Back in October last year, I wrote a piece arguing that the UK legal system is ill-equipped to deal with the climate crisis. Citing a number of high-profile legal challenges to carbon-intensive infrastructure projects which have been dismissed over the last few years, I argued that the wide margin of appreciation enjoyed by decision-makers when it comes to translating the UK’s legally binding emissions-reduction targets into actual policy and the reluctance of judges to be seen to be making politicised decisions meant that such challenges are likely to keep failing. Since then, two interesting judgments have been handed down in cases concerning decisions to approve new fossil fuel developments, which have caused me to revisit some of the assertions I made in my previous post on the subject to see whether they still hold true.

First there was the judgment in R (on the application of Finch) v Surrey County Council [2022] EWCA Civ 187. Here, a majority of the Court of Appeal upheld the decision of Holgate J that Surrey County Council’s approval of a new oil well at Horse Hill was lawful, but disagreed that downstream greenhouse gas (GHG) emissions are “legally incapable” of being factored in as an indirect effect of a project for the purposes of its Environmental Impact Assessment (EIA). The court held instead that such emissions should be included where there is a sufficiently close connection between the proposed project and its putative effect, with the existence of such a connection being decided on a case-by-case basis [41, 141]. The majority found that the necessary causal connection was absent in the present case [85]. However, Moylan LJ held that there was a close connection and the decision to exclude end-use emissions from the EIA was therefore legally flawed. In his own words, “it is not difficult to describe the combustion of material obtained from a development whose sole purpose is to obtain that material for combustion as being an environmental effect of the development” [138].

Then, on 15 March last week, there was another split decision in the High Court over the legality of the UK government’s approval of $1.15bn of export credit finance for a huge liquified natural gas (LNG) project in Mozambique. So, why could Lord Justice Stuart-Smith, who normally sits in the Court of Appeal, and Mrs Justice Thornton not agree? What happens in the event of a 1–1 split decision of this kind? And what (if anything) might R (Friends of the Earth Ltd) v Secretary of State for International Trade / Export Credits Guarantee Department & Chancellor of the Exchequer [2022] EWHC 568 (Admin) mean for the future of UK climate litigation?

The proposed site for the LNG project is in northern Mozambique, in the offshore Rovuma Basin. It is anticipated that around 5% of the LNG extracted would be retained for domestic use in Mozambique, with the remaining 95% being exported. The challenge to the project, brought by Friends of the Earth (FoE), was really a challenge to three separate decisions.

1. First, there was the decision on 10 June 2020 by the CEO of UK Export Finance (UKEF) — the government’s export credit agency, which works alongside the Department for International Trade to help UK exporters to find new markets through loans, guarantees and insurance — to provide $1.15bn in financial support for the project, which was supported by the Secretary of State for International Trade.

2. Second, there was the approval of this investment by the Chancellor of the Exchequer on 12 June 2020.

3. Third and finally, there was the decision of 30 June 2020 by the Accounting Officer and Chief Executive of UKEF to approve the underwriting minute and the decision of 1 July 2020 of the Chief Executive of UKEF to approve the clearance of documents memorandum.

However, for the sake of ease, I will group these stages together and refer to them jointly as ‘the decision’. The decision was controversial within government at the time, with support from then Secretary of State for International Trade, Liz Truss, but concerns or outright opposition expressed by Business Secretary Alok Sharma, Foreign Secretary Dominic Raab and International Development Secretary Anne-Marie Trevelyan. In particular, ministers opposed to the project cited the reputational risks it posed in the context of the UK’s hosting of COP 26 the following year. Stuart-Smith LJ recognised the controversies surrounding the project in his judgment but was at pains to stress at several points that the role of the courts in cases of judicial review is not to comment on the merits of a decision but only on its legality [6, 49, 95].

FoE challenged the decision on two, closely related grounds.

1. Ground 1(a): the decision was based on an error of law or fact, namely that the Project and its funding was compatible with the United Kingdom’s commitments under the Paris Climate Change Agreement (“the Paris Agreement”) and/or assisted Mozambique to achieve its commitments under the Paris Agreement; and/or

2. Ground 1(b): UKEF’s decision was otherwise unlawful in so far as it was reached without regard to essential relevant considerations in reaching the view that funding the Project aligned with the UK and Mozambique’s obligations under the Paris Agreement.

In ruling on each of these grounds, the Court was concerned with three main questions, summarised by Stuart-Smith LJ at [96]:

First, what is the appropriate scope of enquiry when a decision maker decides to take something into account in the course of the decision-making process? Second, should the Court entertain submissions and decide questions of interpretation of the Paris Agreement? Third, and related to the second, is the Foreign Act of State doctrine relevant or applicable to the facts of this case?

The scope of enquiry

All public bodies are under a Tameside duty to carry out a sufficient enquiry prior to making a decision, so that they are in possession of all the necessary information required to make it. The name is derived from Lord Diplock’s judgment in Secretary of State for Education and Science v Metropolitan Borough of Tameside [1976] 3 All ER 665 at 696, [1977] AC 1014, where he held that the question for a court is: “did the Secretary of State ask himself the right question and take reasonable steps to acquaint himself with the relevant information to enable him to answer it correctly?” [1065].

However, subsequent case law has tended to view the question of what considerations should be taken into account and what information should be sought as being a matter for the decision-maker and largely context-specific, subject to the irrationality test and any statutory requirements. Citing the judgment of the High Court in R (Spurrier) v Transport Secretary [2019] EWHC 1070 (Admin), [2020] PTSR 240 [141] ff., concerning the appropriate standard of review where the Tameside duty is engaged, Stuart-Smith LJ also noted that, where the decision under challenge depends “essentially on political judgment” or involves “scientific, technical and predictive assessments” the decision-maker should be granted a wider margin of appreciation in relation to the inclusion or non-inclusion in the decision-making process of information on a particular subject [100]. Thornton J also recognised that in the context of a complex, scientific, predictive evaluation of the kind required when conducting an EIA for this kind of project, decision-makers must enjoy a wide margin of appreciation, and cited a number of other climate change cases where this principle had been stressed [271, 277]. Yet the two judges took very different views on whether UKEF had discharged its duty of enquiry, particularly as regards the calculation of Scope 3 emissions.

GHG emissions tend to be divided into three categories for the purposes of conducting environmental/climate impact assessments. The direct emissions associated with an activity or project fall within Scope 1. In this case that is the emissions associated with the extraction of LNG. In the Horse Hill oil well case it was the emissions associated with the construction of the well and associated buildings. Scope 2 emissions include the indirect emissions from the generation of purchased electricity in order to undertake the activity. Scope 3 are all indirect emissions not included in Scope 2, including the end-use of products produced by the activity.

In relation to the Mozambique LNG project, UKEF produced a climate change assessment report which posed the question: “what are the estimated Scope 3 GHG emissions of this project?”. However, the report ultimately declined to make an estimate on the basis that it would be “inaccurate and therefore likely to be misleading”. An associated environmental/human rights report stated that Scope 3 emissions could not be reported “due to considerable uncertainty in the measurement and reporting of these data”, which “could not be resolved without further analysis or due diligence” [301].

The question for the Court in the present case, therefore, was whether this failure to take Scope 3 emissions into consideration was unreasonable. Stuart-Smith LJ held that it was not. He considered that UKEF enjoyed a wide margin of appreciation over how it conducted its assessment of the climate change impacts of the proposed project in the present case, since “at the time there was no established or internationally recognised methodology for evaluating the climate change impacts of a project like the one under scrutiny” [103], and further held that quantification would not have added anything material to the qualitative assumptions made for the purpose of assessing compliance with the Paris Agreement [234].

By contrast, Thornton J noted that the UKEF climate report set itself the task of producing an impact assessment which would “fully acknowledge”, “fully consider” and “evidence” the climate change risks associated with the project so that they could be coherently presented to ministers but ultimately failed to deliver a proper assessment of those risks [332]. She pointed out that UKEF had neglected to estimate Scope 3 emissions, even though there did in fact exist a suitable methodology, in the form of the GHG Protocol used by many private-sector companies and endorsed by the House of Commons Environmental Audit Committee [304].

Scope 3 emissions for the project were eventually calculated by the Department for Business, Energy and Industrial Strategy (BEIS) after the Prime Minister requested advice on whether they could be offset. This calculation took just 24 hours and was completed on 30 June 2020, shortly before final approval for the project was given. The BEIS calculations indicated that the LNG extracted from the site would produce some 805 million tons of CO₂ over the 25-year lifetime of the project, constituting no less than 0.2% of world’s entire remaining carbon budget if we are to stay within 1.5^oC of warming. Yet the UKEF climate report was never amended to reflect this updated calculation [322–324].

Other flaws in the UKEF climate report were touched upon briefly, in particular its inconsistent assessments concerning the extent to which the Scope 3 emissions from the project would be offset by a reduction in the use of more polluting fuels. While the summary section suggests it is more likely than not that the project would lead to a net reduction in global emissions, the conclusion indicates that it may lead to such a reduction, and a passage quoting analysis by the US export credit agency, US EXIM, states that it is unlikely that the project would replace more polluting fuels and suggests that it might instead hamper the growth of renewables. These differing positions could lead to very different outcomes in relation to the UK’s ability to meet its obligations under the Paris Agreement [310–316].

In light of these ambiguities, and the failure to amend the report with the updated Scope 3 emissions calculation and send it back to ministers for reconsideration, Thornton J concluded that UKEF “failed to make reasonable and legally adequate enquiries in relation to a key consideration in the decision making (climate risks). The lack of information deprived Ministers of a legally adequate understanding of the scale of the emissions impact from the Project” [333].

The interpretation of the Paris Agreement

It is worth noting at this stage that the UK’s international commitments under the Paris Agreement have no automatic force in domestic law, but that the UK has adopted a legally-binding obligation under s.1(1) of the Climate Change Act 2008 to reach net zero emissions by 2050 and an obligation on the Secretary of State to set regular carbon budgets (s.4, CCA 2008). This means that decisions can be challenged in domestic courts on the basis of their failure to comply with these domestic climate obligations, although the Act is not prescriptive about the actions that ministers or officials must take to achieve net zero. However, as the parties in the present case agreed, compatibility with the provisions of unincorporated treaties can also be justiciable in certain circumstances.

Drawing together principles from a range of authorities, Stuart-Smith LJ held that, while there was no general rule that a national court shall never determine a question of interpretation of an unincorporated international treaty, it should adopt a lower intensity of review where the language of the treaty is broad and aspirational [119]. In such circumstances, the domestic court need only satisfy itself that the decision-maker’s interpretation of the relevant treaty provisions is “tenable”, rather than necessarily correct. Thornton J concurred that the correct test in the present circumstances was that of “tenability” [262] but the judges disagreed on whether the decision under challenge satisfied that test.

Stuart-Smith LJ held that “UKEF was entitled to form the view that the support for the Project that was in contemplation was in accordance with its obligations under the Paris Agreement as properly understood. That view was at least tenable” [240], while Thornton J concluded that “the failure to quantify the Scope 3 emissions, and the other flaws in the Climate Report mean that there was no rational basis by which to demonstrate that funding for the Project is consistent with Article 2(1)(c) of the Paris Agreement on Climate Change and a pathway to low greenhouse gas emissions” [335].

Foreign Act of State doctrine

There was no disagreement on the third question, regarding the applicability of the Foreign Act of State doctrine. The Defendants submitted that the portion of Ground 1(a) concerning Mozambique’s commitments under the Paris Agreement was not justiciable, since it is not, as a matter of judicial policy, for the courts of this country to determine the legality of acts of a foreign government in the conduct of foreign affairs. After considering a range of case law on the doctrine, Stuart-Smith LJ held that, while the involvement of foreign state does not automatically preclude domestic courts from ruling on issues of foreign law, provided that there is a relevant “foothold” in domestic law in relation to the issue [130], it was not for a UK court to pronounce on whether the development of the LNG project would cause Mozambique to breach its own obligations under the Paris Agreement [232].

Where next?

So, what happens next? The split decision means that the judicial review did not succeed. However, the day after handing down its judgment, the High Court took the unusual step of issuing an order giving Friends of the Earth permission to appeal. Provided that FoE chooses to proceed, therefore, the Court of Appeal will settle the issue. Given the differing approaches taken by the judges in the lower court to Scope 3 emissions, it will be interesting to see how the judgment of the Court of Appeal in the present case interacts with its decision in Finch v Surrey County Council. Having declined to provide specific examples in that case of circumstances in which the connection between a proposed project and a putative effect might be sufficiently close to justify taking Scope 3 emissions into account when carrying out an EIA, the Court will now be forced to decide whether the connection between the planned project and the end-use emissions in the present case is so close as to make a decision to exclude them unreasonable.

The bar for success for such challenges is extremely high and the weight of recent case law is firmly against the Appellant. It would be foolish to try to predict the outcome of the appeal but, for all the reasons set out in my piece last October, one cannot help but suspect that it will be dismissed. However, given the manifest flaws in the UKEF climate change report and the scale of the GHG emissions that the project would produce, if ever there was a case to test the theory that the UK courts will never overturn a government decision on climate change grounds, this could be it.

What I’ve been up to this week

It is exam season on the Bar course, so much of my time has been taken up with preparing for assessments. But last Wednesday I took an evening off to go and see Ralph Fiennes in David Hare’s new play at the Bridge Theatre. In ‘Straight Line Crazy’, Fiennes plays Robert Moses, the hugely influential and controversial urban planner and master builder, whose decades-long career shaped much of the modern look and layout of the New York metropolitan area. After a slow start, the play worked its way up to a pretty devastating second act, and addressed many mid-twentieth-century arguments — about road-building, gentrification, access to the open space, and structural racism in planning — which are still awfully topical today.