Good enough for jazz: how well does the government need to understand its Paris Agreement obligations? A case of emissions and omissions

24 January 2023 by Lance Baynham

In R (Friends of the Earth Ltd) v Secretary of State for International Trade/UK Export Finance (UKEF) [2023] EWCA Civ 14, the Court of Appeal considered the implications of the Paris Agreement on climate change for governmental decision-making in relation to investing in a liquified natural gas project in Mozambique (the “Project”). Sir Geoffrey Vos MR, with whom Lord Justice Bean and Sir Keith Lindblom SPT agreed, dismissed Friends of the Earth’s appeal against the Divisional Court’s decision to dismiss their application for judicial review.

The judgment sets out the approach which is to be taken where the government declares itself to be acting in accordance with the UK’s obligations under an unincorporated international treaty. The Court of Appeal also considered the well-established duty that a decision-maker must “ask himself the right question and take reasonable steps to acquaint himself with the relevant information to enable him to answer it correctly” (Secretary of State for Education and Science v Metropolitan Borough of Tameside [1977] AC 1014 at 1065, known as the “Tameside duty”). Put briefly, the Court of Appeal held that:

1. the question of whether funding the Project was consistent with the UK’s international obligations under the Paris Agreement was accepted by the parties to be justiciable;
2. however, the Paris Agreement, as an unincorporated international treaty, did not give rise to domestic legal obligations;
3. having decided to have regard to the Paris Agreement, the respondents did not need to be right that funding the Project was consistent with it, so long as that view was “tenable”; and
4. failing to quantify the indirect greenhouse gas emissions from the downstream distribution, storage and use of the gas produced (known as “Scope 3” emissions) – which would undoubtedly be by far the greatest part of the emissions caused by the Project – before deciding to finance the Project, was not a breach of the Tameside duty.

The judgment is significant in clarifying the standard by which a decision-maker’s understanding of the UK’s international obligations is to be judged. However, the Court of Appeal’s reasoning on the Tameside duty – which critics might describe as overly deferential – is perhaps equally important, particularly seeing as this duty can and does apply to all manner of decision-making. This case note sets out the facts, the issues, the judgment of the Divisional Court under appeal, and the Court of Appeal’s judgment, before offering some brief comments by way of conclusion.

The facts

The Project comprises the development of gas-production facilities off the coast of Mozambique and a connected onshore liquefaction facility. The Court of Appeal recorded that the $1.15 billion offered by UKEF amounts to one of its largest ever financing packages for a foreign fossil fuel project.

In June 2019, the House of Commons Environmental Audit Committee, reporting on the impact of UKEF’s investment in foreign fossil fuels (including the Project), advised that calculating Scope 3 emissions was essential for assessing environmental impact. The following month, the UK government issued its Green Finance Strategy, which provided that any investment in fossil fuels would be in line with the Paris Agreement.

The decision to invest in the Project (the “Decision”) was made by UKEF on 1 July 2020, following discussions with ministers including the Secretary of State for International Trade, the Chancellor of the Exchequer, and the Prime Minister. The Prime Minister had been told that it was impossible to accurately assess Scope 3 emissions. The Decision was made without Scope 3 emissions having been quantified, save for a “very rough” [16] estimate of just over 80 megatonnes of CO₂. It was clear, however, that Scope 3 emissions would significantly exceed all other emissions from the Project.

Less than a year later, in March 2021, the UK government issued its Guidance: Aligning UK international support for the clean energy transition, which set out that the UK government would generally “no longer provide new direct financial or promotional support for the fossil fuel energy sector overseas” ([19]).

The Decision was challenged by Friends of the Earth, who argued that it was not consistent with the UK’s obligations under the Paris Agreement, and that it was irrational to think that it was. In particular, the Decision was said to be inconsistent with Article 2(1)(c), which provides that the Paris Agreement aims to “strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty, including by: … (c) making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”.

The issues

The issues were as follows:

1. How should the respondents’ view of the Paris Agreement and their compliance with it be judged? Did they need to get it right, or did their understanding need to be merely tenable?
2. In light of the answer to that question, was it rational to conclude that the Decision was compatible with the Paris Agreement?
3. Did the respondents breach the Tameside duty of enquiry?

As to the first issue, the respondents had accepted that the question of whether the Decision was consistent with the UK’s obligations under the Paris Agreement was justiciable. Friends of the Earth relied on the cases of R v Secretary of State for the Home Department, Ex parte Launder [1997] 1 WLR 839 and R v Director of Public Prosecutions, Ex parte Kebilene [2000] 2 AC 326. In both cases, the court reviewed the compatibility of the decisions in question with the European Convention on Human Rights before it had been incorporated into domestic law. The Court of Appeal, it was submitted, should take the same approach with the Paris Agreement. To do otherwise, would be to reintroduce the justiciability question by the back door.

The respondents, on the other hand, relied on Lord Bingham’s explanation of Launder and Kebilene in R (Corner House Research) v Serious Fraud Office [2008] UKHL 60. In Launder, the parties agreed on the interpretation of the relevant articles. In Kebilene, there was a substantial body of ECHR jurisprudence for the court to draw upon. Lord Bingham held at [44], “Whether in the event that there had been a live dispute on the meaning of an unincorporated provision on which there was no judicial authority, the courts would or should have undertaken the task of interpretation from scratch must be at least questionable”.

As to the correct interpretation of article 2(1)(c), Friends of the Earth argued that it imposed a positive obligation. The respondents argued that it did not.

Concerning the Tameside issue, Friends of the Earth argued that it was irrational to make the Decision without having quantified the Scope 3 emissions, in circumstances where those emissions were indisputably important and massive.

The Divisional Court

The judges differed in their judgments and were unable to agree. The application for judicial review was, accordingly, dismissed, and permission to appeal granted.

Both Stuart-Smith LJ and Thornton J adopted the “tenable view” approach but differed over the construction of the Paris Agreement. Stuart-Smith LJ held that the Paris Agreement did not give the UK hard-edged obligations whereas Thornton J held, at [268], that UKEF “had to demonstrate that funding the project [was] consistent with a pathway towards limiting global warming to well below 2°C and pursuing efforts to 1.5°C”.

The judges also differed on the Tameside issue. Thornton J held at [331] that UKEF’s “judgment that a high level qualitative review of the impact was sufficient was unreasonable”.

The Court of Appeal’s judgment

The Court of Appeal first set out, without reaching “firm conclusions”, its understanding of “the basic structure of the Paris Agreement” [38]. They disagreed with Stuart-Smith LJ’s characterisation of its articles as containing “merely aims and aspirations” [44] but, nonetheless, did not “seek to derive from its text hard-edged obligations that one might more commonly expect to find in a commercial agreement to be interpreted under domestic law” [46]. Accordingly, the Court of Appeal held that that the provisions of article 2 merely “represent the purposes of the Paris Agreement” rather than containing “specific obligations” [38]. The Court of Appeal emphasised that it set out this understanding of the Paris Agreement “not… by way of construction of its precise meaning, but in order to clarify what it appears, from its wording, to be intending to achieve” (at [46]).

As to the standard by which the government’s understanding of the Paris Agreement was to be judged, the Court of Appeal held that Launder and Kebilene were exceptions to the general rule of tenability, rather than the other way around. The respondents chose to take the Paris Agreement into account. They were not compelled to by any provision of domestic law. It was one of many considerations, and it was not for the Court to allocate weight between them. There was also a lack of guidance as to how unincorporated treaties like the Paris Agreement should be interpreted as a matter of domestic law and it would be unworkable for the court to be required to provide the correct interpretation each time.

Applying this standard, the Court of Appeal held that the respondents’ view was tenable. UKEF understood that the Project was considered by Mozambique to be an important part of its energy transition. It had considered Scope 3 emissions but decided that these could not be accurately quantified. All that could be said was that where the Project displaced coal or oil, that was basically good. Where it replaced lower carbon fuels or renewables, that was bad. On balance, UKEF concluded that it was more likely than not that the Project would displace more of the bad than the good. The difficulty of the assessment underlined, in the Court’s view, the appropriateness of the tenability standard. At [56], the Court of Appeal held as follows:

“In short, it cannot possibly have been irrational for the respondents to decide to provide finance for the project, when they were being advised that the project could, in some scenarios, align with the UK’s obligations under the Paris Agreement. That was at least a tenable view.”

As to the Tameside issue, the Court of Appeal considered Thornton J’s view that the failure to quantify 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) [59]. The flaw in this conclusion, in the Court of Appeal’s analysis, was that it relied on an incorrect understanding of article 2(1)(c) – namely, that it imposed positive obligations. In any event, the “decisions as to the quantification of the Scope 3 emissions… were well within the substantial margin of appreciation allowed to the decision-makers” ([63]). 

Comment

The Court of Appeal’s conclusion on tenability is orthodox and reflects the fundamental principle of dualism: domestic and international law operate on different and separate planes. It is consistent with a line of authority which might be considered to stand against the ‘over-legalisation’ of texts which, whilst superficially similar to the domestic legislation or contracts which the courts are used to construing, are in fact a different kettle of fish. The meaning of an unincorporated treaty is primarily a matter of political and diplomatic judgement, just as the meaning of the National Planning Policy Framework is primarily a matter of planning judgement (for which, see R (on the application of Samuel Smith Old Brewery) v North Yorkshire CC [2020] UKSC 3).

More practically, both parties relied on the principle of effectiveness. For Friends of the Earth, it would be contrary to the effective working of the Paris Agreement if the UK government was permitted not to worry too much about what it actually means, so long as it was close enough. For the respondents, the opposite was true. It would be clearly impractical, and stymie decision-making, if the government had to demonstrate that its legal and factual understanding of a hugely complex issue was correct, and with that question having to be determined by the courts, before it could make a decision which it understood in good faith to be in accordance with its international law obligations. Given the difficulty – or perhaps even impossibility – of arriving at a “correct” answer to the question of whether a decision will be “consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”, this position is surely right. If the provision of international law at issue were somewhat less complex, then presumably a narrower range of tenable views would be permitted, in a manner redolent of typical margin of appreciation considerations.

On the other hand, whilst purporting not to provide any “firm conclusions” [38] on the correct interpretation of the Paris Agreement, the Court of Appeal did determine that article 2 contained no positive obligations. Seeing as article 2 includes the 2°C temperature rise target – perhaps the central plank of the Paris Agreement – this is a conclusion, firm or otherwise, which critics will say permits a lax approach to key environmental obligations.

Nonetheless, if criticism is to be made of the Court of Appeal’s judgement, it is perhaps in the approach taken to the Tameside duty. The flaw in Thornton J’s reasoning was held to be her interpretation of the Paris Agreement and, specifically, her conclusion that article 2 imposed positive obligations. However, even if the Court of Appeal is right that compatibility with article 2(1)(c) did not need to be demonstrated, there is no question that Scope 3 emissions were still crucial. Yet, despite the Environmental Audit Committee having stressed their importance; knowledge of the fact that Scope 3 emissions “dwarfed” ([58]) other emissions; internal criticism of UKEF’s failure to quantify Scope 3 emissions; and the fact that the Prime Minister was ultimately given an estimate within 24 hours when he asked for one, there was no breach of the Tameside duty.

At [57], the Court of Appeal held in relation to the Tameside duty that “Subject to an irrationality challenge, it is for the decision-maker, and not for the court, to decide upon the manner and intensity of the inquiry to be undertaken”. In Tameside, the manner and intensity of the inquiry was said to be the need for a decision-maker to take “reasonable steps”to acquaint themselves with the relevant information. In this case, it seems that the executive was entitled to determine for itself what steps were reasonable. Those steps essentially consisted of concluding that getting the relevant information would be too difficult. That might be right on the facts of this case. But it may not always be easy to draw a line between, on the one hand, the apparently permissible conclusion that very important information can be ignored because it is too difficult to assess and, on the other hand, the presumably impermissible conclusion that unknown but important information can be dismissed out of hand.

It is understood that Friends of the Earth are considering an appeal.

Lance Baynham is a second six pupil barrister at 1 Crown Office Row Chambers.