UK’s Financial Conduct Authority Faces Legal Action

Climate Risk and more generally ESG-related legal challenges have greatly increased in recent years.

Recently, ClientEarth have filed a case with the High Court in London against the UK’s Financial Conduct Authority (The FCA) over their approval of Ithaca Energy plc’s prospectus. Ithaca Energy has significant interests in the Cambo and Rosebank oil and gas fields in the North Sea.

Ithaca completed its initial public offering recently and is now listed on the London Stock Exchange (LSE).

ClientEarth argues that Ithaca has failed to adequately describe its climate-related risks, and thereby has not fulfilled the requirements of prospectus regulation. By approving Ithaca’s prospectus, ClientEarth argues that the FCA has therefore breached legal requirements and has unlawfully enabled Ithaca’s initial public offering.

Although Ithaca recognises that there are general risks to the oil and gas industry, ClientEarth argues that Ithaca does not explain how significant they are for its business. ClientEarth argues that this is a significant omission in Ithaca’s disclosure given their plans to develop new fossil fuel assets, which go against the 1.5°C temperature goal set out in the Paris Agreement. New oil and gas projects present several risks to companies and investors such as carbon lock and stranded assets.

ClientEarth also argues that the disclosure has failed to provide a meaningful indication of how Ithaca’s business and finances might be affected by full or even partial achievement of the Paris Agreement goal, therefore depriving stakeholders of critical information needed for an informed assessment of the company’s financial position. Protecting investors is a key duty of the FCA, and ClientEarth argues that the regulator has therefore failed in its duty to investors.

ClientEarth lawyers have filed the claim as a judicial review case against the FCA. It is now up to the High Court to decide whether to grant permission to bring the claim.

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Dr Jacqueline Faridani

Dr Jacqueline Faridani heads up Prospect Law’s fast growing ESG practice. She is an advisor in financial risk management with 20 years of experience in a variety of risk management, compliance and product control roles at Canadian, German, French and Russian banks and life insurance companies, as well as for the Canadian financial regulator (OSFI).

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

Prospect is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, insurance and risk management specialists, and finance experts.

This article remains the copyright property of Prospect Law Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.