On 28 November 2023, the Washington Arbitration Week hosted a panel on Next Generation Disputes: The Convergence of ESG, Labor, And Human Rights in International Arbitration and Beyond, co-sponsored by ArbitralWomen and the Business and Human Rights Lawyers Association (BHRLA).
The moderator, ArbitralWomen Board member Cherine Foty, Senior Associate, Covington & Burling, Washington, D.C., USA, reminded the audience that, as the ESG debate gains traction all around the world, contractual obligations concerning the environment, human rights, and labour rights also become more prevalent. In that scenario, she predicted a ‘greater wave’ of ESG disputes and questioned if arbitration is indeed the best method to resolve them.
Somesha Ferdinand, Global Head of Compliance, CIB at Natixis Corporate & Investment Banking, Paris, France, noted the environmental obligations faced by European financial institutions. In line with the Paris Agreement, they are under pressure to move from ‘brown financing’ to ‘green financing’, which requires them to thoroughly investigate the environmental practices of investors.
Focusing on Latin American jurisdictions, María Lucía Casas, Senior Associate, Xtrategy, Bogota, Colombia, brought up examples of how international treaties have dealt with ESG. Stressing that the inclusion of ESG obligations in treaties raises new questions about consent, Ms Casas explained that treaties commonly address ESG concerns by:
- referencing sustainability, human rights, and corporate social responsibility in the preamble;
- reaffirming States’ rights to impose non-discriminatory measures to enforce public policy; or
- creating ESG obligations for investors.
ArbitralWomen member Clovis Trevino, Partner, Covington & Burling, Washington, D.C., USA, commented on her pro bono representation of international labour unions in the Bangladesh Accord Arbitrations to hold global fashion brands liable for a building collapse which killed over a thousand textile workers. Ms Trevino highlighted the difficulties in financing the proceedings, analysing thousands of documents obtained in discovery, and ensuring that compensation reached the victims.
In spite of the challenges of arbitrating ESG disputes, Shanda Galloway Botts, Senior Vice President Ethics and Compliance, Employment Law & Litigation, AARP, Washington, D.C., USA, argued that arbitration is a viable option for resolving labour disputes. She noted that arbitration is particularly well-suited to labour disputes because of the reduced costs, faster proceedings, and expertise of arbitral tribunals.
As an alternative to litigating or arbitrating ESG disputes, Elizabeth Donnelly, Attorney Adviser for the U.S. National Contact Point, State Department, Washington, D.C., USA, mentioned the possibility of mediation under the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. Mediation under these Guidelines can be beneficial to businesses because it is consensual and not mandatory, it is more flexible than litigation, it offers a wider variety of remedies, and it is non-public.
In conclusion, the panellists were confident that businesses would see a surge in ESG disputes, and that arbitration can be an effective method to solve them. Nevertheless, they urged arbitration practitioners to be mindful of the features of ESG disputes, and to consider making arbitral proceedings more flexible to address such particularities.
Submitted by Maria Eduarda Caramez Vieira, LL.M. candidate, Georgetown University Law Center, Washington, D.C., USA.
Left to right: Clovis Trevino, María Lucía Casas, Somesha Ferdinand, Cherine Foty, Shanda Galloway Botts, and Elizabeth Donnelly