I. Introduction and key features

1.1 The ICC Commission on Arbitration and ADR, with the support of the ICC Commission on Environment and Energy, has created a task force on "Arbitration of Climate Change Related Disputes" (the "Task Force"). Climate change related disputes, for the purpose of the Task Force and this Report, require the existence of a valid and binding agreement to arbitrate whereby parties agree to resolve disputes relating to climate change.

1.2 The Task Force had the following missions:

• To explore whether, and if so, how ICC Arbitration and other dispute resolution services are currently used to resolve climate change related disputes.
• To ascertain what, if any, specific features are required for a dispute resolution mechanism to effectively resolve climate change related disputes.
• To review the ICC Arbitration Rules, Mediation Rules, Expert Rules and Dispute Board Rules in the context of climate change related disputes in order to consider whether it would be appropriate for ICC to offer any additional guidance and suggest sample wording for dispute resolution clauses and procedure.
• To prepare a report that summarises the Task Force’s findings, taking into account that such output could consist of a summary of the issues discussed and proposed solutions for consideration by parties, potential parties, counsel and tribunals alike.

1.3 The Task Force members include business representatives, lawyers, arbitrators, arbitral institutions, in-house counsel, NGO representatives, business and industry groups and academics.

1.4 The purpose of this Report is to examine the role for Arbitration and ADR in the resolution of international disputes related to climate change. The Report first defines climate change related disputes (Section II), providing case studies as appropriate, and then explores current, potential use and benefits of ICC Arbitration and ADR services to resolve such disputes (Sections III and IV) and identifies six broad features that potentially enhance the existing procedures to further improve their effectiveness for resolving climate change related disputes (Section V). These features, which parties to a climate change related dispute (together with arbitral tribunals as the case may be) may wish to take into account, where appropriate and on a case-by-case basis, include:

1. Securing relevant expertise, scientific, technical or otherwise, to ensure that decisions reflect sound and up-to-date knowledge in a new and fast-moving area.
2. Highlighting opportunities to use faster and more effective procedures commensurate with the complexity, urgency and special sensitivities of a collaborative climate change response.
3. Exploring the opportunity for integration of climate change policy, commitments or law into the dispute resolution procedure.
4. Weighing the possible benefits of some increased measure of transparency.
5. Considering options for third party involvement in the dispute resolution procedure.
6. Addressing the role of costs in ensuring that appropriate stakeholders are able to participate in the dispute resolution process.

1.5 Hypothetical cases are used throughout this Report to demonstrate the potential circumstances in which climate change related disputes may arise. These are illustrative and not exhaustive examples. In addition, in Section 5 dealing with specific procedural features of climate change related disputes, sample language is provided to assist parties or tribunals to put in place those features, as appropriate.

II. What are climate change related disputes?

2.1 The Task Force takes a broad view of climate change related disputes, to include any dispute arising out of or in relation to the effect of climate change and climate change policy, the United Nations Framework Convention on Climate Change ("UNFCCC") and the Paris Agreement.¹

2.2 Climate change is one of the biggest imperatives of our time and, as the IPCC Special Report on Global Warming of 1.5°C published in 2018 (the "IPCC Special Report") states it will "require rapid and far-reaching transitions of energy, land, urban and infrastructure (including transport and buildings) and industrial systems" to avoid the worst effects of climate change.²

2.3 The required rapid and far-reaching transition to energy, land, urban and infrastructure and industrial systems arising out of a global response to climate change will necessarily give rise to new investment and contracts, and accordingly contractual and other legal disputes. Such disputes may arise out of or in relation to: (i) contracts relating to the implementation of energy or other systems transition, mitigation or adaptation in line with the Paris Agreement commitments (for the avoidance of doubt, the Paris Agreement is between state parties and the commitments thereunder apply to state parties and not to non-state parties unless they have been incorporated into domestic regulation); (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. Each of these categories of disputes requires a valid and binding dispute resolution agreement between all parties and are further described below.

Category I: Specific transition, adaptation or mitigation contracts

2.4 Contracts (or contractual terms) may be entered into by an investor, funder, industry body, state or state entity, in accordance with or in order to implement energy or other systems transition, mitigation or adaptation in line with Paris Agreement commitments. Rapid and far-reaching transitions of energy, land, urban and infrastructure (including transport and buildings) and industrial systems require investors and other contracting parties to manage and allocate risk, as far as possible, within their contracts and to reinforce that through appropriate and effective dispute resolution mechanisms. Some contracts expressly relate to the UNFCCC, such as the Green Climate Fund ("GCF") agreements relating to "low-emission (mitigation) and climate-resilient (adaptation) projects and programmes developed by the public and private sectors to contribute to countries’ climate change priorities",³ or emission trading system agreements.⁴ Others relate to more general investment in energy or related systems transition, such as contracts relating to funding, insuring, licensing, commissioning, plant construction and dismantling/decommissioning or supply of renewable energy, decommissioning of non-renewable power plants, adaptation of existing buildings and infrastructure to adapt to a warming climate, or new agriculture, forestry infrastructure (such as enhanced irrigation systems) to reduce greenhouse gas emissions from land use. These State commitments may already be reflected by sector in a State’s Nationally Determined Contribution ("NDC") submitted under its reporting obligations under the Paris Agreement.⁵

Category II: Contracts not specifically related to transition, adaptation or mitigation

2.5 Systems transition consistent with a 1.5°C global warming pathway, mitigation measures and adaptation to a warming climate, as well as related environmental impacts of existing and future warming, may directly or indirectly impact other general commercial contracts in a broad range of sectors including energy, infrastructure, transport, agriculture and other land use and food production, and industry (including manufacture and processing). Those contracts may have no specific climate change-related purpose or subject-matter and may even pre-date the Paris Agreement. Nevertheless, contractual performance across a number of sectors may be impacted by the contracting parties’ responses to (i) changes in national laws; (ii) regulation or policy to meet individual country commitments under the Paris Agreement; (iii) voluntary commitments by industry or individual corporations in accordance with climate or sustainability related corporate social responsibility; (iv) environmental impacts of climate change; and/or (v) responses to associated climate change action in national courts and other fora. Potentially every business activity and contractual relationship is capable of being impacted by energy and other systems transition, mitigation or adaptation measures and/or the environmental impacts of global warming.

Category III: Submission Agreements

2.6 A submission agreement (or "compromis") differs from a standard arbitration agreement insofar as it is entered into only after a dispute has arisen or crystallised.¹⁰ Typically, it is difficult for parties to reach any consensus or agreement once a specific dispute has arisen between them, including as to the process to resolve it.¹¹ Consequently, such agreements are rare, but not unprecedented.¹² A related form of dispute resolution agreement that is only formed (or at least perfected) after a dispute has arisen is an agreement pursuant to an unilateral offer to arbitrate, as in many bilateral and multilateral investment treaties.¹³ In the context of climate change related disputes, existing court or other dispute resolution mechanisms may lack jurisdiction or be inadequate to deal with certain types of substantive claims or subject-matters and/or claims by non-parties to the underlying contract, investment or conduct. In certain limited circumstances, where all participating parties properly and validly consent to be bound, submission agreements may be used. For example, a local group or population may be directly impacted by an investment in new or protected forestry areas, impacting their livelihoods and access to natural resources of resident populations. Similarly, a population may be impacted by the establishment of a wind farm or solar power panel installation, affecting arable land or fisheries. In such circumstances, a submission agreement could prevent multiple, multi-jurisdictional, court proceedings with inconsistent outcomes and provide certainty, enforceability and finality within a more attractive time frame than might be available through the courts.¹⁴

2.7 This Report is focused primarily on commercial contract disputes, which represent the vast majority of cases administered by the ICC Court. However, climate change related disputes may also arise pursuant to investor-State treaties, including but not limited to claims arising out of new climate change related regulatory measures implemented by a State. A number of investment treaties provide for ICC Arbitration, and the ICC Court administers investment treaty cases. Therefore, this category of disputes is taken into account by the Task Force, and certain mechanisms or features considered in this Report would apply in equal measure to climate change related disputes arising out of treaty claims.

III. Current and potential use of arbitration in climate change related disputes

3.1 The Task Force’s mandate is first to explore how ICC Arbitration and ADR services are currently used to resolve disputes that potentially engage climate change and related environmental issues. As the Paris Agreement and the IPCC Special Report are relatively recent, disputes arising out of "rapid and far-reaching transition to energy, land, urban and infrastructure and industrial systems"¹⁹ are not yet reflected in past and existing ICC cases. Nevertheless, three important aspects of existing ICC cases are instructive: (i) ICC Arbitration and ADR are frequently adopted in commercial contracts concerning energy, land use, urban and infrastructure and industry with these sectors representing a large portion of ICC cases; (ii) climate change related investment is rapidly increasing and systems transition of the scale proposed by the IPCC will recalibrate regulatory risk and investment strategy in sectors where ICC Arbitration and ADR are already prevalent; and (iii) climate change mitigation and adaptation, and systems transition as a whole, may cause environmental impact and ICC Arbitration and ADR are increasingly being used to resolve environmental claims.

3.2 First, collectively the sectors impacted by transition of the energy, urban and infrastructure, land use and industry systems, as identified by the IPCC, account for the majority of ICC cases and awards; ICC Arbitration and ADR is therefore at the forefront of the ongoing transition. According to the ICC Report for 2017:

The ICC cases cover a wide spectrum of business sectors, ranging from agriculture to heavy industry and manufacturing, as well as public sector activities and service industries. Construction and energy generated the largest number of cases in recent years. In particular, construction and engineering accounted for 23% of all new cases in 2017 (186 new cases filed). The energy sector closely followed the above trend with 155 new cases in 2017, representing 19% of the overall new caseload. Sectors related to telecoms and specialised technologies, financing and insurance, general trade and distribution, industrial equipment, and health, pharmaceuticals and cosmetics each amounted to approximately 6% of cases.

In 2018, the construction and engineering sector accounting for 26.6% of all new cases, followed by the energy sector with 14.6% of new caseload, and sectors related to telecoms and specialised technologies, financing and insurance, general trade and distribution, industrial equipment and health, pharmaceuticals and cosmetics each amounted to approximately 6% of cases.²⁰ As discussed in the Annex, these are all sectors that are impacted by the systems transitions.

3.3 Second, investment in projects designed to mitigate greenhouse gas emissions or adapt to climate change (i.e. climate change investment) is a rapidly growing area and that growth is set to expand exponentially as a result of systems transition. Already in the last decade, and in particular since the Paris Agreement entered into force in November 2016, business and industry has responded to the significant investment opportunities generated by climate change related and other "green" projects and programmes. These investment opportunities are further enhanced by international funding and other incentives under the UNFCCC through international development banks, or available through local, regional, state and other initiatives, as well as increased regulatory and other legal risks associated with investment in high climate impact areas.

3.4 The UN international development banks, international institutions, regional and state bodies, and private foundations are pledging or reserving funds for climate change and "green" projects and programmes. In particular, there is likely to be an entirely new stream of investment that will flow from countries’ climate related commitments contained in their NDCs, which must be filed every five years²¹ and thereafter monitored through an "enhanced transparency framework" designed to "build mutual trust and confidence and to promote effective implementation".²² At the same time, many international development banks and state-owned financial institutions are ceasing to fund projects that would undermine the climate change objectives of the Paris Agreement. These financial measures and trends are designed to "achieve a paradigm shift to low-emission and climate-resilient pathways",²³ and are set to continue and to increase.

3.5 In addition, States and regional governments are introducing national legislation and regulation to lower greenhouse gas emissions targets, and institutions are withdrawing funding from projects that do not provide for measures against high emitters, cap and trade mechanisms and/or other internalisation devices. Other measures include increased transparency of emission levels and climate change related financial disclosure.²⁴ Separately, public interest groups and NGOs are increasingly pursuing climate change related litigation proceedings in various national courts and other fora, primarily seeking to hold state parties accountable for their climate change related commitments.²⁵

3.6 In the IPCC Special Report,²⁶ the IPCC encapsulated the magnitude of the necessary change and ensuing business opportunity, in a relatively short period of time. It concluded that we must limit global warming to 1.5°C to avoid the worst effects of climate change and set out emission pathways and system transitions consistent with 1.5°C global warming. Those pathways require "rapid and far-reaching transitions in energy, land, urban and infrastructure (including transport and buildings), and industrial systems". The IPCC says that transition of: "[t]hese systems are unprecedented in terms of scale, but not necessary in terms of speed, and imply deep emissions reductions in all sectors, a wide portfolio of mitigation options and a significant upscaling of investments in those options". Any "significant upscaling of investments" provides opportunity and risk in four broad areas of business and industry:

1. Energy. System transition requires significant investment upscaling in: enhanced energy efficiency; faster electrification of energy end use; higher share of lower emission energy sources; renewables projected to supply 70-85% of electricity in 2050; share of nuclear to increase; share of fossil fuels with carbon dioxide capture and storage (“CCS”) modelled to increase; electricity generation from gas to be approximately 8% of global energy by 2050; steep reduction in coal to zero; developments in solar, wind and electricity storage technologies; total annual average energy supply investments of US$ 640 to US$ 910 billion for 2016 to 2050; annual investments in low-carbon energy technologies and energy efficiency upscaled by roughly a factor of 6 by 2050 compared to 2015.
2. Urban and infrastructure. System transition requires significant investment upscaling in: changes in land and urban planning practices; deeper emission reductions in transport and buildings; technical measures and practices enabling deep emissions reductions, including various energy efficient options; in transport sector, share of low emission final energy would rise from less than 5% in 2020 to 35-60% in 2050.
3. Global and regional land use. System transition requires significant investment upscaling in: non-pasture agricultural land for energy crops reduction of 4 million km² to increase of 2.5 million km²; 0.5-11 million km² reduction of pasture land to be converted into a 0-6 million km² increase of agricultural land for energy crops; 2 million km² reduction to 9.5 million km² increase in forests by 2050; profound challenges for sustainable management of the various demands on land for human settlement, food, livestock feed, fibre, bioenergy, carbon storage, biodiversity and other ecosystem services; and mitigation options limiting demand for land include sustainable intensification of land-use practices, ecosystem restoration and changes towards less resource-intensive diets.
4. Industry. System transition requires significant investment upscaling in: new and existing technologies and practices including electrification, hydrogen, sustainable bio-based feedstocks, product substitution, and carbon capture, utilisation and storage; emissions reductions by energy and process efficiency.²⁷

3.7 This all has the effect of actively promoting public and private investment and behaviours that are aligned with, facilitate and promote global climate change objectives. 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. These types of contracts are very likely to give rise to climate change disputes and may be appropriate for the specific procedural features that are discussed in this Report.

3.8 Third, arbitration and ADR are also well-established in resolving environmental disputes. The role of arbitration and ADR is already firmly established in resolving disputes in all of those sectors. For the last twelve years (since 2007), there has been on average three new environmental protection cases per year registered with ICC, with up to six in some years. Other arbitral institutions have provided similar statistics. All of these cases could potentially give rise to climate change related disputes. In 2018, the construction and engineering sector accounted for 26.6% of all new cases, followed by the energy sector with 14.6% of new caseload and sectors related to telecoms and specialised technologies, financing and insurance, general trade and distribution, industrial equipment, and health, pharmaceuticals and cosmetics each amounted to approximately 6% of cases.

3.9 Based on current and predicted growth of climate change related investments by States and the private sector in an effort to meet the objectives of the Paris Agreement, the Task Force predicts that climate change related disputes will increase exponentially. This analysis is summarised in the Annex.

IV. Benefits of arbitration for resolution of climate change related disputes

4.1 Arbitration has already been used to determine climate change related disputes arising under the UNFCCC’s Green Climate Fund and the Kyoto Protocol. A broad range of climate change related initiatives concerning renewable energy, climate change adaptation and mitigation, with diverse funding from international, domestic and business sources, will need to consider dispute resolution procedures.

4.2 Moreover, commercial disputes with a climate change related genesis are increasingly likely to be brought by businesses as they adjust to increasing regulation of emissions following the entry into force of the Paris Agreement. Disputes in the context of asset divestment, new renewable energy investments, carbon trading and pricing, and increasingly stringent environmental representations and warranties are some of the issues that are emerging.

4.3 In addition to offering the advantage of a neutral forum and benefitting from worldwide coverage by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the "New York Convention") enabling cross border recognition and enforcement of arbitral awards, other main advantages that arbitration could offer to climate change disputes is accessibility of the tribunal, expertise and flexibility as to where an arbitration is hosted. Arbitral tribunals can adopt realistic time-frames, engage expert knowledge, in certain limited circumstances admit amicus evidence and adapt the process with flexibility depending on the nature and scope of disputes.

4.4 In addition, the international dimension of climate change and the likely presence of states or state entities as parties make international arbitration a suitable forum for the resolution of a variety of such disputes.²⁸

4.5 States and state entities are already claimants in ICC Arbitrations against contractors in construction disputes or against suppliers in energy related disputes. Likewise, states or state entities acting as respondents in ICC Arbitrations may also seek relief by way of counterclaims for environmental damages.²⁹ Against such background, it is worth noting that the Report of the UN Secretary General on Gaps in international environmental law and environment-related instruments: towards the global pact for the environment notes that, while in the absence of an international environment court disputes between states relating to the environment have been addressed by a variety of international courts and tribunals, "[g]aps relating to the implementation and effectiveness of international law have appeared in several aspects of inter-State dispute settlement".³⁰

4.6 In 2012, the ICC Commission on Arbitration and ADR published its Report on States, State Entities and ICC Arbitration detailing how ICC Arbitration works in relation to disputes involving States and state entities.³¹ It aimed to raise awareness of the recommendations, rules and practices that have been developed in the ICC Arbitration system to take into account a State or state entity’s participation, both with respect to the arbitration agreement and procedure. Although ICC Arbitration may be underused in disputes involving States and state entities, approximately 15% of the cases administered by ICC involved a State, a parastatal or public entity as a party.³² These arise in all parts of the world, with both large and small amounts in dispute, in a wide variety of matters most frequently relating to construction, maintenance and the operation of facilities or systems, and with only a minority arising from the alleged breach of a bilateral investment treaty. In addition, that Task Force concluded that a separate set of rules applicable to cases involving States or state entities was in fact unnecessary because the ICC Arbitration Rules contained new provisions that are intended to facilitate and further the participation of such parties in ICC Arbitration.

V. Specific procedural features of climate change related disputes

5.1 Rapid and far-reaching transitions of energy, land, urban and infrastructure (including transport and buildings) and industrial systems require significantly increased and changed investment by States, business and industry. It also requires greater regulation by States as they implement the necessary legal framework to achieve their Paris Agreement commitments to reduce greenhouse gases, including in relation to tariffs, taxation or greater constraints on transition-related activities. Against that backdrop, the Task Force has sought both: (i) to ascertain what, if any, specific features are required for a dispute resolution mechanism effectively to resolve disputes arising out of climate change related investment and policy or regulatory change; and (ii) to review ICC Arbitration Rules, Mediation Rules, Dispute Board Rules and Expert Rules and provide additional guidance, dispute resolution clauses and/or other templates for use in disputes arising out of or in relation to that investment or policy or regulatory change.

5.2 Among other things, the Task Force is responding to the call for international arbitral institutions to consider how to take appropriate steps to ensure their rules are compatible with climate change objectives. In particular, the IBA Climate Change Justice and Human Rights Task Force Report Achieving Justice and Human Rights in an Era of Climate Disruption states:

[F]or environmental and climate change-related disputes, the Task Force recognizes the availability of multiple other arbitral fora which, depending on the nature of the case, may also be considered, including … the ICC … among others. The Task Force encourages all arbitral institutions to take appropriate steps to develop rules and/or expertise specific to the resolution of environmental disputes, including procedures to assist consideration of community perspectives.³³

5.3 ICC’s global reach, as one of the leading arbitral institutions, and increasing experience with state entity parties and multiparty arbitration, position it to take a major role in the determination of climate change related disputes through the several dispute resolution services it offers.³⁴

5.4 Specifically in relation to environmental disputes, the Permanent Court of Arbitration ("PCA") had previously taken steps to tailor its processes by issuing Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment (the "PCA Environmental Rules").³⁵ In particular, the PCA Environmental Rules provide for: (i) PCA lists of potential expert arbitrators or expert witnesses;³⁶ (ii) the possibility for the tribunal to request a summary of technical or scientific matters from the parties;³⁷ (iii) bespoke confidentiality restrictions on information;³⁸ and (iv) possible precautionary interim measures to protect the environment, including provisional orders, where it is deemed necessary to "prevent serious harm to the environment falling within the subject-matter of the dispute".³⁹ The PCA has administered a number of cases under these Rules, concerning both State and non-State actors dealing with environmental disputes.⁴⁰

5.5 This Report assesses and confirms the capability of ICC to immediately offer adequate solutions in climate change related disputes through its several dispute resolution services, be it under the aegis of the ICC Court or ICC Centre for ADR. It also specifically explores potential procedural innovations and guidance for arbitration and ADR in climate change related disputes.⁴¹ This ICC Task Force has identified a number of specific features of international arbitration that may assist in resolving climate change related disputes going forward. These include utilisation and optimisation of:

• use of and recourse to appropriate scientific and other expertise;
• existing measures and procedures for expediting early resolution of disputes or providing urgent interim or conservatory relief;
• integration of climate change commitments and principles of international law, including arising out of the UNFCCC and Paris Agreement;
• enhanced transparency of proceedings;
• potential third-party participation, including through amicus curiae briefs; and
• costs, including advances and allocation of costs, to promote fair, transparent and appropriate conduct of climate change related disputes.

5.6 Each of these is considered below in turn. However, as a preliminary global observation, the ICC provisions on the establishment of Terms of Reference and the holding of a case management conference are unique features of ICC Arbitration. Both provide an early opportunity for parties and tribunals to consider, at an early stage in the arbitration, whether or not specific climate change or related environmental issues are likely to arise and, if so, consider the specific features discussed below.

A. Recourse to appropriate scientific and other expertise

5.7 Arguably the single most important feature of arbitrating climate change related disputes is 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. Appropriate expertise and skills may be provided in various ways including through: (i) arbitrators with appropriate expertise; (ii) party-appointed experts; (iii) tribunal appointed experts; and/or (iv) expert determination (such as pursuant to the ICC Expert Rules).

1) Arbitrators with appropriate climate change related expertise

5.8 The ICC Arbitration Rules make it possible for the parties to have a decisive impact on the choice of arbitrators, including for reasons pertaining to competence and skills. In relation to expertise, users of ICC Arbitration should be more open to appointing tribunal members with appropriate climate change related legal, scientific or technical expertise, in appropriate disputes, especially in three-member tribunals comprising at least one legally-trained arbitrator. There are few, if any, national arbitration laws that require arbitrators to be qualified lawyers. Nonetheless, the default is for parties, co-arbitrators and the ICC Court to appoint a lawyer or retired judge as arbitrator. Despite that, in the construction industry, engineers and architects having received appropriate arbitral practice training are in some countries considered to be preferable decision-makers in certain types of disputes; the same flexibility should be afforded to selection of arbitrators in appropriate climate change related disputes. It should be borne in mind that expert arbitrators are appointed for their ability to better understand technical information put before them, not to apply their own expertise to resolve the dispute, without first putting the proposed expertise to the parties for comment. As such, expert arbitrators would be required to comply with the same standards of due process, natural justice and independence and impartiality as any other arbitrator. Any independent technical knowledge or understanding by the expert arbitrator would need to be put to the parties for comment before being applied in making any award or decision. This could be addressed in the parties’ arbitration clause to ensure that there is no misunderstanding between the parties as to the role of the expert arbitrator.⁴²

5.9 The starting point for the appointment of arbitrators is the wording of the parties’ arbitration agreement. The ICC Arbitration Rules permit the parties to agree on the appointment of arbitrators and/or the method of appointment.⁴⁴ In practice, parties sometimes do expressly provide for specific appointment requirements, such as to the nationality, experience, areas of expertise or other features that arbitrators should meet. The risk is that the more specific the parties are, the more difficult it is to identify an arbitrator with the required attributes and/or expertise.

5.10 Accordingly, the Standard ICC Arbitration Clause is minimal and does not address qualifications or expertise:

All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.⁴⁵

5.11 ICC’s general guidance to parties wishing to supplement the Standard ICC Arbitration Clause in any respect provides that:

Parties are free to adapt the clause to their particular circumstances. For instance, they may wish to stipulate the number of arbitrators given that the ICC Arbitration Rules contain a presumption in favour of a sole arbitrator. Also, it may be desirable for them to stipulate the place and language of the arbitration and the law applicable to the merits. The ICC Arbitration Rules do not limit the parties’ free choice of the place and language of the arbitration or the law governing the contract.

When adapting the clause, care must be taken to avoid any risk of ambiguity. Unclear wording in the clause will cause uncertainty and delay and can hinder or even compromise the dispute resolution process.

Parties should also take account of any factors that may affect the enforceability of the clause under applicable law. These include any mandatory requirements that may exist at the place of arbitration and the expected place or places of enforcement.⁴⁶

5.12 Whenever parties are required to nominate a sole arbitrator or presiding arbitrator for confirmation by the ICC Court or co-arbitrators are required to nominate a presiding arbitrator, they may jointly seek the Secretariat’s assistance on expertise, by requesting that the Secretariat either propose names of possible candidates or provide non-confidential information on prospective arbitrators.⁴⁷

5.13 An advantage of ICC administered arbitration in the appointment process is that the ICC Court or Secretary General must independently review whether or not the arbitrator(s) satisfy any qualification requirements prior to appointment. The ICC Court or Secretary General will only confirm an arbitrator nominated by the parties if the individual is fit to serve as an arbitrator,⁴⁸ and after the prospective arbitrator has signed a statement of acceptance, availability, impartiality and independence.⁴⁹ Fitness to serve may, in appropriate cases, include a minimum level of technical or scientific expertise. For example, in the PCA administered Kishenganga arbitration, the parties agreed to appoint two arbitrators each, who then appointed three further arbitrators including one qualified engineer and one international lawyer. The engineer was a non-lawyer, in recognition that the arbitration raised technical engineering and environmental issues.⁵⁰

5.14 ICC can also act as appointing authority in arbitrations that the parties have elected not to conduct under the ICC Arbitration Rules, e.g. where the arbitration agreement refers to arbitral proceedings conducted under the Arbitration Rules of the United Nations Commission on International Trade Law ("UNCITRAL") or other arbitration proceedings, whether ad hoc or administered by other arbitral institutions.⁵¹ In such a situation, ICC, through the ICC Court, is empowered to act as appointing authority by agreement of the parties, designation by the Secretary-General of the PCA, or otherwise.⁵²

5.15 As provided in the IBA Guidelines on Conflicts of Interest in International Arbitration, "[e]very arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding until the final award has been rendered or the proceeding has otherwise finally terminated".⁵³ Under ICC practice, "[a]n arbitrator or prospective arbitrator must disclose in his or her statement, at the time of his or her appointment and as the arbitration is ongoing, any circumstance that might be of such a nature as to call into question his or her independence in the eyes of any of the parties or give rise to reasonable doubts as to his or her impartiality",⁵⁴ and any doubt must be resolved in favour of disclosure. In assessing whether a disclosure should be made, an arbitrator or prospective arbitrator should consider relationships with non-parties having an interest in the outcome of the arbitration. The Secretariat may in this respect assist prospective arbitrators by identifying "relevant entities" in the arbitration.⁵⁵

5.16 In view of the specific nature of investment arbitrations based on treaties, for the sake of transparency and subject to any considerations of confidentiality, ICC encourages prospective arbitrators to state in their curriculum vitae a complete list of the treaty-based cases in which they participated as arbitrator, expert or counsel.⁵⁶

5.17 Where the ICC Court is required to appoint an arbitrator – i.e. a sole arbitrator,⁵⁷ member of the tribunal where a party has failed to nominate,⁵⁸ or president⁵⁹ – it generally solicits a proposal by a National Committee.⁶⁰ The parties may agree that the ICC Court’s appointment of a sole arbitrator or a presiding arbitrator will take place in consultation between the parties and the Secretariat. ⁶¹

5.18 The ICC Court may directly appoint an arbitrator where: (i) one or more of the parties is a State or state entity; (ii) it considers that it would be appropriate to appoint an arbitrator from a country or territory where there is no National Committee; or (iii) in the President of the ICC Court’s opinion, circumstances make a direct appointment necessary and appropriate.⁶² In those circumstances, the ICC Court carries an even higher responsibility to ensure that the identified appointee is appropriately qualified and fit for the role.

5.19 A party may challenge the appointment before the ICC Court, "whether for an alleged lack of impartiality or independence, or otherwise".⁶³ The language "or otherwise" is a catch-all phrase that could include lack of requisite qualifications. Accordingly, if a party considers that the arbitrator is not appropriately qualified or fit for the role, parties may challenge the arbitrator.⁶⁴ An arbitrator shall be replaced upon acceptance of a challenge or on the ICC Court’s own initiative "when it decides that the arbitrator is prevented de jure or de facto from fulfilling the arbitrator’s functions, or that the arbitrator is not fulfilling those functions in accordance with the Rules".⁶⁵ In such situations, the ICC Court provides the arbitrator concerned, the parties and any other members of the arbitral tribunal an opportunity to comment.

5.20 Thus, the selection of arbitrators under the ICC Arbitration Rules leaves the parties a wide margin of discretion either to choose the arbitrators or specify the method to select them. The ICC Court would usually only step in where the parties cannot agree or they challenge an arbitrator for alleged lack of impartiality or independence or requisite skills.

5.21 The PCA Environmental Rules, by contrast, provide for the establishment of a specialised list of arbitrators considered to have environmental expertise and a specialised list of scientific and technical experts who may be appointed as expert witnesses pursuant to those Rules.⁶⁶ As of July 2018, the PCA’s list included 25 specialised environmental arbitrators⁶⁷ and 17 technical and scientific environmental experts.⁶⁸ This currently includes, for example, a member of the board of directors of the Sri Lanka Carbon Fund. Individuals on the list are nominated by member states and reviewed every four years. Parties to a dispute under the PCA Environmental Rules are free to choose arbitrators, conciliators and expert witnesses from these panels, but are not limited to these panels.

5.22 While the ICC Court of Arbitration does not currently maintain formal lists of experts, the ICC Centre for ADR maintains an open database of experts in different areas as discussed below.

2) Party-appointed experts

5.23 The ICC Arbitration Rules permit parties wide discretion to appoint experts in international arbitration proceedings. The arbitral tribunal may decide to hear "experts appointed by the parties or any other person".⁶⁹ Under the existing Rules, therefore, parties are free to appoint any expert that they consider relevant to the dispute, including climate change experts.

5.24 This is in line with the IBA Rules on the Taking of Evidence in International Arbitration, which provide that a party may rely on a party-appointed expert as a means of evidence on specific issues.⁷⁰

5.25 Existing arbitral practice demonstrates that parties do indeed introduce expert evidence in ICC Arbitration in relation to environmental, energy and other technical issues. In climate change related disputes, the parties and the tribunal may consider raising at the case management conference, or in the context of Terms of Reference as a matter of course, the question whether or not climate change expertise is required. As discussed below, the parties may use the services of the ICC Centre for ADR to assist it in selecting such party-appointed expert(s).

3) Tribunal-appointed experts

5.26 The arbitral tribunal may also appoint its own expert(s). Under the ICC Arbitration Rules, the tribunal may do so after having consulted with the parties.⁷¹ As discussed below, the arbitral tribunal may use the services of the ICC Centre for ADR to assist it in appointing an expert. In climate change related disputes, this could include for example an expert on climate change science, or domestic or international climate change policy, commitments or law. This is not new. For example, in the PCA administered South China Sea arbitration, the tribunal commissioned an independent expert on the coral reef environment.⁷²

5.27 As for party-appointed experts, the IBA Rules on the Taking of Evidence provide that the arbitral tribunal, "after consulting with the Parties, may appoint one or more independent tribunal-appointed experts to report to it on specific issues designated by the Arbitral Tribunal".⁷³ ICC arbitral tribunals have recourse to such experts on a regular basis.

5.28 The ICC Centre for ADR, which is wholly independent from the ICC Court, may propose experts to ICC arbitral tribunals free of charge, which is a unique service offered in all cases administered by ICC.⁷⁴

5.29 Alternatively, a tribunal in an ICC administered arbitration may request that the parties – either jointly or separately – produce a non-technical document summarising and/or explaining any scientific, technical or other specialised information to assist it in its resolution of the dispute. The PCA Environmental Rules expressly provide that an arbitral tribunal may request such a document in relation to environmental claims.⁷⁵ An arbitral tribunal may similarly do so under the ICC Arbitration Rules, which empower tribunals to adopt such procedural measures as they consider appropriate after consulting the parties, provided it is not contrary to any agreement of the parties.⁷⁶ This could also be provided for in the Terms of Reference.

4) The ICC Expert Rules

5.30 As indicated, the ICC Centre for ADR offers services for the proposal or the appointment of experts, and the administration of expert proceedings. Under the ICC Expert Rules, the Centre offers three distinct services relating to experts and neutrals: (i) "proposal", whereby the Centre puts forward the name(s) of one or more experts or neutrals upon a request from one or more parties, a court or an arbitral tribunal; (ii) "appointment", whereby the Centre makes an appointment that is binding upon the requesting parties; or (iii) "administration", whereby the Centre is chosen to administer and supervise the entire expert proceedings. In respect of all three services, the Centre selects an expert either on the basis of a proposal by an ICC National Committee or otherwise.

5.31 As with the ICC Court for the appointment of arbitrators, the ICC Centre for ADR requires any prospective expert to sign a statement of acceptance, availability, impartiality and independence.⁷⁷ The Centre also considers the prospective expert’s attributes, including with respect to nationality, residence, training and experience. Every expert is required to be and to remain impartial and independent of the parties involved in the expert proceedings, unless otherwise agreed in writing by such parties.

5.32 The ICC Centre for ADR conducts a bespoke search in every case in order to identify individuals who fit the particular case criteria. It consults its open database of all the companies and individuals that have submitted profiles to it over the decades of existence of ICC’s expertise services, including its network of professionals and firms worldwide and, most importantly, ICC’s network of National Committees. The Centre thus avails itself of "unmatched access to experts and neutrals on all continents and from all disciplines, including accounting, finance, engineering, information technology, construction, energy and the law".⁷⁸ Given this wide range of expertise, the ICC Centre for ADR is in a good position to select experts whose experience is tailored to the particular needs of the parties in climate change and related environmental disputes.

5.33 It may be timely for the ICC Centre for ADR to explore an outreach to climate change scientists and other technical and modelling experts in order to expand the Centre’s available experts in areas relevant to climate change related disputes.

B. Measures and procedures to expedite early or urgent resolution

5.34 Urgency, timeliness and avoidance of delay is often critical for meaningful resolution of climate change related disputes. The science, innovation and new technology is fast-moving. The environmental impacts and effects on populations are potentially irreversible if not dealt with at an early enough stage. In addition, applicable legislative and regulatory frameworks and the overall energy market will continue rapidly to evolve and impact the allocation of risk in ongoing essential infrastructural and energy projects, possibly affecting millions of lives. Consequently, it is not always viable to expect disputing parties to await resolution of a dispute over the course of two or more years. Climate change action is universally acknowledged to be urgent; arbitration of climate change related disputes must be able meaningfully to accommodate that urgency. However, not all arbitrations, even less ADRs, do take years to resolve disputes, whether climate change related disputes or equally large and/or complex disputes, even in the construction area. One of the virtues of the statement of acceptance, availability, impartiality and independence required to be filed by prospective appointees under the ICC Arbitration Rules, Mediation Rules and Expert Rules, is precisely to allow their selection process to take their availability in account, and parties should give much weight to this consideration where time is a factor in their dispute’s resolution.

5.35 ICC Arbitration has various features that may be adopted or utilised to enhance prompt resolution of climate change related disputes. First, parties and arbitral tribunals may adopt certain case management techniques to facilitate prompt resolution of climate change related disputes.

5.36 Second, parties may proceed on the basis of the new ICC Expedited Procedure. By agreeing to arbitrate under the ICC Arbitration Rules, the parties accept the Expedited Procedure Rules if (i) the amount in dispute does not exceed a limit currently set at US$ 2 million, or (ii) the parties otherwise agree.⁷⁹

5.37 Third, under the ICC Arbitration Rules and dispute resolution practice, there are several additional features already in place, including: (i) use of escalating dispute resolution clauses in order to avoid arbitration altogether; (ii) emergency arbitration; (iii) interim and conservatory measures; and (iv) other time and cost management techniques including those set out at Appendix IV of the ICC Arbitration Rules, the case management conference and Terms of Reference. Many of these features are unique to ICC Arbitration and, as discussed below, the ICC Court and ICC Centre for ADR both provide additional safeguards. Each of these is discussed below.

1) ADR and other escalating dispute resolution provisions

5.38 First, escalating dispute resolution provisions provide for pre-arbitral, non-binding dispute resolution phases ranging from informal consultation, high level settlement meetings, negotiation and mediation to structured adjudication. Often, such ADR will facilitate fast and cost-efficient resolution of a dispute.

5.39 In relation to climate change related disputes in particular, in addition to the often inherent urgency, there are frequently ongoing relations or project commitments or other reasons to seek resolution without instigating formal arbitration proceedings. Moreover, climate change projects or programmes often involve state parties or international organisations or development funds, with whom new climate change industry market entrants must preserve ongoing relations.

5.40 ADR is also reflected, as an alternative to arbitration, in both the UNFCCC and the Paris Agreement, which expressly provide that the states parties to these instruments may have recourse to "settlement of the dispute through negotiation or any other peaceful means of their own choice".⁸¹ Whilst both instruments expressly provide for arbitration, it is subject to further agreement and negotiation of an arbitration annex. Conciliation, on the other hand, is mandatory pursuant to the provisions of both the UNFCCC and Paris Agreement.⁸²

5.41 As to the implementation of multi-tiered dispute resolution provisions, ICC offers several services administered by its ICC Centre for ADR including mediation, expert determination and dispute boards to implement escalation provisions, with final resolution of remaining unsolved disputes under the ICC Arbitration Rules if needed.

i) Mediation

5.42 ICC offers assistance to parties seeking to resolve their disputes amicably through the its Centre for ADR and its Mediation Rules. Mediating climate change related disputes is enhanced where the mediator or adjudicator is appointed for his or her specific expertise in the relevant subject matter.⁸⁴

5.43 As to appointment, unless the parties jointly nominate a mediator for confirmation by the ICC Centre for ADR,⁸⁵ the Centre shall make the appointment or propose a list of mediators to the parties,⁸⁶ on the basis of a proposal by a National Committee or otherwise.⁸⁷ In either case, the prospective mediator shall sign a statement of acceptance, availability, impartiality and independence,⁸⁸ and, when confirming him or her, the Centre shall in any event "consider the prospective mediator’s attributes, including with respect to nationality, language skills, training, qualifications and experience".⁸⁹

5.44 The process under the ICC Mediation Rules is flexible; after discussion with the parties, the only formal obligation on the mediator is to provide the parties with a written note informing them of the manner in which the mediation shall be conducted and for the parties to participate until such note is issued by the mediator.⁹¹ The only guidelines are that the mediator is "guided by the wishes of the parties" and he must treat them "with fairness and impartiality" while, in turn they "shall act in good faith" throughout the mediation.⁹²

ii) Expert determination

5.45 As discussed above, ICC further offers assistance to parties seeking to resolve their disputes through expert determination. Contractually agreed escalating dispute resolution provisions may expressly provide for expert determination as a mandatory step prior to any arbitration proceedings, or the parties may agree to submit to an expert after a dispute has arisen.

5.46 Parties to climate change related disputes may look to an expert to determine a dispute on the basis of his or her scientific, technical or financial expertise, ultimately subject to arbitration or not. The parties may consent to the ICC Expert Rules for this purpose.

5.47 Expert determination may facilitate early resolution of disputes by providing parties with an early neutral assessment on the technical facts in issue – for example the total greenhouse gas emissions of a particular project. This is particularly valuable given that climate science and technical modelling is constantly evolving. And even if settlement is not achieved, such prior expert determination would provide the parties and the arbitral tribunal with a starting point for the determination of the dispute.

iii) Dispute boards

5.48 ICC also assists in the formation and use of dispute resolution standing bodies and offers model governing rules. A standing body, usually of one or three members, is typically set up upon signature or commencement of performance of a mid- or long-term contract. In construction contracts these are commonly referred to as Dispute Boards ("DB"), a generic category including Dispute Adjudication Boards ("DABs") under the ICC Dispute Board Rules. Dispute Avoidance and Adjudication Boards ("DAABs") are a main feature in the recently revised FIDIC Suite of Conditions of Contract.⁹⁴ DBs are used to assist parties avoid or overcome any disagreements or disputes that arise during the implementation of the contract, without delaying the ongoing project implementation. DBs could be effective in various climate change related projects and programmes, such as reforestation projects or irrigation and water distribution projects. DBs could also be used in disputes relating to climate change related environmental impacts, where the parties require the impact (or threatened impact) to be addressed without interfering with the ongoing project.

5.49 The ICC Dispute Board Rules consist of a comprehensive set of provisions for establishing and operating a DB. They cover such matters as the appointment of the DB member(s); the services they provide; and the compensation they receive. In the application of the ICC Dispute Board Rules,⁹⁵ the ICC Centre for ADR can also provide administrative services to the parties, such as appointing DB members, deciding upon challenges against them, determining their fees, and reviewing their decisions.

5.50 Where climate change related disputes are likely to arise in relation to large infrastructure projects, the parties might choose to incorporate ICC Dispute Boards into the suite of contracts for the project. ICC Dispute Boards can be particularly appropriate for large-scale projects: being standing bodies, at least as a general rule, they are expected to remain up to date as to the progress of the project and any issues arising and can intervene to assist as soon as issues arise and before they crystallise into disputes. A number of features of DBs might make them appropriate:

1. The ICC Dispute Board Rules apply to a wide range of disputes, including pre-dispute “differences”. The only major requirement is that there be a “contract”, defined as an “agreement of the Parties that contains or is subject to provisions for establishing a Dispute Board under the Rules.” Provided this requirement is met, a DB may “assist the Parties in avoiding Disagreements, in resolving them through informal assistance, and by issuing Conclusions”, either a Recommendation or a Decision.⁹⁶

2. The specific obligations of the DB members and the extent to which they are required to remain up to date as to the progress of the project and any issues arising can be individually negotiated for each project. For example, the retainer agreement with the DB members can require them to undertake regular site visits, review key progress reports and maintain a general overview of the issues arising. As standing bodies, the DBs would have current knowledge of the project, its status, its aims and any constraints around what changes can be made and how such changes would affect the stakeholders in the project.

3. The parties can select DB members with suitable experience or expertise and establish the process for the DB with considerable latitude. The parties enjoy a wide margin of discretion to organise the DB with the assistance of the Centre, if required. Any project-specific requirements should be able to be accommodated.

4. Upon perceiving a potential disagreement, the DB may identify it and encourage the parties to resolve it on their own. A DB can intervene with informal assistance to help the parties resolve the matter by agreement or determine a dispute through a recommendation or a decision issued after a procedure of formal referral.

5. The ICC Dispute Board Rules offer three different types of DBs: (i) DABs that issue decisions that must be complied with immediately; (ii) Dispute Review Boards (“DRBs”) that issue recommendations that become binding on the parties if none objects within 30 days; and (iii) Combined Dispute Boards (“CDBs”) that normally issue recommendations but may also issue decisions if a party so requests and no other party objects or the DB so decides on the basis of criteria set out in the Rules.

6. The decisions of the DB do not face enforceability issues where the allocation of funds to meet its rulings would come from a standing fund. The applicant would not need to make a further application to give effect to the decision.

5.51 Industry practice demonstrates the use of DBs in major infrastructure contracts, including by states in projects that may detrimentally impact the environment. For example, the Chilean Government has approved the use of technical panels to deal with technical or economic discrepancies among parties that arise during the life of concession agreements. The technical panel is appointed for the duration of the concession and can be asked to resolve a dispute at any time and can act whether the government or the concessionaire requires its intervention. The parties may, however, seek to preserve the right to arbitrate any DB decision. In this respect, the IBA Model Mining Development Agreement Project published a model contract for all aspects of natural resource extraction projects, usually involving state parties. It provides for pre-arbitration conciliation, including through submitting any technical matters to a sole technical expert.⁹⁷

5.52 In addition, ad hoc standing dispute resolution bodies are well known in international dispute resolution. Examples include: (i) the Iran-US Claims Tribunal; (ii) the Claims Resolution Tribunal for Holocaust Victim Asset Litigation, (iii) ad hoc standing dispute resolution bodies established to deal with environmental disasters, such as the Deepwater Horizon oil spill in the Gulf of Mexico; and (iv) the International Oil Pollution Compensation Funds maintained by an intergovernmental organisation that provides compensation for oil pollution damage resulting from spills from oil tankers. While such ad hoc standing bodies may not strictly all be DBs, they provide examples of functions that DBs could conceivably be entrusted with the duties of discharging.

5.53 There are various ways in which DBs might be used in relation to climate change related disputes. For example:

1. Green Climate Fund (“GCF”) disputes. In September 2017, the Board of the GCF adopted Terms of Reference for an Independent Review Mechanism (“IRM”) to consider complaints from countries about funding decisions for projects and complaints from individuals and groups claiming to have been adversely affected by such projects. In relation to adverse effect complaints, the IRM can seek to implement mediation processes to settle the complaint or can make recommendations to the Board of the GCF (as to changes to be made to the project and/or compensation for the affected communities). Where a GCF funded project has wide-ranging impacts that may continue for an extended period, it may be appropriate to build an ICC Dispute Board option into the complaint mechanism processes available to affected individuals and groups. This would allow affected individuals and groups a line of communication directly to the entities working on the project; rather than the more indirect line of communication to the IRM of the GCF, as the funder of the project.

2. Equator Principles (“EPs”) disputes. ICC Dispute Boards could also be built into the dispute resolution processes applying to projects where the funding is subject to the EPs. Currently 92 financial institutions in 32 countries have signed up to the EPs. Pursuant to those principles, the financial institutions commit to only funding projects that appropriately manage social and environmental risks. EP 6 “Grievance Mechanism” provides:

[T]he EPFI [Equator Principles Financial Institutions] will require the client, as part of the ESMS [Environmental and Social Management System], to establish a grievance mechanism designed to receive and facilitate resolution of concerns and grievances about the Project’s environmental and social performance.

The grievance mechanism is required to be scaled to the risks and impacts of the Project and have Affected Communities as its primary user. It will seek to resolve concerns promptly, using an understandable and transparent consultative process that is culturally appropriate, readily accessible, at no cost, and without retribution to the party that originated the issue or concern. The mechanism should not impede access to judicial or administrative remedies. The client will inform the Affected Communities about the mechanism in the course of the Stakeholder Engagement process.⁹⁸

Accordingly, the ICC Dispute Board process could be adapted to act as the grievance mechanism for EPs’ funded projects under EP 6. This could either be a separate DB, solely focused on the community engagement issues. Or, the community engagement issues under the Equator Principles could be one aspect of the role of a DB established at the commencement of the project to deal with issues that arise between the contracting parties.

2) Emergency proceedings

5.54 Second, the ICC Arbitration Rules provide that, where an arbitral tribunal has not been constituted to decide a dispute and the parties are signatories to an arbitration agreement, a party that needs "urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal ("Emergency Measures") may make an application for such measures pursuant to the Emergency Arbitrator Rules in Appendix V".⁹⁹ Although the ICC Rules provide for recourse to an emergency arbitrator, they do not intend to prevent any party from seeking urgent interim or conservatory measures from a competent judicial authority at any time prior to making an application for such measures, and in appropriate circumstances even thereafter.¹⁰⁰

5.55 Pursuant to the ICC Emergency Arbitrator Rules, if and to the extent that the President of the ICC Court considers, on the basis of the information contained in the Application, that the Emergency Arbitrator Provisions apply, the President shall appoint an emergency arbitrator "within as short a time as possible, normally within two days from the Secretariat’s receipt of the Application". The emergency arbitrator’s order shall be made no later than 15 days from the date on which the file was transmitted to him or her.¹⁰¹ Accordingly, climate change related disputes that require immediate orders prior to the constitution of the arbitral tribunal can benefit from these existing Emergency Arbitrator Rules.

3) Interim measures

5.56 Third, the ICC Arbitration Rules, like most arbitration rules, also provide for interim and conservatory measures.¹⁰³ The ICC Arbitration Rules provide that the parties may apply to any competent judicial authority for interim or conservatory measures "in appropriate circumstances" even after the file has been transmitted to the arbitral tribunal.¹⁰⁴ Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, "the arbitral tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate" in the form of "an order, giving reasons, or of an award, as the arbitral tribunal considers appropriate".¹⁰⁵

5.57 In the context of climate change related disputes, interim and conservatory measures may be pertinent, for example in the case of imminent and irreversible associated environmental harm arising out of a climate change related project, programme or initiative. The unique nature of environmental harm is recognised in the PCA Environmental Rules. These Rules expressly empower arbitral tribunals to order interim measures "to prevent serious harm to the environment falling within the subject-matter of the dispute".¹⁰⁶ Such an environmentally-tailored provision may highlight to a tribunal the importance of environmental concerns as part of the overall dispute, as well as the importance of resolving such matters quickly. Similarly, the UN Convention on the Law of the Sea ("UNCLOS") expressly states, at Article 290(1), that a court or tribunal with prima facie jurisdiction may prescribe provisional measures when necessary to prevent serious harm to the marine environment pending the final decision.

4) Other time and cost management techniques

5.58 Fourth, the ICC Arbitration Rules incorporate other provisions to enhance time and cost management in arbitration. These provisions are individually and separately available to and potentially useful for parties to climate change related disputes. These include the ICC Arbitration Rules, Appendix IV on case management techniques, which provides examples of case management techniques "that can be used by the arbitral tribunal and the parties for controlling time and cost. Appropriate control of time and cost is important in all cases. In cases of low complexity and low value, it is particularly important to ensure that time and costs are proportionate to what is at stake in the dispute". They also include the unique ICC features of the mandatory case management conference and Terms of Reference.

5.59 In disputes where, as will often be, the understanding of underlying considerations to the dispute (e.g. business environment, genesis, technical aspects) are paramount to the parties, they should take advantage of the case management conference to inform and brief the arbitrators. The case management conference can, and often should, provide a full opportunity to customise the process and make it as efficient as possible, provided the parties timely express their concerns and make constructive suggestions to accommodate them. This will be relevant in climate change related disputes as much as in many others, if not more, because of the unique mix of legal, technical, ecological, economic and sometimes even socio-economic factors involved.

C. Application of climate change commitments and/or law

5.60 For the avoidance of doubt, ICC and arbitral tribunals are bound by the governing or applicable law to which parties have agreed, including any applicable mandatory rules. The governing law is central to the tribunal’s decision. This Task Force is not suggesting that this can, or should, be changed.

5.61 Increasingly, state action to implement the Paris Agreement commitments, including the elements of NDCs, is reflected in changes to national legal and regulatory frameworks. In addition, many corporates (including but not limited to publicly listed companies) are voluntarily adopting certain industry standards (such as the Equator Principles) or international standards (such as the UN Guiding Principles on Human Rights) into their own corporate social responsibility commitments or codes of conduct. As both the changing regulatory environment and corporate codes reflect an intention to achieve the implementation of the Paris Agreement commitments (and the SDGs), the underlying climate change international instruments or policy may be relevant.

5.62 As international and national laws develop in relation to climate change, this evolution might become relevant, e.g. to termination of contract, determination of declaratory relief as to the responsibility for project delays, force majeure/factum principis, frustration, hardship/fundamental change in circumstances, or illegality.

5.63 In the international investment treaty context, the Paris Agreement is now expressly referenced in some bilateral investment treaties, including the 2018 Netherlands Model Bilateral Investment Treaty.¹⁰⁷ As a result, arbitral tribunals determining claims made by a private sector investor against a host state under such treaties are obliged to give greater consideration to international climate change obligations bearing on states, and specifically the Paris Agreement. Even where there is no reference to the Paris Agreement in the applicable bilateral investment treaty, international obligations are usually interpreted on a progressive basis and it is likely that the Paris Agreement, and NDCs, will inform the investing party’s legitimate expectations in determining, for example, a fair and equitable treatment claim.

5.64 In the commercial contractual context, certain sectors expressly reference in the preambular language or in the governing law provision of the relevant contract the lex mercatoria or industry specific "good" or "best" practice. If so, that may inform a tribunal’s assessment of a particular claim. It is not unusual for parties to specify that the governing law of a contract is not a national law, e.g. the contract may be governed by "public international law" or "general principles of international commercial trade" (often interpreted as reference to the UNIDROIT Principles of International Commercial Contracts 2016). Should commercial parties expressly reference international climate commitments or specific domestic climate law requirements in their contracts, this may be a relevant consideration for an arbitral tribunal to take into account in its decision, even though such commitments or requirements would probably not be sufficient to address entirely the legal issues in dispute so as to lead the tribunal to disregard other rules of the law that would otherwise normally apply. In this regard, it is worth noting that Article 21.2 of the ICC Arbitration Rules refers to national laws and trade usage in relation to the choice of governing law.

5.65 The growing awareness of climate change policy, commitments and law should not be overlooked in the resolution of climate change related disputes. ICC is currently considering whether to propose further recommendations for guidance to parties and arbitrators in this respect.

D. Transparency

5.66 A major concern in the context of climate change related disputes is transparency. Public interest issues are frequently at stake and the lack of transparency in traditional commercial arbitration has been viewed as a barrier to its legitimacy as a satisfactory dispute resolution mechanism for climate change related disputes. ICC considers that increasing the information available to parties, the business community at large and academia is key in ensuring that arbitration remains a trusted tool.¹⁰⁸

5.67 There has been much debate and progress in investor-state dispute resolution processes to increase transparency of proceedings. The UNCITRAL Rules on Transparency in Treaty-based investor-State Arbitration (the "UNCITRAL Transparency Rules"), which came into effect on 1 April 2014, comprise a set of procedural rules that provide for transparency and accessibility to the public of treaty-based investor-state arbitration. The UNCITRAL Transparency Rules provide that, subject to certain exceptions for confidential and protected information,¹⁰⁹ the parties’ main submissions, a list of exhibits, expert reports and witness statements, and the arbitral tribunal’s orders, decisions and awards are all to be made available to the public.¹¹⁰ In addition, in order to provide for similar transparency of proceedings for investment treaties concluded before 1 April 2014, states can ratify the UN Convention on Transparency,¹¹¹ thereby expressing their consent to apply the UNCITRAL Transparency Rules to disputes arising under these earlier treaties.

5.68 Transparency in arbitrations arising from commercial contracts regarding public interest issues may start to gain more traction, since public interest issues are also raised in the context of commercial arbitrations involving states. As has been noted already, "[t]he public versus private distinction between treaty and contract arbitration can be over-stated" because "[c]ommercial arbitrations can often involve state entities, and, as such, can have just as much of an impact on state’s public policy and finances as investor-state arbitration".¹¹² As approximately 15% of ICC Arbitrations involve state entities (of which only a minority are investor-state disputes),¹¹³ they can have just as much of an impact on a state’s public policy and finances as an investor-state arbitration.¹¹⁴

5.69 In climate change related disputes, there is likely to be increasing pressure for the disclosure of information even in commercial disputes because of the public policy implications. This is especially true where members of the public are directly concerned by the dispute, such as persons affected by the environmental impacts of climate change. Increasing transparency of arbitral proceedings could assist in enhancing the perception of legitimacy of those proceedings with broader stakeholders, such as in investor-state dispute resolution, but also in other areas. This will be particularly so if arbitral proceedings concern broader policy issues, such as climate policy and associated environmental impacts.

5.70 Increased transparency in relation to climate change related disputes could be achieved in two main ways: (i) opening the proceedings to the public, including in the publication of submissions, procedural decisions and hearings; and (ii) publication (or even redacted publication) of awards.

5.71 As a preliminary note in this respect, it should be remembered that there is no general rule of confidentiality in dispute resolution proceedings, and that national laws diverge in this respect.¹¹⁵ In general terms, arbitral tribunals may issue orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration,¹¹⁶ depending on the law applicable to the arbitration agreement and the lex arbitrii, and subject to the parties’ positions and expectations.¹¹⁷ Since most national laws defer to the intention of the parties in this respect, in most cases, the parties could expressly agree to publicise all or part of the proceedings, orders and awards (whether they agree in the actual arbitration clause or subsequently, for example during the case management conference and/or in the Terms of Reference).

5.72 The ICC Court already allows some degree of public involvement in the dispute resolution process under its policy of transparency of certain of its own decisions:

The Court therefore endeavors to make the arbitration process more transparent in ways that do not compromise expectations of confidentiality that may be important to parties. Transparency provides greater confidence in the arbitration process and helps protect arbitration against inaccurate or ill-informed criticism.¹¹⁸

5.73 The ICC Court achieves that transparency by publishing on the ICC website: (i) the names of the arbitrators; (ii) the arbitrators’ nationalities; (iii) the arbitrators’ role within a tribunal; (iv) the method of appointment; and (v) whether the arbitration is pending or closed.¹¹⁹ For arbitrations registered from 1 July 2019, the Court will also publish on the ICC website the following additional information: (i) the sector of industry involved; and (ii) counsel representing the parties in the case.¹²⁰ Moreover, the parties may jointly request the Court to publish additional information.¹²¹

5.74 In addition, upon request of any party, the ICC Court may publicly communicate the reasons for: (i) a decision whether or not and to what extent the arbitration shall proceed, i.e. if the ICC Court is prima facie satisfied that an arbitration agreement under the Rules may exist; (ii) a decision whether or not to consolidate two or more arbitrations; (iii) a decision made on the challenge of an arbitrator; and (iv) a decision to initiate replacement proceedings and subsequently to replace an arbitrator. The ICC Court has full discretion to accept or reject a request for communication of reasons.¹²²

5.75 ICC has also traditionally promoted transparency of decision-making through its publication of redacted versions of arbitral awards (e.g. in the ICC Dispute Resolution Bulletin). ICC awards from 1 January 2019, and any other award and dissenting or concurring opinion made in the same case, may be published no less than two years after notification of the award to the parties, absent objection by one or more party. Parties may agree to a longer or shorter time period for publication.¹²³ Also, unless a party objects, a treaty-based award will be published within six months from notification.¹²⁴

5.76 Under the ICC Arbitration Rules, the arbitral tribunal may issue orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information.¹²⁵ Thus, an arbitral tribunal may take measures to ensure confidentiality of the proceedings. Conversely, depending on the law applicable to the arbitration agreement and on the lex arbitrii, and subject to the parties’ positions and expectations, the arbitral tribunal may also allow some accommodations to confidentiality.

5.77 In short, there is nothing in the ICC Arbitration Rules that would prevent the parties from agreeing to disclose information on pending arbitral proceedings to the public. For instance, the parties may seek assistance from the arbitral tribunal to help them determine the content of any public communications they are providing on the dispute. This has been done, inter alia, in cases where the parties, or one of them, are listed companies and subject to obligations of disclosure. Similar arrangements could all the more be agreed in disputes where individuals and/or NGOs are involved.

5.78 The PCA Environmental Rules contain certain features to allow for greater transparency where the parties have agreed by stating that an arbitral tribunal may determine that information is to be classified as confidential and the conditions under which and persons to whom such information may be disclosed.¹²⁶ The PCA Environmental Rules even provide that the tribunal may appoint a confidentiality advisor, such that decisions on confidentiality can be taken without the tribunal having to view the confidential material.¹²⁷ These options could be utilised in climate change related disputes before ICC arbitral tribunals.

5.79 The above notwithstanding, commercial parties have historically favoured confidentiality of arbitral proceedings as one of the key benefits to arbitration.¹²⁸ However, as demonstrated by the UNCITRAL Transparency Rules themselves, there are many options by which to render parts of proceedings public, while still maintaining confidentiality where appropriate.

E. Third party participation

5.80 Climate change related disputes are often complex and multi-faceted, frequently involving public interests, and therefore may benefit from participation of additional third parties, such as affected citizens or populations. As with expertise and transparency, any involvement by third parties in the arbitral process requires the clear and express consent of the parties. Such provision is already incorporated in the IBA Model Mining Development Agreement, although for dispute resolution within community procedures or local courts as opposed to arbitration.

5.81 Similarly to natural resource extraction agreements, other climate change transition, mitigation and adaptation projects or programmes may impact local populations and surrounding eco-systems. Investment in climate change initiatives may involve parallel funding, insurance, state procurement and goods or services agreements, or indeed natural resource mining or extraction agreements. It may be to the benefit of the contracting parties to incorporate a mechanism for resolution of disputes or grievances involving third parties, which may incorporate a waiver by those third parties preventing parallel proceedings in other fora.

5.82 There is some precedent for corporates using arbitration for resolving public interest disputes with third parties. Advantages in doing so may include:

• limitation of multiple proceedings by providing for a one-stop, neutral and efficient forum;
• improved reputation by offering effective means for the adjudication of climate change and related environmental claims to the various stakeholders affected by their business activities;
• improved credit rating or other financial benefit arising out of implementation of corporate social responsibility, and better management of excessive litigation risk in multiple fora, thereby obtaining higher international quality standards or access to top-segments of financial markets; and
• companies may offer an arbitral forum for claims by potentially affected stakeholders as a means to address local or political opposition to a project or to satisfy certain legal requirements in order to allow the project to go ahead.¹²⁹

5.83 Third-party views may be addressed through a separate grievance mechanism, or in single contractual arbitration through joinder of an additional party or non-party participation such as through a written amicus curiae brief.

1) Joinder of additional parties in the arbitration

5.84 The ICC Arbitration Rules allow parties to seek to join additional parties (Article 7), as well to bring claims against multiple other parties (Article 8) in respect of multiple contracts (Article 9). However, the arbitral tribunal cannot permit third parties to join of their own accord.¹³⁰

5.85 In addition, the ICC Court may consolidate proceedings (Article 10) where the parties agree; where all of the claims in multiple arbitrations are made under the same arbitration agreement; or where claims in multiple arbitrations in respect of differing arbitration agreements are nonetheless claims made between the same parties, in connection with the same legal relationship, and the ICC Court finds the arbitration agreements are compatible. It has even been proposed to make possible the consolidation of arbitrations that are subject to different sets of institutional arbitration rules.¹³¹

5.86 Additional parties may thus be authorised to join the proceedings, or another set of proceedings may be consolidated with the proceedings, albeit usually only where the parties have expressly or impliedly consented in their agreement to arbitrate.

5.87 Indeed, it is widely accepted that, while multiparty arbitration "has the advantage of enabling the dispute to be resolved in one single procedure taking account of all issues and the interests of all parties affected and can save considerable costs and time", it requires a showing that all parties have actually consented and that they are treated equally since "the lack of consent as well as any unequal treatment of the parties are grounds for resisting enforcement under the New York Convention".¹³² The core of the issue may be summarised as follows: "consent must be found somewhere, in some form, or there will be no proper basis for requiring the non-signatory to arbitrate".¹³³

5.88 Most climate change industry contracts and climate change related pre-existing contracts will not usually have a specific provision for participation of non-parties in dispute resolution proceedings. There are exceptions: if a development bank were to guarantee a climate change related development project, it might be entitled to participate in any dispute. Alternatively, the parties might agree to permit certain non-parties to participate in the proceedings once a specific dispute has arisen.

2) Amicus curiae

5.89 A less intrusive manner in which non-parties may be heard in arbitration arising out of climate change related disputes is through an amicus curiae submission. Again, this would as a general rule require the agreement of the parties to the arbitration.

5.90 Resort has been had to amicus curiae to a significant extent in investment arbitration, albeit under strict conditions, including under the Rules of the International Center for the Settlement of Investment Disputes ("ICSID") and in the World Trade Organization ("WTO") context, where amicus briefs have been filed by NGOs and admitted by the Appellate Body since 1998. As generally understood in certain legal systems and in investment arbitration, this is when a non-party to the dispute, as "a friend", offers to provide the court or tribunal its special perspectives, arguments, or expertise on the dispute, usually in the form of a written amicus curiae brief or submission. Such a submission has been deemed acceptable depending on three basic criteria: the appropriateness of the subject-matter of the case, the suitability of a given non-party to act as amicus curiae in that case, and the procedure by which the amicus submission is made and considered.¹³⁴

5.91 The ICC Arbitration Rules provide that, in the course of establishing the facts of the case, the arbitral tribunal may decide to hear not only witnesses and experts, but also "any other person".¹³⁵ Likewise, at the hearing, while "persons not involved in the proceedings shall not be admitted", this is "save with the approval of the arbitral tribunal and the parties".¹³⁶ According to the ICC Note to Parties, "[p]ursuant to Article 25(3) of the Rules, the arbitral tribunal may, after consulting the parties, adopt measures to allow oral or written submissions by amici curiae and non-disputing parties".¹³⁷

5.92 Similarly, under the UNCITRAL Rules on Transparency, the arbitral tribunal may allow a third party to file a written submission after consultation with the disputing parties, and considers, among other factors, whether the third party has a significant interest in the arbitral proceedings and the extent to which the submission would assist the arbitral tribunal in the determination of a factual or legal issue "by bringing a perspective, particular knowledge or insight that is different from that of the disputing parties".¹³⁸

5.93 Likewise, under the ICSID Rules of Procedure for Arbitration Proceedings, the arbitral tribunal may allow a non-disputing party to file a written submission after consulting the parties, and where the tribunal considers, among other things, the extent to which the non-disputing party submission would assist the tribunal ‘in the determination of a factual or legal issue related to the proceeding by bringing a perspective, particular knowledge or insight that is different from that of the disputing parties". In addition, the tribunal must ensure that the non-disputing party submission "does not disrupt the proceeding or unduly burden or unfairly prejudice either party".¹³⁹

5.94 Accordingly, arbitral tribunals in climate change related disputes are empowered to hear submissions from amicus curiae, and their participation may be increased further (e.g. at the hearing), at least where the parties and the arbitral tribunal agree. In so doing, arbitral tribunals may find it advisable to ensure that equal access is provided for non-disputing persons presenting varied interests and points.

F. Costs

5.95 The ICC Arbitration Rules include a complete set of provisions governing the costs of the arbitration and their administration by the ICC Court, with limited involvement of the arbitral tribunal. In establishing an "advance to cover the costs of the arbitration", the ICC Court fixes an amount likely to cover the fees and expenses of the arbitrators and the ICC’s administrative expenses (which is usually payable in equal shares by the claimant and the respondent, subject to readjustment). The ICC Rules permit the arbitration to proceed even where one party has not paid its share of the advance on costs since they provide that "any party shall be free to pay any other party’s share of any advance on costs should such other party fail to pay its share".¹⁴⁰

5.96 Accordingly, where a respondent fails to pay its share of the advance on costs, the ICC Rules allow the claimant to pay the respondent’s share of the advance if the claimant wishes the arbitration to proceed. Article 37 of the ICC Arbitration Rules thereby provides for a complete and coherent system of administration of the costs of an arbitration by the ICC Court and its Secretariat, without needing to involve the arbitral tribunal.

5.97 Conversely, should parties agree that one or several members of the public or a representative NGO claimant(s) may become involved in the arbitration as a party one way or another albeit being unable to pay the relevant share of the advance on costs, subject to the law applicable to the arbitration agreement and the lex arbitrii, the parties may provide for adequate funding from an appropriate source in the arbitration agreement, e.g. one party could elect to pay the entire amount of the advance on costs, in accordance with the ICC Arbitration Rules.

5.98 As in all cases, the final award shall fix the costs of the arbitration and decide which of the parties shall ultimately bear them or in what proportion they shall be borne by the parties.¹⁴¹ However, here also, as a matter of practice, parties may agree on a different method of allocating costs. Arbitration agreements do include provisions such as that parties will share equally in the costs of the arbitration, bear each their own costs, or that the losing party bears the entire costs. Similar provisions limit the application of such methods to "reasonable" costs.

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