Author: Nidhi Kulkarni *
| Jurisdictions: | Topics: |
INTRODUCTION
In March 2023, the Intergovernmental Panel on Climate Change finalized its Synthesis Report[1] for the Sixth Assessment Report during its 58th session in Switzerland. Drawing from the three Working Group Reports[2] and three Special Reports,[3] the Synthesis Report summarizes climate change’s widespread impact as well as various forms of climate change mitigation and adaptation practices.
Two themes clearly emerge from the Synthesis Report: Firstly, it is clear from the tone and tenor of the Synthesis Report that the days of using tempered language on climate issues are behind us. One of the initial sections begins by stating, “[i]t is unequivocal that human influence has warmed the atmosphere, ocean and land.”[4] Secondly, justice has been recognized as a vital pillar of climate solutions. Indicatively, the term “climate justice” has been used over 100 times across two Working Group Reports.[5] Seen through this light, the Synthesis Report recognizes that marginalized communities often face increasing pressures due to climate change and have fewer resources for effective adaptation or mitigation.[6] The role climate justice can play in bridging these gaps is monumental. In this context, the role of dispute resolution in tackling climate change assumes immense significance.
In this post, the author analyses the role played by litigation and alternative dispute resolution (“ADR”) in the climate movement and the impact that they have had so far. While doing so, the author emphasizes the increasing role of arbitration and its specific effectiveness in climate disputes. The author concludes that while the outcome of the adjudication of such disputes may not always be in favor of the aggrieved parties, they immensely contribute to building public discourse on the subject.
THE ROLE OF CLIMATE LITIGATION
While elusive as a concept, this post considers climate change litigation to encompass all cases before judicial and quasi-judicial bodies that involve material issues of climate change science, policy, or law.[7] Since 2016, the number of climate litigation cases has increased rapidly—it nearly doubled between March 2017 and July 2020.[8]
Over the years, the kinds of cases being filed (“The Whats”) as well as the defendants involved (“The Whos”) have changed. Over time, climate change has become the central issue in an increasing number of cases.[9] Secondly, strategic litigation, which does not limit its goal to individual litigants’ rights but seeks to advance climate policies and create public awareness, continues to gain ground.[10]
In terms of The Whos, while national governments continue to be the most common targets, corporate climate litigation is witnessing greater diversity, where proceedings are no longer limited to behemoths in the fossil fuel industry and are slowly expanding to the food, agriculture, and finance sectors.[11]
However, it is crucial to understand the larger purpose of such litigations while undertaking any analysis of climate litigation and its role. Such litigations can therefore be categorized under the following groups, which are often not mutually exclusive.
- Human Rights Claims
Also referred to as “climate rights” cases, these actions center around the claim that insufficient action to tackle climate change infringes the plaintiffs’ international and constitutional right to life, liberty, and health. Several such recent cases have been filed across jurisdictions.
Perhaps the most significant of these cases is Urgenda Foundation, in which the Dutch environmental group and 900 Dutch citizens sued their government, requiring it to do more to prevent climate change.[12] Citing articles of the Dutch constitution, EU emission reduction targets, and international environmental law principles, the Hague district court concluded that the state had a duty to take climate change mitigation measures and ordered the state to limit greenhouse gas emissions. It is the first decision by any court in the world ordering states to limit greenhouse gas emissions for reasons other than statutory mandates.[13]
More recently, in Juliana et al. v United States,[14] the plaintiffs grounded their claim in the fact that the government’s fossil fuel policies violated their constitutional rights to life, liberty, and property. While the trial court allowed the claim, the U.S. Court of Appeals for the Ninth Circuit reversed the decision since the court lacked the power to order, design, and supervise the plaintiffs’ requested remedial plan.
In South Asia, a coalition of women have filed a petition against the Pakistan government,[15] alleging that the state’s inaction on climate change has violated their fundamental rights, including the right to a clean and healthy environment.[16] Significantly, they also argue that since climate change disproportionately impacts women, the government’s inaction violated their right to equal protection under the law.
- Actions against Fossil Fuel Expansion
Quite a few actions have sought to challenge governmental sanction of projects that facilitate fossil fuel production.
In a recent filing, ClientEarth, a non-profit group, challenged the UK government’s decision to approve a project converting a coal plant to natural gas.[17] It alleged that the Secretary misinterpreted the relevant policy in assessing the project’s emissions, failed to assess the carbon-capture readiness of the facility properly, and did not consider the UK’s mandate to achieve net zero greenhouse gas emissions by 2050 in a procedurally fair manner. Both the High Court and the Court of Appeal[18] ruled in favor of the defendant. It was held that policy questions required balancing interests and that other public interests weighed against the UK’s climate goals. Further, such emissions were not an “automatic and insuperable obstacle” to the approval of infrastructure projects, and the decision-maker has discretion with respect to approval decisions.
The recent 2023 decision of the Supreme Court of Japan is another decision in favor of governmental authorities. In Citizens’ Committee on the Kobe Coal-Fired Power Plan v Japan, plaintiffs sought an injunction to prevent the construction and operation of a coal plant in Kobe on the grounds that it violated their right to clean air and conflicted with Japan’s 2030 and 2050 climate targets. The Osaka District Court, Osaka High Court, and Supreme Court rejected the plaintiffs’ reliefs on the grounds of standing and lack of a finding on abuse of any discretionary power by the Minister. However, while doing so, the High Court noted that while CO2 emissions are not recognized as a legally protected interest, there was a possibility of a future change in interpretation.
- Failure by Private Actors to Consider Climate Adaptation in Their Business
A significant feature of climate change litigation in the last few years is increasing actions against corporate entities. While most of the initial cases filed have been against Carbon Majors[19], in the last two years, there have been several high-profile cases in the food, transport, and finance sectors. However, a significant challenge in such cases is establishing the causal relationship between the acts of an individual and a particular source of emissions.[20] Several rulings have questioned the lack of a linear causal chain linking the plaintiff’s injury and the source of the emissions.[21]
Fortunately, claimants have developed new mechanisms to increase accountability in the private sector. Several recent litigations are seeking to hold investors liable because their failure to adapt their investment strategies in certain companies after receipt of negative public information caused financial loss.[22] Secondly, as public information about climate change and its adverse effects becomes increasingly available, plaintiffs have brought actions against misleading corporate statements or public disclosures related to a company’s climate change policies (also known as Greenwashing).[23] One such action under this head was filed by ClientEarth against British Petroleum, alleging that its “Possibilities Everywhere” campaign misled the public about the scale of renewable energy in its portfolio and claimed inaccurate emissions savings from natural gas.[24] As a result of this complaint, British Petroleum has withdrawn the campaign and stated that it will discontinue “corporate reputation advertising.”[25] A similar complaint has been recently filed against Dutch airline KLM on grounds of misleading advertisements.[26]
THE ROLE OF ADR MECHANISMS
In the previous section, the author briefly touched upon the increase in the number of litigations against private actors. On a connected note, these very private actors must alter their investment strategies and business transactions to comply with domestic regulations in line with Paris Agreement commitments.[27] This will immediately impact commercial contracts between parties and their underlying dispute resolution clauses.
In such contracts, especially in the construction, energy, and infrastructure sectors, arbitration as a mode of dispute resolution is enjoying increasing global acceptance.[28] In its 2019 Report on Climate Change and ADR, the International Chamber of Commerce (“ICC”) recognized the increasing capabilities of arbitral institutions in handling environmental disputes.[29] While all aspects of a dispute under a commercial contract may not be arbitrable (questions on the validity and constitutionality of certain governmental actions, even under commercial contracts, can only be resolved through court litigation[30]), this does not take away from the effectiveness of arbitration in tackling climate change issues. In fact, the United Nations Framework Convention on Climate Change (“UNFCCC”) specifically provides for resolving disputes through arbitration.[31]
Even from an investment law standpoint, arbitration as a dispute resolution mechanism has been a mainstay. The International Bar Association’s report on Achieving Justice and Human Rights in an Era of Climate Disruption (“IBA Report”) recognized that many states have opted for arbitration when disputes arise between states or between a state and investors, such as in cases involving power generation or natural resource extraction.[32]
This effectiveness stems from the nature of arbitration itself.
Firstly, whether under ad hoc or institutional arbitration, parties have the flexibility to choose the law that will govern the contract and the seat of arbitration. This flexibility helps settle jurisdictional issues that otherwise arise in transboundary environmental disputes. More importantly, as seen in some of the decisions of national courts discussed in Part II above, reliefs were often rejected due to the absence of domestic recognition or codification of climate change policies. This problem can be averted by referring to public international law and international environmental law principles as part of the governing law.[33]
Secondly, arbitral institutes usually have a panel of subject matter experts who can be appointed as arbitrators in individual cases. This feature is especially relevant for environmental disputes, where national judges may lack the relevant expertise.[34]
Thirdly, given the irreversible and urgent nature of climate change issues, speed and timeliness are critical to resolving any environmental dispute.[35] Several features that form part of institutional arbitral rules, such as expedited procedure, early dismissal, emergency arbitration, interim and conservatory measures, and escalating dispute resolution mechanisms, facilitate the timely resolution of such disputes. Moreover, features such as escalating mechanisms and multi-tier dispute resolution clauses also allow parties to opt for other ADR mechanisms, such as mediation[36] and negotiation, which could lead to a faster and more cost-efficient outcome.
Fourthly, foreign arbitral awards obtain recognition and enforcement in the 171 jurisdictions acceding to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”).[37] The New York Convention remains the most widely accepted instrument of its kind, in contradistinction with the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, 2019.[38]
In light of the above, this author believes that arbitration as a mode of resolving environmental disputes will gain tremendous traction in the years to come. While several cases have been filed and adjudicated before the PCA and individual arbitral institutions[39], this number is steadily on the rise.
CONCLUDING REMARKS: ASSESSING THE IMPACT OF DISPUTE RESOLUTION
What is evident from the court rulings discussed in Part I is that quite a few of them did not find in favor of the petitioners. In fact, as of May 2022, only 54% of the cases filed outside the United States had an outcome favorable to climate change response.[40]
Even if unsuccessful, the proceedings and the arguments made in such cases are critical in underlining the high level of public concern and contributing to public engagement.[41]
A useful indicator of the impact of dispute resolution would be the climate policy decisions being taken by parties external to the core climate litigation community. In November 2021, the Lloyds Market Association published a ‘Model Climate Change Exclusion’ clause, which excludes costs arising from claims where the insured himself has contributed to climate change.[42] Several financial institutions actively include litigation risk stemming from climate change in their policy papers and guidance notes.[43]
Additionally, what is slowly becoming clear is that litigation (or arbitration) risk does influence decision-making. Lawsuits against private entities contribute to articulating climate change as a legal and financial risk.[44] According to the author, this could be due to its direct relationship with firm value – with a recent study showing that a filing or an unfavorable decision is said to reduce stock value by -0.41 %, with the impact on Carbon Majors being the most stark/significant.[45]
At the public sector level, courts tend to be restricted by a country’s political and legislative position on climate issues and, hence, may not wield as much power on governments as is necessary. However, this is also changing, with courts increasingly invoking international law principles while adjudicating environmental disputes. Climate advocates are also applying pressure on governments outside courtrooms through sustained and systematic activism and negotiation.[46]
In this context, what is not often discussed is the increasing climate consciousness of courts and tribunals in the way that disputes themselves are adjudicated.
Dispute resolution proceedings around the world have traditionally been known to carry a heavy carbon footprint.[47] International travel and multiple copies of bulky pleadings are just some contributing factors to this scenario.
Initiatives such as the Green Pledge are slowly but surely turning the tide and forcing practitioners and arbitrators to take active steps to reduce their carbon footprint. Since the COVID-19 pandemic, several arbitral institutions have introduced virtual hearings and paperless proceedings in their latest version of rules.[48] Similarly, in India, the Bombay High Court issued a directive in 2021 requiring double-sided printing of all court documents and doing away with using larger paper sizes that litigants traditionally used.[49]
Thus, in conclusion, it is undeniable that dispute resolution is playing a critical role in climate negotiations as well as the ensuing policy decisions of states and private actors. With the increasing incidence of extreme weather events, this author firmly believes that the position and role played by dispute resolution in securing individuals’ rights and remedies will be further cemented.
* Nidhi Kulkarni is an Indian-qualified lawyer currently working with the Litigation and Arbitration team at Khaitan & Co, Mumbai. She has a keen interest in international commercial arbitration and international trade law.
[1] Synthesis Report of the IPCC Sixth Assessment Report, IPCC AR6 SYR.
[2] Climate Change 2021: The Physical Science Basis; Climate Change 2022: Impacts, Adaptation and Vulnerability; and Climate Change 2022: Mitigation of Climate Change.
[3] Global Warming of 1.5 °C (2018): an IPCC Special Report on the impacts of global warming of 1.5 °C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty; Climate Change and Land (2019): an IPCC Special Report on climate change, desertification, land degradation, sustainable land management, food security, and greenhouse gas fluxes in terrestrial ecosystems; and The Ocean and Cryosphere in a Changing Climate (2019).
[4] Synthesis Report of the IPCC Sixth Assessment Report (AR6), IPCC AR6 SYR, Section 2.1.2, page 11.
[5] Climate Change 2022: Impacts, Adaptation and Vulnerability, Climate Change 2022: Mitigation of Climate Change.
[6] Synthesis Report of the IPCC Sixth Assessment Report (AR6), IPCC AR6 SYR, page 17.
[7] Joana Setzer and Catherine Higham, Global trends in Climate Change Litigation: 2022 Snapshot, Grantham Research Institute on Climate Change and the Environment, June 2022.
[8] Global Climate Litigation Report: 2020 Status Review, United Nations Environment Programme, Sabin Centre for Climate Change Law, page 6.
[9] The degree to which arguments on climate change form the crux of a case may vary. For instance, in Enrol Vert et al. v Casino, an international coalition of eleven NGOs sued the French supermarket chain Casino for its detrimental involvement in the cattle industry in Brazil and Colombia, which resulted in severe human rights and environmental harms. While climate change regulation was one of the issues, it was secondary to issues of human health and safety and other fundamental freedoms flowing from the same.
[10] Ben Batros and Tessa Khan, Thinking Strategically About Climate Litigation (25 February 2020), available at http://dx.doi.org/10.2139/ssrn.3564313.
[11] Catherine Higham and Honor Kerry, Taking companies to court over climate change: who is being targeted? (3 May 2022), available at https://www.lse.ac.uk/granthaminstitute/news/taking-companies-to-court-over-climate-change-who-is-being-targeted/.
[12] Urgenda Foundation v State of the Netherlands, [2015] HAZA C/09/00456689.
[13] The Dutch government appealed the district court’s ruling. The decision was upheld by both the Hague Court of Appeal (on 9 October 2018) as well as the Supreme Court of the Netherlands (on 20 December 2019).
[14] Juliana v. United States, 947 F.3d 1159 (9th Cir. 2020).
[15] Maria Khan et al. v. Federation of Pakistan et al., No. 8960 of 2019.
[16] This right which was previously recognized in Asghar Leghari v. Federation of Pakistan, 2018 CLD 424.
[17] ClientEarth v. Secretary of State, [2020] EWHC 1303 (Admin).
[18] [2021] EWCA Civ 43.
[19] Carbon Majors are the big oil, coal and gas producers who are responsible for majority of the carbon emissions. See, Richard Heede, Carbon Majors: Accounting for carbon and methane emissions 1854-2010, Methods and Results Report, Climate Mitigation Services, 2014.
[20] Geetanjali Ganguly, Joana Setzer and Veerle Heyvaert, If at First You Don’t Succeed: Suing Corporations for Climate Change, Oxford Journal of Legal Studies, Volume 38, Issue 4, Winter 2018, Pages 841–868.
[21] Luciano Lliuya v RWE AG, Case No. 2 O 285/15, Regional Court of Hamm, Germany, Smith v Fonterra Co-operative Group Limited, [2021] NZCA 552.
[22] Conectas Direitos Humanos v. BNDES and BNDESPAR, 1038657-42.2022.4.01.3400, Lynn v. Peabody Energy Corporation, 250 F. Supp. 3d 372, Harvard Climate Justice Coalition v. President and Fellows of Harvard College, SUCV2014-03620-H (Mass. Super. Mar. 17, 2015), Market Forces v. SMBC, MUFG and Mizuho, Japanese National Contact Point, 2018.
[23] Joana Setzer and Catherine Higham, Global trends in Climate Change Litigation: 2022 Snapshot, Grantham Research Institute on Climate Change and the Environment, June 2022, page 39.
[24] Complaint against BP in respect of violations of the OECD Guidelines, OECD Watch, available at https://www.oecdwatch.org/complaint/clientearth-vs-bp/.
[25] Press Release, British Petroleum, “BP sets ambition for net zero by 2050, fundamentally changing organisation to deliver” (12 February 2020), available at https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bernard-looney-announces-new-ambition-for-bp.html.
[26] Environmentalists sue Dutch airline KLM for ‘greenwashing’, BBC News, 6 July 2022, available at https://www.bbc.com/news/science-environment-61556984.
[27] ICC Commission Report, Resolving Climate Change related Disputes through Arbitration and ADR, page 8, paragraph 2.3.
[28] ICC Commission Report, Resolving Climate Change related Disputes through Arbitration and ADR, page 13, paragraph 3.1.
[29] As per the report, for the last twelve years (since 2007), there have been on average three new environmental protection cases per year registered with the ICC, with up to six in some years.
[30] Reynold Orsua, Resolving Climate Change-Related Disputes Through Alternative Modes of Dispute Resolution, (2022), 24, Asian Dispute Review, Issue 1, pages 28-34.
[31] See, Article 14 (Settlement of Disputes) of the United Nations Framework Convention on Climate Change.
[32] International Bar Association, Achieving Justice and Human Rights in an Era of Climate Disruption, Climate Change Justice and Human Rights Task Force Report, 2014.
[33] ICC Commission Report, Resolving Climate Change related Disputes through Arbitration and ADR, page 39, para 5.64.
Also see one such sample governing law clause below:
“This contract shall be governed by the laws of […]. In addition, the parties recognise the importance of achieving the ultimate objective of the United Nations Framework Convention on Climate Change (“UNFCCC”), the Paris Agreement and related agreements in order to address the urgent threat of climate change, and agree that this contract shall be construed in a manner that is consistent with that objective.”
[34] For instance, the Permanent Court of Arbitration maintains a list of environmental experts from which parties may choose their arbitrators. See, Reynold Orsua, Resolving Climate Change-Related Disputes Through Alternative Modes of Dispute Resolution, (2022), 24, Asian Dispute Review, Issue 1, pages 28-34.
[35] ICC Commission Report, Resolving Climate Change related Disputes through Arbitration and ADR, page 56.
[36] While this author has restricted her analysis to arbitration as an ADR mechanism, mediation also serves as an effective tool, especially in community actions involving sensitive issues. More importantly, with the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Mediation Convention) coming into force, the enforceability of international settlement agreements is bound to increase.
[37] See, Articles I to III of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. The present list of signatories is available at https://www.newyorkconvention.org/list+of+contracting+states.
[38] Reynold Orsua, ‘Resolving Climate Change-Related Disputes Through Alternative Modes of Dispute Resolution’, (2022), 24, Asian Dispute Review, Issue 1, pp. 28-34.
[39] ICC Commission Report, Resolving Climate Change related Disputes through Arbitration and ADR, Annex, page 50.
[40] Joana Setzer and Catherine Higham, Global trends in Climate Change Litigation: 2022 Snapshot, Grantham Research Institute on Climate Change and the Environment, June 2022.
[41] David Estrin, Limiting Dangerous Climate Change: The Critical Role of Citizen Suits and Domestic Courts—Despite the Paris Agreement. CIGI Papers Series, No. 101, Centre for International Governance Innovation, 31 March 2022.
[42] LMA Model Climate Change Exclusion, Lloyds Market Association Bulletin, available at https://www.lmalloyds.com/LMA/News/LMA_bulletins/LMA_Bulletins/LMA21-041-DP.aspx.
[43] Guidance for participants of the 2021 Biennial Exploratory Scenario: Financial risks from climate change, Bank of England, June 2021, Climate Change Litigation: The Case For Better Disclosure And Targets, S&P Global Ratings, October 2021.
[44] Sabrina McCormick, et al, Strategies in and outcomes of climate change litigation in the United States. Nature Clim Change 8, 829–833 (2018), Geetanjali Ganguly, Joana Setzer and Veerle Heyvaert, If at First You Don’t Succeed: Suing Corporations for Climate Change, Oxford Journal of Legal Studies, Volume 38, Issue 4, Winter 2018, Pages 841–868.
[45] Misato Sato, Glen Gostlow, Catherine Higham, Joana Setzer and Frank Venmans, Impacts of climate litigation on firm value, Grantham Research Institute on Climate Change and the Environment, May 2023.
[46] Prior to COP 27, activists and lawyers from across the world had penned an open letter warning governments that they must deliver stronger science-based targets or risk facing further legal action. Subsequently, several plaintiffs from high profile climate litigations gathered at COP 27 underlining the legal duty of governments and companies even in the absence of framework laws.
Separately, the IBA’s Model Statute for Proceedings Challenging Government Failure to Act on Climate Change (International Bar Association Climate Change Justice and Human Rights Task Force Report, February 2020) is another instrument which seeks to facilitate judicial intervention to assess government response to climate change.
[47] Ruth Anne Robbins, Conserving the Canvas: Reducing the Environmental Footprint of Legal Briefs by Re-Imagining Court Rules and Document Design Strategies, Journal of the Association of Legal Writing Directors, Vol.7, pages 193-202, 2010.
[48] Articles 3(1), 4(4)(b), 5(3) and 26(1) of the ICC Arbitration Rules 2021, Articles 4.1, 4.2, 19.2 and 26.2 of the LCIA Arbitration Rules 2020 and Article 24(2) of the Korean Commercial Arbitration Board, International Arbitration Rules of 2016.
[49] See, Circular dated 14 July 2021, Bombay High Court, available at https://bombayhighcourt.nic.in/writereaddata/notifications/PDF/noticebom20210714125354.pdf.