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The relationship between climate change and international arbitration has become a popular topic within the arbitration community recently. It is therefore not surprising that the London International Disputes Week 2021 (LIDW21) offered attendees an online conference programme which included a number of sessions dedicated to the sustainability and climate change. Indeed, the 2021 event programme covered at least five Member-hosted events on climate change whereas the 2019 edition included none. From my point of view, the connection between the environment and arbitration proceedings may be divided into two categories, namely form and substance.
The form refers to green initiatives which relate to the management of the arbitration process, but which do not concern the subject matter of the arbitration. One of the most relevant initiatives to fall within this category is the Campaign for Greener Arbitrations launched by the international arbitrator Lucy Greenwood in 2019.
Special counsel at the Hong Kong International Arbitration Centre (HKIAC), Kiran Sanghera, spoke about the campaign during the LIDW21 core conference session ‘Environmental, social and governance (ESG) and dispute resolution: poles apart?’ chaired by the arbitrator Lord Neuberger—the other panellists were Kathryn Britten, Managing Director, AlixPartners, and Mark McPherson, Partner, Morrison & Foerster LLP. While panel members were being asked to discuss the influence and role of ESG in dispute resolution, Sanghera highlighted the rising interest of some members of the arbitration community for greener arbitration proceedings. The campaign mainly focuses on reducing the environmental impact of the conduct of international arbitrations. Since then, the campaign has seen the establishment of a steering committee which has produced guiding principles and green protocols for arbitral proceedings, law firms, chambers and legal service providers working in arbitration, arbitrators, arbitration conferences, arbitral hearing venues, arbitral institutions. It notably includes ways to reduce energy consumption, to minimise printing and the use of paper, to travel responsibly, and to offset carbon emissions caused by the arbitration proceedings.
Sanghera also highlighted the important role that arbitral institutions should play to promote greener arbitrations. Their popularity and visibility enable them to lead the way in establishing new practices such as using technology more extensively amid arbitration proceedings. The improvement in this field caused by the coronavirus (COVID-19) pandemic was also mentioned. Statistics from 2020 show that 80 of the 117 hearings hosted by the HKIAC throughout the year were conducted in a virtual or hybrid manner. According to Sanghera, the global health crisis has been a driver of change and has accelerated changes of habit that the Campaign for Greener Arbitrations was trying to implement.
When questioned about the negative impact of virtual hearings on carbon dioxide emissions, Sanghera recognised that going fully digital would necessarily entail an environmental impact but specified that it could represent a greener solution to unnecessary long flights. As to the persisting challenges, she mentioned that the use of paper bundles remained a point of contention. According to one of the HKIAC’s service providers, approximately 70% of the actors still prefer to use paper bundles and do not want to rely on electronic documents. This seems to be because of the uncertainty of technology to practitioners – handwritten annotation appears to be one of the hardest habits to change in the profession. Furthermore, virtual hearings may constitute an inadequate response for longer hearings where individuals are located in different time zones. Sanghera highlighted that in a post-pandemic world, hybrid hearings would probably become the most popular way of conducting arbitrations.
While not mentioned specifically during the events I attended throughout LIDW21, I wanted to highlight the work done by The Chancery Lane Project (TCLP). The collaborative effort of multiple volunteers has led to the development and publication of contractual clauses which aim to tackle climate change. Their published work currently includes four contractual clauses relevant to arbitration proceedings, namely Mia’s clause (low carbon arbitration hearings), Emilia’s Protocols (green litigation and arbitration protocols), Nico’s clause (climate aligned boilerplate), and Toby’s clause (avoidance of excessive paperwork in dispute resolution).
While green management of cases is essential to ensure that everyone plays their part, climate change’s consequences have already started to become a subject matter of disputes. This section will briefly address what was discussed during two Member-hosted events during LIDW21 chaired by Wendy Miles QC, Barrister at Twenty Essex, related to commercial arbitrations and investor-state arbitrations.
As climate change-related disputes increase, the LIDW21 Member-hosted event ‘Climate change and commercial risks’ focused on the current and future litigation risk involved in commercial contracts. The panellist Richard Power, Partner at Clyde and Co, judiciously raised the question of the applicability of force majeure clauses when contractual performance becomes impossible due to extreme weather – if a force majeure clause is meant to be applicable only for unforeseeable events, can it still cover environmental events considering the scientific information that we currently have on the impacts of climate change? He wisely added that force majeure clauses should be carefully drafted.
In the same vein, Power highlighted that a way to reduce climate litigation is to ensure that ‘commercial parties and supply chains are aligned to the same environment goals’. He notably mentioned examples of model clauses elaborated by TCLP such as Agatha’s clause which provides customers with the possibility to switch to an alternative supplier when the latter presents a greener and more sustainable offer. While Power’s remarks to minimise and avoid litigation are certainly useful and important for commercial parties who indubitably do not wish to spend resources on dispute resolution for the sake of entertainment, the other panellist Colin Johnson, Partner at HKA, offered a relevant comment where disputes do arise. Indeed, he highlighted that it is perhaps the judges and arbitrators who will make the difference and offer a middle ground by notably asking themselves questions such as ‘how much environmental risks have been taken into account?’ and ensuring that environmental matters are being considered in their reasoning.
The other Member-hosted event, also moderated by Miles and entitled ‘Climate Change, Public International Law and Disputes – Too Hot a Topic?’ involved discussions about investor-state treaties. The panellist Michelle Bradfield, Partner at Jones Day, mentioned that investor-state arbitrations were one of the key areas where we would notice further environmental claims. This subject seems to involve two angles, one where investment treaties have the potential to further include climate change considerations and one where arbitration proceedings will increase in numbers following changes to domestic regulations.
Environmental considerations will inevitably lead to further environmental obligations for investors. Current and recent examples include the modernisation of the Energy Charter Treaty, an initiative of the European Commission to align the treaty with environmental objectives of the Paris Agreement and of the European Green Deal, and the Morocco-Nigeria bilateral investment treaty (BIT) concluded in 2016 which includes provisions on sustainable development.
The second angle is where there is a negative reaction from investors to states’ domestic environmental policies or regulations. Indeed, regulations taken by states to prevent or remedy the impact of climate change have led to around 70 investor-state disputes known so far. Investors are bringing claims against host states when changes to the regulatory landscape negatively impact their investments or amount to expropriation. Bradfield suggested that we would certainly see further discussions on principles used as defences for host states, such as state necessity or legitimate expectation. She also mentioned the fallback of some states’ environmental policies to avoid costly investor-state disputes.
In the LIDW core conference session entitled ‘The rise and rise of state power in global disputes’ co-chaired by Ruth Byrne, Partner at King & Spalding, and Can Yeginsu, Barrister at 4 New Square, the panellists, Veijo Heiskanen, Partner at Lalive, and Mallory Silberman, Partner at Arnold & Porter, both commented that investment treaties were not going to go away for at least the next decade and perhaps we would witness the rise of state-investment contracts in sectors which are more under state control, such as natural resources. At present, investment treaties seem to be a double-edge sword for states.
Environmental concerns in dispute resolution needed a prominent place in the LIDW21 programme’s ‘Looking forward: change, challenge and opportunity’. I believe that climate change will have important ramifications in the legal profession, both in terms of the conduct of and in the substance of disputes, and LIDW21 has given an insightful overview of the near future of the profession. While I have only briefly shared some highlights of the LIDW21 relating to environmental concerns, all sessions have been informative and valuable and wish to thank all panellists for their time and enlightening thoughts. As London is a major arbitration centre, I hope its legal community will also be a major player in tackling climate change.
Note: this is a summary of the discussions and does not purport to be a full account of the event.
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