Friends of the Earth Ltd (R on the application of) v The Secretary of State for International Trade Export Credits Guarantee Department (UK Export Finance)

A public authority’s duty to inform itself is shaped by the nature of the decision it must make. Where the decision is a complex, predictive and multi-factorial exercise involving substantial policy judgment, the authority has a wide margin of appreciation in deciding what inquiries and information are required. Climate change considerations may be assessed qualitatively where no legal or policy rule requires quantified emissions analysis and the decision would not materially affect the emissions in question.

An unincorporated treaty containing broad and aspirational provisions should generally be assessed by asking whether the decision-maker’s interpretation is tenable. The Paris Agreement does not impose a hard-edged prohibition on financing projects that generate emissions. The claim was dismissed.

Friends of the Earth challenged decisions by the Secretary of State, HM Treasury and UK Export Finance to provide up to USD 1.15 billion in export finance for a liquefied natural gas project in Mozambique.

The challenge alleged that the decisions were based on an error of law or fact concerning the Paris Agreement and that the decision-makers failed to make sufficient inquiries into climate impacts, including Scope 3 emissions, carbon budgets, transition risk and stranded assets.

The central issues were the scope of the duty to inform oneself, the proper domestic approach to interpreting the unincorporated Paris Agreement, and whether the climate assessment provided a rational basis for the decisions.

1. Claim dismissed. The decisions were lawful. The proposed project was proceeding independently of UKEF support, so the decision under review was whether to provide export finance in accordance with UKEF’s statutory purpose and mission, not whether the project or its emissions should exist.
2. The duty to make sufficient inquiry was context-specific. UKEF was entitled to substantial respect and a wide margin of appreciation because the decision involved competing political, economic, scientific and predictive judgments. The court should apply relatively low-intensity review to the overall balancing exercise.
3. There was no legal or policy obligation to quantify Scope 3 emissions or to produce a full environmental impact assessment. UKEF knew that Scope 3 emissions would be very high, considered their uncertainty and possible displacement effects, and was entitled to proceed without precise quantification. The assessment of two trains was also rational because that was the project for which support was sought.
4. The Paris Agreement was an unincorporated international treaty containing broad aims and aspirations, qualified by sustainable development, poverty eradication, equity, common but differentiated responsibilities and national circumstances. Its provisions did not create a prohibition on financing an emissions-generating project. In the circumstances, the appropriate question was whether UKEF’s interpretation and overall alignment assessment were tenable. They were.
5. The court declined to determine conclusively whether Mozambique’s conduct complied with the Paris Agreement. The foreign act of state doctrine and the Agreement’s own mechanisms for implementation and compliance supported judicial restraint. The challenges concerning lock-in, stranded assets, the production gap, carbon pathways and the number of trains were, in substance, merits challenges and did not establish irrationality.
6. Thornton J dissented on the Scope 3 issue. She considered that UKEF failed its duty of inquiry because it did not quantify a material and potentially determinative climate impact, despite expert advice and an available methodology. In her view, the defects meant that there was no rational basis for demonstrating compliance with Article 2(1)(c). Her reasoning did not affect the operative dismissal of the claim.

First-instance judicial review proceedings in the Administrative Court. The claim was dismissed by the court, with Thornton J expressing a dissenting view on the adequacy of the Scope 3 emissions inquiry.