As the world’s politicians, decision makers and scientists are assembling with increasing frequency to advance efforts to address climate change, the role of arbitration and dispute resolution may be among the most understated yet most important elements to ultimate success.

Let us start with this premise: The success or failure of efforts to develop climate change solutions will be largely dependent on the strength and efficacy of the legal frameworks implementing them. Indeed, in the relatively young history of serious efforts to address climate change, lawyers and judges arguably have played as significant a role as diplomats and politicians in realizing actual greenhouse gas reductions. Simply put, even the best-intentioned agreements to reduce greenhouse gases will be in vain without adequate legal mechanisms to implement and enforce them.

It’s at this nexus of achieving climate change goals and identifying effective legal mechanisms to implement them where arbitration has the potential to emerge as critical in the toolbox of options to address climate change. At its core, arbitration is an approach to resolving legal disputes that provides greater flexibility and less formality than the option most people usually associate with the law: going to court. The format and approach to arbitration varies widely around the world and in different settings. But the key is the notion that a goal is best achieved by bringing together interested parties in a legal dispute, most often under the supervision of an experienced and expert third-party neutral, to jointly craft a solution to the issue that provides both a wider range of options and more direct buy in among the stake holders than most court decisions can. By deferring to the actual impacted parties to solve their problem, as opposed to a third-party judge or panel of decision makers forced to rigidly apply the law to the facts, the parties in a successful arbitration can walk away with a better and timely solution to the issue that will be more enthusiastically implemented.

Thus, just as legal frameworks are essential elements to realizing the goals set to address climate change, it is equally important that arbitration emerge as a prominent legal tool to achieve these goals in a way that best reflects the interests of impacted stakeholders, realizes such goals light years sooner than litigation ever could, and results in consensus agreements that are more likely to be fully enforced and achieve their intended results. Thus, while the role of arbitration may have been understated to date in the discussions to put into place climate change regulatory regimes, longer term arbitration may emerge as the key legal mechanism to unlocking and ensuring the success of the goals and agreements enacted by politicians.

The Status of Legal Frameworks to Address Climate Change

In the relatively short history of the world’s efforts to address global climate change, 2015 will likely be remembered as a monumental year. More than 100 nations came together in Paris to sign the most comprehensive agreement to reduce greenhouse gases globally, the United States promulgated a landscape-changing regulation to reduce fossil fuel power generation, and nations began taking steps to implement their Paris commitments.

But while the diplomats and politicians received most of the attention, there have been just as significant developments by lawyers and judges in advancing climate change issues. While there is at least a 20-year history of legal activitism to address climate change, the legal framework continues to evolve in certain ways.

To some extent, the Paris agreement follows on the heels of a consistent line of judicial precedent around the world (described below) where courts have sought to give direction to regulatory and political bodies to reduce greenhouse gases and address climate change. The Paris agreement addresses this line of cases to some extent by doing what courts otherwise have been requiring: A commitment to reduce greenhouse gases at home. However, despite the landmark political accomplishments in 2015, the developments of 2016 and beyond are attempting to further redefine the legal landscape for addressing climate change issues. Specifically, on the heels of the Paris [Page34:] agreement, advocates for addressing climate change are seeking new legal remedies beyond what the diplomats and world leaders agreed to in Paris and beyond what courts have been willing to endorse. To these groups, commitments and regulations to reduce greenhouse gases, while a step in the right direction, do not go far enough.

Instead, advocates for climate change action are shifting their attention to the pursuit of a fundamentally new course of action above and beyond the established commitments to reduce greenhouse gases. Increasingly, they are turning the focus to the pursuit of economic damages, compensation and other remedies directly against energy companies, not only for current and future greenhouse gas emissions, but for an historic accounting of emissions spanning decades and in some cases centuries. This new wave of climate change initiatives takes several forms described below. However, all these efforts share certain commonalities and challenges in their pursuit of what these groups label “climate change justice” — and constitute the beginning of the “2.0” era of climate change issues that seeks remedies directly from energy companies.

Ultimately, these actions face numerous legal challenges and hurdles before courts and other bodies that likely stand in the way of remedies being awarded, but at the same time various groups have indicated that they are not deterred at the moment from advancing new push the envelope arguments in pursuit of such claims which will be an increasing focus in 2016 and beyond.

Climate Change 1.0: 2015 Marks Milestones for Limiting Greenhouse Gas Emissions

The Paris Agreement was more than the most significant milestone for international consensus in creating steps to reduce greenhouse gas emissions with regard to climate change. It also signaled the culmination of the efforts of climate change advocates over the past two decades: To develop limits and caps on greenhouse gas emissions with the goal of stabilizing temperature rise and other climate change impacts.

For more than a generation, the focus of the proponents of climate change legal action has been to do just that: To cap an increase in the planet’s temperature by a certain amount (usually two degrees celsius or less) by in turn capping emissions of greenhouse gases attributed to such rises. The focus to date has been on regulators as the primary actors: Specifically, pursuing various government agencies at national, provincial and local levels to enact regulations and laws to reduce greenhouse gas emissions from sectors they oversee by either imposing energy efficiency requirements on certain sectors (and thus reducing GHG emissions) or capping GHG emissions to some extent. The best known examples of such programs are various fuel efficiency standards for motor vehicles, Europe’s EU-ETS cap and trade system, the United States’ Clean Power Plan regulation of fossil fuel utilities, California’s AB32 cap-and trade program, and a cap-and-trade program in the northeast United States called the Regional Greenhouse Gas Initiative.

Many of these programs arise specifically out of legal activism and judicial efforts to address climate change. What has emerged around the world is a pattern of cases, chronicled in the IBA report, where parties have grown impatient with the lack of action by political leaders and regulators to address climate change. They thus have invoked legal mechanisms such as petitions and lawsuits to go to the courts to try to engage judges to direct decision makers to address climate change. In surveying these cases around the world, they virtually uniformly have resulted in courts engaging to grant the requested relief to some extent and ordering regulators to take action to address climate change.

For example, in a 2015 decision captioned “Urgenda” that is being cited as precedent for a wave of new judicial decisions on climate change, a court in the Hague issued an order requiring the Dutch government to pursue more aggressive greenhouse gas reductions nationally of at least 25 percent by 2020 (compared to 1990). The Urgenda decision, and several others like it around the world, is thus an example of courts engaging directly to promote climate change action when other avenues have stalled.

Looking more broadly at this generation-long effort to utilize legal tools in the pursuit of commitments to greenhouse gas reductions, courts have developed a line of case law that simultaneously has: On the one hand, as in the Urgenda decision, deferred to requests generally pushing regulators to pursue greenhouse gas reductions; and, on the other hand, cast significant skepticism on efforts to leapfrog the regulators and seek remedies directly against companies. On the latter point, the courts have established significant limitations on the scope of greenhouse gas regulation even when they have shown support for regulatory efforts generally. For example, the United States Supreme Court initially ruled in favor of climate change regulations in the landmark 2008 decision Massachusetts v EPA, but in recent years has limited recovery directly against parties that emit greenhouse gases (AEP v Connecticut), has limited the scope of regulations that could reach beyond industrial sources of greenhouse gases (UARG v EPA) and has recently intervened — for the first time in the history of the Court — to stay the implementation of the Clean Power Plan after challengers argued that the broad regulation of the energy sector exceeded the regulator's authority and would cause irreparable harm to the nation’s energy grid. Beyond the [Page35:] United States Supreme Court, other courts have refused to endorse remedies against private parties as opposed to regulators and have declined requests to serve as “special masters” of the climate and greenhouse gas allocations, deferring to regulators to make such determinations. It is with this backdrop of judicial decisions, however, that groups are looking to move beyond the Paris agreement in the next stage of climate change activism.

Climate Change 2.0: The Efforts and Challenges in Seeking Accountability for Climate Change

In upcoming years, the efforts to utilize the legal system to seek further greenhouse gas reductions globally will intensify. Governments around the world will work to implement their commitments in the Paris agreement through regulations and laws at home. These efforts will translate to increasingly stringent requirements that will focus greenhouse gas controls and limits on power generation and other sources, with increasing so-called efforts to “decarbonize” economies around the world. But beyond the national actors focused on commitments to implement the Paris agreement, local governments and activist groups will continue to pursue even greater reductions than the Paris commitments through novel legal initiatives and lawsuits that aim to achieve separate and additional goals.

In the post-Paris “2.0” stage of climate change issues, these latter groups — activist environmental groups and local, state and provincial governments — are seeking to further utilize legal mechanisms to drive additional climate change policies. Specifically, the emerging efforts are aimed beyond just limiting greenhouse gas emissions, but instead seeking remedies against individual emitters of greenhouse gas emissions for their alleged historic accountability for climate change and its impacts. These actions take several different forms and claims, but share a set of commonalities and challenges.

At the outset, core to all these various efforts is a common goal: The pursuit of injunctive relief and/or financial compensation from companies based on an accounting of greenhouse gas emissions. The source of such an accounting, however, is not limited to current or future emissions. Instead, such groups share a common study, referred to as the Heede study, that purports to present an historical accounting for 90 investor- and state-owned companies back to the early 19th Century. The Heede study, however, departs significantly from every established greenhouse gas reporting methodology employed in the world by pursuing an outcome-oriented approach that seeks to lay blame for the majority of the world’s historic anthropogenic emissions to a relative trifle of the world’s nearly infinite greenhouse gas emitters. By choosing a methodology that first and foremost seeks to assign the significant majority of the world’s greenhouse gas emissions to certain parties responsible for the production of fossil fuels regardless of who or what consumed such fuels, the study presents a significant credibility challenge for those groups who seek to tout it in various policy and judicial fora.

However, armed with the Heede study, various groups have indicated they are preparing a new wave of legal challenges and policy campaigns against the identified companies. Such efforts, while different in form, share certain commonalities beyond just reliance on the study. Groups initiated the first of such efforts in September 2015, when they petitioned the Philippines Human Rights commission to investigate companies identified in the Heede report under human rights law for harms from typhoons the groups allege are linked to climate change. The Commission accepted the petition and opened the investigation in December at the close of the Paris negotiations. Whether the Commission pursues an investigation regarding any companies or offers any recommendations is yet to be seen and that case, as with all of these novel efforts, faces extraordinary legal hurdles under existing law. However, regardless of the outcome, the groups have signaled the Philippines case is the first “test case” in new efforts to seek remedies against parties under human rights regimes.

Beyond the Philippines test case, various groups also have indicated that they are preparing actions against companies identified in the Heede report under a wide range of legal theories, including common law nuisance cases, drawing analogies to laws that were used to prosecute tobacco companies, false advertising laws, unjust enrichment, other human rights regimes, and advertising and consumer protection laws.

Although groups have indicated that they plan to bring such claims in the upcoming years, the courts are likely to present significant challenges to their pursuit of these remedies. Climate change litigation has been active for more than 15 years around the world. While in many cases courts have expressed deference and sympathy for efforts to promote governments to take action to address climate change, courts at the same time have taken a fundamentally different approach in expressing skepticism regarding efforts to seek remedies directly from companies. In other words, courts generally have rejected efforts to allow parties to leapfrog properly enacted regulations themselves and seek additional remedies against the emitters of greenhouse gases for emissions that are not otherwise unlawful or prohibited, whether past, present or future. Such skepticism is part policy — a reluctance for courts to step beyond their bounds and serve as either lawmakers or regulators deciding what companies should be accountable for climate change and to what extent.

[Page36:]

But, even more fundamentally, such skepticism is the result of centuries old legal concepts and defenses that will likely bar remedies against individual companies in climate change contexts. Just as climate change presents unprecedented complex policy issues for the world’s leaders to address, it similarly presents challenges to courts who must confront issues such as causation, redressibility and standing, which given an infinite amount of greenhouse gas emitters in the world provide likely insurmountable obstacles to such claims.

The IBA Climate Change Justice and Human Rights Report’s Approach to Legal Frameworks

In 2014, the IBA released what may be the most extensive effort to date to survey climate change legal frameworks around the world and assess options to use existing human rights legal regimes as a potential took for climate change claims. After assessing the state of climate change decisions on each continent and looking to existing human rights precedent, the IBA report reached similar conclusions to the cases above and cited in the report regarding the opportunities to address climate change against state and private party actors respectively through human rights mechanisms.

Regarding potential opportunities to invoke human rights frameworks against state actors, the IBA report (at 118) provided:

(ii) Clarification of Human Rights Obligations Relating to Climate Change

Unlike environmental rights instruments, many human rights instruments allow individuals to seek redress for state-caused harms. As such, they are an important avenue for climate change justice. However, most human rights instruments were promulgated before the advent of the modern environmental movement, and thus do not recognize that a safe, clean, healthy and sustainable environment (hereafter, “a healthy environment”) is a prerequisite to the enjoyment of human rights. Moreover, only a few human rights instruments explicitly refer to environmental threats as an obstacle to human rights. As a result, many of those harmed by environmental degradation must seek redress from human rights bodies indirectly, by arguing that environmental harms impede their enjoyment of enumerated human rights, such as the rights to life, health, privacy and culture. As a consequence, claimants may be able to use this indirect approach to claim climate change injuries as human rights injuries.

This conclusion picks up on the theme addressed above of legal activism to advance requests by parties to invoke courts and other adjudicatory bodies to promote government actors to enact regulations reducing greenhouse gases and general judicial receptiveness to such requests.

At the same time, also consistent with the general reluctance of and limitations on courts to leapfrog regulations and hold emitters more directly accountable for climate change remedies outside a promulgated regulatory regime, the IBA Report provided (at 147-48):

The Task Force supports the increasing international recognition of corporate responsibility for environmental and human rights harms. But that responsibility must be accompanied by development of coherent and clear regulatory standards that make compliance possible. The impetus is on states and international organizations to come to coherent and consistent standards to regulate corporates and multinationals within their jurisdiction as part of their efforts to mitigate and adapt to climate change. In this regard, the Task Force recommends a multi-faceted approach to corporate responsibility that will increase the ability of corporations to self-regulate, including in response to increased regulation by states.

Rather than endorse direct causes of actions against companies, which would go beyond existing judicial precedent, the IBA report instead focused its recommendations for corporations to promote the United Nations Principles on Business and Human Rights, to report their greenhouse gas emissions, to engage in supply chain monitoring, and to ensure compliance with applicable greenhouse gas laws and requirements.

The Growing Opportunity for Arbitration In Advancing Climate Change Efforts

While there is a developing record of parties looking to the courts to pursue claims against state and private actors for climate change remedies, arbitration and international dispute resolution to date have not been first and foremost among the legal tools being sought out. Instead, groups largely have bypassed the traditional role of dispute resolution in climate change cases to leapfrog straight to national courts. While this path has resulted in some victories on paper, the record of actual outcomes is more mixed in the absence of an alternative dispute resolution regime.

Consider for example two high profile situations where an arbitration-type mechanism was and was not utilized. First, perhaps the most significant regulation in place in the United States to reduce greenhouse gas emissions arises out of 2010 rules that seek significant emission reductions from cars and trucks between now and 2025 (specifically, these rules increase fuel efficiency standards to 54.5 MPG by 2025). Importantly, these regulations were not the result of protracted litigation; instead they were the consensus work product of a group of stakeholders over several months between the auto industry in America and environmental groups negotiating under the supervision of the Obama Administration. By using a dispute resolution type negotiation to reach [Page37:] consensus, the parties realized results that could be immediately implemented toward the goal of reducing emissions, that avoided years of protracted litigation, and that reflected and balanced the perspectives of the regulated industry in a way that a court decision could not. In all, the non-litigation, negotiated approach was key to enabling the regulations to be negotiated and put into place in barely a year; an outcome that would take many years, if not a decade, for litigation to achieve.

Contrast that to the more traditional litigation approach. In 2015, environmental groups claimed a significant victory when President Obama promulgated the Clean Power Plan, which is intended to reduce reliance on coal and other fossil fuel electricity generation. The final Clean Power Plan was the result of environmental group efforts that began as far back as 1998, and involved a long and winding road of court decisions, legislative efforts, and regulatory lobbying, as well as three changes in presidential administrations. Although the environmental groups claimed victory at the Clean Power Plan finally being released in August 2015, the Supreme Court quickly intervened to stay implementation of the rule, meaning it is likely to be tied up in the courts and further uncertainty until 2018 at the earliest. Thus, while using traditional litigation tools provided some relief to climate change advocates, it came at a significant cost of delay over decades, ongoing uncertainty over the final outcome, and a lack of control regarding implementation that is in the hands of other parties such as regulators and the courts. Similarly, in cases around the world such as Urgenda, there likely will be several years of additional time before any greenhouse gas decisions are litigated and appealed to finality, decision makers decide how to proceed, and those decisions ultimately are challenged in court again with uncertainty regarding implementation in the interim.

Recognizing the inherent advantages of arbitration in a complex and time consuming legal framework, the IBA report thus takes a very forward leaning approach to arbitration as a serious tool to be considered in resolving climate change disputes. Section 3.1.2 of the IBA report is dedicated to proposing ways to use international dispute resolution mechanisms for seeking remedies against states, including the Permanent Court of Arbitration and other international arbitral fora. The IBA report describes the advantages of using arbitration over conventional legal mechanisms to achieve more timely and effective outcomes regarding climate change.

And while arbitration cannot be overstated as something that can solve all the world’s climate change woes, as the example involving the auto industry indicates, it should be a tool that of primary consideration among parties that are seeking to address a complex climate change issue.

Pros/Cons Analysis

  • Flexibility
  • Time
  • Buy In
  • Informed Arbitrators

Cons

  • Less suitable when law is not established: not for private parties; better as a remedy
  • Some parties may not want results
  • Transparency