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Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
by Thomas F. McInerneyDirector of Treaty Effectiveness Initiative, Adjunct Professor, Loyola University School of Law in Rome
A central motivation for the parties to the Paris Agreement under the Framework Convention on Climate Change ("FCCC") was the desire to achieve tangible progress in mitigating and adapting to climate change. After the Agreement comes into force, attention of stakeholders including parties will turn from the question of what commitments should be made to the question of how to put those commitments into practice. The notion of treaty effectiveness captures this idea. At root, treaty effectiveness means that agreements accomplish the goals they were intended to achieve.
Compliance, enforcement and dispute resolution are chief among these approaches. To understand the prospects for making the FCCC and Paris Agreement work, it is important first to consider experience with other multilateral environmental instruments, specifically in relation to these mechanisms. This analysis may help identify additional measures that may be taken to facilitate the achievement of the Paris Agreement and FCCC overall. Yet, as described below, the limitations of formal treaty mechanisms coupled with the complexity and magnitude of the challenge involved in climate change warrant additional measures that can enhance treaty effectiveness. A key challenge is the role of private actors in advancing the treaty’s aim. As described more fully below, these mechanisms focus almost exclusively on states. The scope of action required to mitigate, remedy and adapt to climate change is so massive that private actors must be involved. Dispute resolution procedures, including arbitration, offer one additional way of engaging those actors.
There are four related but distinct notions regarding how treaties can be made effective. These are compliance, implementation, enforcement and dispute resolution. To clearly understand the prospects for climate agreements, it is essential to distinguish between these concepts.
A central aspect of treaty effectiveness is compliance by the parties. Indeed, compliance is central to treaties’ rationale and purpose. If one conceives of the various reasons that states enter multilateral treaties, avoiding certain harms, protecting certain public goods, or upholding certain standards of conduct are significant. The norms that treaties define are generally designed to ensure the fulfillment of these goals. Treaties can only achieve their intended purposes if states act consistent with their norms, or, in other words, comply. Compliance is not, however, synonymous with effectiveness. Parties may comply with the requirements of a treaty yet if those requirements are deficient or insufficient, the treaty may fail to achieve regulatory purposes. Notwithstanding this caveat, if we accept that international agreements such as the FCCC may have the potential to resolve or mitigate global problems, then compliance with those agreements is at least an important part of the equation.
A related, albeit distinct topic, is the notion of implementation. Unlike compliance, which — putting aside threshold considerations — is at least in theory amenable to a binary determination, implementation is somewhat less precise. It refers to a range of activities that may be undertaken in furtherance of treaties’ provisions. National implementation — including enacting legislation, staffing bureaucracies, raising awareness, budgeting, dialoguing with civil society and stakeholders — encompasses much of the question of implementation, but not its entirety. Implementation may refer to how the committees of the parties as a whole are operationalizing treaties through their decisions and activities.
Thus, while implementation is a key factor in determining states’ compliance, their implementation does not in itself accomplish it. States may implement the necessary statutes or regulations required pursuant to a treaty, yet fail to have the administrative and technical competence to ensure that the standards of a treaty are upheld. Likewise, they may fail to enforce laws on the books. Implementation efforts are salient to judgments of compliance but not conclusive.
To ensure compliance, multilateral treaties often employ some form of non-compliance procedures (NCP). These include reporting, monitoring and reviewing states’ implementation efforts. The typical nature of NCP can be characterized as facilitative rather than coercive. The description of Chayes and Chayes is apt: NCP is often about jawboning rather than coercing states into compliance.1 Transparency, naming, and shaming are also important elements of this practice. For developing countries, NCP are often connected to technical and development assistance, which are provided to enable non-compliant states to fulfill their obligations. The generally cooperative posture of NCP led Chayes and Chayes to argue that compliance practices among multilateral regulatory treaties should be characterized as managerial rather than adversarial.2
Related but distinct from NCP are enforcement measures. While both deal with trying to bring about observance of international law, NCP is a broader notion. Where NCP pertains to a wide range of activities involving widely differing degrees of coercion, enforcement typically occurs after repeated or persistent treaty non-compliance.3 It is a last ditch effort rather than the first response to an instance of nonobservance. It must also be distinguished from domestic level enforcement, which states carry out as part of their treaty implementation.4
The Compliance Committee for the Kyoto Protocol made a clear distinction between these practices. In that case, the parties explicitly distinguished a facilitative, managerialist approach from an enforcement-oriented approach by creating two different branches of the Compliance Committee: the Facilitative Branch and the Enforcement Branch. Judging by the negotiations leading to the Paris Agreement, it is clear that the parties exhibited a much greater appetite for the facilitative approach to compliance over an enforcement-oriented one.
Enforcement must also be distinguished from dispute resolution. The former relates to securing states’ observance of the rules, while the latter pertains to disputes between two or more states that may occur within a treaty regime. Among multilateral regulatory treaties such as the FCCC, these types of disputes are relatively infrequent, yet many treaties do have provisions establishing procedures for the resolution of such disputes. The infrequency of recourse to these mechanisms is reflected in a publication from the UN Environmental Programme, which states “Most MEAs will include provision for the settlement of disputes among Parties, based on standard wording used in other treaty contexts, with a process for compulsory, binding arbitration and conciliation. However, while the Parties are bound to follow the process, generally they are not bound to accept decision outcomes. Parties have seldom availed themselves of these provisions5.”
One illustrative approach to compliance and enforcement among multilateral environmental agreements is the Convention on the International Trade in Endangered Species (CITES). For CITES, the structure of its compliance mechanism reflects parties’ desire to manage the level of public scrutiny over noncompliance matters. The Standing Committee of the CITES Committee of Parties (COP) has taken on the compliance oversight role in part due to the desire of the parties to avoid naming other parties in public COP meetings.6 In addition, the CITES secretariat plays a significant role in identifying and gathering information on noncompliance and then steadily escalating the matter should it not be resolved. It is empowered to:
Experience with CITES is interesting because of its iterative development and elaborate nature. In 2007, the Parties approved a set of Guidelines for Compliance with the Convention. The system is premised on managerialist assumptions involving “a supportive and non-adversarial approach.”7 The system is also designed to be efficient in line with the need to respond quickly to cases of improper trade. It stipulates that findings, reports and communications on individual state compliance matters are to be confidential, however, in a reflection of the Secretariat’s role in facilitating states’ compliance, communications between individual states and the Secretariat on specific compliance issues are treated confidentially.
Under CITES, instances of noncompliance are dealt with through the following process. First, the Secretariat receives information on a party’s alleged infraction and communicates it to the relevant party. The party must then respond as soon as possible, proposing remedial action or requesting additional inquiry if needed. Further illustrating the soft approach to compliance, the procedure stipulates that “where compliance matters are identified, the Parties concerned are given every opportunity to correct them within reasonable time limits, if necessary with the assistance of the Secretariat.”8
Failure to take action within a reasonable time will lead the Secretariat to bring the matter to the attention of the CITES Standing Committee. Submissions are in writing and set forth the specific obligations concerned and an assessment of why parties were unable to meet their objections. The Standing Committee then makes a determination on the veracity and severity of the allegations. If [Page79:] it is not resolved, the Standing Committee will take one of the following actions: (1) provide advice, information and appropriate facilitation of assistance and capacity building, (2) request special reporting, (3) issue written caution, requesting a response and offering assistance, (4) recommend specific capacity building actions, (5) provide in-country assistance, technical assessment or verification mission, upon invitation of the party concerned, (6) publicly notify the other parties of the compliance matter, (7) issue a warning that the party is in noncompliance, or (8) request a compliance action plan be submitted to the Standing Committee. In cases where there is persistent and unresolved noncompliance, the Standing Committee can recommend suspending trade in the country’s CITES species. In making its decisions, the Standing Committee is mandated to take account of the party’s record, capacity, and gravity of the offense.
The Secretariat and Standing Committee then monitor parties’ progress and implementation of the actions taken. Negative determinations can lead to the imposition of further coercive measures including restrictions on a party’s ability to engage in trade with respect to particular endangered species.
As the foregoing suggests, the distinction between compliance, enforcement, and dispute resolution can be fuzzy, as situations may arise whereby a state’s noncompliance affects one or more other states, which seek to resolve the dispute through formal procedures. A key distinction between noncompliance and enforcement procedures and dispute resolution is that the former are multilateral in nature, encompassing all of a treaty’s parties, where the latter are typically bilateral or involve a select group of states. In general, dispute processes are infrequent in multilateral environmental treaty practice.
In terms of disputes between states, parties to the FCCC already have established procedures to govern such matters. Article 14(2) of the FCCC allows parties to elect to submit disputes to either the International Court of Justice (ICJ) or arbitration. Article 25 of the Paris Agreement applies the same principle. Yet experience suggests that there has been little interest among the parties in submitting disputes to either the ICJ or arbitral panels. Granted that the stakes in climate change are particularly high and as climactic conditions and regulatory imperatives grow, occasions for conflict may increase, but it seems unlikely that the tendency to diplomacy will give way to much greater levels of formal interstate dispute resolution.
Overall, a key lesson of treaty compliance and enforcement practice is its underutilization. The practices of treaty bodies largely fit the managerialist model described by Chayes and Chayes. Parties are reluctant to use these procedures against other states. When it comes to climate change, its status as a global commons concern makes attribution of responsibility for harm to individual states difficult, which in turn makes it less likely that these procedures will be used.
Aside from the limited use of compliance, dispute resolution, and enforcement mechanisms in ensuring state adherence to environmental treaty commitments, these mechanisms have an inherent limitation, which is their exclusively state-level scope An important reason for this focus is that states parties have the responsibility for implementing their treaty commitments domestically. States are thus responsible for enforcing these commitments in respect of non-state actors in their jurisdictions. An underlying (if unarticulated) assumption is that states’ efforts will suffice to ensure that the goals of the relevant treaties are advanced throughout the jurisdiction.
Whether this assumption is ever fully warranted, it is clear that in the context of climate change it is insufficient. Indeed, the importance of non-state actors is so great that the effectiveness of global climate change regulation bears very much on the behavior of non-state actors as well as the manner in which those actors — particularly affected individuals and communities — are treated by both state and non-state actors.
This view finds support in recent commentary following the Paris Agreement, which sees a greater role for non-state actors in the context of a changing model of climate change regulation.9 A key change is the move away from a regulatory model of binding emissions targets and towards a catalytic and facilitative approach to climate change exemplified by the Paris Agreement makes reliance on formal treaty compliance measures relatively less compelling. Additionally, the Paris Agreement has had the effect of bringing “cities, subnational governments, businesses and other non-state actors into its very core.”10
Compared to other multilateral environmental agreement compliance, enforcement and dispute resolution practices, the FCCC and Paris Agreement can only be considered weak. The Paris Agreement has provided for an expert-run NCP, but no enforcement provision. It is unlikely that failures to implement treaties effectively or ensure compliance and adherence by non-state actors in a particular jurisdiction can ever be fully resolved through the formal treaty NCP. Rather than leaving the application of the treaty solely to efforts of the states, additional innovative measures may be necessary.
Viewed through the perspective of treaty effectiveness, it is clear that state-centric compliance approach is inadequate. While of varying importance to different regulatory fields, the actions of non-state actors can have as — if not greater — influence on the achievement of regulatory aims as those of state actors. Domestic regulation and enforcement of treaty norms are critical ways of furthering behavior by non-state actors that support treaty aims, yet in a globalized world, international institutions and their member states increasingly recognize the need to directly influence the behavior of individuals and groups outside of the state. The role of private actors in advancing treaty norms and goals is gaining increased recognition in international law.11 Despite evidence of greater emphasis on non-state actors in the climate treaty, the measures for their engagement remain incomplete.
For the purposes of this chapter, I wish to focus on two main ways private actors may further implementation and adherence to the FCCC and Paris Agreement. First, they may make investments that are directly designed to reduce emissions by building alternative energy sources or facilitating the adoption of new technologies, for instance. Private investment can also indirectly support carbon reduction by reducing the use of fossil fuels in business operations generally. Ensuring that sufficient and proper investment occurs will require, among other things, minimization of transaction costs.
A second way private actors can further the FCCC and Paris Agreement is to facilitate fair allocation of responsibility and liability. To ensure that actors are properly incentivized to take action to lower emissions, polluters must be required to internalize the costs of their activities. If individuals do not have access to legal redress to ensure that their losses are allocated to the responsible parties then polluters will not be incentivized to take action. In addition, the provisions of the FCCC and Paris Agreement pertaining to climate adaptation will be undermined. Efficient allocation of liability is important to effective operation of the FCCC and Paris Agreement.
The scope of both of these needs is so large that it is unlikely that existing institutional mechanisms are will suffice to ensure that the needs will be met. Existing state-centered compliance, enforcement, and dispute resolution is not oriented to either the reduction of transaction costs or efficient allocation of liability. These issues are appropriate for resolution through dispute resolution mechanisms, of which, international arbitration is an appealing candidate.
There are two main ways arbitration involving private actors could contribute to existing treaty compliance mechanisms. First, climate related disputes could be arbitrated through investor-state dispute resolution mechanisms undertaken pursuant to international investment agreements (IIAs). Second, the parties to the FCCC could create a process whereby affected individuals could raise claims, including mixed state-private actor cases. Third, disputes between private actors could be resolved through arbitration processes.
Disputes between private actors and states can become the subject of arbitration when states create mechanisms for doing so. International investment agreements (IIAs) are one way that states have opened themselves to this type of action. The traditional rationale for entering IIAs is states’ desire to encourage foreign investment. By specifying the terms for foreign investment, IIAs afford prospective investors with a greater degree of certainty that they will be dealt with equitably and fairly and their assets not appropriated by the relevant state. IIAs generally provide that where disputes between investors and states arise in relation to investments, they will be submitted to arbitration.
IIAs can be a double-edged sword when in comes to environmental protection. On the one hand, they can support and encourage investment that reduces carbon emissions for the same reasons as IIAs may support any type of in-bound investment.12 Gehring and Kent refer to increases in low-carbon investments and associated enhanced transfers of technologies as “externalities of IIAs, which in turn promote the ultimate target of the United Nations Framework Convention on Climate Change.”13 A key aspect of this function of IIAs stems from their role in protecting investors against actions that may interfere with the value of the investment.14
Alternatively, while important to providing a stable legal and regulatory environment for maintaining investments, provisions within IIAs designed to ensure that investors settled expectations are upheld can also be used by actors to contest the application of new or additional regulation.15 The risk of triggering such claims is significant enough that states may be “chilled” or avoid instituting regulations that could be deemed an indirect appropriation, discriminator, or violation of standards of fair and equitable treatment contained in many IIAs.16 Some commentators argue that climate change related investment is particularly at risk for government interference, because of its large sunk costs and the potential political appeal amid fiscal austerity of withdrawing subsidies on which low-carbon investments may be made.17 The potential costs of [Page81:] such actions may be expected to increase the risk premium for such investments and thereby reduce its supply.
The challenge is to ensure that IIAs support green investment, prevent challenges to regulations needed to implement climate change treaty commitments, while at the same time preventing indirect opportunism by governments. To achieve these goals, it may be necessary to amend IIAs.18 Approaches include stipulating that certain matters, in this case climate change-related regulatory measures, could be deemed general exceptions that exclude such measures from the scope of IIAs. Alternatively, climate change related regulation could be defined as “non-precluded measures” within IIAs.19 More study is needed to determine whether there is a need to take such action.
Assuming that amending existing IIAs is desirable, some type of streamlined process will be necessary. Given that thousands of IIAs exist, it would be extremely time consuming, cumbersome, and most likely ineffective to seek to amend these agreements piecemeal. A far preferable option would be to develop a protocol or other instrument whereby states could agree to align their existing IIAs to a single standard. A possible example of how this could be done is the approach currently being followed by the OECD in connection with its effort to prevent tax base erosion.
Pursuant to Action 15 under the Action Plan on Base Erosion and Profit Shifting (the BEPS Action Plan) developed by the OECD at the request of the G20, work has begun on developing a multilateral instrument to modify bilateral tax treaties.20 The objective of the multilateral instrument would be to “modify existing bilateral tax treaties in a synchronized and efficient manner to implement the tax treaty measures developed during the BEPS Project, without the need to expend resources individually renegotiating each treaty bilaterally.”21 The instrument would be open to accession by states and not mandatory.
To address the heterogeneity in the text of different bilateral tax agreements, the proposed approach to the multilateral instrument will need to be capable of addressing the full range of instruments. The initial request for input on the possible instrument noted:
the multilateral instrument must be able to modify existing tax treaties effectively, either by adding a new provision where no provision exists or by modifying or superseding existing provisions. This can be done by including “compatibility clauses” that describe in detail under what circumstances the new provision is intended to be added to or replace the provisions of an existing tax treaty.22
Whether ultimately successful, this model represents an innovative approach to the major practical challenge of achieving harmonization across multiple bilateral legal instruments. It is a potential approach that could be adopted to bring about greater alignment in the many IIAs already in existence.
The use of arbitration to resolve disputes among private investors is already available. Indeed, reports from the PCA are that there have been at least seven such cases surrounding the Kyoto Protocol to the FCCC. Given the exigency of climate change and the need to make the FCCC and Paris Agreement work, a potential area of inquiry is whether transaction costs can be reduced by making dispute resolution less time consuming and costly.
A more challenging question concerns whether arbitration can be used to assist climate-affected individuals or communities to arbitrate disputes with states. It is arguable that new mechanisms should be created to facilitate these processes.
Considering disputes between affected communities and states, there is limited precedent for how this might be accomplished. The first is the non-compliance procedure under the UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters (Aarhus Convention).
The Aarhus Convention provides citizens with rights of access to information, participation in decision making, and access to justice. Compliance matters are overseen by an eight member Compliance Committee, which differs from other environmental treaties in that its members are appointed in their personal capacities. They can be nominated by parties and signatories and NGOs.23 Submissions to the Compliance Committee can be made by (1) state parties regarding themselves or another party, (2) the Secretariat, or (3) a member of the public (including natural or legal persons as provided in national law).24 For communications from members of the public, the Compliance Committee reviews the communications first to determine if domestic remedies have [Page82:] been exhausted. If the Committee makes a preliminary determination of admissibility, it will be forwarded to the relevant party for comment. Whether the state party responds or not, the Committee will hold a formal discussion on their respective views five months after the transmittal to the party.25 It is important to recognize that the compliance process does not afford the individual a remedy but instead is designed to determine compliance with the treaty. It is interesting to note that communications taken up by the Compliance Committee are “not sub judice and determinations of non-compliance are not res judicata.”26
While selected states have agreed to create the Aarhus Convention compliance mechanism, it is not clear that they will be willing to do so with respect to climate change claims. A key factor in the development of public interest environmental litigation has been governments’ lack of cooperation in addressing communities’ or other groups’ complaints about environmental harm. Moreover, results from public interest litigation are mixed, with governments and public authorities simply maintaining their policies despite adverse rulings.27 The lack of cooperation of states in these processes suggests the need for caution.
For disputes involving affected communities or individuals and private business interests, a key challenge will be whether the process holds appeal to both sides. For affected communities and individuals, the appeal is obvious enough. They may have the opportunity to recover losses they otherwise might not have had. Yet in the absence of strong domestic laws designed to hold actors responsible for losses sustained by other actors, it is unclear how much appeal such processes might have to potential respondents.
In general, the appropriateness of arbitration for affected communities or individuals turns on the legitimacy and fairness with which international arbitration is perceived. For parties who might be forced to respond to such actions, one benefit might be greater reliability and greater insulation of arbitral tribunals from political influence.
When we consider that multilateral instruments such as the FCCC and Paris Agreement are complex and seek to influence multiple complex adaptive systems on a global level, it becomes clear that the work of achieving the agreements’ aims cannot occur solely through states efforts. Multiple actors — business, civil society, indigenous groups, citizens, NGOs, intergovernmental organizations — all have important roles.
It is difficult to anticipate the ways in which access to dispute resolution mechanisms for private actors could support the effectiveness of the FCCC. Aside from the benefits of providing remedies to private claimants, dispute resolution could enhance formal compliance practices. In addition, if the FCCC parties were to create new means for private actors able to participate in NCP or inter-state dispute resolution, they could increase the amount of information available to the parties, thereby improving their ability to manage the treaty.
Depending upon the scale of dispute resolution that occurs among non-state actors, it could affect the underlying dynamics between the parties the climate change regime. In other contexts, research suggests that litigation can play an important role in driving institutional change processes.28 If there is a significant uptick in the amount of private climate change arbitration, it could have an effect on states’ and other actors’ willingness to meet indicative national determined contribution targets.
Admittedly, these suggestions are speculative, however, the problems that we confront are without parallel and the tools developed to resolve them are still very much works in progress. Making the climate change agreement effective will take concerted effort from millions of individuals. Expanding opportunities to ensure those efforts are maximized through better dispute resolution is one promising approach.
Abram Chayes and Antonia Chayes, The New Sovereignty: Compliance with International Regulatory Agreements (1995).
See generally, ibid
Christian Tams, “Enforcement” in Gier Ulfstein, Thilo Marauhl, and Andreas Zimmerman, eds. Making Treaties Work: Human Rights, Environment and Arms Control (Cambridge, 2006), p392.
UN Environmental Programme, Multilateral Environmental Agreement Negotiator’s Handbook (2007), available at: http://unfccc.int/resource/docs/publications/negotiators_handbook.pdf
Ulfstein, supra, p.141.
CITES Conf. 14.3, Guidelines. Para. 4.
Thomas Hale, “‘All hands on deck’! The Paris Agreement and Nonstate Climate Action”, 16 Global Environmental Politics 12, 13 (2016).
Natasha Affolder, “The Market for Treaties”, 11 Chicago J. Intl. L 159 (2010); Natasha Affolder, “Transnational Conservation Contracts”, 25 Leiden J. Intl. L. 443 (2012).
Anatole Boute, “Combatting Climate Change through Investment Arbitration”, 35 Fordham Intl. L.J. (2012), p. 614.
Markus W. Gehring and Avidan Kent, “International Investment Agreements and Sustainable Development: Future Pathways”, in eds. Shaukat Alam, Md Jahid Hossain Bhutan, Tareq M.R. Chowdhury and Erica J. Techera, Rutledge Handbook of International Environmental Law (2013), p.561, 581-2.
Boute, supra, p. 615.
Freya Baetens, “The Kyoto Protocol in Investor-State Arbitration”, in eds. Marie-Claire Cordonier Segger, Markus W Gehring, and Andrew Newcome, Sustainable Development in World Investment Law (2011), p. 695.
Gehring, supra p.581.
Boute, supra p.614-615.
Baetens, supra p.707.
Gehring, supra p.575.
OECD, Action 15, p. 4. available at: http://www.oecd.org/ctp/beps-action-15-mandate-for-development-of-multilateral-instrument.pdf
OECD, “Request for Input on the Development of a Multilateral Instrument to Implement the Tax Treaty-Related BEPS Measures”, available at http://www.oecd.org/tax/treaties/BEPS-Discussion-draft-Multilateral-Instrument.pdf.
Ulfstein, supra p.126.
MoP, Decision I/7. See also Ulfstein et al., Making Treaties Work (2006), p 195.
Viet Koster, “Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters”, in Ulfstein et al., supra at p.199-200.
ibid p. 204.
Nona Razzaque, in eds. Shaukat Alam, Md Jahid Hossain Bhutan, Tareq M.R. Chowdhury and Erica J. Techera, Rutledge Handbook of International Environmental Law (2013), p.150.
Beth Simmons, Mobilizing for Human Rights (2012).