Call for COP26 to adopt climate change arbitration provisions

Writing for LexisNexis (33-page / 11.3MB PDF), Pamela McDonald of Pinsent Masons, the law firm behind Out-Law, said that activating the arbitration annex in the 2015 Paris Agreement on cutting carbon emissions would provide a more suitable forum to address disputes arising under it.

“Although the Paris Agreement provides for nationally-determined targets to reduce greenhouse gas emissions, as it stands, implementation and enforcement mechanisms under both the agreement and the UNFCCC [United Nations Framework Convention on Climate Change] are either absent or weak,” she said. “There is no truly effective mechanism to insist states comply with their obligations, and the international community is reliant on individual states to commit to honour the agreement and monitor compliance.”

Although the dispute settlement clause in the Paris Agreement provides for arbitration, it does so by reference to the dispute settlement clause in the UNFCCC, which enables parties to declare that they accept arbitration in accordance with the procedures to be adopted by the COP of the UNFCCC in an ‘annex on arbitration’. However, to date, no such procedures have been adopted by a COP.

McDonald said that several arbitral institutions, together with the International Bar Association (IBA), had “seized the opportunity to raise awareness of the potential of arbitration in the field of climate change” at COP23 in Bonn, Germany in 2017. The IBA, ICC International Court of Arbitration, Permanent Court of Arbitration and the Stockholm Chamber of Commerce (SCC) arbitration institute hosted a panel discussion on dispute resolution as an official side event at the conference, during which they addressed adjudication, conciliation and arbitration in the context of the Paris Agreement.

“A discussion at COP26 and, hopefully, adoption of the arbitration annex would provide a vital means of ensuring the Paris Agreement is respected,” she said. “It would encourage states to adopt further climate change response measures, and provide parties with a more suitable forum for the resolution of climate change disputes.”

Arbitration has significant advantages over litigation as a climate change dispute resolution mechanism, McDonald said. It is a “successfully tried and tested method” of dispute resolution for the types of multi-party, multi-jurisdiction disputes that are likely to arise in this context, and the New York Convention on mutual recognition and enforcement of arbitral awards provides certainty as to enforcement internationally.

Other global climate change protocols include a similar ‘annex on arbitration’ or adopt arbitration as a means of settling disputes, such as the Kyoto Protocol, the Montreal Protocol on the ozone layer and the UN Convention on the Law of the Sea.

COP26 takes place from 31 October to 12 November 2021, and is the 26th meeting of the parties to the UNFCCC. The conference, which was delayed by one year due to the Covid-19 pandemic, comes at a crucial time for global climate change policy. Earlier this month, in a major report, the UN’s Intergovernmental Panel on Climate Change (IPCC) warned that climate change is now “widespread, rapid and intensifying”.