Dec 11, 2023

Climate change arbitration: navigating regulatory waves and shaping a new legal landscape

Although climate litigation is a recent phenomenon, it is evolving rapidly. These recent changes can only be explained by the historical moment in which we find ourselves, where the urgent need for action has led public authorities, especially the European Union, to approve large regulatory packages in this area.

This new regulation took only a short period of time to be approved.

  • It is transforming corporate social responsibility from a voluntary phenomenon to a mandatory phenomenon.
  • It is generating uncertainty and, with it, a potential increase in disputes.
  • It is creating a new context in which activists and NGOs are starting to see litigation as a tool to enforce the compliance of sustainability policies adopted by the States and companies.

As a result of this, climate litigation is expanding at great speed. According to the latest 2023 report from the Sabin Center for Climate Change Law at Columbia University, approximately 2,500 cases have already been filed in the context of climate litigation in 65 different jurisdictions, including, the first investor arbitrations, that started as of this year, 2023.

[tooltip="Future cases in climate litigation"]

  1. Partners, investors or shareholders that sue companies for lack of information on their sustainability policies.
  2. Supply chain disputes
  3. Claims for liability of company boards.
  4. Trading of carbon credits in public and private markets


[tooltip="What can arbitration offer in this context?"]

Commercial arbitration could offer interesting benefits in the fight against climate change:

  • Firstly, its rapid nature. Climate change is an imminent threat that requires urgent action. Arbitration, in this sense, offers faster and therefore more effective solutions to ensure compliance with climate commitments.
  • Its flexibility and, more specifically, the possibility of incorporating experts in the Arbitral Tribunal on issues of enormous technical complexity, both legal and scientific.
  • Finally, the creativity of the arbitrators. In an area of law that has yet to be developed, arbitrators can offer imaginative solutions in the formation of a climatic Lex Mercatoria.


[tooltip="What challenges does climate arbitration face?"]

Arbitration faces several challenges in the field of climate change dispute resolution:

  • Transformation of claims to encourage arbitration-So far, in climate litigation many of the claims do not seek an economic award but only a declarative one, as a moral victory and as a useful tool for activism and public awareness. These approaches, however, represent a barrier to commercial arbitration because of its associated costs. It would be necessary to establish or explore formulas to transform claims, giving them an economic content, with the aim of encouraging their exercise and financing.
  • Attribution of liability- Closely related to the above, it is also a challenge to attribute shares of responsibility and individualize remedies when dealing with a global problem such as climate change. The attribution of responsibility and the quantification of damages involve various technical and legal difficulties when it is not possible to establish with certainty to what extent each one of us is responsible for climate change. In this regard, the science of liability individualisation needs an academic development.
  • significant study costs- Finally, there are high study costs caused by constant regulatory developments regarding climate change in many different areas of law. This constitutes a strong entry barrier, as it forces companies and legal firms to dedicate many resources to the preparation of disputes.


Further information:

For any queries relating to the topics raised in this article, please contact Cristina Camarero Espinosa

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