Message from the President

Alexis Mourre

International Arbitration cannot live in a vacuum and ignore the global environmental challenges faced by our planet.

ICC is committed to the United Nation’s (UN) climate and Sustainable Development Goals (SDGs). As the global Focal Point for business and industry in respect of the UN climate negotiations, ICC represents the views of the private sector at all UN climate negotiations and hosts a ‘Business and Industry day’ during the annual COP conferences. Moreover, in 2016, ICC was granted Observer Status at the UN General Assembly – the first time that a private-sector organisation has been admitted formally into the UN system. In this role, we represent the private sector in respect of the SDGs, including leading the largest business event at the UN High Level Political Forum on sustainable development. As the world’s largest business organisation with a network of over six million members in more than 100 countries, we have a broad view on the business response to climate change and sustainability. Our role as Focal Point coupled with our Observer Status means that ICC is uniquely positioned to contribute the business perspective on these issues.

In particular, the ICC Court is at the forefront of many climate change initiatives. The ICC Court was at the initiative, with the PCA and the Arbitration Institute of the Stockholm Chamber of Commerce, of a ground-breaking conference on the role of arbitration in climate change and environmental disputes, two editions of which took place in conjunction with the COP conferences in Paris (2015) and Marrakech (2016), with parallel events being held in Paris on 7 December 2015 and in Stockholm on 21 November 2016. Following the Paris event, the ICC published a pioneer book in 2017 on ‘Dispute Resolution and Climate Change: The Paris Agreement and Beyond’, the first ever publication dealing in a comprehensive way with arbitration and climate change. The ICC also published a report on the occasion of COP23: ‘What role for Dispute Resolution in supporting the Paris agreement on Climate Change?’

These initiatives reflect the ICC Court’s increased focus on how better to facilitate the resolution of international climate change related disputes in a manner that promotes the objectives of the Paris Agreement.

Our efforts will continue through our renewed participation in COP24, which will take place in Katowice, Poland on 3-14 December 2018. As part of these efforts, the ICC Commission on Arbitration and ADR has established in 2017 a new Task Force on ‘Climate Change Related Disputes and Arbitration’, which will work in close cooperation with the ICC Commission on Environment and Energy, whose mandate is to develop policy recommendations and tools to promote sustainable and inclusive economic growth as well as responsible business engagement in line with the Paris Agreement and the SDGs. We are deeply grateful to Wendy Miles and Patrick Thieffry for accepting to take the lead on this important initiative.

Climate change issues frequently arise in ICC arbitrations. In 2017, almost 20% of all ICC registered arbitration cases were in the energy sector, rising from less than 10% in 1999. This figure includes oil and gas as well as renewable projects but excludes water, sanitation, flood protection, construction, agriculture, fishing and forestry and transportation sectors, all of which may also give rise to climate change related issues and claims. Separately, for the last ten years (since 2007), there has also been on average three new environmental protection cases per year registered with ICC, with up to six in some years.

Looking forward, that proportion is only going to increase. In a 2016 report, the UN Environmental Program estimated the yearly cost of climate change adaptation in developing countries from US$ 280 to US$ 500 billion by 2050. In its 2017 report on ‘climate investment opportunities’, the International Finance Corporation estimates to US$ 90 trillion the new investment required to implement the existing Paris Agreement targets as set out by the signatory countries in the Nationally Determined Contributions (or NDCs), including the globalisation of new technologies and solutions for mitigation and adaptation.

These investments will require a suitable dispute resolution agreement referring to a robust and experienced arbitral institution. The transition from fossil fuels to renewables involves a recalibration of existing investor-state and private agreements that currently apportion interest and risk in exploration, development and production of oil and gas and coal reserves. As states implement policies to progress their Paris Agreement commitments, either voluntarily or in response to litigation by citizen groups, NGOs or shareholders, existing and future natural resource allocations will be revisited. In order for the Paris Agreement’s objectives to succeed, the disputes that will inevitably arise from these policies and commitments must be resolved in a manner that takes into account, and is consistent with, those objectives.

Meanwhile, the renewable energy industry, solar, wind, hydro and biofuel, is growing apace. More than 40 solar energy investment disputes against Spain, Italy and the Czech Republic have been commenced, seeking reparation for alleged breaches of said states international obligations due to regulatory changes.

The energy sector is, however, only part of the picture. The necessary adaptation required to ensure that infrastructure, transport and housing projects remain resilient to climate change requires implementation of new standards and exposure to new risk. The ICC’s long standing experience in the construction and infrastructure industry, in particular in FIDIC arbitrations, places it in unique position to administer the many arbitral disputes that will arise in this complex and fast-changing environment.

The ICC Task Force on Climate Change Related Disputes and Arbitration has several important objectives. It will explore how ICC Arbitration and other dispute resolution services are currently used to resolve climate change related and associated energy and environmental disputes. It will ascertain what, if any, specific features are required for a dispute resolution mechanism to resolve these disputes (including, but not limited to, scientific knowledge, climate change law expertise, renewable energy law expertise, environmental law expertise etc). It will review ICC’s Arbitration, Mediation and Expert Rules in order to consider whether it would be appropriate for ICC to adopt any additional guidance and/or bespoke arbitration clauses for such disputes. The Task Force report will surely be the basis for many further initiatives to assist users, states and state entities, as they address one of the most important challenges ever faced by humanity.