Inside Arbitration: The era of reconciliation – How arbitration will tackle climate and human rights disputes

The HSF Singapore Management University Asian Arbitration Lecture outlined how new concerns have eroded the barriers between private and public law

The Herbert Smith Freehills (HSF) Singapore Management University Asian Arbitration Lecture 2022 was delivered by University of Notre Dame professor of law and global affairs Diane Desierto and focused on human rights, environmental and climate change laws in the substance and procedure of international arbitration. The lecture was followed by a panel discussion with Singapore's solicitor-general Daphne Hong, Gitta Satryani, Singapore arbitration partner and Antony Crockett, arbitration partner and global head of HSF's business and human rights practice. In this article, we provide a snapshot of the major themes and issues raised through the lecture and discussion.

Inter-state, investor-state and commercial arbitration have increasingly wrestled with the complexities of human rights, environmental and climate change law and their impact on the substance and procedure of international arbitration. These areas of public law are more frequently asserted by parties as part of the corpus of applicable law to a dispute. Moreover, they often recognise the role of human rights law, environmental law and climate change law as part of either existing or changing regulatory frameworks that ultimately bear upon the ability of a sovereign state or non-sovereign party to perform legal obligations under contract or treaty.

At the outset of the lecture, professor Desierto observed that human rights, environmental and climate change laws are not homogeneous or monolithic bodies of lex specialis (meaning where two laws collide in a situation, the law governing a specific matter overrides the more general counterpart). The uniqueness of treaty and customary norms in each of these fields injects complexities to the substance and procedure of disputes submitted to international arbitration, including inter-state disputes, investor-state disputes and international commercial disputes. There is no definitive set of international law rules that harmonise and provide secondary rules for reconciling lex specialis with lex generalia.

The absence of a harmonisation mechanism or set of conflicts rules mean arbitral tribunals may adopt different methodological approaches, while seeking to ensure an appropriate exercise of the arbitral function within the scope of the tribunal's jurisdiction and competence. Methodological approaches vary:

• Firstly, there are strategies of accommodation and effectiveness (eg, seeking to give effect both to the commercial, investment or treaty instrument that serves as the basis of arbitral consent, while accepting some relevance for human rights, environmental and climate change laws).
• Alternatively, there are more formal approaches as to whether human rights, environmental or climate change laws are applicable in the context of any particular dispute.

Regardless of the methodological approach taken by a tribunal in dealing with arguments based on human rights, environmental or climate change law, professor Desierto argued the arbitral tribunal will have to contend with substantive and procedural considerations when these bodies of law interact with commercial contracts, investor-state contracts, investment treaties and other inter-state agreements. For example, tribunals may need to decide how human rights, environmental or climate change laws bear on jurisdiction, the availability and nature of interim measures to be awarded, the merits and issues of damages and remedies. Procedural considerations will include:

• the composition of the tribunal (particularly the expertise of arbitrators);
• the design of arbitral procedures;
• the participation of non-disputing parties;
• the evidentiary/fact-finding approach;
• the probative value and assessment of evidence submitted; and
• the supervisory role of state courts as well as questions relating to recognition and enforcement of arbitral awards.

Tribunals will always have to bear in mind the arbitral function and the consent on which their jurisdiction is based. They will need to manage expectations regarding the limits of their jurisdiction while also allowing for flexibility in determining how human rights, environmental or climate change laws may impact the resolution of disputes. Arbitrators will need to gain expertise in these areas while the composition of tribunals may need to become more diverse or more expert participation may be needed to illuminate the interpretations of these dimensions of a dispute.

Reparative expectations in human rights, environmental and climate change laws are also unique. Unlike the more predictable parameters of compensation and damages in commercial contracts or investment contracts, the public law nature of human rights, the environment and climate change may not be readily compatible with traditional approaches to assessing damages. Arbitral tribunals will have to manage parties' expectations on what reparative measures they can realistically authorise in international arbitration disputes where human rights, environmental or climate change law are inevitably invoked.

Professor Desierto concluded by arguing we have passed the age of possibilities for separation between public law and private law given the nature of climate change-related disputes and the fact that human rights challenges and climate change action affect cross-border commerce, investment and international relations. International arbitration will remain an important dispute resolution mechanism to adapt to this new era.