

In 2020, UK Export Finance (UKEF) decided to provide the project, to develop the Rovuma basin in Mozambique, one of the largest recent gas discoveries in the world, with up to $1.15bn (£1bn) in export finance. The decision, which was approved by ministers, does not offer direct funding, but rather provides a financial guarantee under the Export and Investment Guarantees Act 1991 conditional on the procurement of British goods and services.

A matter of adequacy

At least partly in response to the controversy surrounding the project, UKEF had resolved to take into account the Paris Agreement on climate change during the decision process. A climate change report was prepared and the decision was, apparently, taken on the basis that the funding was potentially compatible with the treaty’s obligations. 

The legal battleground was on the adequacy of the assessment undertaken, in particular whether it was necessary to quantify ‘scope 3’ emissions – those arising from the use of the gas rather than its production.

There was little between the two judges in their consideration of the facts, but their approach to the law differed starkly. Lord Justice Stuart-Smith (the senior judge) accepted that the report was a novel exercise with substantial limitations, but was not prepared to find that it was unlawful. In effect, he concluded that UKEF was well aware of the report’s limitations, including that scope 3 emissions had not been quantified. However, the government had also had to weigh other factors in its decision:

The decision was multifaceted with other high-level political policy considerations (apart from climate change) at play:

  • The climate change report gave reasons for why the project might be compatible with the Paris Agreement, such as displacement of dirtier fuels and necessity for a low carbon transition, and did not go further.
  • It was obvious that ‘scope 3’ emissions would be very large.
  • The project would have gone ahead anyway with or without export finance guarantees.

In summary, Stuart-Smith ruled: “The decision-maker was entitled to adopt a less rigorously technical approach to climate change as one feature amongst many that would have been necessary or appropriate in other circumstances.”

However, Mrs Justice Thornton’s powerful dissent is worth reading.

UKEF had lawfully and reasonably decided to take the Paris Agreement into account and had submitted (to the prime minister, no less) that the project supported the UK’s commitments under it, Thornton pointed out. Critically, article 2(1)(c) of the agreement committed countries to ensuring that finance flows are consistent with low-emission climate-resilient development. 

In her view, UKEF could not reasonably conclude that the export finance flows would align to the treaty’s temperature goals without considering ‘scope 3’ emissions – a critical point given that the project would use 0.1-0.2% of the world’s remaining carbon budget. She did not consider that it was appropriate to be less rigorous: UKEF had set out to assess climate change and the report “is an environmental impact assessment”, she emphasised.

‘Hard look’

The most interesting aspect of the claim may be that, despite no statutory duty or argument based on legitimate expectation, the court was prepared to consider whether public authorities have a legal duty to come to conclusions on climate change that pass scrutiny. 

This question is set to face greater scrutiny given that permission has now been granted for the claim to be heard by the Court of Appeal.

An important issue that will be tested on appeal is how far the UKEF should go in determining compliance with the Paris Agreement. Relevant to that question is whether the agreement itself provides a clear metric that domestic courts can rely on. 

The Court of Appeal will be required to look in more depth at the “tenable view” doctrine, under which domestic courts have previously been reluctant to interpret provisions of international law. In other words, can a domestic commitment to act in accordance with the Paris Agreement amount to a hard-edged commitment justiciable by domestic courts – in particular in relation to article 2(1)(c)?

As both public and private bodies increasingly make climate change commitments referring to the Paris Agreement, the case is obviously of wider significance. 

More generally, it reflects a tension on the domestic bench over the intensity of review that is appropriate when coming to conclusions on climate change impacts. To adopt a term from environmental assessment law in the US, how much of a ‘hard look’ is required?

In the recent case R (Finch) v Surrey CC and others ([2022] EWCA Civ 187), the Court of Appeal was split on a similar question. Lord Justice Moylan (in the minority) concluded that “cogent reasons” would be required for excluding scope 3 emissions and that these had not been provided. Reasons appear to be the primary current battleground for climate challenges, and as the issue of climate change gets ever more serious, it is unlikely to go away.

  

Ned Westaway is a barrister at law firm Francis Taylor Building.