Split Divisional Court dismisses climate change challenge against Government funding of LNG project

The Divisional Court has dismissed a claim seeking to challenge a decision of the UK’s export credit agency, UK Export Finance (‘UKEF’), to provide financial support to a liquid natural gas development in Mozambique. The decision was challenged in a judicial review by Friends of the Earth, who argued, inter alia, that the provision of financial support was inconsistent with the UK’s obligations under the Paris Agreement and that UKEF was obliged to calculate the emissions from consumption of the gas by end users (commonly referred to as Scope 3 emissions) before taking a decision to provide financial support to the project.

Lord Justice Stuart-Smith and Ms Justice Thornton confirmed that, given the nature of the Paris Agreement and its status as an unincorporated treaty, the correct approach for the court to take was to consider whether UKEF’s view of compatibility with the Paris Agreement was tenable. The Court also considered that UKEF was entitled to a wide margin of appreciation in respect of what information it was required, under its Tameside duty, to take into account when making its decision.

Lord Justice Stuart-Smith concluded that there was no legal or policy obligation for UKEF to quantify Scope 3 emissions and that their view that support for the project was compatible with the Paris Agreement was tenable, given, inter alia, the provision made in that treaty for sustainable development and the eradication of poverty. He declined to consider whether the project was compliant with Mozambique’s climate change obligations in light of the Foreign Act of State doctrine.

Ms Justice Thornton indicated that the claim failed “given the judgment of Stuart Smith LJ”, but considered that UKEF was required to calculate Scope 3 emissions in order to assess compatibility with the Paris Agreement.

Permission to appeal to the Court of Appeal has been granted by the Court.

Adam Heppinstall QC and Freya Foster acted for the Interested Parties instructed by Latham and Watkins.

The judgment is available to read in full here.