The global response to climate change will involve the transformation of energy, land, urban, infrastructure and industrial systems, and is expected to spark disputes amongst states, businesses, and populations worldwide.
The International Chamber of Commerce (the ICC) set up a Task Force in 2017 to consider arbitration's role in resolving climate change related disputes (the Task Force). The Task Force's members included business and industry representatives, lawyers, representatives of NGOs and academics. On 28 November 2019 the Task Force launched its Report (the Report), which identifies which disputes should be classified “climate change related disputes”, considers whether arbitration and other dispute resolution mechanisms require any special features to resolve climate change related disputes, and reviews the ICC Arbitration Rules in light of the Task Force’s findings.
Climate change related disputes
The Report takes a broad view of climate change related disputes and identifies three main categories:
(i) contracts relating to the implementation of energy or other systems transition, mitigation or adaptation, in line with the Paris Agreement commitments;
(ii) contracts without any specific climate related purpose or subject matter, but where a dispute involves or gives rise to a climate or related environmental issue; and
(iii) submission or other specific agreements entered into to resolve existing climate change or related environmental disputes, potentially involving impacted groups or populations.
Relevant procedural features
The Report notes arbitration's historical role in resolving climate change related disputes, offering a neutral forum as well as the global recognition and enforcement of awards through the New York Convention. The Report sets out six features of arbitration that could be enhanced to improve its effectiveness in resolving these disputes.
The Report recognises the importance of appropriate expertise, be it legal, scientific or technical, in resolving climate change related disputes. Arbitration allows parties to specify qualification requirements in their arbitration agreements and to appoint arbitrators and experts with relevant expertise. The ICC can assist in proposing candidates and reviews whether the arbitrators selected meet any qualification requirements. The ICC can also request expert reports and any other relevant input required. The Report suggests that the ICC Centre for Alternative Dispute Resolution, which assists in identifying appropriate arbitrators and experts, could connect with climate change scientists and other technical experts to expand the pool of experts available.
The urgent nature of climate change related disputes, in terms of both their potential environmental impact and the rapid pace of reform required, demands that they are resolved promptly. The Report considers various ways to facilitate this, including case management techniques, such as limiting documentary evidence where appropriate. In certain cases, parties to a climate change related dispute can agree to the new ICC Expedited Procedure Rules, which offer a more time and cost-effective route to resolution. The Report also discusses alternative dispute resolution mechanisms, such as mediation, expert determination and dispute boards as options for a more streamlined dispute resolution process. Finally, the Report emphasises the availability of "emergency proceedings" and "interim measures", which enable urgent action to be taken if required.
Responding to climate change commitments and law
The Report recognises the impact of the evolving legal and regulatory framework, public policy and voluntary corporate codes in the field of climate change, and the way they will impact disputes – including in the areas of the determination of damages, the termination of contracts, force majeure clauses, frustration and illegality. Parties are increasingly incorporating provisions such as these into their contracts to help manage the risk and uncertainty posed by climate change and related transformation issues. The Report explains that the ICC is considering whether to propose further guidance to parties and arbitrators with respect to these changes.
In recent years, there has been a push towards transparency in arbitration. This push has primarily focused on investor-State arbitration (for example, the UNCITRAL Transparency Rules, effective as of April 2014), however, there is also a drive towards greater transparency in commercial arbitration, especially where disputes have public policy implications. This drive is particularly relevant for climate change related disputes, where the public is directly affected by the environmental impact. The Report notes that transparency can be increased by opening proceedings to the public and by publishing awards. Confidentiality rules, however, depend on the relevant national law and commercial parties are often keen to ensure the confidentiality of their proceedings. The ICC Arbitration Rules require certain basic information about an arbitration to be published, including the names of the parties and the arbitrators. There is also scope for the parties to request that the ICC Court publish additional information and the reasons for a decision. Awards are published at least two years after the parties have been notified of the award, unless they object.
Third party participation
The Report notes that climate change related disputes are often complex, involve a range of parties, and engage the public’s interest in issues for which additional third-party participation may be valuable. With the express consent of the parties, additional parties can be joined to an arbitration and separate proceedings can be consolidated. Parties can also allow amicus curiae to make submissions, which is a less intrusive option that joinder or consolidation, but still enables a different perspective or argument to be presented to the tribunal.
Flexibility surrounding costs
Finally, the Report discusses flexibility relating to the allocation and the payment of costs in arbitration. This flexibility means that funding can be arranged for public or NGO claimants where necessary, in accordance with the ICC Arbitration Rules.
Overall, the Task Force predicts that "climate change related disputes will increase exponentially". While the Report highlights arbitration's adaptability and suitability for resolving these disputes, uncertainty remains regarding their exact nature and the manner in which they will be resolved. Clearly, climate change related disputes are, and will remain, a hot topic for the ICC and businesses globally.
The Report highlights arbitration's adaptability and suitability for resolving climate change related disputes.