16. Paris Agreement

The starting point for any consideration on environmental liability is Article 8 of the Paris Agreement which, in its para. 1, recognises the importance of averting, minimising and addressing loss and damage associated with the adverse effects of climate change. With this, Article 8 connects with the Warsaw International Mechanism (WIM)-work programme of 2013 which specifies that adverse effects resulting from climate change can be both sudden and slow onset events. Sudden onset events include occurrences such as storm surges, tropical cyclones, droughts, floods and heatwaves; slow onset events can take the form of a rise in sea level, desertification, increasing average temperatures, salinisation, loss of biodiversity, glacial melting, land and forest degradation as well as ocean acidification. ¹ Loss and damage linked to these events can occur in man-made environments as well as natural systems, although the WIM’s emphasis is centred more on the damage to man-made environments. Generally speaking, the phrase “loss and damage” addressed by Article 8 Paris Agreement in reference to the WIM differs between economic losses and non-economic losses: Economic losses are understood as the loss of resources, goods and services that are commonly traded in markets ² and may entail both physical assets (e.g. property and public infrastructure) as well as income. Non-economic losses concern material and non-material values that are usually incommensurable and thus not tradable: impairment of life, health, dignity, human mobility and cultural heritage, as well as negative impacts to the natural world, such as damage to biodiversity and ecosystem services. ³ Most non-economic losses are the result of specific human-environment interactions, which renders them highly context-dependent in terms of the values assigned to them. ⁴

The Paris Agreement does not explicitly address any form of liability or financial responsibility in connection with loss and damage associated with the adverse effects of climate change, neither does it provide any tools for assessing divergent responsibilities. ⁵ Having said that, the agreement’s preamble refers to “the principle of equity and common but differentiated responsibilities (…), in the light of different national circumstance” (3rd recital), which echoes Article 3 of the UNFCCC. One fundamental element of the principle “common but differentiated responsibility” is the need to take into account the different circumstances, particularly each State’s contribution to the problem and capacity to remedy it (Decision 3/CP.19). Any further interpretation of the principle, such as it being a legal basis for enforceable financial liability, is untenable in the light of current State practice. Most importantly, differentiated responsibility has found its expression through a multitude of responses and schemes. Nevertheless, the simple fact that the Paris Agreement explicitly addresses loss and damage induced by climate change is in itself remarkable. Through Article 8 para. 1, the parties recognise the importance of addressing loss and damage without actually specifying possible forms of actions and remedies. This has been left to the political processes undertaken by the WIM on Loss and Damage, which itself has been given some prospects for enhancement by para. 2 of Article 8 Paris Agreement. By the same token, Article 8 also makes it clear that the WIM remains firmly under the supervision of the CMA (Conference of the Parties serving as the meeting of the Parties to the Paris Agreement).

The UNFCCC-COP, which adopted the text of the Paris Agreement in its 21st session, was well aware of the possibility that the “loss and damageParis Agreementloss and damage” reference in Article 8 para. 1 Paris Agreement may develop over time, either internally or externally to the WIM framework, into a legal basis for financial responsibility including liability claims associated with the adverse effects of anthropogenic climate change. However, most developed States represented in COP had little interest at the time to lay the groundwork for any system to deal with financial claims as part of climate change justice.⁶ In the end, the UNFCCC-COP representatives agreed in para. 51 of Decision 1/CP.21, to which the Paris Agreement is annexed, that Article 8 of the Paris Agreement provides no legal basis for liability or compensation.⁷ This para. 51 of Decision 1/CP.21 is part of the chapter entitled “Decisions to give effect of the agreement” and its sub-chapter “loss and damage” (para. 49-51).

The text of para. 51 states that the COP “Agrees that Article 8 of the Agreement does not involve or provide a basis for any liability or compensation”. While the terms “compensation” and “liability” are not defined, the choice of terms in para. 51 echoes Principle 13 of the Rio Declaration and thus provides a connection to the common usage of the terms in international environmental law. For reference, Principle 13 stipulates that:

States shall develop national law regarding liability and compensation for the victims of pollution and other environmental damage. States shall also cooperate in an expeditious and more determined manner to develop further international law regarding liability and compensation for adverse effects of environmental damage caused by activities within their jurisdiction or control to areas beyond their jurisdiction.

Even though the COP-preparatory work does not disclose the rationale for para. 51’s wording, it stands to reason that its intent is to prevent from the outset any context interpretation of Article 8 Paris Agreement in the light of Principle 13. What the soft law Principle 13 envisages for environmental damage in general, namely that States have a duty to establish a liability and compensation regime for victims, shall not be provided for under Article 8 Paris Agreement.

As is the case with Principle 13, para. 51 of Decision 1/CP.21 embraces all forms of redress without differing between the domestic and international legal order. Given the plethora of nuanced meanings, liability and compensation can have within various domestic legal orders, the sole focus of this chapter is on the understanding of these terms in international law. As pointed out in Chapter 3 of this study, international law’s usage of the term “liability” denotes the primary-rule requirement to provide reparations for damage irrespective of whether the harmful act was wrongful (Sect. 3.​2). In addition, the term extends to encompass both operators and States. From an international law perspective, para. 51’s use of the term “compensation” is more intriguing. Based on the conjunction “or” between the terms “liability” and “compensation”, para. 51 indicates that a duty to compensate may occur outside of a liability regime. This understanding gives rise to the interpretation where the two terms may be viewed as not being strictly interdependent, a position that can be supported by the fact that the term “compensation” is closely connected to the law of State responsibility. In the Gabčíkovo-Nagymaros case, the ICJ’s now well-known ruling is now reflected in Article 36 Articles on State Responsibility: “It is a well-established rule of international law that an injured State is entitled to obtain compensation from the State which has committed an internationally wrongful act for the damage caused by it.” ⁸ Although the term “compensation” is firmly rooted in the law of State responsibility, para. 51’s clear focus on Article 8 Paris Agreement confirms that the COP did not rule out State responsibility for every breach of the Paris Agreement. ⁹ Most importantly, the Paris Agreement is not a self-contained regime that precludes any recourse to customary international law because the latter alone provides for secondary rules in cases of primary rule beaches, e.g. by introducing a comprehensive compliance regime. Indeed, by exclusively referring to and clarifying the meaning of Article 8, para. 51 of Decision 1/CP.21 neither curtails nor excludes any secondary rules of customary international law. ¹⁰ What para. 51 exclusively tries to prevent is that Article 8 Paris Agreement is used as a basis for understanding that its reference to “common but differentiated responsibility” triggers the duty of emitting States to compensate losses and damage outside of their jurisdiction.

The wording of para. 51 is obviously designed to comprehensively prevent the development of an international legal regime designed to provide redress for loss and damage related to climate change suffered by States, other international actors, as well as natural and legal persons. As such, Decision 1/CP.21 makes it plain that Article 8 Paris Agreement should not be interpreted as a sound legal basis for international claims for damages and compensation (“Article 8 of the Agreement does not involve…”), nor should Article 8 be construed as imposing an international obligation on States to establish a liability regime under domestic law (“Article 8 of the Agreement does not… provide a basis for any liability…”). However, given that the Paris Agreement is a conventional climate regime that will evolve over time, future CMA decisions may reference the ‘historical’ understanding of Art 8 Paris Agreement at the time of its adoption.

The legal impact of para. 51 on the interpretation and application of the Paris Agreement over time depends on many factors, most importantly on the future approach of the CMA (and the WIM, under the CMA’s supervision) regarding liability and compensation. Accordingly, one of the most pressing questions is whether or not para. 51 of COP decision 1/CP.21 will prevent any future legal development towards an international liability regime for climate loss and damage. The decision and its para. 51 have been adopted by the UNFCCC-COP when the Paris Agreement was adopted. Consequently, the decision is to be classified as an “agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty” (Article 31(2)(a) VCLT). Essentially, this is the case because para. 51 sets the context in which Article 8 Paris Agreement has to be interpreted. At the same time, it is important to note that documents such as the COP Decision 1/CP.21 are extrinsic to the Paris Agreement, i.e. they are not an integral part of the treaty and thus not backed by the treaty’s binding force. ¹¹ As a means of context interpretation, para. 51’s main purpose is to resolve all ambiguities left by the wording, object and purpose of Article 8 Paris Agreement (Article 31(1) VCLT).

A further, and very much supplementary, means of interpretation is the circumstance of the agreement’s conclusion (Article 32 VCLT), which only carries weight if all methods of interpretation under Article 31 VCLT leave the meaning of Article 8 Paris Agreement unclear. It is therefore substantially immaterial that para. 51 was introduced inter alia for domestic reasons, specifically to enable Barack Obama, the then US President, to avoid seeking approval for ratification from a hostile Senate, which would have been necessary if the agreement had financial implications for the US. ¹²

With regard to events following the conclusion of the Paris Agreement, Article 31(3) VCLT differs between subsequent agreements (lit a) and subsequent practice in the application of the treaty (b). Subsequent agreements regarding the interpretation or application of Article 8 Paris Agreement can be any CMA decision, provided that it is based on the consent of all the parties to the Paris Agreement. According to Article 16(4) Paris Agreement, the CMA shall make, within the limits of its mandate, any decisions necessary to promote the agreement’s effective implementation. In other words, the CMA does not have the mandate to create entirely new legal obligations for the States parties to the Paris Agreement. Arguably, it would be ultra vires if the CMA decides that Article 8 Paris Agreement is a proper legal basis to establish strict liability for the States parties’ regarding climate change damage.

Having said that, Article 16(4) Paris Agreement does not prevent the CMA from construing Article 8(3) Paris Agreement as the source of the States parties’ obligation to enhance, through the WIM, international and domestic liability regimes with respect to loss and damage associated with climate change. Such a CMA decision would not be a supplement to the Paris Agreement but simply a further interpretation of Article 8 Paris Agreement by way of subsidiary agreement (Article 31(3)(a) VCLT). Nevertheless, the obvious conflict of any such CMA decision with para. 51 of COP Decision 1/CP.21 is not easy to resolve given that Article 31 VCLT does not delineate a hierarchy between its para. 2 (context interpretation) and para. 3 (subsequent agreement) as evidenced by para. 3’s chapeau: “There shall be taken into account, together with the context: a) any subsequent agreement…”. In this particular case, it is not the formal value of the specific means of interpretation that is decisive but the moment in time that the process of interpretation refers to. In other words, it depends on whether the interpretation seeks to establish the meaning of the treaty provision at the time of the treaty’s conclusion (static approach) or at the time of the treaty’s interpretation (dynamic approach). ¹³ Whereas inter-State courts, such as the ICJ, traditionally lean towards the static approach, ¹⁴ the dynamic approach is nevertheless routinely used when the wording of the provision indicates that the parties envisaged an evolving meaning over time. ¹⁵ In short, if the concept embodied in the treaty is evolutionary and dynamic from the outset, this should be reflected in any approach used when interpreting the treaty’s provision. ¹⁶

Irrespective of whether or not it is practical or even futile to wait for a liability-oriented interpretation of Article 8 by the CMA, it is safe to say that the normative concept of the Paris Agreement in general, and Article 8 in particular, is inherently dynamic and development-oriented. Theoretically, this paves the way for re-interpretation of Article 8 Paris Agreement at some point based on the consent of all the parties to the Paris Agreement that overrules para. 51 of COP Decision 1/CP.21.