A Point of no Return: Climate Change Litigation and Liability

 

Seminar on Global Environmental Policy and Law

Semester 98-1

Class Reflection Paper

李崇菱 Tsung Ling Lee[1]

R95A41013

 

  International climate talks at the UN summit in Copenhagen this week has been closely watched around the world, the recently released “long-term action plan text" regarding international climate change strategy has been interpreted as ambitious and positive document, nevertheless, key issues such financial assistance for developing countries to adapt to climate change remain unresolved. The need for climate change mitigation as core principle in different legal regimes thus become imperative, the explosion of climate change litigation in subnational, national, and supernational courts in the last decade under a range of substantive legal approaches is encouraging, as different actors in different geographical locations are actively challenging different legal norms. Moreover, as the United Nations Framework Convention on Climate Change (UNFCCC) does not include nor mention the need for a liability regime, climate change litigation worldwide create an alternative pluralist legal dialogue, and engage actors and non-actors through a richer narrative of climate change litigation, thus transcend the traditional notion of nation-state and boundaries. Transnational regulatory governance is a positive and constructive step towards combating the anthropogenic climate change, as it is currently the most significant international environmental problem, exacerbating the North-South divide as the people in the developing nations are in worse position to take adaptation measures. .

 

I.                Environmental Insurance Coverage – Changing role of Regulatory Regime

 

  The prevalence of environmental insurances worldwide has impacted on how a state-actor implement its regulatory regime. As the increased frequencies and unpredictability of extreme weathers, environmental insurances policies can be drafted to insure against liability incurred from past or current releases of hazardous substances, which has become popular with firms and corporations, where the purchase environmental insurance can spread risk and benefit from experiences and efficiencies of insures should remedial matter arise. Environmental insurance agreements though essentially are private contracts between private parties, nevertheless, the embedded economic incentive in environmental insurance agreements create incentives for private parties, i.e. insurance companies to play traditional regulatory functions in the past reserved for the government. Moreover, through environmental insurance agreements, it also created private obligations, which are more often stricter than public regulatory standards. However, insurers are vulnerable to climate change liability resulting from damage caused by extreme-weather events. For example, the worldwide insurance losses in 2005 alone from weather-related property loss reached USD 80 millions.[2]

 

II.              Financial Impacts of Morakot and the need to Reshape the Insurance Sector

 

  In August this year, the economic loss due typhoon Morakot is estimated by a U.N. Office for Coordination of Humanitarian Affairs at USD 3.4 billion, in the aftermath, the Cabinet also allocated a reconstruction fund of NTD 100 billion to be used over three years. The devastation of typhoon Morakot also revealed the weakness of typhoon and flood insurance coverage in Taiwan, particularly in rural areas where it is the most vulnerable. According to official statistics, as of August 21, 13 days after the arrival of typhoon Morakot in Taiwan, mere 464 claims amounting to NTD1.5 billion has been filed in the property and casualty insurance sector. In other word, the insurance sector only covers 1/3 of total damage brought by typhoon Morakot, and in the 362 towns and cities around Taiwan, only one third of towns, with fewer than 10 properties are covered by typhoon and flood insurance.

 

  This discrepancy reveals the dependency on the public sector in the face of natural disasters and the poorly structured and regulated insurance industry to share risks and damage control[3]. Although a variation of natural disaster insurance is available in Taiwan, they are not mandatory, and this could explain the lack of willingness to take up environmental insurance. For example, in order to be covered by typhoon and flood risk, a homeowner need to purchase fire and basic insurance first, then add additional coverage of typhoon and flood. According to the statistics, of all 7.66 million homes in Taiwan, only 1.98 million are covered by fire insurance, and among those insured, only 1694 household have fork out the addition payment for typhoon and flood insurance. In other word, only two out of every 10,000 residences in Taiwan are insured against these natural disasters. Even more disconcerting, the disparity between urban and rural insurance coverage is startling. Counties of Chiayi, Pintung, Taitung, Kinmen and Lienchiang, where the first three counties are among the areas hit worst by Morakot are under-insured.

 

  The lack of insurance coverage in Taiwan is due to the costly insurance premiums for natural disasters, where the financial burden is often too high for people living in the rural areas. Insurance premiums are calculated based on losses in the past decade due to natural disasters such as storms and earthquakes, then divided by the number of households in a community, thus depending on locality, natural disaster insurance premiums varies, and this place rural areas with frequent encounters of extreme weather at financial disadvantaged place. An annual premium for example, could easily reach NTD 5000, with basic NTD2000 fire insurance, and additional NTD 3000 for typhoon and flood insurance coverage. 

 

  As an island nation, Taiwan is extremely vulnerable to the effects of climate change, and the recent encounters with typhoons, floods, and mudslides, where reconstruction of homes, and resume business is a costly financial exercise, how Taiwan restructure its policies and implement its laws are pivotal in preparation of future natural contingencies. Typhoon Morakot exposed the structural deficiency of the insurance sector, and the over-reliance on the public sector to provide financial support. Though, government plays an important role in providing financial support in the aftermath by allocating funds to assist rebuilding of homes, it also risk diversifying and over stretch the national budget. Whether Taiwan would take the regulatory route in imposing compulsory home insurance to minimize the over-stretch of state resources leaves a room for discussion. However, in the face of climate change, and how to tackle global warming and related natural disasters, Taiwan faces different policy choices, for example, tthe rights-based approach, ad-hoc approach, court-based approach or as a collective-responsibility approach, the abundance of choices, nevertheless, must be analyzed in light of its social and legal context.

 

III.            Alternate Route – Transnational Climate Change Litigation

 

  Currently, both producers and largest emitters of greenhouse gases externalize the cost of their climate change contribution, and often are left for the vulnerable population to bear. Though regions in both the North and the South are equally at risk of climate change, nevertheless, people in the South are particularly vulnerable and are in a worse position as they are less equipped with adaptation measures. Climate change regulation necessitates multilayer legal approaches, ones that engage simultaneously at more than one level of governance; individual, local, national, regional and global. Thus transnational climate change litigation is a feasible alternative way to pressure state-actors to comply with international obligations, or at least, to address the problem directly. Moreover, litigation provides and acts as a mechanism for private parties to engage regulatory questions even more directly than legislative or executive decision-making processes. Climate change litigation provides a space for different actors to interact with each other at different levels, and from different branches, where they work together to solve a common problem through dialogue.

 

A.    Alien Tort Claims Act and Transnational Litigation

  Foreign plaintiffs may have a claim in United States courts under the Alien Tort Claims Act to seek redress for the impacts of climate change[4]the door is still ajar subject to vigilant door keeping, and thus open to a narrow class of international norms today.”[10] Hence, the unsettled jurisprudence on the “law of nations” means that environmental violation is potentially within the scope of meaning of the ATCA. . The United States Congress enacted the Alien Tort Claims Act (ATCA)[5] on September 24 1789 to provide “extraterritorial jurisdiction over the crimes of piracy, slave trading, violation of safe conduct and the kidnapping of ambassadors”. The ATCA provides “the district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”[6] A cause of action under the ATCA must fulfill the following elements (1) an alien sues, (2) for a tort; (3) the alleged act is committed in violation of the law of nations. The latter element the “law of nations” is problematic, as it remains unsettled, as the United States Supreme Court had not yet articulated a conclusive definition of the law of nations.[7]However, in 1980 where the modern era of ATCA jurisprudence began with the Second Circuit’s decision in Filartiga v. Pena-Irala, the court held that the law of nations is not static, rather it evolves concurrently with the rights and duties recognized by the international community.[8] Nevertheless, in Sosa v. Alvarez-Machain[9], the Supreme Court construed the law of nations narrowly, holding that a claim under the ATCA must “rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th-century paradigms we have recognized”. But the Court also recognized “

 

  Nevertheless, several cases recently have tested the ground of the ATCA to environmental claims, but the courts did not deem them as actionable. For example, in Amlon Metals, Inc.v. FMC Corp[11] the plaintiff sued FMC for transporting hazardous materials in violation of a contract between the two parties. Plaintiff Amlon claimed violation of the Stockholm Declaration and also cited the Restatement Third of Foreign Relations Law of the United States. Nevertheless, the District Court granted the motion to dismiss, citing that the claim was not enforceable under the ATCA as the Stockholm Declaration did not contain any specific proscriptions.  

 

  In Flores v. Southern Peru Copper[12]residents of Peru claimed that the defendant’s copper mining had caused air and water pollution, and violated their “right to life”, “right to health” and “right to sustainable development” and violations of international environmental law. The court opined that the principles asserted by plaintiffs to establish the right to health, life, and sustainable development presented only “virtuous goals understandably expressed at a level of abstraction needed to secure the adherence of States that disagree on many of the particulars regarding how actually to achieve them.” Thus, the court concluded on the basis of “boundless and indeterminate” rights are insufficient to comprise part of customary international law.[13]

 

  Hence, environmental cases under the ATCA reflect the United States court’s reluctance to accept violation of environmental principles as a basis to find a violation of the law of the nations. Nevertheless, academics have commented that ATCA claims alleging environmental violations could still succeed. First, plaintiff could base climate change claims on treaty violations such as the UNFCCC, the United Nations Conventions on the Law of the Sea Agreement Relating to the Conversation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks, which are multilateral environmental agreements, and is most likely to prevail[14]. Second, plaintiff could assert that sustainable development have attained “law of nations” status and should form the basis of an actionable claim under the ATCA.[15]  

IV.            Conclusion

 

  Though transnational climate change litigation remains unlikely, nevertheless, it has the potential to be part of the process of transnational regulatory reigme. Mapping climate change litigation worldwide provides a glimpse of the power dynamics, and how different actors in varies of judicial forums interact with each other, and influence the current regulatory process. By examining the domestic insurance structure in conjunction of the prevalence of natural disasters in Taiwan, the lack of domestic insurance coverage is disconcerting, and how to restructure the insurance sector, or domestic regulatory regime to respond to the increasing frequency of extreme weather is pivotal not only to protect the vulnerable but also how to allocation state resources accordingly. Transnational litigation is an alternative route, though feasible but under current jurisprudence is unlikely. Nevertheless the space created by climate change litigation would fill the regulatory gaps, and engage different actors across the world to solve the common problem.    

 

---