Arbitration tipped to handle rise in climate-related disputes

Out-Law News | 10 Dec 2019 | 12:43 pm | 2 min. read

Access to arbitrators with relevant technical expertise and a link between global climate change commitments and principles of international law are among the features that make arbitration an attractive forum for businesses to resolve disputes over climate change-related issues, a report published by a major arbitral institution has said.

The report, produced by a task force at the International Chamber of Commerce (ICC) Commission, said "the ability to ensure that appropriate expertise is available to the parties and the tribunal in addition to understanding of disputes and their resolution techniques" is "arguably the single most important feature of arbitrating climate change related disputes". It said the expertise and skills can be obtained through the appointment of arbitrators, experts appointed by the parties or the tribunal, or from "expert determination".

Alistair Calvert, an arbitration and energy expert at Pinsent Masons, the firm behind Out-Law, welcomed the report. He said it "highlights a number of the key features of arbitration which make it particularly suitable for the resolution of this growing type of dispute".

The task force, on arbitration of climate change related disputes, also said that the integration of climate change commitments and principles of international law, including obligations arising out of the Paris Agreement of 2015 at which countries party to the UN Framework Convention on Climate Change agreed to implement measures aimed at curbing the continued rise in global temperatures, was another favourable feature of arbitration as a forum for resolving climate-related disputes.

Another such feature of arbitration is the ability of parties to take advantage of measures and procedures for expediting early resolution of disputes or for providing urgent interim or conservatory relief, it said.

The task force also highlighted the transparency of arbitration proceedings, the ability of third parties to participate, and the cost regime's role in promoting "fair, transparent and appropriate conduct of climate change related disputes" as the other features of international arbitration that make it an attractive option for resolving such disputes.

The task force said that it expects to see the number of climate-related disputes grow in future, pointing to a growth in investment in initiatives promoting global climate change objectives as one of the reasons for its forecast.

"Such investment and change in practices is likely to result in a proliferation of underlying investment agreements and other contracts or contractual terms that demonstrate an intention or commitment to promote those objectives," the report said. "These types of contracts are very likely to give rise to climate change disputes."

According to the task force, the number of new environmental protection cases brought before the ICC's arbitral tribunals has been growing since 2007, with similar growth witnessed at other arbitral institutions too. These cases have potential to "give rise to climate change related disputes", it said.

The ICC Commission set up the task force to explore the extent to which arbitration is used to resolve climate change related disputes, and examine whether there are specific features of a dispute resolution mechanism that make it right for effectively resolving climate change related disputes. The task force is also responsible for reviewing existing rules of arbitration to see if new guidance is needed in the context of climate change related disputes. The task force must then publish a final report detailing its findings.

The ICC Commission has said climate-related disputes are suited to being handled in arbitration because the decisions of arbitral tribunals are enforceable, the efficiency of proceedings, and because there is scope to tailor the process to parties' needs, including through the selection of appropriately expert members of the arbitral tribunal.