Mozambique LNG project: High Court judges split over decision to fund disastrous gas project

Stark disagreement between two High Court judges over case brought by Friends of the Earth leaves outcome hanging in the balance
However Justice Thornton concluded that the government had “no rational basis” to deem the project’s financing consistent with the Paris Agreement, making it “unreasonable” and therefore unlawful
Result still to be determined as the group awaits court order, appeal likely if judicial review deemed unsuccessful

Friends of the Earth is awaiting the final result of a judicial review after two High Court judges today failed to agree on whether ministers had acted lawfully in approving $1.15bn of financing for a gas mega-project in Mozambique. Although one of the judges concluded the government had acted unlawfully, today’s split decision means the judicial review has not yet succeeded as the group awaits a court order determining the final result.

The claim, brought to the High Court by Friends of the Earth, examined the government’s decision to fund the Mozambique liquified natural gas (LNG) project through its export credit agency, UK Export Finance (UKEF), as approved by the Treasury and the Department for International Trade (DfID).

Justice Thornton, one of two judges who heard the case, agreed with Friends of the Earth’s assessment that the decision to fund the new development, one of UKEF’s largest ever financial packages, was granted without a complete understanding of its climate impacts. She concluded that there was “no rational basis” to show that the financing of the project was consistent with the terms of the Paris Agreement and international ambitions to limit global temperature rise to 1.5 degrees. Its approval was therefore unlawful.

UKEF had failed to assess the project’s total emissions impact by taking into account those produced through the ‘end-use’ of the gas, or its eventual combustion. It was also inconsistent in its conclusions about the project’s likely effects on global emissions, and as such ministerial decision makers were misled.

Friends of the Earth says that Justice Thornton’s damning assessment poses critical questions for UKEF over its responsibility to act in accordance with the law. The group deems 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, entirely inconsistent with the government’s public-facing endorsement of the internationally-binding treaty. It is also inconsistent with current government policy on overseas finance.

Friends of the Earth maintains its view that a claim should succeed where any High Court Justice identifies unlawful conduct, but the court has not yet confirmed whether it has or hasn’t ruled in the group’s favour. A majority view was not reached by both judges, because the second judge, Justice Stuart Smith’s conclusions starkly contrasted those of his counterpart. This means that overall consensus has not been reached by the whole court. In the event that Friends of the Earth’s claim is considered unsuccessful, an appeal is considered inevitable to reach a definitive outcome.

Research by Friends of the Earth and the New Economics Foundation shows that the Mozambique LNG project will produce between 3.3 and 4.5 billion tonnes of CO2 equivalent over its lifecycle, more than the combined annual greenhouse gas emissions of all 27 EU countries.

By Justice Thornton’s own calculations using the Department for Business, Energy and Industrial Strategy’s (BEIS) assessment of project emissions, this accounts for 0.2% of the remaining global carbon budget if the aim of keeping within 1.5 degrees of warming is to be met, with a 66% probability. It’s also estimated that the construction phase of the project alone will 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. The lives and livelihoods of many living in the Cabo Delgado region have already been turned upside down as a result of its development. This is set to become worse still when the country, already extremely vulnerable to multiple climate impacts, becomes increasingly affected by the Earth-warming emissions that the project will create.

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.”

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.”

The importance of this legal case

Friends of the Earth believes that Justice Thornton’s conclusions are significant for a number of reasons:

This case was a critical opportunity to test what compliance with the Paris Agreement looks like. That a High Court judge has deemed UKEF’s actions unlawful means that there may be a basis to call other government decisions into question along similar lines
Justice Thornton’s ruling is internationally significant, because it is considered the first time a judge has said that all flows of finance, to be consistent with the Paris Agreement, must be shown to be in line with the temperature goal to be consistent with the treaty
There are potential international implications, particularly for other export credit agencies that have relied on the plausibility of the same climate assessments to justify their own investments in the Mozambique LNG project