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)*
Business entities such as Multinational Corporations have been accused of perpetrating human right abuses through acts such as killings, rape, and other forms of sexual and gender-based violence, bad labour practices, displacement of people and land injustices against the neighbouring communities while undertaking investment activities in developing countries. Further, the activities of multinational corporations especially those involved in the exploration of natural resources have resulted in environmental concerns such as environmental degradation, extinction of biodiversity, contamination and destruction of soil and air pollution affecting the socio-economic lives of indigenous populations. This affects the realizing the Environmental and Social tenets of the ESG framework. ADR mechanisms can be used to enforce ESG standards by holding businesses responsible for violation of environmental and human rights standards.
Indeed, there has been rise in investment treaty arbitration across the globe including Africa where Multinational Corporations are contractually bound through investment treaties to comply with ESG standards such as environmental governance and respect for human rights and are further subjected to ADR mechanisms especially arbitration when they violate ESG requirements stipulated in investment treaties. Further, the United Nations Guiding Principles on Business and Human Rights provide a framework for realizing Environmental, Social and Governance standards by enshrining the corporate responsibility to respect human rights towards attaining the ESG pillars through sound environmental management, protection of human rights and good corporate governance. The Hague Rules on Business and Human Rights Arbitration flow from the UN Guiding Principles on Business and Human Rights and provide a framework through which business entities can be compelled to comply with ESG standards through arbitration.
The nexus between ADR and ESG is therefore demonstrated through the use of ADR mechanisms to enforce ESG tenets. ADR mechanisms are also 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. Business 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. ADR mechanisms such as International Commercial Arbitration and International Commercial Mediation allows businesses to attain these benefits by ensuring privacy, confidentiality, cost effectiveness and expeditiousness in management of disputes and further promoting the enforceability of decisions. ADR mechanisms also allow business to select expert decision makers such as arbitrators and mediators who are knowledgeable on ESG issues such as human rights, renewable energy and climate change thus fostering effective and efficient management of disputes.
The growing interest of governments, regulators, Non-Governmental Organisations (NGOs) and private companies in ESG has led to a corresponding increase in the number of disputes involving ESG concerns. Such disputes may be cross border in nature therefore requiring interpretation of laws from different nations. ADR mechanisms such as International Commercial Arbitration and International Commercial Mediation are thus ideal in managing ESG related disputes since they have a transnational applicability and can foster privacy, confidentiality, expeditious and cost-effective management of disputes. Further, mechanisms such as arbitration can ensure grant of interim reliefs in ESG related disputes important in instances like irreversible environmental damage or gross violation of human rights. Injunctive relief can be obtained in an expedited manner, and since ESG disputes usually require initial adjudication that cannot be delayed, injunctive reliefs from arbitration proceedings are best suited for such purposes. For instance, in the event that a business practice could cause irreparable environmental damage, the parties concerned could take advantage of emergency arbitration procedures before the constitution of the arbitral tribunal.
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. Consequently, it has been asserted that mediation is an ESG tool and its use adds ESG value to businesses. It is thus ideal in managing ESG disputes including real estate disputes, environmental disputes and disputes relating to consumer and business relationships. ADR mechanisms are thus viable in managing ESG related disputes. In addition, it has been argued that parties can use ADR mechanisms such as negotiation to achieve ESG requirements at workplaces such as fair labour practices that entails the right to equal pay, workplace safety and leave among other entitlements.
Fair labour practices are a crucial component of the ‘Social’ pillar in the ESG debate. Social factors in the ESG debate include working conditions, health and safety, employee relations, diversity, equity & inclusion, operations in conflict regions, and a vast array of further topics connected with sustainable labour relations. It has been pointed out that negotiation is a big part of life and can be used effectively at workplaces by employees to negotiate with their employers for favorable working terms and conditions including fair labor practices which are vital in the ESG debate. Negotiation has been described as an informal process that involves the parties meeting to identify and discuss issues at hand so as to arrive at a mutually acceptable solution without the help of a third party. It can facilitate parties in coming up with creative solutions in various contexts including the workplace. ADR mechanisms such as negotiation are thus viable in achieving ESG requirements by businesses such as fair labour practices.
It is thus evident that ADR and ESG are interrelated concepts. ADR mechanisms can foster efficient management of ESG related disputes such as those concerning human rights and climate change. Further, ADR mechanisms such as arbitration can aid in enforcing ESG concerns including human rights standards. In addition, mechanisms such negotiation can be used to achieve ESG requirements at workplaces such as fair labour practices. Linking ADR and ESG tenets is thus vital in fostering Sustainable Development by addressing social concerns such as poverty, hunger, health, education, gender equality, access to clean water and employment through investments in areas such as energy, industry, innovation and infrastructure while mitigating the effects of climate change as envisaged under the United Nations 2030 Agenda for Sustainable Development. It is therefore imperative to link ADR and ESG tenets in order to achieve Sustainable Development.
This is an extract from Kenya’s First ESG Law Book: Embracing Environmental Social and Governance (ESG) tenets for Sustainable Development” (Glenwood, Nairobi, July 2023) 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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