Dispute resolution and climate change

Could international disputes operate as a governance tool capable of driving change in corporate and public policies for climate change? Maybe. As climate change litigation is on the increase globally, this development is worth analyzing from an international arbitration perspective.

recent policy report from the Grantham Research Institute on Climate Change gives a valuable insight into international trends in climate change litigation, including how these cases could be of relevance for continued climate change efforts. The report covers developments in climate change litigation globally between May 2019 and May 2020, addressing trends in strategies and arguments, impacts of cases, and exemplifies how central climate change has been to the main legal arguments.

Disputes could function as a tool for climate governance in different ways. The report lists three indirect regulatory impacts where judgments could serve as catalysts for behavioural change; (i) increased sensitization of legal institutions to the nature of climate change, (ii) increased public awareness of climate change, and (iii) increased perception of ‘litigation risk’ on the part of the government and corporate actors.

Reading the report with my international arbitration glasses on, a few things stood out as potentially relevant for the arbitration community.

First, climate change elements in cases appear in different shapes and forms, and with different impacts. For example, demands for strategies to properly manage climate risk is no longer an outlier but a reality for many businesses. An absence of climate risk assessments could therefore constitute a potential liability. Second, the growing consensus about the effects of climate change is becoming increasingly visible in the courts. Cases lost could still be relevant building blocks for future climate change action, given courts’ reasoning.

Climate change elements of disputes

Climate change could be central, peripheral, or even incidental to cases. From an international arbitration perspective, the incidental aspect is perhaps where arbitration would most likely get involved as climate change appears on the periphery of a commercial dispute. These are the cases that do not necessarily make specific references to climate, but where the outcome of the dispute could, directly or indirectly, have practical consequences for climate change mitigation or adaptation measures. The report Green Technology Disputes in Stockholm from last year includes several examples of cases.

The climate change litigation report referred to above notes that “litigation cases where climate change is incidental can also have important strategic, policy or governance implications”. From an arbitration perspective, this potential could be lost if we do not raise our ambitions and share what we choose to call climate-related dispute intelligence (see the SCC Forecast from the 2019 Climate Action Week). Lessons learned from previous disputes could be a valuable litmus test spurring future action and change (on a side note, the SCC has recently increased its efforts to publish anonymized awards, in collaboration with the ICCA and Kluwer Arbitration)

Climate change is becoming part of daily business

Climate change risks are also ever more present in commercial life. Failure to consider or properly present or disclose climate risks or exposure could be expected to increase not only statutory but also contractual responsibility. Another report earlier this year, the Climate Change Litigation update from Norton Rose Fulbright, points out that “[r]regardless of any formal disclosure requirements, corporations around the world are becoming more and more aware that the physical and transitional risks of climate change pose a very real threat to their current business models.”

This is a scenario where international arbitration could expect to be confronted with climate change issues on a more regular basis. The absence of proper risk management could constitute a potential liability, and strategies to adequately manage climate change risks therefore need to be in place, including from a dispute management perspective.

Building a narrative to fight climate change

In some cases, even where they have lost in court, litigants claim some success as the reasoning of the court contributes to building narratives in support of climate change efforts, which helps build their case in a broader perspective. Rulings by courts could also be favourable in clarifying matters of law, which could support future climate regulation or action.

A frequently cited example is Juliana vs. the United States and the decision from the US Court of Appeals of the Ninth Circuit on 17 January 2020. The claim from 21 children that the US Federal Government had violated their constitutional rights by causing dangerous carbon dioxide concentrations was ultimately dismissed on the basis of institutional competence and non-justiciability, but the judgment included language recognizing the effects of climate change, including that the plaintiffs’ injuries were caused by carbon emissions from fossil fuel production, extraction and transportation. [The case is currently pending appeal].

In another example from Norway, in Greenpeace Nordic Ass’n vs. Ministry of Petroleum and Energy, the Borgarting Court of Appeal heard a case where a decision to award production licences for petroleum activities in the Barents Sea had been challenged. The Court found that “fulfilment of the targets of the Paris Agreement requires drastic cuts in emissions. Total reported national contributions are too low to fulfil the Paris Agreement’s targets, and therefore a progression must occur in the contributions. The burden-sharing principles in the Agreement are suited to strengthen Norway’s responsibility.” The case is currently pending appeal, as the Court found that a violation of the Norwegian Constitution could not be established.

With courts across the globe contributing to the climate change narrative, there is no reason why international arbitration could not do the same. It would of course require a different view on confidentiality. But through a conscious effort focused on sharing facts and reasoning – but without necessarily sharing the identity of the parties – international arbitration could also contribute to building momentum in support of climate change action

Secretary General Annette Magnusson




Subscribe to our newsletter and event notifications here