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 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)*
Various climate change instruments contain dispute resolution mechanisms for management of climate change disputes including those in carbon markets. For example, the United Nations Framework Convention on Climate Change (UNFCCC), allows parties to seek settlement of disputes through negotiation or any other peaceful means of their own choice. The UNFCCC also allows parties to submit their parties to the International Court of Justice (ICJ) or to arbitration in accordance with procedures to be adopted by the Conference of the Parties (COP). The UNFCCC also envisages the management of climate change disputes via a conciliation commission which shall be created upon the request of one of the parties to the dispute.
According to the UNFCCC, the commission shall be composed of an equal number of members appointed by each party concerned and a chairperson chosen jointly by the members appointed by each party. The UNFCCC provides that the commission shall render a recommendatory award, which the parties shall consider in good faith. The Kyoto Protocol embraces the dispute management mechanisms set out under the UNFCCC. It thus envisages the management of climate change disputes including those in carbon markets through arbitration, litigation at the ICJ and conciliation through a conciliation commission. The Paris Agreement also embraces the dispute management mechanisms stipulated under the UNFCCC which are arbitration, submissions of disputes to the ICJ and conciliation.
At a national level, the Climate Change (Amendment) Act provides for management of disputes in carbon markets. The Act provides that any dispute arising under a land-based project shall be subjected to the dispute resolution mechanism set out in the Community Development Agreement in the first instance and be resolved within thirty days from the date the dispute is lodged. In addition, the Act provides that any dispute that is not land based and is not subjected to a Community Development Agreement shall be resolved through Alternative Dispute Resolution in the first instance. The Act therefore envisages the use of Alternative Dispute Resolution (ADR) mechanisms in managing disputes in carbon markets. These mechanisms include negotiation, mediation, arbitration, and conciliation.
Further, where any dispute is not managed within thirty days, the Act provides that such dispute shall be referred to the National Environment Tribunal. The Tribunal is established under the Environmental Management and Coordination Act with the jurisdiction to inter alia make orders to enhance the principles of Sustainable Development in Kenya. In addition to the foregoing dispute management mechanisms set out under climate change instruments, it has been pointed out that dispute management in carbon markets is also governed by carbon contracts.
While some of these contracts provide for litigation, most of them envisage the use of arbitration in managing disputes in carbon markets. For example, the International Emissions Trading Association’s Emissions Trading Master Agreement for the European Union Emissions Trading Scheme (EU ETS) allows for the use of arbitration in managing disputes in carbon markets with the option to choose among the International Chamber of Commerce (ICC) Rules, United Nations Commission on International Trade Law (UNCITRAL) Rules or The Permanent Court of Arbitration (PCA) Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment.
In addition, the World Bank’s Forest Carbon Partnership Facility General Conditions Applicable to Emissions Reduction Payment Agreements allows the use of conciliation and arbitration under the UNCITRAL Rules for managing disputes in carbon markets. The use of arbitration in managing disputes in carbon markets is also envisaged under Norway’s Certified Emission Reduction Purchase Agreement. The Agreement provides that if a dispute has not been resolved by negotiation within twenty days of delivery of the Dispute Notice, the complaining Party may, at any time thereafter, submit the dispute to be resolved by arbitration in accordance with the Rules of Arbitration of the London Court of International Arbitration (LCIA) for the time being in force.
From the foregoing, it emerges that arbitration is a preferred mechanism for managing disputes in carbon markets. Arbitration refers to a private consensual process where parties in dispute agree to present their grievances to a third party for resolution. It has also been defined as a dispute management mechanism where parties through an agreement submit their dispute to one or more neutral third parties who make a binding decision on the dispute.
*This is an extract from the Article: Managing Disputes in Carbon Markets, Available at: https://kmco.co.ke/wp-content/uploads/2024/02/Managing-Disputes-in-Carbon-Markets.pdf (25th February 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. 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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