In R. (on the application of Friends of the Earth Ltd) v Secretary of State for International Trade/UK Export Finance (UKEF)  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.
- 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.
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:
- 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;
- 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;
- 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
- Whether the respondents failed in their duty of enquiry under Secretary of State for Education and Science v. Metropolitan Borough of Tameside  AC 1014 (“Tameside“) by not obtaining an accurate quantification of the Project’s Scope 3 emissions.
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.
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“.
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.
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.
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.