By Ms. Prapti Shrestha and Ms. Manaswini Sharma*
Abstract
This blog fulfills the theme on corporate liability for transboundary climate harm. It considers the potential impact of prevailing climate advisory proceedings by the International Court of Justice (ICJ), the International Tribunal for the Law of the Sea (ITLOS), and the Inter-American Court of Human Rights (IACtHR) on national, regional legal, policy, and governance responses. The blog outlines the corporate roles in causing climate change over centuries and the development of corporate environmental liability by focusing on the weaknesses in responding to transboundary harm. It outlines the current status of law for the proceedings as well as the historic precedents in ICJ, ITLOS, and IACtHR, and considers holding corporations responsible for climate injuries. The paper then offers recommendations for improving legal frameworks on the national and international fronts for vulnerable countries like Nepal to ensure effective corporate liability and climate justice.
Introduction
The compounding effects of climate change are an unprecedented threat to human well-being everywhere on the globe with particularly devastating effects on poor countries like Nepal. Although Nepal is responsible for negligible contributions to world greenhouse gas emissions, it faces increased incidences of natural calamities like sudden pulls on glaciers, increased exposure to landslide and flooding and extreme climate disruption to climate-sensitive businesses. Nepal only contributes 0.1% of the world greenhouse gas emissions but ranked 10th in the long term Climate Risk Index 2021, which shows the high climate change vulnerability of Nepal. The rate of glacial melt is very high and the local people of the Langtang valley are reporting warning signs for climate change according to Langtang valley research study. Glaciers melt more rapidly in the valley due to the reason temperatures exhibit a general temperature rising trend. There is evident retreating for the Langtang valley glaciers in the last few years by observation on satellite images, hydrology data as well as temperature data, as well as the observation of the villagers.
One of the most important things about addressing this crisis is recognizing the important role the corporate actors are taking in bringing about climate change by virtue of their aggregate historic and current emissions and sometimes their blocking climate policies. In recognition of the call for corporate responsibility more than ever before, a series of innovative climate advisory proceedings i.e. ongoing and have been concluded in international courts such as the ICJ, ITLOS, and IACtHR. The proceedings by these international organisations are important for vulnerable countries like Nepal, since they will be able to shape how corporations will be held accountable for transboundary climate harm. Multiple international courts, looking at climate change, using different legal rules like general international law, maritime law, and human rights law, shows an international consensus for clear legal rules for climate action. This could lead to a stronger and more complete international legal system for addressing climate change in the future.
Corporate Impact and Accountability
The interconnection between corporations and climate change dates back to the early days of industries built on fossil fuels, when during early industrialization, industries began significantly driving emissions to realize profit. As scientific research advanced over the years, researchers have increasingly quantified a large, specific amount of historical carbon emissions attributed to individual corporations, primarily within the fossil fuel and cement industries, establishing a direct causal link to the ongoing climate crisis. Research also suggests that many corporations have known information on how their products (emissions) and practices (emissions) were detrimental to the climate for many decades, and frequently, were actively attempting to counteract climate action and misinform the public. This historical context of active obstruction allows for the ethical questions surrounding corporate responsibility in the existing climate emergency framework.
While the concept of corporate accountability for environmental damage has come a long way over time, its origin and development focused primarily on environmental regulations and laws at the national level. With the rise of corporate social responsibility (CSR) and corporate environmental responsibility (CER) in the mid to late 20th century, there was a shift toward voluntary corporate behavior addressing societal and environmental issues. However, the realisation of the shortcomings of voluntary action has shifted attention to legal accountability and the increased option of climate litigation to compel corporate behaviour. This evolution from voluntary CSR to legal action and mandatory reporting signifies a growing societal expectation for accountability through corporate action or inaction affecting environmental impacts.
Climate change involving harm across borders faces unique challenges. Imposing accountability on corporations involved in actions across borders incorporates complex jurisdictional issues. Assigning climate harm as the responsibility of any one corporation when the issue is global can be challenging scientifically and legally. To achieve effective solutions would require a meaningful degree of international cooperation to accomplish the necessary legal frameworks that would overcome these challenges. Due to the actual and potential impacts created by activities across borders, the mere existence of national laws is insufficient to achieve corporate responsibility for environmental impacts without international legal collaboration and frameworks for corporate accountability.
The Emergence of Corporate Climate Accountability in Law
The earliest legal precedent on state liability for harm from practice or activity within state jurisdiction was considered to be the Trail Smelter case that asserted the principle for states to owe a duty not to cause cross-boundary harm towards the environment. Even though it was concluded that states should be more liable for environmental harm than corporations, state-level expectations influenced corporations that were capable of controlling their environmental conduct. The “no harm” logic on state liability could be proportionally extended to corporations that are linked to environmental harm. Since there are prevailing state-level prevention efforts, while corporations commit rampant pollution, it is logical to hold corporations accountable for their share of prevention and paying for harms caused.
The United Nations Framework Convention on Climate Change (UNFCCC) was the first climate change-specific legal regime to address obligations and commitments regarding climate change. While early climate change specificity focused on state parties’ commitments, growing concern about climate change and corporate emissions led to the realization that incorporating companies into legal design is inevitable. This realization was driven mainly by recognizing the extent and source of greenhouse gas emissions by corporations, which highlighted the need for corporate action on climate change. Historically, transnational businesses have prioritized economic interests over environmental concerns, which then leads to waste-induced damage, particularly where effective regulations were lacking. Excessive anthropogenic pollution, such as in the Thames river violates the principle of ecological integrity, harming the health of residents. The Minamata illness in Japan was caused by a corporation discharging neurotoxic waste into water bodies, resulting in cases of severe neurological damage in people relying on fishing. Disasters like The Torrey Canyon oil spill and Love Canal pollution showed how industrial disasters could have transboundary impact, further highlighting the need for international collective action to create rules for corporate accountability. The dioxin contamination in Italy led to strong pressure to create strict industrial hazard prevention rules.
International attention in the second half of the 20th century (like The Stockholm Declaration) focused on human activity causing environmental degradation. International regimes for the law were largely a response to megadisasters such as illicit transnational disposal of harmful wastewaters, the Khian Sea disaster, Bhopal industrial disaster, and Baia Mare cyanide spill. New events such as toxic wastewaters dumpings in Abidjan, however, show that it is difficult to keep the multinational actors legally responsible and to prevent misuses due to various regulatory configurations.
Current Status of Corporate Climate Accountability Laws
The contemporary legal scenery for corporate climate responsibility is where new international evolutions combine with divergent national legislations. A series of nations has implemented climate change legislations and environment protection policies for the conduct of corporations, such as emissions disclosure or establishment of environmental standards. Others implemented CSR legislations which, even if oftentimes more generic than climate change, include environmental considerations or reporting. Key evolution in the above direction is the one by the European Union’s Corporate Sustainability Reporting Directive (CSRD) implemented in incorporation as from 2023, expanding the scope for data corporate entities need to report on the former’s environmental and social footprint on the lines of climate-related risk and emissions throughout value chain. Even if such national and supranational developments achieve such ends, the homogeneous and globally binding regime of law and regulation for corporate liability for climate change is largely missing.
Implementation of current corporate climate responsibility measures is filled with serious complexities. It is challenging to implement legal standards internationally and to attribute responsibility for cross-border carbon footprints to multi-national corporations that have operations in various countries. More seriously, the extensive control corporate lobbying has over politics and rulemaking has the effect of either diluting or delaying more effective actions. This implies that while legal tools are being crafted, effectiveness is undermined by discriminatory practice on one hand and asymmetric corporate-regulator relations on the other hand.
Precedents of ICJ, ITLOS, and IACtHR
The modern climate advisory proceedings in the ICJ, ITLOS, and IACtHR have the potential to make a significant future contribution to corporate climate liability. The ICJ is weighing on the basis of a General Assembly referral whether states under international law had a responsibility for ensuring protection for the climate system against human-induced emissions of greenhouse gases. Subject to one of the most determinative legal questions pending for the ICJ‘s determination being whether the no-harm rule, historically imposing on states a responsibility to ensure activity on its territory is not constituting appreciable environmental harm to other states, is applicable as far as climate change is concerned, if the ICJ establishes a general state liability for ensuring protection for the climate system, it may set a legal precedent for the claim where states have an international law responsibility to regulate corporate pollution within their jurisdiction as part of an international obligation. As has been demonstrated by the Chilean case, a determinative ICJ decision could potentially have an impact on national case law such that courts are imposing principles such as due diligence and the no-harm rule on governments as well as on private emitters with the potential to expand corporate climate-related liability.
The International Tribunal for the Law of the Sea (ITLOS) has already rendered an historic advisory opinion regarding the protection of the marine environment from pollution caused by climate change. The Tribunal specifically acknowledged that the release of greenhouse gases amounts to marine pollution under the United Nations Convention on the Law of the Sea (UNCLOS). Notably, the Tribunal also affirmed that states have an obligation of due diligence to prevent, reduce, and control such pollution, and specifically reaffirmed the principle that such obligation is especially relevant where such activities are primarily carried out by or on behalf of private individuals or entities. Such precedent is of broad significance to the liability of corporations in industries affecting the marine environment by emissions or other activities. By specifically holding that states have an obligation to ensure that persons outside state organizations but within their jurisdiction observe measures for protection of the marine environment, the Tribunal directly links state obligation with the regulation of corporate behaviors. Such opinion is also likely to impact the on-going cases in the ICJ.
The Inter-American Court of Human Rights (IACtHR) provided an advisory on states’ commitments on human rights in response to the climate crisis. It highlights that it is the states’ duty to regulate corporate activity to prevent and reduce the climate crisis while also providing remedies for it. Yet, it has also clarified that corporations are themselves responsible to not harm Human Rights considering their contribution to the greenhouse gas emissions. The court declared that big polluters like fossil fuel companies should be warned that their actions which disrupt the climate is a conduct that has been carried out in violation of law. This advisory opinion of IACtHR isn’t directly binding on corporations but provides a guide for national or regional courts to hold corporate actors accountable for contributing to the climate crisis. It assigned the states with the obligation to not only hold the corporations accountable for their actions but also to provide domestic remedies to the victims of climate change like reparation from the corporation that implicated them.
Such new ICJ, ITLOS, and IACtHR precedents can possibly diffuse on national and regional platforms in many different ways. Annual advisory opinions while not legally enforceable in the same way as contentious case judgments are greatly influential in law and moral authority and could act as persuasive precedent in national litigation. The May 2024 climate change advisory opinion for the ITLOS is one such precedent for the interpretation of the UNCLOS state obligations to protect the marine environment built on a legal base available for informing new instruments with legal authority and informing national law and court judgments for more corporate accountability. The evolution and implementation of mandatory human rights and environment due diligence law is contentious globally but has relevance on national platforms of governance on international law reform on corporate climate responsibility. National legislations such as those in France, Germany, and the new EU Corporate Sustainability Due Diligence Directive require corporations to identify, avoid, and mitigate climate and human rights-related environmental destruction in all value chains and practice operations and also consistently ensure victims’ access to national legal avenues for remedy. Countries are able to integrate into national law such international tribunal established standards on such matters as such standards for due diligence and the no-harm rule. Secondly, the IACtHR human paradigm has the possibility for influencing the establishment of national climate law and regulation particularly for corporate actors whose practice may contravene human rights by climate effects.
Conclusion and Recommendations for Nepal
These climate advisory proceedings before the ICJ, ITLOS, and IACtHR are a watershed moment in the world search for climate justice and corporate liability. These new precedents carry the potential to significantly influence the legal and policy measures that shall occur on international, regional, as well as national fronts by creating certain repercussions for vulnerable nations like Nepal. So, these nations need a distinct climate change act which clearly includes a system of principles for corporate liability founded on the legal systems and findings from the ICJ, ITLOS, as well as IACtHR. Improvement of compliance instruments for existing environmental legislations is also needed such that corporations engaging in or exerting influence over countries like Nepal are subjected to the same degree of responsibility like governments. Nepal also needs to include provisions for corporate due diligence against climate impacts such that companies refrain from contributing to climate change. Lastly, improvement in public awareness and provision for access to justice for victims of climate change inflicted by corporate operations is also required. Lastly, Nepal needs to seek international and regional partnerships to build its ability for holding corporations responsible for transboundary climate harm by exchanging best practice to achieve its net zero emission goal. Then Nepal could improve climate change resilience while contributing to a world movement towards broader corporate responsibility and climate justice.
* The authors are fourth-year law students of the BBM- LL.B program of Kathmandu University School of Law, Nepal.