ClientEarth, R (on the application of) v Financial Conduct Authority

Where Parliament entrusts an expert regulator with approval of a prospectus, the regulator’s evaluative assessment is ordinarily challengeable only on public law grounds. The court must not substitute its own view where the statutory requirements admit of more than one rational assessment.

Article 16 of the Prospectus Regulation requires material and issuer-specific risk factors to be adequately described. It does not separately require disclosure of the issuer’s assessment of materiality or specificity, or prescribe a particular quantitative or qualitative analysis.

For Aarhus Convention purposes, a provision must have a sufficiently close connection with environmental matters. Financial-services legislation whose purpose is investor protection and market efficiency does not become environmental law merely because disclosed risks may have remote environmental consequences.

ClientEarth renewed its application for permission to challenge the Financial Conduct Authority’s approval of Ithaca Energy plc’s prospectus on 9 November 2022. Permission had been refused on the papers by Sir Ross Cranston.

The proposed judicial review alleged that the prospectus failed to comply with Articles 6 and 16 of the Prospectus Regulation in relation to climate-related risks, and that the FCA’s approval decision was irrational. The court also considered delay, standing and whether the claim qualified as an Aarhus Convention claim for costs purposes.

1. Permission and delay. Although the claim was filed at the end of the three-month period in CPR r.54.5(1), the delay and its consequences did not justify refusal for lack of promptness.
2. Standing. ClientEarth had sufficient public-interest standing because the claim fell within its environmental expertise and mission.
3. Articles 6 and 16. The FCA’s approval under s.87A of the Financial Services and Markets Act 2000 involved an evaluative judgment. The court could intervene for an error of law, failure to take relevant considerations into account or irrationality, but could not substitute its own assessment where the requirements admitted of more than one rational view.
4. Article 16 required risks to be specific to the issuer or securities, material to an informed investment decision, and adequately described. It did not impose a separate obligation to disclose the issuer’s assessment of materiality or specificity, nor require a particular quantitative or qualitative analysis. The FCA’s interpretation was correct and its assessment was rational. Grounds 1 to 3 therefore had no realistic prospect of success.
5. Aarhus Convention. The expression “relating to the environment” required more than a mere connection. Section 87A and the Prospectus Regulation concerned investor protection and market efficiency, not environmental protection. Any effect of prospectus disclosure on investment flows or climate mitigation was speculative, incidental and remote, and the claim lacked the requisite close connection and significant environmental benefit. It was not an Aarhus Convention claim.
6. Permission was refused on all grounds.

This was a renewed permission application in the Administrative Court. Permission had been refused on the papers by Sir Ross Cranston, sitting as a High Court Judge, on 18 April 2023.