R (on the application of Friends of the Earth Ltd) v The Secretary of State for International Trade/UK Export Finance (UKEF)
| Jurisdiction | England & Wales |
| Judge | Sir Geoffrey Vos MR |
| Judgment Date | 13 January 2023 |
| Neutral Citation | [2023] EWCA Civ 14 |
| Docket Number | Appeal No: CA-2022-000759 |
| Court | Court of Appeal (Civil Division) |
and
[2023] EWCA Civ 14
Sir Geoffrey Vos, MASTER OF THE ROLLS
Lord Justice Bean
and
Sir Keith Lindblom, SENIOR PRESIDENT OF TRIBUNALS
Appeal No: CA-2022-000759
Claim No: CO/3206/2020
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE KING'S BENCH DIVISION
DIVISIONAL COURT
Stuart-Smith LJ and Thornton J
Royal Courts of Justice, Strand,
London WC2A 2LL
Jessica Simor KC, Zachary Douglas KC, Kate Cook, and Gayatri Sarathy (instructed by Leigh Day) for the Claimant/Appellant (Friends of the Earth)
Sir James Eadie KC, Richard Honey KC, Hollie Higgins and Conor Fegan (instructed by Government Legal Department) for the Defendants/Respondents (the respondents)
Adam Heppinstall KC and Freya Foster (instructed by Latham & Watkins) for the Interested Parties (the interested parties)
Hearing dates: 6–8 December 2022
APPROVED JUDGMENT
This judgment was handed down remotely at 10.00am on Friday 13 January 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Sir Geoffrey Vos MR delivering the judgment of the court:
Introduction
The main issue in this appeal is whether the UK Government acted unlawfully in approving UKEF's $1.15 billion investment in a liquified natural gas project in Mozambique (the project). The Divisional Court (Stuart-Smith LJ and Thornton J) could not agree on the outcome, and the application by Friends of the Earth for judicial review of the Government's decision (the decision) was dismissed. Both judges gave substantive judgments, and none of the facts that they recited in their judgments has been contested before us. The argument has, however, assumed a rather different focus in this court.
We recognise at the outset that the 197 state parties to the Paris Agreement of 12 December 2015 (the Paris Agreement) said that climate change represented an urgent and potentially irreversible threat to human societies and the planet and “thus require[d] the widest possible cooperation by all countries, and their participation in an effective and appropriate international response, with a view to accelerating the reduction of global greenhouse gas emissions”. Notwithstanding that stark statement of the position, this case concerns an application for judicial review of UK Government decision-making and is to be determined, as the parties agree, on the basis of accepted and familiar principles of public law. Nothing we say in this judgment should be construed as supporting or opposing any political view of the issues. Our task is only to establish whether the decision is vitiated by an error of law.
The essential facts
The Divisional Court set out the facts on which both sides relied at [1]–[93] and [248]–[270]. Reference should be made to those paragraphs. In this section, we set out only those matters that are essential to understanding our decision. We have recorded the most relevant terms of the Paris Agreement in the annex to this judgment. Reference should be made to the entirety of the Paris Agreement for a full understanding of its provisions.
Friends of the Earth is a not-for-profit organisation that undertakes campaigning and other work in furtherance of environmental protection objectives. UKEF is an export credit agency whose mission is to ensure that no viable UK export fails for lack of finance or insurance from the private sector.
The project comprises the development of offshore deep-water gas production facilities 50 kilometres from the coast of Northern Mozambique connected to an onshore gas receiving and liquefaction facility. It is to be operated by TotalEnergies E&P Mozambique Area 1 Limitada (Total) and funded via MOZ LNG1 Financing Company Limited. The decision is said to be one of the largest single financing packages ever offered by UKEF to a foreign fossil fuel project. It formed part of a larger package worth in the region of $14.4 billion provided by other countries' export credit agencies, including the USA ($3.75 billion), Japan ($5 billion), South Africa (up to $0.96 billion), Italy (up to $0.95 billion), the Netherlands ($0.75 billion) and Thailand ($0.15 billion) (the figures changed but are given as at mid-2019). Various commercial lenders, including the African Development Bank, and regional banks from Southern Africa also supported the project. UKEF's support was conditional on Total procuring UK goods and services and is expected to create approximately 2,000 UK jobs.
We were told that Mozambique is one of the least developed and poorest countries in the world and is extremely vulnerable to climate change impacts.
We will now enumerate in chronological order the main events upon which the challenge to the decision was based.
In June 2019, the House of Commons Environmental Audit Committee reported on the scale and impact of UKEF's support for overseas fossil fuel projects including the project. It concluded that calculating Scope 3 emissions (all indirect emissions from the fossil fuels extracted by a project not included in Scope 1 (direct emissions) and Scope 2 (indirect emissions from the generation of purchased electricity)) was essential for an understanding of the full emissions impact of a project. It recommended that the Greenhouse Gas Protocol provided an appropriate methodology.
In July 2019, the UK Government issued its Green Finance Strategy saying that it would ensure that any investment support for fossil fuels affecting emissions was in line with the Paris Agreement. The respondents say that this passage was expressly limited to official development assistance (ODA), and did not relate to export finance provided by UKEF, which is not a form of ODA.
In March 2020, consultants Wood Mackenzie produced a report entitled Mozambique LNG – Carbon Emission Benchmarking, saying that they were unable to model the project's emissions impact with any degree of certainty, but that there was particular scope for the gas produced to displace coal in power generation in China, India and Indonesia to “potentially reduce emissions”. Wood Mackenzie said that they could not provide a definitive assessment of the emission reduction associated with the project.
On 29 May 2020, UKEF's final climate change report on the project (the CCR) concluded after a detailed analysis that “[g]as from the [project] is … considered by the Government of Mozambique to be an important contributor to the energy transition of Mozambique in line with its NDC [nationally determined contribution] and its Paris Agreement commitments” and that “[t]his aligns with the UK Government's commitment to support developing countries to respond to the challenges and opportunities of climate change as part of its own Paris Agreement obligations”. The CCR concluded that the project's Scope 3 emissions would significantly exceed its Scope 1 and Scope 2 emissions.
On 1 June 2020, Mr Louis Taylor, Chief Executive of UKEF (Mr Taylor), briefed the Secretary of State for International Trade (SSIT) recommending support for the project. He suggested that the SSIT read the CCR and said at [37] that “UKEF has a requirement to consider Climate Change risks as part of its consideration of support for the Project”.
On 10 and 12 June 2020, the SSIT and the Chancellor of the Exchequer (CHX) provided their respective consents for the project. The Secretary of State for Business, Energy and Industrial Strategy and the Secretary of State for Foreign and Commonwealth Affairs opposed the project on environmental grounds.
On 18 June 2020, Mr Taylor briefed the Prime Minister saying that different Ministers and Departments held opposing views on the project, but that the requisite approvals from the CHX and the SSIT had been received, and that there were material legal risks to a decision either way. The briefing noted that gas was a transition fuel that was likely to displace higher polluting fossil fuels like coal and oil, and result in a net decrease in emissions in countries where that was the case. It was not possible to assess accurately the Scope 3 emissions. Friends of the Earth submitted that these latter points were wrong.
On 26 June 2020, the Prime Minister's private secretary indicated that the Prime Minister had reviewed the details of UKEF support for the project and was content for it to proceed. By a separate email, the Prime Minister's office asked the Department for International Development and the Department for Business, Energy and Industrial Strategy to provide advice on how a facility could be created for carbon capture, utilisation and storage to offset the emissions generated through the project.
On 30 June 2020, Mr Taylor was given a “very rough” estimate of 805.75 Mt (megatonnes) of carbon dioxide (CO2) for the Scope 3 emissions over the life of the project. Mr Taylor approved the underwriting minute for the project on 30 June 2020 and cleared the necessary legal documents on 1 July 2020. He gave these approvals in the exercise of his delegated power under section 1 of the Export and Investment Guarantees Act 1991. In that way, the UK Government made the decision to invest in the project without commissioning any detailed quantitative analysis of the Scope 3 emissions.
On 1 July 2020, the Commonwealth Development Corporation (the CDC — now called British International Investment), whose shares are wholly owned by the UK Government, issued its climate change strategy document. The CDC said that: “[c]rucially, we will not make new investments … in fossil fuel sub-sectors that we...
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