The Supreme Court rules in favour of the state in what has been defined as the Norwegian “climate lawsuit” of the century

The Norwegian Supreme Court set by all available judges (plenary) gave 22 December 2020 its judgment in the climate lawsuit against the Norwegian state, where the specific risk at stake was that the award of production licences in the 23rd licensing round could be declared invalid (nil and void). The case was heard between the Norwegian state represented by the Ministry of Petroleum and Energy and Greenpeace Nordic, Nature Youth Norway (and other environmental organizations).

Introduction

The core issue was whether the award of production licences in the Arctic/Barents Sea in the 23rd licensing round was a violation of among others Article 112 of the Norwegian Constitution (“Article 112”) with the legal consequence that the award would be declared invalid (nil and void). The Supreme Court ruled in favour of the Norwegian state.

The 23rd licensing round consisted of 40 blocks located in the Barents Sea South and Barents Sea South East. The main activities after award of a production licence are to conduct exploration activities such as seismic surveys and drilling exploration wells in accordance with obligations undertaken in the mandatory work program under the production licence. The initial exploration drilling activities have a minimal environmental impact. Any potential development of the field with subsequent production of oil and gas requires a new approval from the authorities, which will be elaborated on below.

To date, only seven wells have been drilled, resulting in zero commercial discoveries. Hence, it is very uncertain to what extent the award of production licenses in the 23rd licensing round will actually lead to production of oil and gas with potential emissions to the environment as a consequence.

The main legal topics

The main legal question for the Norwegian Supreme Court was whether Article 112, and especially its first paragraph, gives material rights to private persons, and if so, what the content of this right is. The provision states: (unofficial translation)

Every person has the right to an environment that is conducive to health and to a natural environment whose productivity and diversity are maintained. Natural resources shall be managed on the basis of comprehensive long-term considerations which will safeguard this right for future generations as well.

 In order to safeguard their right in accordance with the foregoing paragraph, citizens are entitled to information on the state of the natural environment and on the effects of any encroachment on nature that is planned or carried out.

 The authorities of the state shall take measures for the implementation of these principles.”

If the Supreme Court were to find that Article 112 gave individuals rights enforceable by the courts, then the question would be if licences granted in the 23rd licensing round violated the principle under Article 112, and under how extensive scrutiny such test should be.

The case also included other legal issues. Most notably was the question of whether the 23rd licensing round infringed the right to life under the Article 2 of the European Convention on Human Rights (“ECHR”) and Article 93 of the Constitution and/or the right to respect for private and family life, cf. Article 8 of the ECHR and Article 102 of the Constitution. A unanimous court found that the award of licences was not in breach of these rights.

Lastly, the Supreme Court thoroughly discussed whether the decision from 2013 to open the Barents Sea South East area for petroleum activities had any procedural errors, that would lead to the subsequent administrative decision to award licences being declared invalid (nil and void).

In this brief newsletter, we will provide some key takeaways relating to the interpretation of Article 112 and the procedural errors related to not estimating the theoretical emissions that could follow from opening the Barents Sea South East for petroleum activities.

The majority’s opinion

The Supreme Court was set by all available judges (plenary). The majority, consisting of eleven judges, found that the granting of production licenses in the 23rd licensing round was valid.

The Supreme Court gave a thorough interpretation of Article 112. In the majority’s view, the wording did not provide a clear answer to the question of whether this provision gives material rights to individuals. However, the former Article 110 b, which was replaced by Article 112, and the preparatory works indicated that the main element of Article 112 was the Parliament’s (Norw: Stortinget) duty to implement adequate and necessary measures to combat and mitigate climate change. Article 112 may however provide rights for individuals to be tried before the courts when it comes to environmental issues not expressed in and governed by applicable legislation. The Supreme Court also stated that if the Parliament has not been involved in an administrative decision, Article 112 may serve as a relevant factor for the interpretation.

Where the Parliament has taken a stand, and implemented measures through legislation etc., the Supreme Court found that Article 112 will function as a “legal safety net”. The majority found that a condition for the courts to declare legislation and other formal decisions by the Parliament as invalid, is that the Parliament grossly has set aside its obligations pursuant to Article 112. The threshold is consequently very high.

The Supreme Court did not find that the threshold was reached when the Parliament decided to open the Barents Sea South East for petroleum activities, and added that the award of production licences in the 23rd licensing round was directly linked to the previous decision by the Parliament to open the applicable areas for petroleum activities. Several measures had been implemented to combat the effects of emissions, inter alia, duties related to CO2-emissions, EU’s quota system, measures relating to carbon capture and storage, etc.

When discussing which emissions were relevant, the majority held that the main targets of the Norwegian climate policy is based on international framework agreements, e.g. the Paris Agreement. In these agreements, a bearing principle is that each state is responsible for emissions within its own territory. The majority thereafter concluded that Article 112 was only applicable to emissions in Norway. Hence, global emissions stemming from export of petroleum were both outside the scope of Article 112 and outside the obligations undertaken by Norway in international framework agreements.

In conclusion, the majority found that the Parliament had clearly not grossly set aside its duties under Article 112, and the award of production licenses in the 23rd licensing round was therefore valid.

The dissenting opinion

The minority, consisting of four judges, agreed with the majority regarding the interpretation of Article 112 and the ECHR.

The minority, however, found that procedural errors had been made when opening the Barents Sea South East for petroleum activities in 2013, making the decision to award production licences in the 23rd licensing round invalid. The dissent related to the mandatory impact assessment that shall be carried out before opening an area for petroleum activities, cf. Directive 2001/42/EC as implemented in the Petroleum Regulation Section 6.

In the view of the minority, the assessment did not adequately consider possible future global emissions stemming from the extraction and consumption of the potential petroleum to be produced. The minority held that it was difficult to assess possible impacts before any petroleum was discovered. Still, it noted that the assessment could have been carried out on a higher level, i.e., based on different scenarios for likely discoveries. Consequently, the minority held that the lack of such overriding impact assessments of the potential emissions must lead to the award of licences being declared invalid.

High level comments to the minority’s opinion

The Norwegian state admitted that the potential climate effects of opening the Barents Sea South-East for petroleum activities in 2013 were not assessed in accordance with the Petroleum Regulation Section 6, which implements “Directive 2001/42/EC of the European Parliament and of the Council of 27 June 2001 on the assessment of the effects of certain plans and programmes on the environment” into Norwegian law.

It should be noted that the majority found that it was sufficient, and also most appropriate, to calculate the effects of potential emissions after a commercial discovery is made, and a Plan for Development and Operation of petroleum deposits (PDO) is submitted to the authorities for approval. The discussion below is therefore only related to the minority’s assessments.

Adequate environmental impact assessments must be conducted prior to opening new areas for petroleum activities, and the minority’s reasoning highlight that being in breach of this requirement may lead to the decision being declared invalid.

The principle, as implied by the minority, leading to the decision being declared invalid, is found in Section 41 of the Public Administration Act, which reads (unofficial translation):

If the rules of procedure set out in this Act or regulations made in pursuance thereof have not been observed in dealing with a case concerning an individual decision, the administrative decision shall nevertheless be valid when there is reason to assume that the error cannot have had a decisive effect on the contents of the administrative decision.

In this case an important question was whether the lack of assessments of the potential emissions caused by the opening of the Barents Sea South East for petroleum activities in 2013 could affect the decision to open the area for petroleum activities and the subsequent award of production licences in 2016.

One could argue that although environmental impact assessments of potential emissions was not conducted in compliance with Directive 2001/42/EC, it is appropriate to conclude that this error cannot have had an effect on the decision to open the area for petroleum activities. Although not explicitly stated, the majority’s reasoning may also be interpreted in line with this argument. For case law on the threshold for declaring an administrative decision invalid, see Supreme Court Judgment 2017-2247-A, where it is emphasised that the decision will be invalid if established that it is a not too distant possibility that the error may have affected the decision.

It should be taken into consideration that the award of a production licence does not in itself provide a right to develop a potential petroleum discovery with subsequent C02-emissions as a result. To be able to develop a discovery, a PDO must be submitted to the authorities for approval. The authorities may decide not to approve the PDO or approve the PDO with various conditions attached. The calculation of the potential emissions should therefore be based on the theoretical likely number of commercial discoveries leading to a field development in the Barents Sea South East, and the total resources to be produced in the applicable fields (theoretical high-level assessment).

Only two commercial discoveries have led to field developments and subsequent emissions from production since the Barents Sea South was opened for petroleum activities back in 1989. When conducting a high-level environmental impact assessment of potential emissions related to opening the Barents Sea South East for petroleum activities in 2013, the number of licences awarded in the Barents Sea South during the period 1989-2013 compared with the actual emissions occurred could arguably also be used as guidance.

If the above assessments had been conducted prior to opening the Barents Sea South East for petroleum activities in 2013, it still seems very likely that the Parliament’s decision to open the Barents Sea South East for petroleum activities would be upheld (too distant possibility that the error may have affected the decision). If this assumption is correct, the administrative decision shall despite the error, be valid.

Concluding remarks

The judgment implies that for all environmental issues where the Parliament has taken a position and incorporated legislation, Article 112 of the Constitution will function as a “safety net”. For the courts to overrule an administrative decision in such cases, the Parliament must have grossly set aside its obligations pursuant to Article 112. The threshold is consequently very high. Article 112 may however provide rights for individuals to be tried before the courts when it comes to environmental issues not discussed and governed by applicable legislation.

The judgment is well aligned with the principle of separation of powers. As questions concerning fundamental environmental issues involve political considerations, where extensive and broad priorities must be made, the Supreme Court emphasised that democratic principles entail that such decisions are made by the elected government, not by the courts.

The Supreme Court’s judgment may be brought in before the European Court of Justice, and it therefore remains to be seen whether the final chapter has been reached in this climate lawsuit. In any case, we assume that the Norwegian authorities will ensure that adequate environmental impact assessments will be provided if new areas are opened for petroleum activities in the future and for all upcoming awards of production licences on the NCS.