ClientEarth’s application for judicial review of FCA decision to approve prospectus refused

The High Court has refused an application by ClientEarth for judicial review of the decision by the Financial Conduct Authority (FCA) to approve a prospectus published by the oil and gas producer, Ithaca Energy.

Ithaca was listed on the London Stock Exchange in November 2022. In February 2023 ClientEarth filed a judicial review claim against the FCA over its decision to approve Ithaca’s IPO prospectus.

In April 2023 on the papers, the court found in favour of the FCA and refused ClientEarth's application for permission to apply for judicial review. Following this decision, ClientEarth exercised its right to ask the court to reconsider its decision at an oral hearing.

ClientEarth clarified its case at the oral hearing and argued that the signing-off of Ithaca’s prospectus was in breach of the UK Prospectus Regulation (UK PR) requirements, because the prospectus failed to adequately disclose Ithaca’s climate-related risks. It also argued that the FCA had acted irrationally in concluding that the prospectus contained the necessary information which was material to an investor when making an informed assessment of Ithaca’s financial position and prospects (as required by Article 6 UK PR).

The judge held that:

• the prospectus did address risks to Ithaca’s business and securities arising out of climate change factors, associated regulatory measures and changes in consumer use;
• the FCA, in its capacity as an expert regulator, was required to exercise judgment as to whether the legal requirements of Article 6 (the 'necessary information' test) and Article 16(2) (requiring disclosure of risk factors) of UK PR were met; and

while ClientEarth disagrees with the FCA’s evaluation, it failed to demonstrate any arguable error of law in the approach taken by the FCA or its conclusions, and did not come close to demonstrating that the FCA had acted irrationally, which is a very high hurdle to overcome.