In September 2020, Friends of the Earth England Wales and Northern Ireland brought a legal challenge against UK Export Finance’s decision (the “Decision”) to provide over $1 billion of UK taxpayers’ money to help finance a liquefied natural gas (“LNG”) project off the coast of Mozambique. Through the project, the energy company Total (an interested party) aims to extract 43 million tonnes of LNG per year for 32 years. This will result in total combustion emissions of 4.3 billion tonnes of CO2e: more than the total annual emissions for all 27 countries within the EU.

This case is not concerned with whether, or the extent to which, the UK government should have considered the Paris Agreement in reaching its decision. Rather, it is concerned with whether, having concluded that both the project and its financing were compatible with the UK and Mozambique’s obligations under the Agreement, and having taken the decision on that basis, the decision was lawful.
In March 2022 the High Court issued a judgment with a split two-judge court. One of the judges ruled: (a) the government erred as it had no rational basis to conclude financing the project was consistent with article 2(1)(c) of the Paris Agreement; (b) government ministers approving the deal were misled; and (c) for finance flows to be aligned to the Paris Agreement, they must be demonstrably aligned with the Agreement’s temperature goals. The second judge ruled the decision was lawful. He held the court should give the government latitude in deciding for itself what enquiry to make, for example when quantifying climate impacts, and that the court should only scrutinise the government’s decision lightly. The claim proceeded to the Court of Appeal.

In January 2023 the Court of Appeal gave judgment, unanimously dismissing Friends of the Earth’s appeal. One of the key questions considered was whether article 2(1) of the Paris Agreement imposed positive obligations on the UK. The court held:
1) On the standard of review, the government was only required to adopt a ‘tenable’ view of what the Paris Agreement meant, and provided this was the case, the court could not and should not hold that it had made an error of law. It was not required to adopt a correct view, as Friends of the Earth had argued (relying on the Vienna Convention). It noted that the Paris Agreement did not give rise to domestic legal obligations.
2) In this case the government had adopted a tenable view. The court applied the constitutional law principle of dualism, noting that it could not and should not second guess the executive’s decision-making in the international law arena where there is no domestic legal precedent or guidance.
3) It was not irrational to make the decision to fund such a project without quantifying its scope 3 emissions. The project would have gone ahead with or without finance from UK Export Finance, the absolute quantification of scope 3 emissions would not have answered the nuanced question of whether the financing was compatible with the UK’s obligations under the PA, and the obligations in question were not absolute requirements to restrict the increase in global average temperature and to make finance flows consistent with a low-emissions pathway and climate-resilient development, but rather, these were only some of the purposes of the PA. The court held that the question of whether, and to what extent, gas from the project would replace more polluting fossil fuels and over what timescale was very complex – it was therefore not clear to what extent the project would contribute to the fossil fuel transition.

Though the court declined to construct the PA’s precise meaning, it held that:
•	The actions required by Articles 4, 7, 9, 10, 11 and 13 are not merely aims and aspirations, as one of the lower judges held, but are to be taken with the aim of strengthening the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty and for purposes including achieving the temperature goals and making finance flows consistent with a low-emissions pathway.
•	The temperature goal in article 2(1)(a) is a clear objective of the PA, to which all parties committed.
•	It was not clear to what extent the project would contribute to the fossil fuel transition, and it was not necessary for the respondents to take any firm view as to the precise nature of the UK’s obligations under the PA, only as to what was not required of the UK, namely that article 2(1)(c) does not create an obligation for the UK to show that its decision on overseas funding is consistent with a low-emissions pathway. Because the respondents were advised that the project could, in some scenarios, align with the UK’s obligations under the PA, the decision was not irrational.

In June 2023 the Supreme Court refused Friends of the Earth permission to appeal the Court of Appeal’s decision, bringing the litigation to an end.

Friends of the Earth v. UK Export Finance

<p>This entry was provided by the Sabin Center for Climate Change Law. Please see the terms of use for citation and licensing of third party data.</p>

Friends of the Earth v. UK Export Finance - points of claim

Filed

United Kingdom

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

Justice is the ethical and political framework that addresses fairness, including issues of responsibility, rights, and structural inequity.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

People who are less able to respond to the effects of climate change due to having limited financial or physical assets

The processes through which enterprises can identify, prevent, mitigate and account for how they address their actual and potential adverse impacts. Due diligence is the idea that reasonable precautions should be taken to avoid causing harm to people, the environment, or society. It also involves identifying and mitigating risks before they occur.

An agency providing government-backed financing, guarantees, and insurance to support domestic companies' international exports, that can play a role in financing climate-related projects.

Either money or something of monetary value is transferred between two or more organisations, people or countries.

The release of heat-trapping gases, primarily from human activities such as burning fossil fuels, agriculture and industry.

Actions to reduce emissions in energy generation and supply.

Terrestrial means "of the earth" and relates to the risks to ecological system that includes all living organisms and their interactions within land-based environments, such as forests, grasslands, and deserts.

Fossil gas, commonly known as natural gas, is a fossil fuel consisting chiefly of methane with smaller amounts of other hydrocarbons and trace gases, found in underground deposits.

People with different national or cultural traditions from the dominant population

Social and cultural groups that share collective ancestral ties to the lands and natural resources where they live, occupy or from which they have been displaced

People who have left their homes, whether through force, voluntarily, or a mixture of both

The activities of industries involved in the production, distribution, and sale of energy, including electricity, gas, and renewables.

Activities that involve planning, designing and building infrastructure, residential, and commercial structures.

This sector involves the wholesale and retail selling of goods.

This sector involves activities to move goods and people, alongside the storage of products.

Activities of businesses and institutions that provide financial services and products to individuals and organisations.

Activities involving the catching, processing, and selling of fish for food, recreation, and industry.

Slow onset events evolve gradually from incremental changes over many years or from increased frequency or intensity of recurring events. As defined in the Cancun Adaptation Framework (2010), slow onset events include risks and impacts from rising temperatures, desertification, biodiversity loss, land and forest degradation, glacial retreat, ocean acidification, sea level rise, and salinization.

Friends of the Earth v. UK Export Finance - points of claim

Policy instrument

Risk

Impacted group

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Finance