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Energy Law Exchange

December 9, 2019

The ICC Releases Report on Resolving Climate Change Disputes through Arbitration


The International Chamber of Commerce (“ICC”) has just released its Report on “Resolving Climate Change Disputes through Arbitration” (the “Report”).[1]  The long-awaited Report is the result of almost two years of work by the ICC’s Task Force on Arbitration in Climate Change Related Disputes, exploring the role of arbitration and ADR in future disputes related to climate change.

The timely launch of the Report comes right after the European Parliament’s declaration of a “Climate Emergency” in Europe and globally,[2] and just on time before the COP25 taking place in Madrid this month.  Due to the length of the Report, this article focuses only on three specific topics: what are climate change-related disputes, third-party participation, and transparency.

Defining Climate Change Related Disputes

Due to the large increase in investment and policy initiates worldwide in order to meet the objectives of the Paris Agreement, the Report predicts that climate change related disputes “will expand exponentially” in the near future.[3]  But what are really “climate change related disputes”? 

The Report adopts a broad definition, which is not limited to disputes arising out of the Paris Agreement and the United Nations Framework Convention on Climate Change (UNFCCC).  The Report identifies three broad categories of disputes that fall within the scope of “climate change-related” disputes, and also includes specific hypothetical cases for each of these categories:

  1. Specific transition, adaptation or mitigation contracts: Includes disputes arising out of contracts with a specific climate change related purpose or subject matter, such as those relating to the implementation of energy or other systems’ transition, mitigation or adaptation, in line with the commitments under the Paris Agreement.  This includes, for example, disputes arising out of contracts for the construction and delivery of a renewable energy plant.[4]
  2. Contracts not specifically related to transition, adaptation or mitigation: The contracts under this category do not have a specific climate related purpose or subject-matter, but the dispute involves a climate or environmental issue.  In fact, the report considers that “potentially every business activity and contractual relationship” can be impacted by climate related measures and environmental impacts of global warming.[5]  These disputes may affect a variety of sectors, such as construction or manufacturing.
  3. Submission Agreements or compromis: These involve instances where the parties agree to submit to arbitration a dispute that has already arisen, due to the unavailability or inadequacy of other fora.  This category would cover disputes involving large groups or populations impacted by investments or activities related to climate change or with an impact on climate change or the environment.[6]

Third-Party Participation and Transparency

Among the many relevant aspects that may affect arbitration of these types of disputes specifically, there are two that are less common in commercial (including ICC) arbitration: third-party participation and transparency.

Despite the commercial nature of the types of disputes that the ICC’s Report intends to cover, climate change-related disputes will frequently involve public interests and will therefore suffer from increased pressure for information disclosure.  Moreover, in some instances these types of disputes may benefit from the participation of third parties, such as affected populations or civil society organizations with an interest in ensuring compliance with climate change commitments.  The Report highlights a number of possible advantages for corporations too, such as avoiding parallel proceedings or improving their reputation and credit rating.[7]

For the same reason, the Report advocates for increased transparency in the context of these public policy-related disputes in order to ensure that “arbitration remains a trusted tool.”[8]  As such, the Report suggests different options, such as the publication of awards (redacted if necessary) or applying certain features from the PCA Environmental Rules.[9]  This is in line with the ICC’s recent steps towards increased transparency, including through its new policy of publishing arbitral awards unless one or more party objects.[10]

Conclusion

As climate change becomes ever more relevant in States’ policies and corporate decisions, arbitration is likely to play an important role in solving future disputes. The Report provides the most up to date and practical analysis on how these types of disputes can be effectively resolved through ICC arbitration, and will provide valuable guidance to all arbitration users, including potential parties, counsel and tribunals.

 

*Isabel San Martín is an International Arbitration Associate at King & Spalding (Paris) and was a member of the ICC’s Task Force on Arbitration of Climate Change Related Disputes.

[1] Report on Resolving Climate Change Related Disputes through Arbitration and ADR, available for download at: https://iccwbo.org/publication/icc-arbitration-and-adr-commission-report-on-resolving-climate-change-related-disputes-through-arbitration-and-adr/

[2] https://www.europarl.europa.eu/news/en/press-room/20191121IPR67110/the-european-parliament-declares-climate-emergency

[3] Id., at 52.

[4] Id., at 8–9

[5] Id., at 9.

[6] Id., at 10–11.

[7] Id., at 45.

[8] Id., at 40.

[9] Id., at 42–44.

[10] See Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration, which entered into force on 1 January 2019.