Client briefing: UK Export Finance

Quick read

A decision by the UK’s export credit agency (UKEF) to back a liquiefied natural gas project in Mozambique has been unsuccessfully challenged by Friends of the Earth (FOE) in judicial review proceedings. The campaigners claimed that the decision was unlawful as it was not aligned with the UK and/or Mozambique’s Paris Agreement commitments and failed to take into account relevant considerations, including the project’s Scope 3 emissions. In a split two judge panel, the court found that the decision was lawful, concluding that the decision making process of the UKEF was multifaceted and involved balancing different policy considerations, including not only climate change but also the eradication of poverty in Mozambique. Friends of the Earth has been granted permission to appeal.

Summary of facts

In June 2020, UKEF made the decision to provide financing and support worth up to $1.15 billion for a liquefied natural gas project in Mozambique as part of its remit to support UK exports. In the leadup to this decision UKEF took into consideration the Paris Climate Change Agreement and reached the conclusion that funding the project was compatible with the UK and Mozambique’s commitments.

In September 2020 FOE brought a legal challenge against UKEF’s decision, seeking judicial review of the decision on the basis that it was unlawful. Underlying the decision was a report prepared by UKEF, which FOE argued was inadequate as it did not quantify the Scope 3 emissions of the project.

Grounds for challenge

FOE claimed that UKEF’s decision to finance the project was unlawful on two grounds:

1. It was based on an error of law or fact, namely that the project and its financing were compatible with the UK and/or Mozambique’s commitments under the Paris Agreement. FOE said it was not.
2. In reaching the decision to finance the project, UKEF had failed to take into account certain essential factors, particularly the quantity of greenhouse gases generated by the project.

Judgement

The challenge was heard by two judges in the High Court. The panel was split meaning that FOE’s challenge failed, although permission to appeal was readily granted.