UK Court of Appeal gives Government more flexibility on the Paris Agreement

Overview

The Court of Appeal has handed down a unanimous judgment dismissing an appeal of an application for judicial review of the UK Government’s decision to approve finance of a Mozambique natural gas project. The Court considered the applicable standard of review where a domestic court is asked to judicially review a judgment formed by a decision-maker that their conduct is consistent with an unincorporated international treaty (in this case, the Paris Agreement).

The Court’s decision has made it harder for those wishing to challenge fossil fuel projects on climate change reasons. The decision emphasises the limited scope of judicial review and the margin of appreciation to be afforded to the Government when considering international law obligations.

Background

In December 2021, two High Court judges (sitting as a Divisional Court) heard an application made by environmental NGO, Friends of the Earth, for judicial review of the Government’s decision to approve an export finance package worth $1.15bn in respect of a liquified natural gas project in Mozambique (the “Project”).

Friends of the Earth brought the challenge on two grounds:

• Error of law or fact: the decision was based on an error of law or fact, namely that the Project was compatible with the UK’s obligations under the Paris Agreement (and/or assisted Mozambique to achieve its commitments under the Paris Agreement); and/or
• Failure to take into account relevant considerations: the decision was otherwise unlawful, as the decision that funding the Project aligned with the UK and Mozambique’s obligations under the Paris Agreement was reached without regard to essential relevant considerations.

The claim failed in the High Court as a result of the Court being split 1-1.

Stuart-Smith LJ rejected the claimant’s argument on the basis that the Government’s view that the Project aligned with the Paris Agreement was at least tenable (see para 240 of the Divisional Court judgment). While Thornton J accepted that the Government’s view on the Project’s compatibility with the Paris Agreement needed to only be tenable, she found the claim should succeed. In particular, the Government’s reliance on a ‘high-level qualitative review’ of the Project’s emissions, without quantification of Scope 3 emissions, was unreasonable (see paras 331 and 244) and deprived Ministers of a legally adequate understanding of the scale of the Project’s emissions impact for the purpose of making their decision (see paras 328 and 333). Greenhouse gas emissions are categorised into three ‘scopes’ by the Greenhouse Gas Protocol. Scope 3 emissions are 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).

The 1:1 split is the result of the matter being heard by a Divisional Court. Divisional Courts can be constituted by two judges. A case may be referred to a Divisional Court where, for example, it concerns a matter of significant public interest. While Divisional Courts are a rare occurrence, two judges sitting as a Divisional Court being unable to reach a consensus is rarer still. In a judicial review context, it leads to an unusual procedural dilemma as no final outcome is reached. In this case, Stuart-Smith LJ and Thornton J resolved this dilemma by granting permission to appeal.

Court of Appeal

Friends of the Earth appealed to the Court of Appeal on the following grounds:

• Tenability issue: the Government was required to adopt a view of the Paris Agreement that was more than merely tenable;
• Rationality challenge: there was no rational basis on which the Government could conclude that the decision was compatible with the whole of the Paris Agreement and Article 2(1)(c) in particular; and
• Tameside challenge: the Government failed in their Tameside duty of enquiry to obtain a quantification of the Project’s Scope 3 emissions, and their view that the Government’s final climate change report on the project was sufficient was irrational.

The Court of Appeal handed down a single unanimous judgment dismissing Friends of the Earth’s appeal (see Friends of the Earth v Secretary of State for International Trade/UK Export Finance [2023] EWCA Civ 14).

Construction of the Paris Agreement

The Court of Appeal did not agree “completely” with either Stuart Smith LJ or Thornton J’s approach to the Paris Agreement. Stuart-Smith LJ emphasised the aspirational nature of the Paris Agreement and reasoned that distilling ‘hard-edged’ obligations would be inconsistent with a proper understanding of the convention (see paras 230 and 239). By contrast, Thornton J’s view was that the Paris Agreement did give the UK hard-edged obligations.

Instead, the Court of Appeal emphasised the importance of the structure of the Paris Agreement. Article 3 provides that parties are to undertake ambitious efforts “as defined in Articles 4, 7, 9, 10, 11 and 13” with a view to achieving the purpose set out in Article 2. Specific obligations on state parties to the Paris Agreement are therefore primarily found in Articles 4, 7, 9, 10, 11 and 13, and the provisions of Article 3 represent the purposes of the Paris Agreement (see para 38).

Article 2 is declarative of the treaty’s purposes, which relate to obligations set down in its articles. In the Court’s view, what Article 2 does not do is create an obligation on the UK to demonstrate that its overseas funding was consistent with a pathway towards limiting global warming to well below 2°C and pursuing efforts to 1.5°C (see para 55(vi)).

Tenability as the applicable standard of review 

Friends of the Earth argued that the Government had erred in law as the Government had proceeded on the basis that its decision was aligned with its obligations under the Paris Agreement and, in particular, its obligations under Article 2(1)(c) (see paras 22-25). Since the Government had accepted that the international law question of whether funding the Project was consistent with the UK’s obligations under the Paris Agreement was justiciable, Friends of the Earth submitted that the court could not re-introduce justiciability factors and the tenability approach by the back door (see para 25). It argued that the Court was bound to provide an “answer” to the legal question, rather than showing such deference to the Government’s view on it.

The Court rejected Friends of the Earth’s argument and found that the question of whether it was an error of law for the Government to have concluded that funding the Project was aligned with the UK’s obligations under the Paris Agreement must be judged by considering whether the decision-makers adopted a tenable view of that question. This conclusion was arrived at as a result of the application of the constitutional principle of dualism: that is, the Court cannot and should not second guess the executive’s decision-making in the international law arena where there is no domestic legal precedent or guidance (see para 40).

In reaching that conclusion, the Court emphasised that the standard for judicial review may be, and is in this case, less intense where the issue is not properly within the province of the domestic court. The Paris Agreement is an unincorporated international treaty: it has not been implemented into English law and does not give rise to domestic legal obligations. Accordingly, where a decision-maker decides to take into account unincorporated international law, the question for a domestic court is not whether the decision-maker’s view as to that law was correct but merely whether it was tenable.

Rationality – tenable interpretation of the Paris Agreement

Friends of the Earth argued that the Government’s decision was irrational because, as a matter of law, and as the Government itself acknowledged six months after the decision in its climate change policy, financing the Project did not align with the UK’s obligations under the Paris Agreement. Friends of the Earth did not argue that the decision was irrational on the basis that it would, if it had been made some six months later, have contravened the Government's then climate change policy.

Applying the tenability standard to this case, the Court found that the Government’s view as to the proper interpretation of Article 2(1)(c) of the Paris Agreement (that the Paris Agreement did not prohibit the provision of finance to the gas project in Mozambique) was a tenable one. It could not possibly have been irrational for the Government to decide to provide finance for the Project when they were being advised that the Project could, in some scenarios, align with the UK’s obligations under the Paris Agreement (see paras 55 and 56):

• It was not clear to what extent the Project would contribute to fossil fuel transition. The reports and materials obtained by the Government made clear that the precise outcome of the Project could not be predicted).
• There was no domestic law requirement for the Government to be certain that the decision complied with the UK’s obligations under the Paris Agreement, even if they eventually formed the view that it did. To arrive at that view, the Government judged that while the Project would have a significant climate change impact by increasing global greenhouse gas emissions, liquified natural gas could as a “transition fuel” by displacing the use of more polluting fuels such as coal.
• The question of compliance with the Paris Agreement is hugely complex, as the Government’s climate change report shows. It would be unworkable and impracticable if the Government could only make such a decision if it were able to demonstrate that its view of the factual and legal position was correct.

No breach of Tameside duties of enquiry

The Court of Appeal considered the fact that the Government made the decision to invest in the Project without commissioning any detailed quantitative analysis of the Scope 3 emissions. The Court was critical of Thornton J’s central holding that the relevant decision-makers had failed to discharge their duty of inquiry in relation to the calculation of Scope 3 emissions, which meant that there was no rational basis by which to demonstrate the funding was consistent with the Government’s obligations under Article 2(1)(c).

The Court of Appeal found that the failure of the relevant decision-makers to obtain a quantitative estimate of the Scope 3 emissions of the Project did not amount to a breach of their Tameside duties to make reasonable enquiries (Secretary of State for Education and Science v. Metropolitan Borough of Tameside [1977] AC 1014 at 1065). The Court referred to the fact that there is a wider margin of appreciation in decision-making involving the application of scientific knowledge or expertise (see para 57). The Government’s conclusion in relation to the quantification of the Scope 3 emissions and the adequacy of the high level qualitative review in the climate change report were well within the substantial margin of appreciation allowed to the decision-makers (see para 63).

Discussion

In the wake of the High Court’s decisions at first instance, there was discussion about how prepared courts would be to intervene in government decision-making to ensure strict adherence to climate change obligations. Many considered that Thornton J’s judgment could provide a roadmap for major projects to be challenged where the Government had made insufficient inquiries into, or reached a debatable view on, the project’s climate change implications. Certain projects (such as a solar or wind farm construction project) could be particularly vulnerable to challenge, as there will often be difficult debate as to whether the reduction in emissions facilitated by such projects outweigh the significant emissions in building them.

While the Court of Appeal recognised the stark statement in the Paris Agreement that climate change represented an urgent and potentially irreversible threat to human societies and the planet, the Court was careful to emphasise that its task was only to establish whether a UK Government decision is vitiated by error of law, and that its judgment should not be construed as supporting or opposing any political view. Ultimately, though, the Court’s decision has made the roadmap to challenging projects much more difficult to follow. The Court emphasised the limited scope of judicial review and the margin of appreciation to be afforded to government in considering international law obligations.

Friends of the Earth are considering whether to appeal the Court of Appeal’s decision. At least at this stage, an appeal to the Supreme Court cannot be ruled out.