Cumbrian coal mine investor ‘leaving itself open to legal challenge’, warn lawyers

The financier behind a proposed new coal mine in Cumbria is at risk of opening itself up to legal challenge by supporting the project, lawyers have warned.

The legal charity ClientEarth has published a cautionary statement to EMR Capital, which manages the Cayman Islands private equity fund providing the financial backing to the proposed Whitehaven coal mine in Cumbria. 

The government is due to make a final decision on whether or not the mine will go ahead this month, after the planning application was called in last year following widespread opposition to the mine on environmental and climate grounds. 

ClientEarth has warned that through the fund’s ongoing investment in the mine, EMR Capital is at risk of breaching the duties it owes to its investors in the fund.  

Robert Clarke, one of the charity’s lawyers, said that the Whitehaven coal mine was “the very definition of a future stranded asset”.

"Even if it were to get permission, demand for coking coal from UK and EU steel makers will continue to dry up as the industry moves away from fossil fuels. That leaves serious questions as to whether EMR Capital is exposing the fund and its investors to such foreseeable financial risk unreasonably and unnecessarily.”

Clarke added that the private equity firm owed an explanation to its investors as to “how continued support for the project is compatible with their best interests, which it has a legal duty to protect.”

The NGO says that EMR Capital’s support of the mine is “squarely at odds” with its public commitments to support global climate goals, and to meet responsible investment standards, and that there are legal liability and regulatory consequences that “may stem from misleading communications to investors”. 

As such, ClientEarth said that the firm should “carefully consider whether it has properly reported on its approach to the climate-related risks and impacts associated with the mine to investors”.

“Investors are very much alert to the economic and commercial risks associated with new coal projects like the Whitehaven mine – and expect their asset managers to identify and properly manage those risks,” said Clarke. “Any fund investing in such risky projects should be prepared to justify its investment decisions.” 

In a project update in April, West Cumbria Mining - the developer behind the project - said that the war in Ukraine had added to the case for the government to approve the mine, saying that the project would “help slash the need to import foreign coal, deliver the levelling-up agenda for Cumbria and support Britain's steelmakers with a new local and reliable critical raw material”. 

However, this claim was subsequently rubbished by steel industry expert, Chris McDonald, chief executive of the Materials Processing Institute. He told the Observer in May that arguments using the invasion of Ukraine in order to build support for the mine were misplaced, and that there was no support from the British steel industry.

"I think it's important to be clear that even if this mine opened tomorrow, it would not displace a single tonne of Russian coking coal from the UK – and I can say that with confidence,” he told the paper. “Tata Steel already does not use any Russian coking coal. British Steel have said they can't use the coal from Cumbria. So there's no possibility that it can displace any Russian imports."

At the time, the Observer said that sources at Tata Steel "concurred with McDonald's view, though the company has not publicly expressed a view on the mine", while British Steel declined to comment to the newspaper.

ENDS has approached EMR Capital for comment