Britain’s financial watchdog has been hit with a rare legal action by an environmental group that claims the Financial Conduct Authority illegally signed a listing document that allegedly failed to explain the climate change risks of oil and gas producer Ithaca Energy.
The case is the first time that environmental law charity ClientEarth, which has a record of successful claims, has been targeted by UK regulators.
The group also recently filed a claim in the High Court against Royal Dutch Shell directors personally over their response to climate change risks. Both petitions have not been accepted by the court, which must now decide whether to allow the case to proceed.
Ithaca, which has significant interests in the controversial Cambo and Rosebank oil and gas fields in the North Sea off the coast of Scotland, listed on the London Stock Exchange last November.
ClientEarth said it had filed an action against the FCA in the UK High Court over the regulator’s approval of the Ithaca prospectus, a legal document the company must complete before an initial public offering.
Robert Clarke, responsible finance lawyer ClientEarth, said the prospectus of Ithaca which acknowledges that climate change poses a risk to oil and gas companies, but it is too common to leave investors informed or to meet prospectus regulations, which require companies to disclose material risks .
He said the document did not explain how the risks would specifically affect Ithaca or how significant the risks would be for the company, especially considering the Paris agreement’s goal of keeping global temperatures below 2C and ideally no more than 1.5C above pre-industrial levels. level.
“One of the main tasks of the financial regulator is to protect investors. The main way it does this is by ensuring that companies that participate in the listing on the London Stock Exchange adequately disclose the risks associated with their activities, including climate-related risks, in the prospectus such as required by law,” Clarke said.
“In the case of Ithaca’s listing, we believe the regulator has failed when it comes to this basic function by finally declaring Ithaca’s prospectus even though the legal requirements have not been met.”
Clarke said adequate disclosure of climate-related risks was in the “best interests of investors, society and the planet”. “This case is about ensuring regulators play a role in adequately enforcing disclosure rules,” he said.
The claim has been filed as a judicial review case, a type of legal case that challenges a decision by a public body.
The FCA said it intended to fight a petition by ClientEarth for permission to bring the case to the High Court.
Ithaca said it noted the response of the FCA, and added “at this stage it would not be appropriate for us to comment further”.
It is rare for UK regulators to face such legal challenges.
In 2006, the High Court refused to grant permission to Yukos Oil to proceed with a judicial review of the decision by the Financial Services Authority, the predecessor of the FCA, to approve the prospectus related to the offering of public shares of Rosneft, the Russian oil company. .
Climate activists are increasingly taking legal action to target companies, governments and now regulators on environmental issues. Since 1990, more than 2,000 cases of climate litigation have gone through the courts around the world, according to a database compiled by the Grantham Institute on climate change and the environment at the London School of Economics.
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