challenging the decision of UK Export Finance (UKEF) to provide up to USD 1.15 billion export credit support in relation to the USD 20 billion Area 1 liquefied natural gas (LNG) facility in Mozambique: R (Friends of the Earth) v Secretary of State for International Trade & Ors [2023] EWCA Civ 14.  

The issues in the appeal were:

• whether it was an error of law for the respondents to have concluded that the decision was aligned with the UK’s obligations under the Paris Agreement;
• whether, once the respondents had decided to provide finance in respect of the project on the basis that such funding was in accordance with the UK’s obligations under the Paris Agreement, the court could assess that question on the basis only of whether the respondents’ view was or was not a tenable, rather than the correct, one;
• whether the court should determine the proper construction of article 2(1)(c) of the Paris Agreement and, if so, what that construction was;
• whether respondents failed in their duty of enquiry under Secretary of State for Education and Science v Metropolitan Borough of Tameside [1977] AC 1014 to obtain a quantification of the project’s Scope 3 greenhouse gas emissions, and whether their view that the climate change report (CCR) was sufficient was irrational.

The Court of Appeal resolved the issues in the appeal in favour of the respondents.

In relation to the Paris Agreement, the Court of Appeal said at [38]-[39]:

“Our conclusion is that the specific obligations on state parties to the Paris Agreement are primarily to be found in articles 4, 7, 9, 10, 11 and 13, as article 3 indicates, and that the provisions of article 2, as article 3 also makes clear, represent the purposes of the Paris Agreement. The specific obligations are to be undertaken with a view to achieving those stated purposes.”

“Once it is understood that article 2 reflects the purposes of the Paris Agreement, the other questions before the court fall into focus. The purposes in article 2 including “holding the increase in the global average temperature” and “making finance flows consistent with a pathway towards low greenhouse gas emissions” are to be achieved, for example, through the setting of nationally determined contributions (article 4), and through developed countries providing financial resources to assist developing countries (article 9).”

The Court added at [46], [55] and [59] in relation to the Paris Agreement:

“We do not find it helpful … to seek to derive from its text hard-edged obligations that one might more commonly expect to find in a commercial agreement to be interpreted under domestic law. The Paris Agreement is pre-eminently an international agreement negotiated, as we have said, by some 197 states to deal with a global problem”.

“Article 2(1)(c) does not create an obligation on the UK to demonstrate that its overseas funding was consistent with a pathway towards limiting global warming to well below 2°C and pursuing efforts to 1.5°C. Article 2(1)(c) demonstrably contains the aims and purposes of the Paris Agreement”.

“Article 2(1)(c) … is an aim and a purpose of the Paris Agreement, not an obligation of the UK Government, with which compliance or consistency must be demonstrated”.

On the tenability issue, the Court of Appeal held at [40]:

• “the Paris Agreement is pre-eminently an unincorporated international treaty that does not give rise to domestic legal obligations”;
• “the court cannot and should not second guess the executive’s decision-making in the international law arena where there is no domestic legal precedent or guidance”;
• “provided it was tenable for UKEF to reach the view that funding the project was aligned with the UK’s obligations under the Paris Agreement, the court could not and should not hold that it had made an error of law”;
• “UKEF’s view was indeed a tenable one, bearing in mind the huge complexities explained in the CCR”.

On the Tameside challenge, the Court concluded at [41]:

“it is not possible to say that it was irrational to take the funding decision without quantifying the Scope 3 emissions. It was known at the time that the project would go ahead with or without finance from UKEF. The absolute level of Scope 3 emissions did not answer the nuanced question of whether approval of the financing would or would not align with the UK’s obligations under the Paris Agreement. The obligations in question were, anyway, not absolute requirements to restrict the increase in global average temperatures, and to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. These were some of the purposes of the Paris Agreement.”

The Court of Appeal also said at [62]-[63]:

“62.    The ultimate question for the court is whether it can be said to have been irrational for UKEF to have taken the funding decision without quantifying the Scope 3 emissions and supplementing the CCR report. Quantification of the Scope 3 emissions did not answer the far more difficult question considered in both the CCR and the Wood Mackenzie report, which was whether, and to what extent, gas from the project would replace more polluting fossil fuels and over what timescale. It was, as we have already said, well understood that Scope 3 emissions would far exceed Scope 1 and 2 emissions.

63.    We conclude that UKEF’s decisions as to the quantification of the Scope 3 emissions and the adequacy of the CCR were well within the substantial margin of appreciation allowed to the decision-makers. The decision to fund the project was not irrational, even bearing in mind that an estimate of the Scope 3 emissions proved to be obtainable in a short timescale when the Prime Minister, in effect, asked for it. Any estimate is by its nature uncertain. A failure to make such an estimate as part of a multifaceted decision-making process does not itself render the decision irrational.”

A copy of the judgment and the official summary are available here.

Richard Honey KC and Conor Fegan were instructed by the Government Legal Department on behalf of the Respondents.  They were led by Sir James Eadie KC, and acted alongside Hollie Higgins (Blackstone Chambers).