In this Centre for Climate Engagement’s spotlight interview series, we explore law for climate action through the lens of a range of experts in their fields. This month’s interview is with Wendy Miles QC, a specialist in international dispute resolution, who makes the case for all lawyers to be climate fluent.
When and why did you become interested in climate change and how do you use your career to help tackle it?
In 2014 the International Bar Association published a report which was requested by Mary Robinson, former President of Ireland and founder of The Mary Robinson Foundation – Climate Justice, titled ‘Achieving Justice and Human Rights in an Era of Climate Disruption’. I was at an International Bar Association (IBA) conference in Singapore when the report was published and attended the launch because there were no international arbitration events scheduled. I planned to collect material for my sons who were studying climate change and science at school. Al Gore was speaking at the launch and Mary Robinson was there, as well as the former president of the Maldives – all amazing speakers.
It was an absolute eye-opener and within five minutes I realised the subject matter was squarely in my field of day-to-day practice. It brought together a lot of the work that I’d been doing since my Master’s, when I first graduated from law school in the mid 1990s. I focused on autonomous governance and relationships between sovereigns and peoples or populations within states who were entitled to secession under international law, but out of pragmatism chose a form of self-governance within the sovereignty of the state whose territory they were within. All of the associated peace building and dispute resolution work that I’d been doing throughout my career – from 1998 to that moment in 2014 – seemed relevant to climate change justice issues, to natural resource extraction issues, to the rights over natural resources, to the conservatorship over ecosystems. Attending the event was an epiphany moment when the various components of my practice and broader interests suddenly aligned.
Can you describe what you do?
My specialism is international dispute resolution. I act as an arbitrator and counsel in disputes arising out of primarily foreign direct investment – a non-national investing in a foreign state. Most of my work is increasingly in disputes arising out of investment in energy and infrastructure transition.
This area of international dispute resolution emerges from a particular historical context. As international economic law evolved over the 20th century and imperialism was replaced by neoliberalism, there was a heavy push for a dispute resolution system that transcended national courts and national governments. This was to protect international property rights over national government action to expropriate without compensation or otherwise treat foreign investors unfairly. A number of international instruments emerged from the supporting legal framework. One is the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, known as the New York Convention. This was the seminal treaty in the broader international investment protection regime, to which there are now 169 state parties. It is a treaty by which state parties commit to recognise and enforce, as if it were a local court judgment, a foreign arbitral award. Another is the Washington Convention of 1965, dealing with investment protection under treaty and arbitration.
My current practice mix is split between sitting as arbitrator (generally president), as counsel and advising on climate change transition strategy work, and there is overlap in all three. In 2020 I was appointed to the UK panel of arbitrators and conciliators for the International Convention of the Settlement of Investment Disputes, the body that administers investor state arbitration where agreed to by the parties.
Where does climate change sit?
I think of the system of international economic law, insofar as it needs to facilitate accelerated transition to meet climate change mitigation and adaptation goals, as a body, comprising multiple interdependent systems that all work together. The skeleton is the rule of law, giving structure to the body; without the other systems it is a pile of bones. Public international law is the nervous system sending the signals and messages to the body as to how it should behave to protect the rule of law. It does not implement; it simply sends the signals. The muscular system, the driving force in the body, is national law – domestic law, that comes from legislation, regulation and jurisprudence (or case law). A lot of climate litigation works to build the jurisprudential muscles. My day job (my non-climate job) primarily involves the fourth system – the circulatory system– which is the capital ‘blood’ that moves through the global economy.
International arbitration implements and enforces international agreements and instruments that comprise that circulatory system. It is what parties frequently choose in preference to the other party’s national courts and may be considered the acupuncture point for the transition of the circulatory system. There are millions of cross-border contracts; not all result in disputes and arbitration, but those that do so will interpret, apply and implement the legal obligations of the parties arising out of the investment. The ensuing awards allocate risk and set the direction for investment going forward.
Climate change mitigation is plainly urgent. COP26 in Glasgow really brought home to me what is required from an international economic law perspective. Consider the figures from the Glasgow Financial Alliance for Net Zero (GFANZ), which brings together the financial sector to accelerate the transition to a net-zero economy and represents $137 trillion in investment funds. When Alliance members committed to aligning their investment portfolios with net zero, with a 45% reduction target for 2030, they presented a formula for what money needs to go where. So, if you want to get 45% reduction between now and 2030, $32 trillion needs to be invested in scaling up low carbon infrastructure. Now 62% of that is energy; of the $7 trillion a year of new investment, $4 trillion alone is investment in new energy systems.
The cases I’m involved in are investments in energy, infrastructure, transportation, manufacturing, natural resource extraction on some other element in the cycles or supply chains in transition. The favoured model for parties seeking damages for breach of contract or treaty investment protections appears to be the discounted cash flow, or income approach. This is commonly used for valuing shares and businesses for mergers and acquisitions. As it is a future income projection model, it needs to estimate future costs. For investments in high carbon emitting energy systems, these could include for example carbon tax, cost of offsets, loss of subsidies and, ultimately, loss of any revenue on sales. To date, I have not seen those transition costs modelled and it is not clear to me why that is so.
In addition to valuing loss or compensation, arbitral tribunals are also required to interpret and apply the law and to consider areas of expert evidence, as well as facts. Arbitration generally tends to adopt a common law approach to evidence, with adversarial cross-examination of experts and witnesses. We know from public litigation in other fields, including medicine, that scientific experts do not provide answers in absolute terms. In practice, there is a risk that the adversarial process could undermine climate science if not managed carefully.
Applicable law is also critical. A system of law may apply as the agreed governing law of the contract or treaty, or the mandatory law of place of performance or even place a registration of a party. As climate change laws continue to proliferate in national law systems – the muscles of the body of international economic law – these will become increasingly likely to apply in arbitration through an applicable law.
You helped to set up the Net Zero Lawyers Alliance that mobilises commercial lawyers, law firms and commercial law to help achieve climate mitigation and adaptation goals. Is there increasing interest in Net Zero from the legal community? What do you hope the Alliance can achieve – or is achieving?
One key aim of the Net Zero Lawyers Alliance is to put the climate change brick in the brain of commercial lawyers, irrespective of their practice area. Lawyers need to be aware that new climate laws and commitments are emerging and to know when to apply them. I’m working with the Centre for Climate Engagement at the University of Cambridge to help develop training tools for lawyers across different practice areas to demonstrate how far this spreads across the scope of legal advice. The idea works in a similar way to Chapter Zero that aims to equip board directors to be climate fluent.
The independent climate change think tank, E3G has published a charter across professional groups and bodies to help identify how professional bodies might support members undergoing the transition. The first step is to get your own house in order. This is critical for each of us to play our role in reaching net zero but it also provides an affinity with clients who are doing the same. And legal services are part of the client procurement chain. If legal service providers are not climate fluent, there is a risk that they are not able to provide competent legal advice. This is the way the world is moving. If GFANZ is correct, and $32 trillion is to be invested in new infrastructure by 2030, that will be transformative. We must move with the times and be aware of what’s happening around us.
While there are risks there is also opportunity. The figure of $7 trillion for new investment and scaling up brings a lot of associated legal fees. There is enormous opportunity here because everybody is struggling with transition. I think lawyers are able to assist with some aspects of risk allocation and risk management in this very uncertain phase of society and economics. Clients are increasingly looking to engage lawyers who get it, who understand those risks, and that enhances a firm’s offering to clients.
You recently returned to the University of Cambridge to complete a PhD. Can you tell us why you decided to do this, what you are researching and how it will inform your work in the future?
Someone recently said a PhD in international law should tackle the ‘pebble in your shoe’. Mine was that the area of law that I was practising was capable of having a direct and significant impact on climate change mitigation and adaptation. Rather than wait to discover whether that impact would be positive or negative, I decided to conduct my own empirical study to investigate the alignment between energy transition and international arbitration award outcomes.
At the same time, the Net Zero Lawyers Alliance is conducting three additional studies to tackle systemic approaches to international economic law beyond international commercial arbitration. I’m hoping to put those together at some point. We need to understand whether the existing international economic law framework is able to facilitate transition to net zero or whether it will simply lock in future profits for existing investment. Both scaling-up investment in alternative infrastructure and investment in phasing down and phasing out existing high carbon infrastructure require a more nuanced approach to valuation, as well as a comprehensive application of applicable law and science.
Which issues remain a challenge and what makes you hopeful about the future?
For lawyers, humility is a challenge. Different sectors of society and business have been working on climate for decades. Commercial lawyers have been largely absent outside environmental law. Now that we are engaged, I think it is important to listen, learn, read and reflect. We can look specifically at what we do and think across the system as to how solutions might evolve from our areas of knowledge. This means engaging with incumbent operators of the systems in transition, to identify what might be creating obstacles and what might create glide rails within the law.
As lawyers we need to listen to learn, not just listen to solve. We need to get better at listening to other voices, to learn about what solutions look like from non-legal perspectives, as well as from legal perspectives outside our own disciplines. We need to reflect and figure out what a workable, viable solution might look like, and then work to ensure that the necessary steps are taken within our own practice areas.
One encouraging indicator from the Net Zero Lawyers Alliance is how readily commercial lawyers and firms are engaging seriously at the top level. There has been a lot of work done by public interest groups, by civil society, lawyers and campaigners which has moved even the most conservative parts of professional services. Business and industry and now the professional service providers that service them have woken up to transition, which is really encouraging and gives me hope.
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