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Combating Climate Change through Low Carbon Development

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By Hon. Dr. Kariuki Muigua, OGW, PhD, C.Arb, FCIArb (Leading Environmental Law Scholar, Sustainable Development Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), The African Arbitrator of the Year 2022, Kenya’s ADR Practitioner of the Year 2021, CIArb (Kenya) Lifetime Achievement Award 2021 and ADR Publisher of the Year 2021 and Author of the Kenya’s First ESG Book: Embracing Environmental Social and Governance (ESG) tenets for Sustainable Development” (Glenwood, Nairobi, July 2023) and and Kenya’s First Two Climate Change Law Book: Combating Climate Change for Sustainability (Glenwood, Nairobi, October 2023) and Achieving Climate Justice for Development (Glenwood, Nairobi, October 2023)*

Responding to climate change involves a two-pronged approach that entails mitigation and adaptation mechanisms. Mitigation involves reducing the flow of heat-trapping greenhouse gases into the atmosphere, either by reducing sources of these gases (for example, the burning of fossil fuels for electricity, heat, or transport) or enhancing the “sinks” that accumulate and store these gases (such as the oceans, forests, and soil).

Mitigation envisages making the impacts of climate change less severe by preventing or reducing the emission of greenhouse gases (GHG) into the atmosphere. The goal of mitigation is to avoid significant human interference with Earth’s climate, “stabilize greenhouse gas levels in a timeframe sufficient to allow ecosystems to adapt naturally to climate change, ensure that food production is not threatened, and to enable economic development to proceed in a sustainable manner.

Adaptation on the other hand means anticipating the adverse effects of climate change and taking appropriate action to prevent or minimise the damage they can cause, or taking advantage of opportunities that may arise. Examples of adaptation measures include large-scale infrastructure changes, such as building defenses to protect against sea-level rise, as well behavioral shifts, such as individuals reducing their food waste.

The aim of mitigation is to reduce our risks from the harmful effects of climate change such sealevel rise, more intense extreme weather events, or food insecurity. It also includes making the most of any potential beneficial opportunities associated with climate change for example, longer growing seasons or increased yields in some regions. One of the mitigation mechanisms that has been embraced in efforts towards confronting climate change is the idea of low carbon development.

The concept of low carbon development which is also expressed using the term Low-Emission Development Strategies (LEDS) also known as low-carbon development strategies, or lowcarbon growth plans. They refer to forward-looking national economic development plans or strategies that encompass low-emission and/or climate-resilient economic growth.

Low carbon development has also been defined as forward-looking, climate-friendly growth strategies that can highlight a country’s priority actions for climate mitigation and adaptation, and a country’s role in the global effort against climate change. The idea of low-carbon development aims to achieve the goals of reducing greenhouse gas emissions, exploiting low-carbon energy, and ensuring economic growth.

It has been observed that LEDS have attracted interest in the climate negotiations as a soft alternative to voluntary or obligatory GHG emission reduction targets in developing countries. Low carbon development focuses on addressing and integrating climate change with development objectives and is therefore a more useful approach for developing countries.

The idea of low carbon development has been advocated as the inevitable choice to confront climate change and achieve Sustainable Development. To effectively reduce greenhouse gas emissions while fostering economic growth, different countries have begun to search for new development paths among which low-carbon development has become a widely advocated one.

In order to foster Climate Justice there is need to promote access to information and public and community participation and access to in decision making processes including the design and implementation of projects and formulation of laws, policies and guidelines concerning climate change. Access to information and public participation are fundamental principles of Climate Justice and have been captured in various legal instruments on climate change.

Public participation is fundamental in climate change mitigation and adaptation since it enhances the capacity to cope with climate change risks and further ensures that decisions reflect local values. It can also foster investment in people-centered laws and institutions to promote transformative climate action and adoption of customary, informal and indigenous approaches to protect biodiversity and promote sustainable use of natural resources. Public participation should thus be embraced in order to realize Climate Justice. There is also need to eliminate structural inequalities in climate action including gender and intragenerational inequalities.

It has been asserted that women often bear the brunt of climate disasters since they depend more heavily on natural resources like water and firewood, meaning that if these items become scarce, they may need to travel farther for them. However, women, youth and person with disabilities among other marginalized groups are often excluded from the decisionmaking table when disaster risk reduction solutions and other climate change responses are designed and implemented contributing to climate injustices. Unequal participation in decision-making processes and labour markets by these groups compound inequalities and often prevent them from fully contributing to climate-related planning, policy-making and implementation.

Women can and do play a critical role in response to climate change due to their local knowledge of and leadership in areas such as sustainable resource management and leading sustainable practices at the household and community level. It has also been asserted that the voice of the youth is pertinent in climate action since the younger generation, will suffer the consequences of climate change more greatly than their parents and grandparents. In addition, people with disabilities may be severely affected by the effects of climate change due to the difficulty in accessing vital resources in case of food insecurity and water scarcity and difficulties in responding to emergencies in case of disasters associated with climate change such as floods.

It is thus imperative to foster the participation of women, youth, person with disabilities and other marginalized groups in climate action in order to realize Climate Justice. It is also essential to increase funding to developing countries and regions of the world in order to enhance their ability to respond to the effects of climate change. It has been observed that developing countries in Africa, Asia, the Caribbean Islands and the Pacific Islands which due to an unfortunate mixture of economic and geographic vulnerability, continue to shoulder the brunt of the burdens of climate change despite their relative innocence in causing it.

Consequently, these countries have suffered from catastrophic consequences of climate change including severe storms, tropical cyclones, flooding and drought resulting in loss of lives, destruction of property and vital infrastructure and food insecurity among others. Due to their geographical vulnerability and low economic development, most of these countries are unable to effectively respond to the effects of climate change thus compounding the problem. Therefore, it is imperative for developed countries and international financial institutions such as the World Bank to increase or keep their pledges on climate funding to these countries in order to enhance their climate resilience through measures such as investments in food security, clean technology, renewable energy and sustainable forestry.

*This is an extract from the Book: Achieving Climate Justice for Development (Glenwood Publishers, Nairobi, October 2023) by Hon. Dr. Kariuki Muigua, OGW, PhD, Senior Advocate of Kenya, Chartered Arbitrator, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Lifetime Achievement Award 2021 (CIArb Kenya), African Arbitrator of the Year 2022, Africa ADR Practitioner of the Year 2022, Member of National Environment Tribunal (NET) Emeritus (2017 to 2022) and Member of Permanent Court of Arbitration nominated by Republic of Kenya. Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Managing Partner of Kariuki Muigua & Co. Advocates and Africa Trustee Emeritus of the Chartered Institute of Arbitrators 2019-2022. Dr. Muigua is a 2023 recipient of President of the Republic of Kenya Order of Grand Warrior (OGW) Award for his service to the Nation as a Distinguished Expert, Academic and Scholar in Dispute Resolution and recognized among the top 5 leading lawyers and dispute resolution experts in Band 1 in Kenya by the Chambers Global Guide 2022 and was listed in the Inaugural THE LAWYER AFRICA Litigation Hall of Fame 2023 as one of the Top 50 Most Distinguished Litigation Lawyers in Kenya and the Top Arbitrator in Kenya in 2023.

References

Almomani. S., ‘Climate Justice for People with Disabilities.’ Available at https://www.worldforgottenchildren.org/blog/climate-justice-for-people-with-disabilities/154 (Accessed on 29/07/2023).

Climate Change Act, No. 11 of 2016, Laws of Kenya.

European Environment Agency., ‘What is the Difference between Adaptation and Mitigation?’ Available at https://www.eea.europa.eu/help/faq/what-is-the-differencebetween#:~:text=In%20essence%2C%20adaptation%20can%20be,(GHG)%20into%20the% 20atmosphere (Accessed on 07/09/2023)

Hugel. S., & Davies. A., ‘Public Participation, Engagement, and Climate Change Adaptation: A Review of the Research Literature.’ WIREs Climate Change, 2020.

Mace. M., ‘Mitigation Commitments under the Paris Agreement and the Way Forward.’ Climate Law, No. 6 of 2016, pp 21-39 39 European Bank for Reconstruction and Development., ‘The Paris Agreement.’ Available at https://www.ebrd.com/paris-agreement (Accessed on 29/07/2023).

Muigua. K., ‘Redefining the Role of Lawyers in Climate Justice.’ Available at http://kmco.co.ke/wp-content/uploads/2023/06/Redefining-the-Role-of-Lawyers-in-ClimateJustice-.pdf (Accessed on 29/07/2023).

NASA., ‘Responding to Climate Change.’ Available at https://climate.nasa.gov/solutions/adaptationmitigation/#:~:text=Responding%20to%20climate%20change%20involves%20two%20poss ible%20approaches%3A%20reducing%20and,pipeline%20(%E2%80%9Cadaptation%E2% 80%9D) (Accessed on 07/09/2023).

United Nations Children’s Fund., ‘What is Climate Justice? And what can we do Achieve It?’ Available at https://www.unicef.org/globalinsight/what-climate-justice-andwhat-can-we-do-achieve-it (Accessed on 29/07/2023).

United Nations Economic and Social Commission for Asia and the Pacific., ‘LowCarbon Development Plan.’ Available at https://www.unescap.org/sites/default/files/45.%20FS-Low-Carbon-Development-Plan.pdf (Accessed on 07/09/2023).

United Nations Framework Convention on Climate Change, United Nations, 1992., Available at https://unfccc.int/resource/docs/convkp/conveng.pdf (Accessed on 07/09/2023).

United Nations Framework Convention on Climate Change., ‘China’s Achievements, New Goals and New Measures for Nationally Determined Contributions.’ Available at https://unfccc.int/sites/default/files/NDC/202206/China%E2%80%99s%20Achievements% 2C%20New%20Goals%20and%20New%20Measures%20for%20Nationally%20Determine d%20Contributions.pdf (Accessed on 29/07/2023).

United Nations Framework Convention on Climate Change., ‘Introduction to Gender and Climate Change.’ Available at https://unfccc.int/gender (Accessed on 29/07/2023).

United Nations Framework Convention on Climate Change., ‘The United States of America Nationally Determined Contribution.’ Available at https://unfccc.int/sites/default/files/NDC/202206/United%20States%20NDC%20April%20 21%202021%20Final.pdf (Accessed on 29/07/2023)

United Nations., ‘Low Carbon Development.’ Available at https://sustainabledevelopment.un.org/index.php?menu=1448#:~:text=The%20concept%20o f%20low%20carbon,low%2Dcarbon%20growth%20plans (Accessed on 07/09/2023)

Xin. X, Yuding. W, & Jianzhong. W., ‘The Problems and Strategies of the Low Carbon Economy Development.’ Energy Procedia 5 (2011) 1831–1836.

Yuan. H, Zhou. P, & Zhou. D., ‘What is Low-Carbon Development? A Conceptual Analysis.’ Energy Procedia, 5 (2011) 1706–1712.

Yuan. H, Zhou. P, & Zhou. D., ‘What is Low-Carbon Development? A Conceptual Analysis.’ Op Cit. 22 Brower. A., ‘Fighting Climate Injustice: 10 Strategies for Action.’ Available at https://www.gensler.com/blog/fighting-climate-injustice-10-strategies-for-action (Accessed on 29/07/2023).

News & Analysis

The Nexus between Environmental Social and Governance (ESG) and Arbitration

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By Hon. Prof. Kariuki Muigua, OGW, PhD, C.Arb, FCIArb is a Professor of Environmental Law and Dispute Resolution at the University of Nairobi, Member of Permanent Court of Arbitration, Leading Environmental Law Scholar, Respected Sustainable Development Policy Advisor, Top Natural Resources Lawyer, Highly-Regarded Dispute Resolution Expert and Awardee of the Order of Grand Warrior (OGW) of Kenya by H.E. the President of Republic of Kenya. He is the Academic Champion of ADR 2024, the African ADR Practitioner of the Year 2022, the African Arbitrator of the Year 2022, ADR Practitioner of the Year in Kenya 2021, CIArb (Kenya) Lifetime Achievement Award 2021 and ADR Publisher of the Year 2021 and Author of the Kenya’s First ESG Book: Embracing Environmental Social and Governance (ESG) tenets for Sustainable Development” (Glenwood, Nairobi, July 2023) and Kenya’s First Two Climate Change Law Book: Combating Climate Change for Sustainability (Glenwood, Nairobi, October 2023), Achieving Climate Justice for Development (Glenwood, Nairobi, October 2023) and Promoting Rule of Law for Sustainable Development (Glenwood, Nairobi, January 2024)*

Arbitration is form of Alternative Dispute Resolution (ADR) mechanisms. ADR refers to a set of mechanisms that are applied in management of disputes without resort to adversarial litigation. It has been described as a private and consensual process where parties to a dispute agree to present their grievances to a third party for resolution. It is argued that ESG principles have become a model for sustainable business development through which a corporations’ goal for solving environmental, social and governance problems is achieved. Consequently, ESG considerations have an increasing impact in international business as evidenced by the incorporation of sustainability clauses in investment contracts. In such contracts, investors are required to adhere to the concept of sustainable development as envisaged under the contracts and failure to do so may result in ESG related disputes.

In the wake of the climate change debate, there have been calls for responsible business practice towards climate change mitigation through measures such as reduction of carbon emissions. The Paris Agreement on Climate Change has raised the awareness of the need for global efforts to combat climate change and the role of responsible and ethical corporate behavior towards achieving this goal. Further, corporations are increasingly required to safeguard human rights as envisaged by ‘S’ pillar of ESG.

However, some corporations have been accused of violating these ESG concerns as a result of their business practices. Some corporations have been accused of failing to promote climate change mitigation through reduction of carbon emissions and transitioning to cleaner energy production. Further, some corporations have been accused of violating fundamental human rights such as the right to a clean and healthy environment especially in the investment sphere in Africa. These instances have resulted in an increasing number of ESG-related disputes. The growth of ESG concerns has seen corporations being increasingly required to embrace ESG principles in their business practices. Consequently, ESG clauses are being adopted in commercial and investment contracts.

In case of violation of such clauses, ESG related disputes are bound to occur. It has been asserted that adoption of ESG related practices into pre-existing social and governance models adopted by corporations would be disruptive. The inclusion of ESG clauses in commercial contracts not only points to the importance of ESG concerns to companies but it also serves as potential source of disputes where such considerations are not complied with. ESG issues are not only reshaping corporate behavior across the globe but can also be a potential battleground in international disputes25. This creates the need for an effective mechanism of management of such disputes in order to enhance ESG principles in the quest for Sustainable Development.

Arbitration has for a long time been the most viable mechanism for management of international commercial and investment disputes. It offers a neutral forum for the management of disputes and addresses some of the concerns that parties may have in relation to the other parties’ legal system. In international commercial and investment arbitration, parties are reluctant to submit to the jurisdiction of the other party due to the likelihood of favoritism by the host judicial system. Further, arbitration has the potential of facilitating expeditious management of disputes.

In international commercial and investment arbitration, there is need to manage disputes expeditiously in order to preserve the commercial interests of parties. The viability of arbitration in management of international commercial disputes is further enhanced by the availability of a legal framework for the recognition and enforcement of foreign arbitral awards. The New York Convention provides the legal framework for the recognition and enforcement of foreign arbitral awards across different jurisdictions. Consequently, the adoption of ESG elements in international commercial and investment agreements has resulted in the use of arbitration to manage disputes arising from such agreements.

ESG concerns have become prominent in investor-state arbitration with arbitral tribunals having to determine issues relating to climate change, corruption and human rights. It has been asserted that the growth of ESG will redefine the practice of arbitration as it seeks to adapt to the new concerns created by ESG. However, the flexibility of arbitration and its ability to adapt to emerging concerns means that it is well positioned to manage ESG disputes. However, there is need for reform in order to enhance the role of arbitration in managing ESG disputes.

*This article is an abridged version of the Article The Place of Environmental, Social and Governance (ESG) in Arbitration (Available for download at Kariuki Muigua & Co. Advocates Website, follow the link) by Hon. Prof.  Kariuki Muigua, OGW, PhD, Professor of Environmental Law and Dispute Resolution, Senior Advocate of Kenya, Chartered Arbitrator, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Lifetime Achievement Award 2021 (CIArb Kenya), African Arbitrator of the Year 2022, Africa ADR Practitioner of the Year 2022, Member of National Environment Tribunal (NET) Emeritus (2017 to 2023) and Member of Permanent Court of Arbitration nominated by Republic of Kenya and Academic Champion of ADR 2024. Prof. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Prof. Kariuki Muigua teaches Environmental Law and Dispute resolution at the University of Nairobi School of Law, The Center for Advanced Studies in Environmental Law and Policy (CASELAP) and Wangari Maathai Institute for Peace and Environmental Studies. He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Prof. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Managing Partner of Kariuki Muigua & Co. Advocates and Africa Trustee Emeritus of the Chartered Institute of Arbitrators 2019-2022. Prof. Muigua is a 2023 recipient of President of the Republic of Kenya Order of Grand Warrior (OGW) Award for his service to the Nation as a Distinguished Expert, Academic and Scholar in Dispute Resolution and recognized among the top 5 leading lawyers and dispute resolution experts in Band 1 in Kenya by the Chambers Global Guide 2024 and was listed in the Inaugural THE LAWYER AFRICA Litigation Hall of Fame 2023 as one of the Top 50 Most Distinguished Litigation Lawyers in Kenya and the Top Arbitrator in Kenya in 2023.

Hamilton. J & Coulet-Diaz. M., ‘Arbitration & the ESG Era’ available at https://www.whitecase.com/news/media/arbitration-esg-era (accessed on 28/09/2022).

International Arbitration in 2022., ‘The Rising Significance of ESG and the Role of International Arbitration’ available at https://www.freshfields.com/en-gb/our-thinking/campaigns/internationalarbitration-in-2022/the-rising-significance-of-esg-and-the-role-of-international-arbitration/ (accessed on 28/09/2022)

Mazhorina. M.V., ‘ESG Principles in International Business and Sustainable Contracts’ available at https://aprp.msal.ru/jour/article/view/3223?locale=en_US (accessed on 28/09/2022).

Moses. L.M, ‘The Principles and Practice of International Commercial Arbitration’ 2 nd Edition, 2017, Cambridge University Press 28 Ibid 29Muigua. K., ‘Promoting International Commercial Arbitration in Africa’ available at http://kmco.co.ke/wp-content/uploads/2018/08/PROMOTING-INTERNATIONAL-COMMERCIALARBITRATION-IN-AFRICA.pdf

Muigua. K., ‘International Investment Law and Policy in Africa: Human Rights, Environmental Damage and Sustainable Development’ available at http://kmco.co.ke/wpcontent/uploads/2018/11/International-Investment-Law-and-Policy-in-Africa-AILA-Conference-Paper5-11-2018.pdf (accessed on 28/09/2022)

Muigua. K., ‘Realising Environmental, Social and Governance Tenets for Sustainable Development’ available at http://kmco.co.ke/wp-content/uploads/2022/07/Realising-Environmental-Social-andGovernance-Tenets-of-Sustainable-Development-Kariuki-Muigua-July-2022.pdf (accessed on 28/09/2022)

Muigua. K., ‘Settling Disputes Through Arbitration in Kenya’ Glenwood Publishers Limited, 4th Edition, 2022

Ross. A., ‘We need talk about ESG’ available at https://globalarbitrationreview.com/we-need-talkabout-esg (accessed on 28/09/2022)

The ALP Review., ‘The Importance of ESG and its effect on International Arbitration’ available at https://www.alp.company/sites/default/files/ALP%20Review%20- %20The%20Importance%20of%20ESG %20and%20its%20effect%20on%20International%20Arbitration.pdf (accessed on 28/09/2022).

United Nations Conference on International Commercial Arbitration, ‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards’ United Nations, 1958

Von Wobeser., ‘The Role of Arbitration in ESG Disputes’ available at https://www.vonwobeser.com/index.php/publication?p_id=1650 (accessed on 28/09/2022)

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Enhancing the Role of Arbitration in Management of ESG Disputes

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By Hon. Prof. Kariuki Muigua, OGW, PhD, C.Arb, FCIArb is a Professor of Environmental Law and Dispute Resolution at the University of Nairobi, Member of Permanent Court of Arbitration, Leading Environmental Law Scholar, Respected Sustainable Development Policy Advisor, Top Natural Resources Lawyer, Highly-Regarded Dispute Resolution Expert and Awardee of the Order of Grand Warrior (OGW) of Kenya by H.E. the President of Republic of Kenya. He is the Academic Champion of ADR 2024, the African ADR Practitioner of the Year 2022, the African Arbitrator of the Year 2022, ADR Practitioner of the Year in Kenya 2021, CIArb (Kenya) Lifetime Achievement Award 2021 and ADR Publisher of the Year 2021 and Author of the Kenya’s First ESG Book: Embracing Environmental Social and Governance (ESG) tenets for Sustainable Development” (Glenwood, Nairobi, July 2023) and Kenya’s First Two Climate Change Law Book: Combating Climate Change for Sustainability (Glenwood, Nairobi, October 2023), Achieving Climate Justice for Development (Glenwood, Nairobi, October 2023) and Promoting Rule of Law for Sustainable Development (Glenwood, Nairobi, January 2024)*

Arbitration represents a viable mechanism for management of ESG disputes. The following are proposals for interventions towards embracing arbitration in management of ESG disputes for Sustainable Development towards enhancing the use of arbitration in ESG disputes:

Enhancing Knowledge in ESG Concerns

Statistics show that many ESG related disputes are being managed through arbitration. According to the International Chamber of Commerce, engineering, construction and energy disputes represent the highest number of cases handled representing 38% of all cases registered so far. Such disputes entail ESG components such as renewable energy projects, environmental protection and human rights concerns. This demonstrates that ESG and arbitration are inextricably linked. Arbitration practitioners thus need to equip themselves with knowledge in ESG related matters in order to be better placed to manage ESG related disputes.

Promoting Sustainable Development

Sustainable Development has been defined as development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs. This concept entails a combination of elements including environmental protection, economic development and social issues. The importance of Sustainable Development has seen the adoption of the Sustainable Development Goals as the global blueprint of development. Most of the Sustainable Development Goals entail aspects of ESG such as clean water and sanitation, affordable and clean energy, industry, innovation and infrastructure and climate action. Arbitration practitioners should therefore promote the principles of sustainable development when managing ESG related disputes. This could entail requiring investors to comply with the host country environmental laws and ESG standards in mining, energy and construction disputes which have an ESG bearing.

Upholding Human Rights

The ‘S’ pillar in ESG seeks to promote responsible and ethical corporate behavior through aspects such as respect for human rights. However, corporate behavior especially in the investment sphere in Africa has resulted in gross violation of human rights. Some corporations which have invested in oil exploration have been accused of human right abuses, environmental degradation and unsustainable peace due to their business culture. In Kenya, a multinational corporation that has invested in the agricultural sector has been accused of human right abuses such as killings, rape, and other forms of sexual and gender-based violence allegedly committed by its guards, bad labour practices and land injustices against the neighbouring communities. Some of these disputes have ended up in arbitration where tribunals are called upon to adjudicate on human rights issues. Arbitrators should thus seek to uphold human rights in such disputes by rendering awards that are in line with human rights standards. By promoting human rights, arbitrators will be embracing the ‘S’ pillar that is fundamental in the ESG debate.

Promoting Good Governance

The Governance pillar in ESG seeks to achieve good financial and accounting standards as well as legal and regulatory compliance, such as transparency, corporate structures and ethics in corporate conduct. It also seeks to align Governance with the Sustainable Development Goals where governance issues include industry, innovation and infrastructure (Goal 9); peace, justice and strong institutions (Goal 16); and partnerships with public and private institutions (Goal 17). Good governance can be promoted through arbitration by rendering awards that adhere to good governance practices such as transparency, accountability, reporting and disclosure.

Seeking Expert Assistance in Complex ESG Matters

Arbitration has a significant role in promoting ESG tenets in areas such as climate change. Arbitrators play a significant role in shaping and adapting international law to respond to the climate crisis. However, in some instances, arbitration has been slow to act to act in response to the climate crisis. Some climate change concerns such as determining adherence to climate change commitments through low carbon transition requires arbitrators to be fully informed and engaged in such concepts. This may require expert analysis and guidance from persons with requisite knowledge in environmental matters. Arbitrators should therefore seek expert assistance in such issues in order to be fully informed and render awards that promote ESG principles.

Conclusion

The relationship between Environmental, Social and Governance (ESG) and arbitration continues to grow. Adoption of ESG by corporations as a means of promoting responsible and ethical business practices and the wide use of arbitration in management of international commercial and investment disputes points to increased use of arbitration in management of ESG related disputes. In managing such disputes, arbitrators should promote ESG considerations whilst balancing the needs and interests of parties involved in issues such as climate change. Arbitration represents a viable mechanism for managing ESG disputes while simultaneously promoting Sustainable Development. There is need to enhance the viability of arbitration in management of ESG related disputes.

*This article is an abridged version of the Article The Place of Environmental, Social and Governance (ESG) in Arbitration by Hon. Prof.  Kariuki Muigua, OGW, PhD, Professor of Environmental Law and Dispute Resolution, Senior Advocate of Kenya, Chartered Arbitrator, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Lifetime Achievement Award 2021 (CIArb Kenya), African Arbitrator of the Year 2022, Africa ADR Practitioner of the Year 2022, Member of National Environment Tribunal (NET) Emeritus (2017 to 2023) and Member of Permanent Court of Arbitration nominated by Republic of Kenya and Academic Champion of ADR 2024. Prof. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Prof. Kariuki Muigua teaches Environmental Law and Dispute resolution at the University of Nairobi School of Law, The Center for Advanced Studies in Environmental Law and Policy (CASELAP) and Wangari Maathai Institute for Peace and Environmental Studies. He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Prof. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Managing Partner of Kariuki Muigua & Co. Advocates and Africa Trustee Emeritus of the Chartered Institute of Arbitrators 2019-2022. Prof. Muigua is a 2023 recipient of President of the Republic of Kenya Order of Grand Warrior (OGW) Award for his service to the Nation as a Distinguished Expert, Academic and Scholar in Dispute Resolution and recognized among the top 5 leading lawyers and dispute resolution experts in Band 1 in Kenya by the Chambers Global Guide 2024 and was listed in the Inaugural THE LAWYER AFRICA Litigation Hall of Fame 2023 as one of the Top 50 Most Distinguished Litigation Lawyers in Kenya and the Top Arbitrator in Kenya in 2023.

References

Amao. O., ‘Corporate Social Responsibility, Human Rights and the Law: Multinational corporations in Developing Countries.’ Routledge, 2011.

Cummins. T et al., ‘ESG Litigation – How Companies Can Get Ready, Respond and Resolve Claims’ available at https://www.emerald.com/insight/content/doi/10.1108/JOIC-07-2021-0032/full/html (accessed on 29/09/2022)

Fitzmaurice, M., ‘The Principle of Sustainable Development in International Development Law’ International Sustainable Development Law, Vol. 1.

Greenwood. L., ‘The Canary is Dead: Arbitration and Climate Change’ Journal of International Arbitration, Volume 38, Issue 3 (2021).

Miles. W., ‘BVI: A Frontline Focus for Resolving Future Climate Change Related Disputes’ available at https://www.bviiac. org/Portals/0/Files/Publications/Wendy%20 Miles %20QC_BVI_ A%20Frontline%20Focus%20for%20Resolving%20Future%20Climate%20Change%20Related %20Disputes.pdf (accessed on 29/09/2022)

Krajewski, M. ‘Human Rights in International Investment Law: Recent Trends in Arbitration and Treaty-Making Practice.’ Available at SSRN 3133529 (2018).

Maiangwa.B & Agbiboa.D., ‘Oil Multinational Corporations, Environmental Irresponsibility and Turbulent Peace in the Niger Delta’ Africa Spectrum 2/2013: 71-83

Kenya Human Rights Commission., ‘Heavy price for… egregious human rights violations’ available at https://www.khrc.or.ke/2015-03-04-10-37-01/press-releases/737-heavy-price-for-kakuzi-s-egregioushuman-rights-violations.html (accessed on 29/09/2022).

RL360, “Governance-The G in ESG,” Available at: https://www.rl360.com/row/funds/ investmentdefinitions/g-in-esg.htm (accessed on 29/09/2022)

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The ALP Review., ‘The Importance of ESG and its effect on International Arbitration’ available at https://www.alp.company/sites/default/files/ALP%20Review%20- %20The%20Importance%20of%20ESG %20and%20its%20effect %20on%20International%20Arbitration.pdf

United Nations., ‘Sustainable Development Goals’ available at https://sdgs.un.org/goals (accessed on 28/09/2022)

World Commission on Environment and Development, Our Common future. Oxford, (Oxford University Press, 1987).

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News & Analysis

Way Forward in Managing Risk and Liability of ESG Litigation

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By Hon. Prof. Kariuki Muigua, OGW, PhD, C.Arb, FCIArb is a Professor of Environmental Law and Dispute Resolution at the University of Nairobi, Member of Permanent Court of Arbitration, Leading Environmental Law Scholar, Respected Sustainable Development Policy Advisor, Top Natural Resources Lawyer, Highly-Regarded Dispute Resolution Expert and Awardee of the Order of Grand Warrior (OGW) of Kenya by H.E. the President of Republic of Kenya. He is the Academic Champion of ADR 2024, the African ADR Practitioner of the Year 2022, the African Arbitrator of the Year 2022, ADR Practitioner of the Year in Kenya 2021, CIArb (Kenya) Lifetime Achievement Award 2021 and ADR Publisher of the Year 2021 and Author of the Kenya’s First ESG Book: Embracing Environmental Social and Governance (ESG) tenets for Sustainable Development” (Glenwood, Nairobi, July 2023) and Kenya’s First Two Climate Change Law Book: Combating Climate Change for Sustainability (Glenwood, Nairobi, October 2023), Achieving Climate Justice for Development (Glenwood, Nairobi, October 2023) and Promoting Rule of Law for Sustainable Development (Glenwood, Nairobi, January 2024)*

In order for companies to manage the risk and liability associated with ESG litigation, it is imperative for them to strengthen their ESG reporting and disclosure requirements. It has been observed that recent ESG trends have driven the requirement by businesses to report on ESG aspects such as human rights and environmental standards as evidenced by emerging legal frameworks requiring companies to report on human rights and environmental issues, emerging mandatory human rights due diligence legislation, and increased legal enforcement and litigation risks.

As a result, it is important for companies to treat public disclosures in relation to ESG matters seriously and consider taking independent auditing and verification steps, particularly for annual ESG-related reports and/or other material ESG disclosures. Such an approach can help companies effectively manage and reduce the risk of ESG related litigation.

In addition, it has been argued that there is need for companies to embrace best practices in order to mitigate the risks of ESG litigation and also address such litigation when it arises. For example, it has been suggested that companies should conduct risk assessments in order to determine the likelihood of ESG related suits and deal with such concerns immediately; undertake public engagement to order to ensure openness and transparency in ESG matters; build knowledge on ESG issues in order to be well equipped to handle ESG claims when they arise; and strengthen their management systems and internal practices in order to enhance compliance with ESG standards.

It has been observed that ESG litigation is associated with several risks to companies including regulatory and enforcement risk, reputational risk, damage to brand, potential disruption by activists and financial risks such as loss of access to capital and financial losses as a result of damages, fines and other forms of monetary compensation. It is also imperative to strengthen access to justice in ESG matters. It has been pointed out that in order for litigants to be given the right of access to courts in ESG matters, whether individually, collectively, or as a third party or amicus curiae, the criteria pertaining to standing, which differ from jurisdiction to jurisdiction, must be followed.

It is also necessary to widen and strengthen the jurisdiction of courts on ESG issues such as climate change. Further, it has been pointed out that there is need to embrace techniques such as litigation funding in order to provide the financial stability and support needed to pursue legal action without compromising on the quality of representation or legal strategy in ESG matters. It has been argued that litigation funding can be an effective strategy for needy claimants to pursue claims against a company that they may ordinarily not be able to afford, enabling them to ultimately to hold companies to account for ESG failures.

Finally, it is imperative for companies to think creatively and strategically in order to effectively resolve ESG claims. It has been pointed out that ESG claims may significantly differ from other types of litigation companies have previously faced, hence the need for creative solutions towards these claims. For example, in ESG claims, there is need to bear in mind both the litigation aspects of a dispute, and broader ESG concerns including those around reputation and access to capital. As a result, it has been suggested that there is need for companies to be alive to the potential for resolving ESG claims outside the court room, and what mitigation strategies could be deployed to avoid litigation.

Alternative Dispute Resolution (ADR) mechanisms are ideal in managing ESG disputes by fostering privacy, cost effective and expeditious management of disputes while also allowing parties to select experts to hear and determine contentious ESG matters. In addition, it has correctly been observed that businesses would normally prefer to have their disputes managed in a private manner in order to prevent ruining their image in public and also in an expeditious and cost-effective manner in order to protect business interests.

It has also been pointed out that the use of ADR mechanisms such as mediation in managing ESG related disputes is a practical demonstration of a sustainability-oriented business culture since mediation can offer a quick, flexible, consensual and win-win solution based on the mutually accepted interests of the parties. ADR mechanisms can therefore be an effective tool to enable companies manage the risks associated with ESG litigation.

*This is an extract from the Article: Fostering Environmental, Social and Governance (ESG) Litigation for Sustainability, Available at: https://kmco.co.ke/wp-content/uploads/2024/02/Fostering-Environmental-Social-and-Governance-ESG-Litigation-for-Sustainability.pdf (Accessed 2nd March 2024) by Hon. Prof.  Kariuki Muigua, OGW, PhD, Professor of Environmental Law and Dispute Resolution, Senior Advocate of Kenya, Chartered Arbitrator, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Lifetime Achievement Award 2021 (CIArb Kenya), African Arbitrator of the Year 2022, Africa ADR Practitioner of the Year 2022, Member of National Environment Tribunal (NET) Emeritus (2017 to 2023) and Member of Permanent Court of Arbitration nominated by Republic of Kenya and Academic Champion of ADR 2024. Prof. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Prof. Kariuki Muigua teaches Environmental Law and Dispute resolution at the University of Nairobi School of Law, The Center for Advanced Studies in Environmental Law and Policy (CASELAP) and Wangari Maathai Institute for Peace and Environmental Studies. He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Prof. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Managing Partner of Kariuki Muigua & Co. Advocates and Africa Trustee Emeritus of the Chartered Institute of Arbitrators 2019-2022. Prof. Muigua is a 2023 recipient of President of the Republic of Kenya Order of Grand Warrior (OGW) Award for his service to the Nation as a Distinguished Expert, Academic and Scholar in Dispute Resolution and recognized among the top 5 leading lawyers and dispute resolution experts in Band 1 in Kenya by the Chambers Global Guide 2024 and was listed in the Inaugural THE LAWYER AFRICA Litigation Hall of Fame 2023 as one of the Top 50 Most Distinguished Litigation Lawyers in Kenya and the Top Arbitrator in Kenya in 2023.

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