COP-27 highlights growth in climate-related liabilities

Aarna Law recently hosted a panel discussion on climate change disputes as part of the International Chamber of Commerce’s “Make Climate Action Everyone’s Business” Forum.

Participants explained why there was an increasing need for legal advice relating to climate change disputes particularly at the corporate level.


  • Annette Magnusson, CEO, Climate Change Counsel
  • Danielle Yeow, Research Fellow, National University of Singapore
  • Albert Marsman, partner, De Brauw Blackstone Westbroek


  • Bhavya Chengappa, Advocate, Aarna Law

Danielle Yeow began the session with a rundown of the key discussions and commitments from the COP27 conference, which closed on 20 November.

  • She explained that COP-27 was designed to focus on implementation divided among three workstreams: mitigation, adaptation, and finance. The discussions at this meeting were focused primarily on finance, which led to the progress being slow.
  • The draft outcome document, referenced the food crisis, the energy crisis, the gaps in financing, and biodiversity.
  • The document specified that USD 4 trillion a year needed to be invested in renewable energy until 2030, but also highlighted the principles of equity and common but differentiated responsibility.
  • “Loss and damage funding’ was a key item on this year’s COP agenda and could be significant to developing countries, who are likely to be most affected by climate change while not being the main actors responsible for it. While the mechanism was not finalised, it was not to be construed as compensation or a recognition of liability. It was also unclear whether this funding would focus on preemptive or reactive funding, said Yeow.

Annette Magnusson observed that these high-level perspectives from COP27 would need to be detailed with granularity by lawyers. Yeow agreed and added that non-state actors had undertaken net-zero pledges, and accountability for that would also require legal scrutiny. Regulatory mechanisms were being set up, especially around concerns over corporate greenwashing further generating the need for legal insights.

No mechanism yet for state disputes

For state-to-state disputes under the United Nations Framework Convention on Climate Change and the Paris Agreement, Yeow noted that there had not yet been any proceedings and that the specialised arbitration regime that was to be adopted had not yet been set up. She mentioned that if the parties could not resolve their dispute through negotiation or other peaceful means, there was then mandatory recourse to conciliation if one party asked for it. Again however, the required conciliation mechanism had yet to be adopted. While the Paris Agreement Implementation and Compliance Committee would soon become functional, its role was not enforcement, and it could only make recommendations. She also said that the pledges under the Paris Convention were not legally binding, and the pressure was therefore largely political, reducing the need for the dispute resolution mechanisms.

Companies face increasing disputes over climate-related policies

Albert Marsman gave several examples of how climate-driven planning can lead to disputes at the corporate level. Joint venture partners for example can be in conflict about whether the joint venture corporation ought to be investing in traditional energy sources. He also highlighted disputes over warranties in manufacturing requirements referencing the Bangladeshi Accord on Fire and Building Safety that helped Bangladeshi workers hold foreign corporations accountable for fire and safety. He said private corporations should consider a similar mechanism to codify environmental obligations.

Magnusson reminded the participants that issues of climate could also include general commercial disputes around mitigation and adaptation measures. She spoke of the need for cross- practice area expertise, and for specialists to work together.

Marsman added that ADR had always been advertised as a mechanism where outside expertise could be brought in and pointed out that non-profits were intervening and participating in climate disputes as amici curiae, and this trend was likely to increase.

Yeow mentioned the importance of not using environmental obligations as a cover for trade protectionism citing the case of the tobacco trade, and the conflict between trade treaties and obligations under tobacco control obligations.

The discussion ended on an optimistic note, with participants agreeing that existing investment protection agreements did in fact recognise environmental obligations.