Two judges have disagreed in what could be a landmark case over whether the UK government acted lawfully in approving $1.15bn financing for a liquified natural gas (LNG) project in Mozambique.
The case at the High Court, brought by Friends of the Earth, examined the decision to fund the scheme through the export credit agency, UK Export Finance (UKEF), approved by the Treasury and the Department for International Trade.
The judges’ split decision means the judicial review has not yet succeeded and a court order is awaited with the final result.
Friends of the Earth said today it was likely to appeal if the judicial review was refused.
The case, which tested compliance with the Paris Agreement, centred on the failure to assess the project’s total climate impact by taking into account emissions produced from the end-use of the gas, known as scope 3.
This is thought to be the first time a judge has argued that to be consistent with the Paris Agreement all finance flows must be shown to be in line with the international ambition to limit temperature rise to 1.5C.
Other government decisions could now be called into question.
Mrs Justice Thornton said the decision to fund the new development, one of UKEF’s largest ever financial packages, was approved without a complete understanding of its climate impacts.
“UKEF failed to make reasonable and legally adequate enquiries in relation to a key consideration in the decision making (climate risks).
“The lack of information deprived Ministers of a legally adequate understanding of the scale of the emissions impact from the project.”
She concluded that there was “no rational basis” to show that the financing of the project was consistent with the Paris Agreement and international ambitions to limit warming to 1.5C. Its approval was therefore unlawful, she said.
But the other judge, Lord Justice Stuart-Smith, said Friends of the Earth’s challenge should fail. He found there was no legal requirement to quantify scope 3 emissions. UKEF was entitled to its decision, he said:
“The [Paris] Agreement contains numerous aims or aspirations that may prove to be in tension or frankly irreconcilable on the facts of a given case, this case being a paradigm example.”
UKEF had argued in court in December 2021 that the Paris Agreement was a “high level aspirational declaration”, that had not been incorporated into UK domestic law and did not contain “clear and specific obligations”.
Friends of the Earth said today Mrs Justice Thornton’s conclusions posed “critical questions for UKEF over its responsibility to act in accordance with the law”.
The organisation said UKEF’s position – that it can finance the project on the basis that the terms of the Paris Agreement are ambiguous and at times unworkable – was “entirely inconsistent with the government’s public-facing endorsement of the internationally-binding treaty”. It was also inconsistent with current government policy on overseas finance, the organisation added.
Will Rundle, head of legal at Friends of the Earth, said:
“While we await the court’s decision on the final outcome of our case following a split judgement, our claim that the government’s export credit agency acted unlawfully has today been vindicated by a High Court Justice.
“We believe this is the first time a judge has recognised that all finance under the Paris Agreement must demonstrate alignment with the goal of limiting global heating to 1.5 degrees.
“There are big questions now for UKEF and for the government on whether it can feasibly still support this project when a judge has plainly said that its funding cannot rationally be considered compliant with the law.
“This case has shown that making poor decisions at the expense of our planet’s future leaves the government increasingly vulnerable to climate litigation.”
A government spokesperson said:
“We welcome the judgment and remain confident that UK Export Finance follows robust and internationally recognised due diligence before providing any support for overseas projects.
“We cannot comment further on ongoing legal proceedings.”
Research by Friends of the Earth and the New Economics Foundation showed that the Mozambique LNG project would produce 3.3-4.5 billion tonnes of CO2 equivalent over its lifecycle. This is more than the combined annual greenhouse gas emissions of all 27 EU countries.
Mrs Justice Thornton calculated this accounted for 0.2% of the remaining global carbon budget to keep temperature rise to within 1.5C (with a 66% probability). The construction phase alone would increase Mozambique’s emissions by up to 10%.
The development of the gas project has also been linked to conflict, human rights abuses and the displacement of hundreds of thousands of Mozambicans, Friends of the Earth said. The lives and livelihoods of many living in the Cabo Delgado region have already been dislocated by the development. This was likely to get worse when Mozambique became increasingly affected by multiple impacts of climate change.
Rachel Kennerley, international climate campaigner at Friends of the Earth, said:
“It’s baffling that UK Export Finance has doggedly defended claims that it did all it was required to when there’s such clear evidence ministers were misled about the devastating potential of this enormous new gas field. Shamefully, UK Export Finance has ridden roughshod over the aims of the Paris Agreement just months after the UK government was championing the treaty at international climate talks.
“Government hypocrisy is nothing new but the repercussions are global. It’s communities like those in Mozambique that are unfairly paying the highest price for climate breakdown.
“The global gas market is incredibly volatile as we’ve seen in recent weeks, and this project will neither bring down energy bills or make our supply more stable. It’s only by scaling up cheap renewables that we can guarantee a safer planet for all and a secure energy supply. We urge the government to withdraw its dirty money from this damaging project once and for all.”
Updated to correct name of Lord Justice Stuart-Smith