In her recent interview with The Arbitration Club, Dr. Atie Babaie explores the evolving landscape of climate and ESG litigation — a field reshaping how international law approaches environmental accountability.
Key Challenges in ESG and Climate Disputes
One of the most significant obstacles Dr. Babaie identified is the lack of universally accepted definitions for ESG and climate disputes. This absence creates inconsistent legal frameworks across jurisdictions, hampering effective dispute resolution and making it difficult for parties to anticipate outcomes or structure agreements.
She also emphasised the need to address power imbalances between corporations and affected communities. In many ESG-related disputes, communities bear the environmental costs of corporate activity yet lack equivalent legal resources or standing to pursue effective remedies. This asymmetry challenges the fundamental fairness that dispute resolution mechanisms are designed to provide.
A further complexity lies in quantifying long-term environmental damage that is not purely economic. Unlike commercial disputes where losses are relatively measurable, climate and ESG cases often involve harms that unfold over decades, affect ecosystems rather than balance sheets, and resist straightforward valuation.
The Role of Arbitration
While arbitration offers neutrality and procedural flexibility that make it well-suited to cross-border disputes, Dr. Babaie noted that it remains underdeveloped for ESG cases. The mechanism's inherently private nature limits transparency and accessibility — qualities that are especially important when disputes involve communities and public environmental interests rather than only commercial parties.
Arbitration must evolve to meet the transparency demands of ESG disputes. The private nature of proceedings, while commercially valuable, can undermine public trust when environmental accountability is at stake.
However, she suggested that meaningful improvements are achievable. Enhanced transparency measures and the use of amicus curiae briefs — written submissions from non-parties such as NGOs and affected communities — could allow broader participation without fundamentally altering arbitration's character. These reforms would help ensure that ESG arbitration reflects not only the interests of the disputing parties but also the wider public interest in environmental outcomes.
Institutional Evolution
International arbitral institutions have a central role to play in advancing ESG dispute resolution. Dr. Babaie highlighted several avenues through which they can adapt: revising procedural rules to accommodate the distinctive features of environmental disputes, integrating ESG principles into arbitrators' decision-making frameworks, and broadening participation mechanisms to address both private commercial interests and public environmental concerns.
These institutional changes would position arbitration not just as a commercial tool but as a legitimate forum for resolving the complex, multi-stakeholder disputes that define the ESG era.
Guidance for the Next Generation
Dr. Babaie concluded with a message for young lawyers entering the field: adopt multidisciplinary approaches. Climate and ESG litigation cannot be navigated through legal analysis alone. Effective practice requires integrating insights from economics, social sciences, sustainability studies, and international relations — disciplines that together provide the context needed to understand what is at stake and advocate meaningfully for clients.
The full interview is available through The Arbitration Club's website.