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By Flora Curtis & Acland Bryant
Following the split decision in the Divisional Court, Friends of the Earth (“FoE”) appealed to the Court of Appeal.
FoE made three main arguments:
- UKEF was required to adopt a view of the Paris Agreement (“PA”) that was more than merely tenable;
- There was no rational basis on which UKEF could have concluded that the decision to fund the Project was compatible with the PA as a whole, or article 2(1)(c) in particular; and
- UKEF failed in its Tameside duty of inquiry by failing to obtain a quantification of the project’s Scope 3 emissions, and its view that the CCR was sufficient was irrational.
The Court of Appeal considered that the first two issues raised the following three issues that were central to the determination of the appeal, namely:
- Whether the Respondents had made any error of law in concluding that the decision to finance the Project was in line with the UK Government’s obligations under the PA;
- The degree to which the Court should scrutinise whether the Respondents had interpreted the PA correctly in reaching their conclusion under (i); and
- Whether the Court should determine the proper construction of Article 2(1)(c) and, if so, what that construction was.
The Court of Appeal’s Judgment
The appeal was dismissed by Sir Geoffrey Vos MR delivering the judgment of the court. The Master of the Rolls indicated that he agreed broadly with the conclusions reached by the Divisional Court and the Respondents as to the “tenability” question, and with the Respondents as to the rationality and Tameside challenges. The Court declined, however, to agree fully with either member of the Divisional Court as to the correct approach to the PA.
The structure of the PA
Before turning to the substance of the appeal, the Court considered it important to understand and set out the basic structure of the PA. According to the Court, the PA imposes specific obligations on state parties in Articles 4, 7, 9 10, 11 and 13. Article 2, by contrast, sets out the general purposes of the PA. The specific obligations are to be undertaken by the parties with a view to achieving the general purposes set out in Article 2. Article 2 does not therefore impose freestanding obligations on state parties.
The tenability question
Agreeing with the Divisional Court, the Respondents argued that UKEF had only needed to reach a “tenable” interpretation of the PA, and the obligations placed on States by the Agreement, when deciding whether to fund the Project. Before the Court of Appeal, FoE argued that this was the antithesis of the approach required by the Vienna Convention, namely that the PA be interpreted in good faith in accordance with its ordinary meaning, in light of its object and purposes. FoE argued that the “tenability” approach avoided interpretation, was contrary to the principle of effectiveness, and was inconsistent with a line of binding domestic authority – starting with the case of , ex parte. Launder – to the effect that, if an applicant is to have an effective remedy against a decision-maker who has misdirected himself as to an unincorporated provision of international law, it is right to examine the substance of the matter. Once a question under a treaty is justiciable, the court must determine it.
The Court of Appeal rejected this argument as one which “ignores constitutional norms and seeks to turn a series of exceptions into the general rule”.
The Court concluded that FoE had confused treaties that had been incorporated into English law with unincorporated treaties that were not. The Launder line of case law was not applicable here, as in those cases there was either no live dispute as to the interpretation of provisions of international law, or alternatively a body of ECHR jurisprudence on which the national court could draw before deciding the issue before it. This case was different, and it would be questionable for the courts to interpret from scratch the meaning of an unincorporated provision of the PA on which there was no existing judicial authority. Were the courts routinely to do this, it would lead to the extensive direct domestic application of treaties and international law, thus undermining the basic constitutional principle that unincorporated treaties are unenforceable.
According to the Court, it would be unfortunate were decision-makers deterred from seeking to give effect to what they understand to be the UK’s international obligations by fear that their decisions might be held to be vitiated by an incorrect understanding. It must be possible for the executive to say that it wants to comply with an unincorporated treaty, even though there may be different views as to what precisely it means. It must also be able to say that it thinks on balance and in good faith that a particular decision is compliant, without successful challenge.
The “tenable view” approach was, therefore, the correct one.
The rationality challenge
FoE argued that the Government’s decision to finance the Project was irrational because it had itself later acknowledged such fossil fuel projects to be misaligned with the PA. The day after UKEF’s decision to fund the Project was taken, for example, the Commonwealth Development Corporation had stated that investments in the fossil-fuel sector were not aligned with the PA.
The Court rejected the rationality challenge. As Stuart-Smith LJ had concluded in the Divisional Court, UKEF had to take its decision having regard to all material factors – not just the UK’s obligations under the PA. There was no domestic law requirement that the government be certain that the decision complied with the PA. The question whether the decision complied with Paris was hugely complex and beset by uncertainties as to future events. It would be unworkable and impracticable if the government could only make such a decision if it were able to demonstrate definitively that its view of the factual and legal position was correct.
The Court concluded that the rationality of UKEF’s decision had to be approached by looking at the decision at the time it was taken – not with the benefit of hindsight. UKEF’s decision had been supported by the Wood Mackenzie Report and the CCR. UKEF’s decision could therefore only be impugned on rationality grounds if Thornton J’s interpretation of the PA were correct – i.e. that in order to demonstrate compliance with Article 2(1)(c), UKEF had to demonstrate that funding the Project was consistent with a pathway towards limiting global warming to well below 2oC and pursuing efforts towards 1.5 oC.
The Court did not agree with Thornton J’s interpretation or her conclusions. It was not necessary for the Court to take any firm view as to the precise nature of the UK’s obligations under the PA – only to be clear about what the PA did not oblige the UK to do. Article 2(1)(c) created no obligation on the UK Government to demonstrate that its overseas funding was consistent with the specific temperature goals set out in the PA, or to make finance flows consistent with a pathway towards low GHG emissions.
It cannot possibly have been irrational, therefore, for UKEF, SSIT or the Chancellor to decide to finance the Project, when they were being advised that the project could, in some scenarios, align with the UK’s obligations under the PA. That view was at least tenable.
The Tameside challenge
As to the Tameside challenge, the Court disagreed with Thornton J’s conclusion that the failure by UKEF to quantify the scope 3 emissions for the Project was unreasonable.
UKEF was entitled to consider climate change risks, but it was not required to assess those risks mathematically. In any event, the Project was going ahead with or without UKEF’s financing – the decision was not, therefore, one that could have reduced or avoided the project’s scope 3 emissions. The ultimate question for the Court was therefore whether it could be said to have been irrational for UKEF to undertake the funding decision without quantifying scope 3 emissions, and without supplementing the CCR report.
In this case, the Respondents were aware that the scope 3 emissions of the project would be considerable. Any estimate of the scope 3 emissions would by nature have been uncertain. Even had a quantification been available, this would not have answered the far more difficult question whether, and to what extent, gas from the project would have replaced more polluting fossil fuels, and over what timescale. In that context, UKEF’s decisions as to the quantification of Scope 3 emissions and the adequacy of the CCR were well within the substantial margin of appreciation allowed to them in this case.
Supreme Court
On 20 February 2023, FoE lodged an appeal against the Court of Appeal’s decision with the Supreme Court. On 9th June 2023, the Supreme Court refused FoE permission to appeal on the basis that the application did not “…raise an arguable point of law”.
Comment
Flora Curtis
The Court of Appeal’s decision highlights the difficulty faced by courts in approaching unincorporated international treaties when they are relied upon in domestic litigation. The Court was clear that it agreed with the Divisional Court that UKEF need only demonstrate that it had reached a “tenable” view as to the interpretation of the PA. However – as Thornton J had been in the High Court – the Court of Appeal was effectively compelled to interpret the PA anyway in order to decide whether the Government’s own interpretation had been “tenable”. The Court appears to have been far more willing to set out firm views on what the PA does not require of state parties, while declining to explore in any detail the positive obligations that the PA does impose. It will be interesting to see the extent to which the Court of Appeal’s comments on the overall structure of the PA, and the role of Article 2 in particular, will be cited and relied upon in future cases that turn on the tenability of an authority’s interpretation of the PA.
The case is also another interesting example of the courts grappling with the question how far it is appropriate to intervene where questions are raised as to the technical evidence base underlying decisions related to emissions and climate change. While the High Court did intervene in the Net Zero Strategy judgment to require the Secretary of State to consider the quantification of estimated emissions savings for policies developed under the specific statutory framework of the Climate Change Act 2008, in the present case (and in Finch) the Court of Appeal was more willing to give the Government a wide margin of appreciation. These cases suggest that the courts will generally only intervene to require decision-makers to produce and consider detailed emissions quantification figures where there is a compelling statutory basis for doing so.
Acland Bryant
Quantifying Climate Impacts
The goal of limiting warming to 1.5°C is at the heart of PA and central to avoiding the most devastating impacts of climate change. As a result of the direct relationship between total cumulative emissions and global temperature change, there is a known ceiling on the amount of further emissions that can be released to stay within 1.5°C. That ceiling, the ‘global carbon budget’, is rapidly shrinking and will, based on current projections, likely be used up within 6 to 9 years. This unambiguous science is crucial to understanding the PA, as recognised by Thornton J [248 – 253HC].
The Project’s lifetime (estimated 40 years) emissions, including end use of the LNG, were not calculated by UKEF, but subsequent estimates show they will exceed total annual emissions from all 27 EU countries combined. In this context, the failure to quantify emissions fatally undermined UKEF’s conclusion that funding the Project was compatible with the UK’s PA obligations. You cannot answer this question without knowing total expected emissions, and then considering how they might interact with credible pathways to 1.5°C. Quantification of scope 3 emissions is clearly an issue of great importance, which courts will have to consider in a number of other cases including Finch.
The quantification of scope 3 emissions is also an essential part of discharging government’s duty of inquiry. For the Court to conclude that the duty of inquiry can be discharged on the basis that the Project would go ahead anyway is a flawed approach because: (a) there was a lack of evidence that the Project would go ahead anyway; and (b) even if the Project were to go ahead anyway, that does not mean that there is no other relevant information needed to make a decision.
In my view, Thornton J rightly described UKEF’s assertion that the gas from the Project would displace and/or replace more environmentally harmful fossil fuels on the global market as evidentially ‘unclear’ [308HC]. Despite this, the Court of Appeal found that a chance a project may reduce global emissions is enough to demonstrate compliance with the PA under UK domestic law. This is very concerning considering current attempts to frame gas as a ‘transition fuel’ and given the rate at which the global carbon budget is being depleted.
Declining to Interpret, but then Proceeding to Interpret Anyway?
The Court of Appeal’s construction of the PA is different to both judicial interpretations in the Divisional Court, and to that advanced by either party. Whilst purportedly declining to interpret the PA, the Court of Appeal developed a construction of the PA through a negative lens – focussing on what the PA “is not”.
This partial interpretation creates more confusion as to the construction of the PA than existed before the UKEF litigation began. Moreover, the conclusion that Article 2, the central tenet of the PA, gave rise to no obligations on States has potentially far-reaching implications.
Article 2(1)(c) uses the word “making”, an operative word which creates an obligation of conduct, must be interpreted in line with the other subsections of Article 2. The individual provisions of Article 2 cannot be seen in isolation. Article 2(1)(c) must be interpreted by reference to the temperature goal in Article 2(1)(a), since there is a direct correlation between emission levels and temperature rises. Finance flows are “a core element in meeting the temperature goal”. To conclude that Article 2 of the PA creates no obligations, including those of conduct, essentially takes the heart out of the PA and ignores the operative language contained within the Article.
The Supreme Court’s Decision
The Supreme Court’s decision not to hear the appeal is disappointing. The Court of Appeal’s decision is to stand as the authority on the scope of the duty of inquiry and interpretation of the PA, neither of which are helpful nor clear. It is likely that, based on the Court of Appeal’s judgment, we will continue to see big fossil fuel projects being pursued on partial information. However, whilst proponents of the PA have been dealt a blow and fossil fuel projects have won the battle, the war is far from over. The partial interpretation provided by the Court of Appeal leaves scope for further PA arguments to be made. It is a shame the Supreme Court did not take the opportunity to deal with this issue more substantively and provide guidance as to the interpretation of the PA.
Richard Honey KC and Conor Fegan appeared on behalf of the defendants in this matter. They have not been involved in the drafting of this post.
Flora Curtis is a barrister at Francis Taylor Building specialising in environmental, public and planning law.
Acland Bryant is a barrister working at Friends of the Earth and a PhD Researcher at the University of East Anglia.