Kota Kinabalu: The Borneo International Centre for Arbitration and Mediation (Bicam) based at the Sabah International Convention Centre (SICC) offers Environmental, Social and Governance (ESG) disputes resolution as it positions itself as a leading hub for legal services, particularly international arbitration and mediation as it promotes Alternative Dispute Resolution (ADR).
This is according to Bicam Senior Counsel Sharifah Shazuwin.
As commercial contracts and international trade and investment treaties contain an arbitration clause that requires the parties to submit a dispute to an arbitral tribunal rather than ordinary state courts, Sharifah advocates striking a balance on ESG issues as she puts it:
- E: Protection of ecosystem versus attracting foreign direct investment
- S: Protection of indigenous / local community rights versus protection of investor rights
- G: Good faith investors versus political transitions (stable/unstable)
The question is whether arbitration is suitable for resolving ESG disputes. Arbitration has a number of characteristics that make it particularly attractive. It is precisely these characteristics that make arbitration suitable for ESG disputes.
Some of the advantages of arbitration are:
- Parties have the ability to appoint independent arbitrators with specific expertise in ESG issues, such as climate change and human rights;
- Arbitral awards are likely to be recognised and enforced (almost) globally, due to the New York Convention; and
- Injunctions can (in principle) be obtained quickly in cases of irreversible environmental damage or gross human rights violations.
Sharifah pointed out that confidentiality offered by arbitration is a major factor favoured by parties in disputes. Besides if any of the companies are in danger of being wound up, the process of arbitration can be expedited.
Due to the integration of ESG ideals into commercial contracts, international trade and investment treaties, laws and regulations, it is inevitable that ESG disputes will more often be resolved through international arbitration.
Environmental, Social and Governance is an umbrella term for issues relevant to an organisation’s assessment of its impact on society and the environment.
As the importance of ESG in corporate policies and investment decisions increases, so too will the number of disputes that will arise out of ESG-related issues.
