“The check, please!” – Incentivizing states to pay for climate change?

Thinking aloud

When it comes to climate change, there is a disparity between causers of effects and the ones having to endure them. Virtually all states and many large businesses contribute to climate change, whereas the resulting damage does not affect everybody equally and at the same time. The international law on state responsibility in situations of shared responsibility is thin, which makes it difficult for particularly affected states to effectively seek compensation. Against this background the post attempts to spark a discussion by offering a different perspective on the problem which relies more on incentivizing rather than forcing responsible states to compensate.

The legal landscape on plurality of responsible states

A look at the ILC’s Draft Articles on the Responsibility of States for Internationally Wrongful Acts (ASR) unfortunately yields a rather poor return regarding rules that deal with a plurality of responsible states for an injury or damage. The ASR devote only one article to the matter:

Article 47. Plurality of responsible States

1. Where several States are responsible for the same internationally wrongful act, the responsibility of each State may be invoked in relation to that act.

2. Paragraph 1:

(a) does not permit any injured State to recover, by way of compensation, more than the damage it has suffered;

(b) is without prejudice to any right of recourse against the other responsible States.

For climate change related damages, where affected states face not two or three, but a whole mosaic of perpetrators, two questions arise that determine the usefulness of this ASR rule:

1. Can affected states claim compensation from another state which only contributed to the damage to a marginal extent?

2. If compensation can be claimed, can such a claim aim at full compensation or is it limited to the extent of the contribution to the damage?

To answer these questions, the ILC’s commentary to the ASR and international jurisprudence may offer some guidance:

Commentary 1 to Art. 47 ASR states that “responsibility is not diminished or reduced by the fact that one or more other States are also responsible for the same act”, but it does not explicitly address matters of marginal contribution/responsibility. Comment 10 to Art. 16, however, dealing with aid or assistance in the commission of an internationally wrongful act, provides that assistance which “may have been only an incidental factor in the commission of the primary act, and may have contributed only to a minor degree, if at all, to the injury suffered” does not relieve the assisting state from its responsibility. It rather limits the assisting state’s responsibility to its degree of contribution/enablement. An argument to the effect that a minor degree of contribution to climate change relieves a state from corresponding obligations altogether has also been rejected by the Dutch Supreme Court in the Urgenda Case (at 2.3.1). The drafters of the Guiding Principles on Shared Responsibility in International Law come to the same conclusion (Principle 10 and commentaries 12 and 13). Marginal degrees of contribution do thus not relieve states from their international responsibility for climate change.

In the commentary to Art. 47 ASR the ILC only addresses the second question explicitly for a scenario where two or more states carry out an internationally wrongful act together in the sense of “acting jointly in the respect of the entire operation” (Comment 2). Here “the injured State can hold each responsible State to account for the wrongful conduct as a whole”. If contributions to climate change would fall under the circumstances of “acting jointly” is questionable, given that states do not work together to cause climate change. In commentary 13 to Art. 31 ASR the ILC held that “unless some part of the injury can be shown to be severable in causal terms from that attributed to the responsible State, the latter is held responsible for all the consequences”, but relativized that statement by adding that such consequences must not be “too remote” of the conduct in question. All in all, the rule seems to be that full compensation can be claimed from all responsible parties, unless their contribution to the damage is marginal, “remote of the wrongful conduct” or “negligible”. Otherwise, compensation can only be claimed up to the degree of responsibility of the individual causer. For climate change related damages this aggravates the disadvantage of affected states. They will likely have to deal with a mosaic of responsible actors and file a horrendously inefficient amount of time and resource consuming claims in which they would have to argue over notoriously difficult questions of causal relations.

Although international environmental law attempts to relativize questions of contribution to climate change and empower developing states vis-à-vis their developed counterparts through the principle of common but differentiated responsibilities (CDR), it unfortunately does not change much with regard to the legal landscape portrayed above. That is, for one, due to the fact that the CDR principle only affects the primary obligations of states relating to climate change (e.g. Art. 3 Kyoto Protocol). CDR modifies the extent to which states have to take measures depending on socio-economic factors and degrees of contribution to climate change with an emphasis on developed states (cf. Principle 7 Rio Declaration; Art. 3(1) UNFCCC; Art. 4(4), 9 Paris Agreement). It does not establish a “common but differentiated state responsibility” in the sense of the ASR. CDR is focused on enabling sustainable development, which is reflected in its history and many of its manifestations (e.g. Art. 3(4)(5) UNFCCC). Funds established in climate conventions also regularly serve to finance development and assist developing countries to comply with e.g. emission limits (see the ‘Montreal Fund’), rather than to compensate states affected by climate change. For another, CDR protects and favours developing but not necessarily affected states. While the two may overlap developed states will certainly be affected as well, some potentially rather soon in case of e.g. the Netherlands.

CDR also has two potentially beneficial implications for affected states: In some instances, where it exempts developing states from primary obligations completely, CDR can pre-empt developed states from raising clean hands defences against developing states’ claims and reduce the total number of legally responsible states. But given the ubiquitous contribution to climate change around the world, this can hardly alleviate the problem of a vast plurality of responsible states.

The right to recourse

From the perspectives of affected states focussed on possibilities to claim compensation, the legal landscape does not look very promising. Yet, what is often overlooked is the perspective of the responsible states and the incentives international law may provide for them to proactively compensate affected states.

What the ASR only mention on the sidelines in Art. 47(2)(b) is the possibility of a state providing full compensation to take recourse against other responsible states. The commentary on this clause is very brief. Commentary 10 to Art. 47 ASR only clarifies the relationship between the rule in paragraph 1 and potential rights to recourse that states “may” have (the ILC references Articles IV(2) and V(2) of the UN Space Liability Convention as potential bases for recourse rights). Article 47(2)(b) does not provide such a right, but merely holds that paragraph 1 is without prejudice to them.

The Guiding Principles on Shared Responsibility in International Law explicitly foresee a right to recourse in Principle 12, relying on Special Rapporteur Crawford’s assessments (para. 276d) and on a statement from the International Tin Council case before the UK House of Lords (at p. 480). They do, however, somewhat undersell the establishment of a right to recourse in international law. When looking at different legal orders from around the world, the rule that a right to recourse arises whenever one of many responsible actors provides compensation beyond the share that it is individually responsible for (a consequence of joint and several liability), appears time and time again. For the European national legal orders, the Principles of European Contract Law contains Art. 10:106(1), which states that:

“[a] solidary debtor who has performed more than that debtor’s share may claim the excess from any of the other debtors to the extent of each debtor’s unperformed share, together with a share of any costs reasonably incurred.”

Corresponding national laws can be found e.g. in Germany (§ 426 German Civil Code), France (Art. 1317 Code Civil), Greece (Art. 928 Greek Civil Code) and many other countries. Outside of Europe the rule is reflected e.g. in Art. 891 Afghan Civil Code, Art. 950 Belarusian Civil Code, Art. 283 Brazilian Civil Code, Art. 178 Civil Code of the PCR, Art. 1214 Cameroonian Civil Code, Art. 1908 Ethiopian Civil Code, Art. 217 Iraqi Civil Code, Art. 442 Japanese Civil Code, Art. 179 Moroccan Civil Code and in the legal systems of the US, Australia (see p. 20 with further references) and Russia. Arguably, a right to recourse as a result of full or at least excessive payment in case of shared responsibility is a general principle of law in the sense of Art. 38(1)(c) ICJ Statute.

A win-win situation? – Thinking aloud

Recourse rights could be a powerful incentive for major causers of climate change related damages to pay and thereby benefit the disproportionally affected states as well.

Since compensating the victims of climate change related damages beyond the own share of responsibility grants legal claims against other causers, leverage at the international negotiation table would be the result. Not in a financial sense, but in a political one and potentially even with a view to legitimizing countermeasures. Since the major emitters are typically wealthier industrial nations, a legally recognized claim against another powerful state may be worth more to them than the amount of money they would have to pay an affected state. Due to CDR exempting developing states from certain primary responsibilities, recourse rights might in fact be limited against developed sates from the outset. Besides bathing in the positive publicity, a paying state could also ensure that no claims could be acquired against it in relation to the damages suffered by a particular country.

Once the potential of obtaining recourse rights against big international players/emitters is recognized, it might kick off a rush at the tollbooth, which could reverse the legal problems that affected states face in obtaining compensation. They might even be in the empowered position to negotiate favourable conditions for themselves once an emitter wants to pay. Arguably, since states are free in if and how much compensation they want to collect from responsible states, they could reject overpayment unless the emitter is willing to pay the right price. This would also prevent the paying states from overcompensating only up to the share of one specific other state, against which they might want to receive a recourse right. The rule in Art. 47(2)(a) ASR, by which a state may not recover, by way of compensation, more than the damage it has suffered, only aims at preventing double compensation, i.e. claiming the full sum from more than one responsible state. But the scenario envisaged here is a different one. A negotiating affected state is not trying to enrich itself by way of compensation – it is rather setting up conditions under which it is willing to allow one of its legal claims to pass onto another state.