Court of Appeal reiterates limits of judicial review in the climate change context

In R. (on the application of Friends of the Earth Ltd) v Secretary of State for International Trade/UK Export Finance (UKEF) [2023] EWCA Civ 14 the Court of Appeal dismissed an appeal brought by Friends of the Earth relating to the Government’s decision to provide export finance in support of a natural gas project in Mozambique. In doing so, the court gave importance guidance on the role of the Paris Agreement on climate change in domestic judicial review cases.

Key points

  • 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.
  • When considering the lawfulness of a public law decision in the context of an unincorporated treaty such as the Paris Agreement, the standard of review in judicial review proceedings may be based on tenability and not correctness.

Background

Friends of the Earth (“FoE“) sought to appeal the dismissal of its application for judicial review of the Secretary of State’s decision to provide export finance in support of a natural gas project (the “Project“) in Mozambique. The decision was initiated by United Kingdom Export Finance (“UKEF“) in exercise of delegated powers. At first instance, the Divisional Court was split and the judicial review did not succeed (see our commentary on the judgment).

FoE appealed to the Court of Appeal. It raised the following issues:

  1. Whether it was an error of law for UKEF to have concluded that the decision was aligned with the UK’s obligations under the Paris Agreement;
  2. Whether, given UKEF had decided to finance the Project on the basis that funding was in accordance with the UK’s obligations under the Paris Agreement, the court should assess the lawfulness of that decision on the basis only of whether UKEF’s view was tenable, rather than correct;
  3. Whether the Court of Appeal should determine the proper construction of Article 2 (1) (c) of the Paris Agreement (which relates to making finance flows consistent with a pathway towards low greenhouse gas emissions and climate resilient development); and
  4. Whether the respondents failed in their duty of enquiry under Secretary of State for Education and Science v. Metropolitan Borough of Tameside [1977] AC 1014 (“Tameside“) by not obtaining an accurate quantification of the Project’s Scope 3 emissions.

Judgment

In a single unanimous judgment, Sir Geoffrey Vos dismissed the appeal and addressed the issues raised by FoE fully in his judgment.

The Paris Agreement

Sir Geoffrey Vos held that the Paris Agreement did not give rise to domestic legal obligations as it is an unincorporated international treaty. The court did not agree with the comments made in the Divisional Court that the Paris Agreement consisted of “a composite package of aims and aspirations“, noting that it does contain specific obligations on states, but it is not helpful to seek to derive from the text hard-edged obligations of the kind found in commercial agreements.

For the purposes of this judgment the court did not consider it necessary to take any firm view as to the precise nature of the UK’s obligations under the Paris Agreement, but focused on what the UK was not obliged to do. Sir Geoffrey Vos concluded that Article 2 (1) (c) did not create an obligation on the UK to demonstrate that its overseas funding was consistent towards limiting global warming, but instead contained the aims and purposes of the Paris Agreement.

The question of whether funding the Project was aligned with the UK’s international obligations under the Paris Agreement was however accepted to be justiciable.

Tenability

The court held that the question of whether it was an error of law for the respondents to have concluded that funding the Project was aligned with the UK’s obligations under the Paris Agreement, was to be judged by the tenability standard rather than the correctness test, and provided an explanation of their approach.

The respondents here chose to take into account the UK’s obligations under the Paris Agreement but were not compelled by domestic law to do so. The court noted the lack of clear guidance as to how unincorporated treaties such as the Paris Agreement should be interpreted under domestic law. Sir Geoffrey Vos referred to the Paris Agreement as one of many factors that UKEF decided to consider when making their decision and emphasised that it was not for the courts to allocate “weight as between competing factors“. As an example, he outlined that if domestic courts had to definitively construe unincorporated treaties every time the executive decided to have regard to them in making decisions, it would be “problematic” and “unworkable”.

The court therefore found that the fact that UKEF had reached a definitive view that its decision was compliant with the UK’s obligations under the Paris Agreement (rather than saying it was simply tenable) had no effect on the outcome. The court explained that the executive can state that it wishes to comply with an unincorporated treaty even though there may be different views as to what precisely it means. The court went further and accepted that the executive “must also be able to say, without successful challenge, that it thinks on balance and in good faith that a particular decision is compliant, even if it later changes its policy or is shown to have been wrong in the view that it took“.

Rationality

FoE’s rationality challenge focused on the argument that the Government later acknowledged that financing the Project did not align with the UK’s obligations under the Paris Agreement.

Sir Geoffrey Vos explained that the uncertainty and complexity surrounding the Project made it clear that UKEF could not predict a precise outcome. In particular it was not clear to what extent the Project would contribute to fossil fuel transition. He observed that UKEF had to consider all relevant and material factors when making their decision which included the UK’s obligations under the Paris Agreement.

The court held that the correct standard to apply was whether UKEF’s view that the decision aligned with the UK’s obligations was tenable when it was taken (not with the benefit of hindsight). There was no requirement to be certain that the decision complied with those obligations. 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.

In light of the complexity of the case, the court found that UKEF’s view was indeed tenable and therefore it was not irrational for UKEF to decide to provide finance for the Project.

Tameside challenge

The court referred to Thornton J’s approach in the Divisional Court, where she considered that the failure to quantify the Scope 3 emissions meant “that there was no rational basis by which to demonstrate that funding for the project was consistent with Article 2 (1) (c)”, and described it as flawed on the basis that Article 2 (1) (c) does not impose an obligation on the UK Government with which compliance must be demonstrated.

Noting that it was for the decision maker to decide upon the manner and intensity of the inquiry to be undertaken, Sir Geoffrey Vos stated that the ultimate question for the court was whether it was irrational for UKEF to have taken the funding decision without accurately quantifying the Scope 3 emissions, in a context where it was always fully understood that the Scope 3 emissions were significantly larger than the other categories of emissions. Sir Geoffrey Vos noted that the precise quantification of the Scope 3 emissions did not answer the important questions of whether and to what extent gas from the Project would replace more polluting fossil fuels or whether financing would or would not align with the UK’s obligations under the Paris Agreement.

The court held that UKEF’s decisions as to the quantification of the Scope 3 emissions were within the substantial margin of appreciation given to decision-makers. The court concluded that despite failing to estimate the scope 3 emissions accurately, the decision was not irrational.

Comment

This is an important judgment on the standard of review the courts will apply when asked to consider unincorporated international law and the broad margin of discretion afforded to public bodies when deciding complex and uncertain issues.

The judgment also serves as a strong reminder of the high bar of success for judicial review applications despite the growing relevance and appreciation of climate change-related issues. Indeed the judgment started with a reminder that it should not be construed as supporting or opposing any political view, but was focused only on establishing whether the decision was vitiated by an error of law. Regardless of the context, judges are expected to restrict themselves to applying accepted and familiar principles of public law.

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Court finds unlawfulness in relation to Government’s Net Zero Strategy

In R (Friends of the Earth Ltd and ors) v Secretary of State for Business, Energy and Industrial Strategy [2022] EWHC 1841 (Admin), the High Court partially upheld a challenge to the Government’s Net Zero Strategy (the “NZS“) under the Climate Change Act 2008 (the “2008 Act“).

Key Points

  • It is not incumbent on the Secretary of State to rely on quantitative analysis alone on climate change issues where this is not mandated by the legislation.
  • It is, however, necessary that sufficient information is provided to the relevant minister and to Parliament in order to fulfil obligations under the 2008 Act.
  • Section 3(1) of the Human Rights Act 1998 (the “HRA“) does not permit the court to interpret legislation in a way that confers greater rights protection where there is no question regarding the incompatibility of the legislation with a Convention right on an ordinary interpretation of the provision.

Background

The 2008 Act was amended in response to the UK’s obligations under the Paris Agreement, which required member states to hold the increase in the global average temperatures. Section 1 of the 2008 Act requires the Secretary of State to ensure that the net UK carbon account for 2050 meets certain benchmarks. The Secretary of Secretary is also required by statute to create carbon budgets for future periods to meet these benchmarks.

Section 13 requires the Secretary of State to prepare “such proposals and policies” as he considers will enable the carbon budgets which have been set to be met. Section 14 requires that “as soon as is reasonably practicable” after setting a carbon budget, the Secretary of State must lay before Parliament a report setting out proposals and policies for meeting the budgetary periods.

Following the setting of Carbon Budget 6, the defendant Secretary of State laid the NZS before Parliament pursuant to sections 13 and 14. The Good Law Project, Friends of the Earth Ltd, and ClientEarth (the “Claimants“) sought to challenge this by judicial review on several grounds:

  • Ground 1(1): The Defendant erred in law on the basis that he was not entitled to conclude that the proposals and policies in the NZS (prepared under section 13) would enable the carbon budgets to be met.
  • Ground 1(2): The briefing material supplied to the Defendant was insufficient, meaning that he had failed to take into account relevant considerations.
  • Ground 2: The Defendant failed to include information legally required to discharge his section 14 obligations, namely an explanation for how the NZS will enable the carbon budgets to be met, an estimate of the contribution of each proposal and policy for reducing emissions, and the time scales over which the proposals will have effect.
  • Ground 3: Section 3(1) of the HRA has the effect that sections 13 and 14 should be interpreted as the Claimants contend, and not as the Defendant contends which would risk contravention of Convention rights.

Despite these issues, the Claimants acknowledged the positive value of much of the NZS. Consequently, the Claimants sought declaratory relief rather than quashing of the NZS.

Judgment

Ground 1(1)

The Claimants contended that the Defendant’s duty under section 13 required that he make an assessment of the time scales within which the measures would take effect and their impact on reducing emissions. Such an assessment required numerical predictions of the contribution which the proposals and policies would make to meeting the carbon budgets. The Claimants contended that although the Defendant was allowed to make a qualitative judgment as to whether the measures would be sufficient to meet the carbon budget, the Defendant was not allowed to use a qualitative judgment to overcome a shortfall presented by quantitative analysis.

The court disagreed with this analysis. There was nothing in the statutory scheme requiring this quantitative approach, which would have been a significant constraint on the Defendant’s ability to judge how to discharge his duty. Section 13 necessarily involves making predictive assessments into the future, which inevitably introduces uncertainty and subjective judgment. The Defendant is accountable to Parliament for his proposals and policies under section 13: he will have to answer Parliamentary questions and appear before Parliamentary Committees. This is the mechanism by which the merits, realism and efficacy of the Defendant’s policies should be challenged. Although the fact that the Defendant is subject to parliamentary scrutiny does not preclude the court’s involvement (there is no indication that the functions under section 13 are not justiciable), the obligation in section 13 does not have to be satisfied by quantitative analysis alone – it is simply a relevant consideration that should inform his decision.

On that basis this ground was dismissed.

Ground 1(2)

The question here was whether the legal information provided was sufficient to make a proper decision. The Claimants contended that the relevant omissions were:

  • (a) Lack of an assessment of the time scales over which the proposals and policies were expected to take effect;
  • (b) Failure to identify under the quantitative analysis the contribution that each proposal or policy would make to meeting the carbon budgets; and
  • (c) Failure to identify under the qualitative analysis which proposals and policies would meet the carbon budget.

The court held that only if the briefing omitted something which the Defendant (or a relevant minister) was legally obliged to take into account, and which was not insignificant, will he have failed to take into account a material consideration. The test is whether the legislation mandated, expressly or by implication, that the consideration be taken into account or whether it was so “obviously material” that a failure to take it into account was irrational.

With regards to omissions (b) and (c), it was clear that the quantification of the effect of individual policies was obviously a material consideration on which information had to be provided to the minister in order that he could discharge his section 13 functions and make a rational decision. There was no dispute that these matters were not addressed in the briefing. Regarding omission (a), the court accepted that it was a matter of judgment as to how much detail should be included in the ministerial submission regarding the assessment of time scales.

Therefore, the court upheld the challenge in relation to omissions (b) and (c) only.

Ground 2

The court held that the Defendant was required to provide greater detail in its report to Parliament than merely publishing “the proposals and policies” suggested without any further information. This turned on the meaning of section 14 and what the phrase a “report setting out proposal and policies” meant. It was clear from the statutory context and the explanatory notes to the 2008 Act that this included explanation about how the government intended to meet its obligations under the Act. Moreover, although the legislation did not require detailed workings or modelling to be provided to Parliament, a quantitative analysis would be necessary for these purposes.

The court was conscious of the need to respect the constitutional separation of functions in a situation where the Executive provides a report to Parliament. Parliament is well able to call for more information to be provided where it wishes to do so. Therefore, the court should tread carefully in this area. However, it remains the role of the court to interpret the legislation and resolve legitimate disputes on the scope of the obligations that legislation imposes.

The NZS did not go below national and sector levels to look at the contributions to emissions reductions made by individual policies (or by interacting policies) where assessed as being quantifiable, which it ought to have done in order to comply with the language and statutory purposes of s.14. However, on the facts, the NZS did address the issue of time scales.

Consequently, the court again upheld the challenge in part.

Ground 3

The Claimants argument proceeded along the lines that the UK has obligations under Articles 2, 8, and A1P1 of the European Convention on Human Rights to take effective action against climate change because this represents a real and “imminent threat” to “life, quality of life and to property”. Therefore, the effect of section 3(1) of the HRA is to require sections 13 and 14 to be interpreted as the Claimants contend: Parliament should be assumed to have intended those provisions to be conducive to more, rather than less, rights protection. The Claimants made this argument despite not being aware of any authority in which a court has stated that this is a permissible application of section 3(1) of the HRA.

The court rejected this argument as not according with established principle. Section 3(1) only applies if the ordinary interpretation of a provision is incompatible with a Convention Right. This is not the same as saying that section 3 allowed courts to adopt interpretations that would ensure greater rights protection when an issue of incompatibility does not arise. In any case, the Claimants’ submission would go beyond the permissible incremental development of clear and constant Strasbourg case law.

Comment

This judgment is notable as it demonstrates that courts are not afraid to conduct a detailed review of the actions of the Government in fulfilling their obligations under climate change legislation. Interestingly, Mr Justice Holgate started his judgment by emphasising that climate change is a global problem. The Claimants succeeded in two significant respects: the court held that the information provided to the relevant minister and the report laid before Parliament were both legally inadequate.

It is important to note, however, that the court was at pains to emphasise that the challenge was still directed at the legal sufficiency of the Secretary of State’s actions and a rationality challenge must not be used as a cloak for a challenge the merits or demerits of policies. The primary mechanism of accountability of the Executive is Parliament, but this does not prevent the courts from intervening in circumstances where the Government acts unlawfully, even on issues of policy.

The judgment can be contrasted with that of R (on the application of Friends of the Earth Limited) v Secretary of State for International Trade/Export Credits Guarantee Department [2022] EWHC 568 (Admin), where the court refused to quash a decision to provide export finance in support of a natural gas project (see our blog post on this case here). There the Claimants unsuccessfully sought to use international legal instruments to challenge the decision on climate change grounds. Read alongside each other, these two cases confirm that while “high-level” and “aspirational” international instruments may not create specific duties in national law, domestic legislation read in its proper context may well do so and is a much stronger basis for holding the Government to account in terms of its actions on climate change.

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Climate change and the role of regulators

In November 2020, the government announced an ambitious ten-point plan to boost green jobs and reach net-zero. The plan was a recent recognition at a national-level of the pressing need to combat climate change. It addresses an expansive set of topics: from offshore wind to walking and cycling; from carbon capture to finance. The proposals suggest regulatory changes in respect of nuclear power, buildings and finance form part of the plan.

The Climate Change Committee expects that businesses will be the primary drivers of the net-zero emissions target and provide the majority of investment required for the green transition. Therefore, any new regulations and regulatory action in this area must take into account the reality for businesses and consumers. This will provide the most effective means of switching to low-carbon solutions in circumstances where businesses are expected to be significant contributors to reach net-zero.

We have prepared a paper focusing on the extent to which regulators are currently obliged to take into account climate change policy when making decisions to better inform businesses of the direction of travel in this area. We provide an overview of the general legislative landscape in respect of climate change, considering whether and how regulators are impacted by that high-level legislation. We then consider the variety of tools that regulators are using in respect of climate change in the energy, transport, finance and construction sectors.

Please click here to read our paper on these issues.

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Supreme Court unanimously finds plan to build third runway at Heathrow Airport is lawful

The Supreme Court has overturned a unanimous decision of the Court of Appeal, in finding that the Airports National Policy Statement (the “ANPS”) and its accompanying environmental report are lawful.

The ANPS is the framework that governs the construction of a third runway at Heathrow Airport and under which an application by a developer would be considered. This policy was designated as such by the Secretary of State in June 2018.

The defendant in this case, the Secretary of State for Transport, did not appeal the Court of Appeal’s decision and made no submissions to the Supreme Court. Instead, an interested party, Heathrow Airport Ltd (“HAL”) was granted permission to appeal to the Supreme Court. HAL owns Heathrow airport.

The Supreme Court decision

The Court of Appeal had found that the ANPS was unlawful on the basis of the following grounds, which the Supreme Court considered and rejected in turn.

“Government policy” ground

Pursuant to section 5(7) and (8) of the Planning Act 2008 (the “PA 2008”), the Secretary of State was required to give an explanation of how the policy set out in the ANPS took account of Government policy relating to the mitigation of, and adaptation to, climate change. It was a linchpin of the environmental activists’ success at the Court of Appeal that that Court decided that “Government policy” included the commitment to implement the emissions reductions targets under the Paris Agreement. In particular, it was the Court of Appeal’s view that there was nothing to warrant limiting the phrase “Government policy” to mean only the legal requirements of the Climate Change Act 2008 (the “CCA 2008”), finding that the concept of policy was broader than legislation.

The Supreme Court disagreed with this analysis. It took a purposive approach, explaining that the purpose of the section 5(8) is to make sure that there is a degree of coherence between the policy set out in the ANPS and established Government policies. It was the Court’s view that for the provision to operate sensibly the phrase must be given a relatively narrow meaning so that the relevant policies can readily be identified. Otherwise, civil servants would be required to “trawl” through Hansard and press statements to see if anything had been said by a minister which might be characterised as “policy”. The Court found that it could not have been Parliament’s intention to create “a bear trap” for ministers by requiring them to take into account any ministerial statement which could as a matter of ordinary language be described as a statement of policy relating to the relevant field.

As such, the Supreme Court held that when the Secretary of State designated the ANPS, there was no established Government policy beyond that already encapsulated in the CCA 2008. This is because, at that time, the Government’s approach on how to adapt its domestic policies to contribute to the global goals of the Paris Agreement was still in a process of development.

Section 10 ground

Under section 10(2) and (3) of the PA 2008 the Secretary of State is required to designate national policy frameworks with the aim of contributing to the achievement of sustainable development. The Court of Appeal found that the Secretary of State breached this duty when promulgating the ANPS in that he failed to have proper regard to the Paris Agreement.

The Supreme Court found that reasoning unsustainable. It held that the evidence demonstrated that the Secretary of State took the Paris Agreement into account and, to the extent that the obligations under it were already covered by the measures in the CCA 2008, he gave weight to it. Putting it another way, the Secretary of State was required to consider the CCA 2008; beyond that he had discretion whether to take the Paris Agreement further into account. The test to be applied to determining whether the exercise of that discretion was lawful was whether his decision was so irrational that no rational decision-maker would make it (the “Wednesbury Test”). This test was not met in this case. The Supreme Court held that the view formed by the Secretary of State, that the international obligations of the UK under the Paris Agreement were sufficiently taken into account for the purposes of the designation of the ANPS by having regard to the obligations under the CCA 2008, was “plainly” rational. This was bolstered by: the Secretary of State’s assessment based on expert advice from the Climate Change Committee (the “CCC”), an independent body; the ANPS indicating that the up-to-date carbon targets under the CCA 2008 would be taken into account at the stage of considering whether developer consent should be granted; and section 6 of the PA 2008 provides scope for the Secretary of State to amend the ANPS should that be necessary.

On this basis the Supreme Court overturned the Court of Appeal’s reasoning.

Environmental report ground

The Court of Appeal had found that the Secretary of State had breached his duty under article 5 of the Strategic Environmental Assessment Directive 2001/42/EC on the assessment of the effects of certain plans and programmes on the environment (the “Directive”) to issue a suitable environmental report for the purposes of public consultation on the proposed ANPS, by failing to refer to the Paris Agreement.

The Supreme Court explained that an environmental report for the purposes of the Directive is required to provide a basis for informed public consultation on the plan. Whether the information included in an environmental report is adequate and appropriate is a matter of discretion for the Secretary of State and the exercise of that discretion is subject to the Wednesbury Test. The Court found that this test had not been met given that the Secretary of State decided to follow the advice of the CCC to the effect that the UK’s obligations under the Paris Agreement were sufficiently taken into account in the UK’s domestic obligations under the CCA 2008, which were referred to in the ANPS and the appraisal of sustainability. The Supreme Court found in favour of HAL on this ground.

Post-2050/Non-CO2 emissions ground

Section 10(2) and (3) of the PA 2008 obliged the Secretary of State in performing his function of designating the ANPS to do so with the objective of contributing to sustainable development and in so doing to have regard to the desirability of mitigating, and adapting to, climate change. The Court of Appeal found that the Secretary of State breached this duty when promulgating the ANPS for two reasons.

First, he failed to have proper regard to the desirability of mitigating climate change in the period after 2050. However, the Supreme Court found that the Paris Agreement was still being developed in June 2018, when the ANPS was being designated.

Second, he had failed to have proper regard to the desirability of mitigating climate change by restricting emissions of non-CO₂ impacts of aviation, in particular nitrous oxide. The Supreme Court dismissed this argument, stating that it was a matter of discretion for the Secretary of State. Further, that discretion had not been exercised irrationally because of six reasons:

  1. His decision reflected the uncertainty over the climate change effects of non-CO₂ emissions and the absence of an agreed metric which could inform policy.
  2. It was consistent with the advice which he had received from the CCC.
  3. It was taken in the context of the Government’s inchoate response to the Paris Agreement.
  4. The decision was taken in the context in which his department was developing as part of that response its Aviation Strategy, which would seek to address non-CO₂
  5. The designation of the ANPS was only the first stage in a process by which permission could be given for the third runway scheme to proceed and the Secretary of State had powers at the developer consent stage to address those emissions.
  6. It is clear from both the appraisal of sustainability and the ANPS itself that the applicant for developer consent would have to address the environmental rules and policies which were current when its application would be determined.

On this basis the Supreme Court found in favour of HAL on this ground as well.

Comment

The Court of Appeal’s decision could be regarded, in some ways, as conservative, given that it decided not to quash the ANPS. Instead, it declared that the ANPS in its present form was unlawful and could not have legal effect. This gave the Secretary of State the opportunity to reconsider the ANPS. Nonetheless, the Supreme Court’s decision could make it significantly easier for the Secretary of State to proceed with plans for a third runway at Heathrow. However, this case has not been without its political twists and turns. Notwithstanding the Supreme Court’s decision, at the time of writing this blog, it has been reported that the Prime Minister has refused to endorse proposals for a third runway at Heathrow. It remains to be seen what happens next.

Andrew Lidbetter
Andrew Lidbetter
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+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998
Shameem Ahmad
Shameem Ahmad
Associate
+44 20 7466 2621