As climate scientists have become increasingly clear that climate-warming trends over the past century are extremely likely to be due to human activities, the role for dispute resolution is only just emerging. And it is complex. There is not one forum or one source of law that will drive climate change litigation. It may even be that new causes of action or legal principles will be required in order to respond to climate change, which is certain to have a profound impact on international relations, human rights, regulatory frameworks (domestic and international), financing and transactions.
what role will dispute resolution ultimately come to play in undoubtedly one of the greatest challenges of our times?
As discussion around how the law responds gathers momentum, the ICC publication Dispute Resolution and Climate Change: The Paris Agreement and Beyond, edited by Wendy Miles QC (Debevoise & Plimpton) is an important text. It brings together in one place an in-depth discussion of the ways in which the disruption caused by the response to climate change will drive disputes. From a range of different, but sometimes overlapping perspectives, it asks the question – what role will dispute resolution ultimately come to play in undoubtedly one of the greatest challenges of our times?
UNFCC and the Paris Agreement
Few will not be familiar with the fact that, in December 2015, States concluded the negotiations for the Paris Agreement under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC). But many will not appreciate the ambitious nature of the Paris Agreement both in terms of outcome and means.
In Chapter 15, Kate Cook (Matrix Chambers, Legal Response Initiative) lays bare the scale of the challenge. The need, as recorded in the Preamble to the Paris Agreement is the following:
[A]n effective and progressive response to the urgent threat of climate change on the basis of the best available scientific knowledge.
In order to stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous interference with the climate system, the challenge is to hold the increase in global average temperature to ‘well below 2°C above pre-industrial levels’ and pursue efforts to limit that increase to 1.5°C. The problem is that there is a significant gap between the States’ mitigation pledges and what is required to achieve this aim, and time is running out. Efforts of States to address climate change must therefore be ratcheted up if States are to make up the distance between where we are now and where we need to be in order to address the climate change goals.
Transparency and collective responsibility underpins this global effort
Cook looks at how the Paris Agreement responds to this challenge by adopting a ‘progressive approach’; including requiring each state to put forward sufficiently ambitious nationally determined contributions. Also requiring developed states to mobilise climate finance and provide financial resources to assist developing states with adaptation and mitigation. Transparency and collective responsibility underpins this global effort and is supported by a global stocktake in 2023 and every five years thereafter. Cook argues that states are under a collective obligation to travel forwards not backwards and with some speed. And in her chapter she explores how this progressive approach of the Paris Agreement is supported key principles of international law – including the ‘no harm principle’, the ‘prevention principle’, the ‘duty of cooperation’, the ‘duty of good faith’ and the ‘precautionary principle’.
Scale and scope of climate change litigation
Picking up on this progressive approach, Professor Michael Gerrard (Sabin Center for Climate Change Law, Columbia Law School) looks at the way in which the obligations imposed by the UNFCCC and the Paris Agreement could trickle down into different legal fora (Chapter 16). The scale and scope for legal challenges is immense. For example, regulation introduced in order to meet State’s commitments to mitigate have already been met with challenges in the domestic courts; 25 lawsuits filed in respect of an Obama administration proposal to control pollution from coal-fired power plants is cited as one such example. As states make the transition to clean energy through the construction of wind and solar farms and other facilities for the production of low-carbon or zero-carbon energy, disputes across the full spectrum are likely to arise – planning, construction, funding, trade. On the other side of the coin, the winding down of businesses burning fossil fuels will generate litigation across a similar, but mirror image, spectrum. Not just commercial interests which will be affected; rising water levels will result in population displacement and questions as to who is responsible for compensation.
Climate change investment and finance
As the Paris Agreement specifically recognises, investment and financial flows will play a critical role in addressing climate change. It is therefore not surprising that the book tackles this issue from four different perspectives. In Chapter 7, Andrea Bacher (Environment & Energy, ICC) looks at how the ICC Business Charter for Sustainable Development can help to grow business by integrating sustainability strategies with business models by focusing on governance, liability, risk management and economic growth. Martijn Wilder (Baker & McKenzie) focuses on the sale and purchase contracts for carbon commodities (Chapter 8). These are frequently contracts between states and private entities, can incorporated the terms of the UNFCC and be worth millions of dollars. They present their own problems. Martijn discusses three; (i) the application of international obligations in the domestic/private sphere; (ii) different cultural approaches to determining liability; and (iii) the status of new organisation established to deal with climate change and whether they can be sued for their interventions. In Chapter 10, Crenguta Leaua (Leaua & Asociatii) tackles the types of undertakings private parties may be required to give in investment contracts with state parties in order to help advance the state’s own international commitments to climate change.
An important innovation under the UNFCCC was the establishment of the Green Climate Change Fund, a global fund created to help developing countries limit or reduce their greenhouse gas emissions and adapt to climate change. Gerd Droesse (Green Climate Fund) explains the Fund’s role in promoting and funding sustainable development, focusing on some of the challenges which a new international organisation such has this has in establishing the necessary privileges and immunities to be able to operate effectively (Chapter 9).
Where do disputes under investment treaties fit in?
The relationship between investment treaties and the transfer from old energy sources to renewable energy is still being worked out, but it seems inevitable that an increasing number of investment treaty claims will arise as a result of this major shift in the global economy. As States strive to meet their commitments under the UNFCCC and the Paris Agreement we can expect to see – and indeed have already seen – changes to investment incentives and regulation of the energy sector. Could these changes, which are designed to incentivise investment in renewable energy, give rise to investment claims from investors in fossil fuels and result in a regulatory ‘chill’ inhibiting states from taking steps to address the urgency of climate change? Anna Joubin-Bret (Avocat à la Cour, Paris) provides some answer to this (Chapter 11). She compares the approach to environmental protection in traditional international investment agreements with more recent ones, which retain the right to regulate for a public purpose. Joubin-Bret argues that investment agreements have found different ways to accommodate host countries’ efforts to protect the environment leaving the avenue for states to take action ‘fully open’. Jeremy Sharpe (Sherman & Sterling) in Chapter 12 looks at what changes can be made to offer better protection for the environment. Those tools include defining substantive treaty protection more clearly, clarifying how other legal principles or obligations – such as those arising in multilateral environmental agreements – relate to an applicable treaty, and incorporation of soft law principles concerning the environment.
What role can and should arbitration play?
Unquestionably arbitration has an important role to play in climate change disputes, but, in my view, it is wrong to think that a distinct genre will develop. It is precisely because climate change requires a seismic shift in energy sources that significant disruption is inevitable. As a dispute resolution mechanism that is favoured especially for international commercial disputes, it follows that many of these disputes will be resolved in arbitration. Thomas McInerney (Director of Treaty Effectiveness Initiative, Loyola University School of Law) observes that a state-centric compliance approach is inadequate to address climate change (Chapter 14). He argues that private actors have an important role to play in influencing the achievement of regulatory aims through investment (direct and indirect) in alternative energy sources and facilitating the allocation of responsibility and liability for lowering emissions. McInerney considers three ways in which arbitration may interact with this role: (i) investor-state disputes; (ii) mixed state-private actor cases; and (iii) disputes between private actors.
It is precisely because climate change requires a seismic shift in energy sources that significant disruption is inevitable.
But how well equipped is arbitration for climate change disputes? This is something Judith Levine (Permanent Court of Arbitration) addresses in her chapter drawing on the PCA’s wealth of experience in handling environmental disputes (Chapter 3). The key considerations in her view are greater accessibility, technical expertise and procedural flexibility; considerations endorsed as being important by David Rivkin (Debevoise & Plimpton) in his update on the work of the IBA Task Force on Climate Change Justice and Human Rights that has published a comprehensive report on this topic in 2014 (Chapter 2). Levine notes that accessibility of non-parties to the arbitration assumes a particular importance in the context of climate change for self-evident reasons. The public interest in such cases is supported by the notion of collective responsibility that underscores the Paris Agreement. Levine is well placed to comment on the key considerations for the use of arbitration in this context as the PCA developed specialist rules for handling environmental disputes as far back as 2001.
Disputes of the future
Despite this being a fast moving area, Dispute Resolution and Climate Change is not afraid to make predictions about the future. In Chapter 4, Roger Martella (Sidley Austin, Vice Chair IBA Task Force on Climate Change Justice and Human Rights) tackles the next generation of claims that are likely to be brought directly against energy companies in the pursuit of securing commitments to reduce green house emissions. In many ways the traditional causes of actions are simply not fit for purpose. Climate change is a global phenomenon for which numerous actors are responsible. In the circumstances traditional legal concepts such as causation, redressibility and standing represent particular challenges. Many of the first generation of legal cases have, unsurprisingly, been brought in national courts. Martella suggests that many of these cases would be better suited to arbitration and the flexibility it can offer to tackle sophisticated disputes. In Chapter 18, Edna Sussman (Independent Arbitrator) explores the full panoply of potential climate change disputes – from project-based disputes to false and misleading advertising disputes, from emissions reduction market disputes to insurance coverage disputes to name but a few. She argues that the advantages of arbitration are even more persuasive in the context of climate change disputes, citing the ability to: (i) co-opt expert arbitrators, (ii) maintain on-going business relationships, (iii) confidentiality; and (iv) neutrality of forum given the international nature of likely disputes.
Only the beginning
The topic addressed by this impressive collection of essays, only some of which I have been able to mention in this brief review, could not be more important. Cook starts her chapter quoting an observation made by China when presenting its own commitments to reduce carbon emissions in 2015: ‘A one-thousand-mile journey starts from the first step’. The time required to complete this journey is ticking at an alarming rate. If there is any hope of completing it in time, significant steps must be taken by a range of actors. This disruption will generate disputes. That much is certain. But the role that dispute resolution will play is still to fully emerge, and if it is to be a positive one, legal processes will need to evolve to meet the specific challenges thrown up by climate change. Dispute Resolution and Climate Change is an important contribution in advancing that conversation.
This Article is published with the kind permission of ICC and was originally published in the ICC Dispute Resolution Bulletin, 2017/4 (available for purchase on the ICC Store and included in the ICC Digital Library).
If you would like to learn more about this topic, listen to our podcast with Wendy Miles QC and Kate Cook.