The ICJ’s advisory opinion clarifies states’ legal obligations to combat climate change, potentially increasing climate-related litigation and regulatory scrutiny for businesses, and providing support for states in certain energy transition related investment treaty arbitrations. Governments may now introduce tighter regulations in order to comply with the ICJ’s interpretation of states’ obligations under international law, which in turn is likely to impact foreign investments. Businesses could see heightened accountability for environmental impacts, including stricter compliance expectations and potential disputes over fossil fuel activities. The advisory opinion expressly reinforces states’ duty to regulate harmful activities, including those of private companies. Companies may need to reassess transition commitments, anticipate regulatory changes, and prepare for intensified scrutiny from governments, activists, and stakeholders, leveraging climate-related opportunities to strengthen defensible positions and create business value.
From Paris to The Hague: The ICJ Redefines Climate Obligations
The International Court of Justice (ICJ) has issued a landmark advisory opinion that potentially marks a turning point in climate change litigation. International treaties such as the Paris Agreement and the Kyoto Protocol started to set the way, but the recent ICJ advisory opinion provides further endorsement of states’ legal obligations under international law.
By providing much needed clarity on the legal duties of states in the context of climate change, this advisory opinion could pave the way for states to sue other states over climate change, including for historic emissions of greenhouse gases (GHGs). It is also likely to be instrumental in climate related investment treaty arbitrations. The ICJ found that states have an “obligation to prevent significant damage to the environment” and must “cooperate in good faith” to combat climate change. This decision could well have far-reaching implications for governments, and vulnerable populations. For businesses, should the opinion be implemented, there is an expectation for greater climate-related litigation and regulatory intervention, which could impact foreign and domestic investments alike.
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