David R Haigh KC Keynote Address - LCIA 'Tylney on Tour' Vancouver 15 June 2023 On 3 June 2023, the LCIA took 'Tylney on Tour' to Vancouver for a morning symposium and lunch, focused on energy disputes, kindly hosted at Borden Ladner Gervais LLP (BLG). This followed the ICCA and the Vancouver International Arbitration Centre (VanIAC) joint conference on 'Energy Infrastructure Disputes and Arbitration: Today and Tomorrow' on 2 June. As is the LCIA 'Tylney-style' tradition, the sessions’ lively discussions were generated by topics submitted in advance by delegates and expertly guided by the four co-Chairs under the Chatham House Rule: Gerald W Ghikas KC, Vancouver Arbitration Chambers, Vancouver; Sarah McEachern, Borden Ladner Gervais LLP (BLG), Vancouver; Abby Cohen Smutny, White & Case LLP, Washington DC; and Rachel A Howie, Dentons, Calgary. Following the sessions, the LCIA was delighted to have leading Canadian independent arbitrator, David R Haigh KC, give the keynote address under the title Dispatches from the Front: There’s Still Lots of Work to Do. We are pleased to share the keynote address in full below. If you’re interested in attending the LCIA’s next 'Tylney-style' event in Paris on 29 October 2023, don’t forget to register your interest to avoid missing out on any updates. Dispatches from the Front: There’s Still Lots of Work to Do Introduction I would like to thank Jacomijn van Haersolte-van Hof and the LCIA for their invitation to address you today. I am greatly honoured. Jackie’s far-sighted and outstanding leadership at the LCIA continues to be an example to us all. Allow me to begin with a personal anecdote. I like to say that a sixteen-year-old boy decided that I would be a lawyer. I recall informing my parents about this potentially life-long choice and watching their responses. My Dad, in particular, seemed quite pleased, perhaps in part because he himself, although a successful businessman (rancher, cattle dealer, and feedlot operator and hotel owner), did not have a lot of formal education. In fact, shortly after I had spoken with him, he came looking for me to say that although he had been in business for many decades, he had never had to use a lawyer and he wondered how I was going to earn a living! As a result of this little exchange, I have a small ritual I follow from time to time. In particular, when I am feeling especially busy or even when I am concerned about where the next file will come from, I occasionally look up over my shoulder (giving my Dad the benefit of the doubt), I say, “don’t worry Dad, there’s still lots of work to do.” Over the past two days, we have had the opportunity to hear from some very well-informed, leading arbitrators and legal practitioners about their views on international dispute resolution and energy infrastructure. I am very proud of the conference on Energy Infrastructure that our colleagues, Tina Cicchetti, Joe McArthur, and Craig Chiasson have organised. Energy arbitration has traditionally played a preponderant role in international arbitration. But as we enter this new era, one must ask, particularly in light of the much-anticipated on-coming wave of green infrastructure developments, will there be a role for international arbitration? If, so what will it look like? Can we, as experienced dispute resolution specialists, provide the services and support to meet the challenge of this new generation of energy projects and the disputes that may follow in their wake? In order to answer these questions, I want to provide you with some of my observations concerning the energy infrastructure space. In the interests of full disclosure, I acknowledge that I reside in a province and city where energy production and development remain our most important economic drivers. The Alberta Oil Sands are considered to be the world’s third or possibly fourth-largest oil reserve. I also acknowledge that I earned my living for many years litigating energy disputes and continue now to serve frequently in arbitrations that are energy-based matters. For the sake of balanced disclosure, I should add that ironically, my home province is also home to the largest amount of investment in wind and solar energy in the country. For example, in 2022, Alberta added almost 1400 MW of installed capacity compared with 387 MW in Saskatchewan and 10 MW in Ontario. In the observations and comments I am going to make here today, I assure you that I absolutely uphold our duty to be good stewards of this beautiful planet, and I share the overall objective that we humans must collectively restructure how we create and consume energy. The challenge will be in the doing of it. And how we will deal with the inevitable work of resolving the disputes that will likely accompany this transition away from fossil fuels. Finally, let me say that I am an optimist. I believe profoundly that we humans will find our way through these challenges I am going to describe. We must strive to meet these challenges with wisdom and compassion. Dispatches from the Front I propose to answer my questions with what I will call ‘dispatches from the front’. In this case, it is a figurative reference to current developments as humanity potentially undergoes a major energy transformation, converting our economies from fossil fuels to other forms of energy production. These events are likely, in my view, to lead to significant challenges and stresses between public policy objectives and the on-the-ground events leading to their implementation. Although by no means a thorough review, my dispatches are intended to illustrate the emergence of some of these challenges and stresses and humanity’s opportunity to meet them. My first dispatch is what one of my old law school professors would have called a penetrating glance into the obvious (an observation that I seem to recall was sometimes directed at me). This much-touted and anticipated green revolution is far from being unanimously endorsed or upheld. Let me offer just a few underlying facts to keep us grounded on this subject. In Canada, for example, we have had at least two recent general elections in which the political parties have relied on the worries and possibly enthusiasm of many voters for our country to keep our agreements under the Paris Accord of 2015, for example, by spending billions of dollars to promote or foster switching to electric vehicles and deflecting fossil fuel based development. So far, the result is that we still have fewer than 5% of our vehicles being electrically powered. We still operate our hauling, whether by trucks or trains, or our sailing vessels, as well as our farming operations, with fossil fuels. In fact, like the whole of the rest of the world, we fly all our airplanes with fossil fuels. In that regard, it should be noted that the Paris Accord expressly exempted air travel from anybody’s obligations. The Economist, on 22 May this year highlighted the dilemma that worldwide, flying creates about 2% of annual global emissions, but contributes far less than that percentage to world GDP. Thus, the great green revolution that is occurring may have to wait for the public to catch up. Currently, in North America some jurisdictions are passing legislation that will prohibit the sale of cars consuming fossil fuels by various dates and certainly no later than 2035. Public regulations have been promulgated for net zero emissions by 2050. Such objectives may well meet the general wishes of many voters, but whether consumers will comply with these objectives remains to be seen. There will, however, be a growing tension between what seem to be urgent and necessary courses of action to many as opposed to what in the short term will be practical and convenient for many others. In any event, let us look at some other matters that almost any ordinary news reader may have noticed. My second dispatch from the front simply notes a widespread effort to coerce or compel or shame insurers to cease insuring oil and gas operations and bankers to cease lending to such operations. When I say ‘widespread’, I would note particularly the reports in the last couple of months of well-known Game of Thrones actors along with certain faith-based groups who have called for Lloyds of London to stop insuring certain fossil fuel projects, coal, and oil sands in particular, and any new projects such as the East African Crude Oil pipeline. While one unintended consequence of this sort of social action may be to make existing oil and gas reserves more valuable, such actions on a larger scale will undoubtedly increase the pressure on the issue of whether the disuse of fossil fuels will be achieved by such actions. My third dispatch from the front: the UK’s energy secretary, Hon. Grant Shapps, has recently been confronted in court by several organisations seeking judicial reviews over the government’s proposed net-zero strategy. These parties include Friends of the Earth, the Good Law Project and ClientEarth. The High Court had ruled the Minister’s original proposal was unlawful while a newly published plan seeking to ensure that 28% of car sales are electric by 2025 (as well as extending grants for heat pumps and a British Insulation Scheme) is again under attack as lacking detail and failing thus far to deliver needed emissions cuts. ClientEarth has also brought proceedings in the UK High Court against the directors of Shell Oil, claiming, as a shareholder, that the board has not adequately managed climate risk. Although their action was dismissed in the first instance, ClientEarth is seeking an oral hearing to review that decision. I would also mention the most recent annual general meeting of Total Energies in Paris on 26 May 2023, which was disrupted by demonstrators protesting the lack of adequate details and planning by management for reducing Total’s carbon footprint. Tear gas was used to control these people as they rushed the platform where management was sitting. On the same day, the French Energy Minister, Agnes Pannier-Runacher, told France Info radio that oil and gas companies needed to “reinvent themselves” and would have no future unless they could map a path out of fossil fuels. The UK government recently disclosed it has high confidence in only 40% of the net zero emissions policies required to meet the goals set for 2037. A leaked document from the UK Department for Environment, Food and Rural Affairs showed that 21 of 44 of its net zero policies, including tree planting and peatland restoration, would be hard to achieve. The current Canadian prime minister promised in 2022 to have Canada plant some 2 billion trees by 2030. A recent public audit released in April 2023 confirmed that to date none have been planted under this particular programme. Not one tree. One province has declined to participate and conversations with four others are continuing. Thus, we continue to see significant gaps between public policy objectives and on-the-ground events. According to the global head of minerals investment for McKinsey & Co., as expressed at the March 2023 mining conference in Toronto, the world likely needs to add about 400 terawatts of clean electricity by 2030 (a mere seven years from now) to meet the net zero targets for carbon emissions. Which is roughly a 400-fold increase from current levels. To achieve such an objective is potentially going to require very significant capital funding, changes in consumer habits, and our ways of living. Nothing at this stage can be taken for granted about our lifestyles or how such colossal goals can be achieved. Bearing in mind these examples, my fourth dispatch from the front concerns the principle of fair and equitable treatment. The ICJ at the beginning of April issued a judgment in the Iran v United States case. Iran brought its action under the 1955 Treaty of Amity between those two countries, challenging the US government’s actions in attaching various Iranian state and non-state assets to satisfy various anti-terrorism sanctions and amendments to the Foreign Sovereign Immunities Act. The ICJ developed the concept of “unreasonable and discriminatory measures”. In particular, the ICJ found that where the US legislation, as applied by the courts, harmed Iranian companies with no clear connection to Iran, it was unreasonable and manifestly excessive. In other words, there must be proportionality between the purpose of such a law and its effects. In recent Canadian financial news, Ultra Lithium Inc., a Vancouver-based miner, announced a few weeks ago that it was obtaining funding by selling its Laguna Verde lithium brine project in Argentina to Power Minerals Ltd., an Australian mining company. What brought this about was a sudden announcement by the Canadian government six months ago that Canadian mining companies were required to cut ties with Chinese investment in what it called the “critical minerals industry”. Lithium is one of those critical minerals. In fact, around the same time, the Canadian government also announced it will be subsidising Volkswagen’s first major battery factory outside of Germany in St. Thomas, Ontario, to the tune of about $13 Billion (yes, billion with a “b”), primarily in the form of tax credits. So German investment is good, Chinese investment is bad. In any event, Ultra Lithium says it avoided what it called a “crisis situation” by selling to the Australians. It takes very little imagination to see investor state claims written all over these inter-related events. If the proportionality described in the ICJ’s judgement is applied to measures taken in the name of climate change, one can readily imagine that there may be circumstances where the state’s police powers are disproportionate to the effects such measures might have. We will all have to watch the likely growing urgency of moving our societies towards the very significant goals of climate policies. For example, you may recall that our colleague, Constantine Partasides, yesterday referred you to the ICSID case of Rockhopper Mediterranean Limited v The Italian Republic, ICSID Case ARB/1714, where the Claimants obtained recovery under the Energy Charter Treaty from Italy for expropriation of an offshore oil concession that was cancelled in 2015 because of a decision to ban offshore drilling operations within a certain distance from shore. The tribunal majority held that this was an expropriation of Claimant’s interests and awarded significant damages, in the order more or less of $125 million. While controversial for other reasons, what I think was especially noteworthy about this award was that the tribunal majority was very careful to say that their decision had nothing to do with the underlying environmental issues, but was based solely on international law. We all know, however, that these matters have grave implications for environmental concerns. My fifth dispatch from the front refers to the roughly $400 to $500 Billion approved by the US Congress, at the behest of the President, for the so-called Inflation Reduction Act. Or is it more than a trillion dollars? Based on news accounts, I am never sure. It is a lot, in any event. This little gem promises to convert the US from a Paris Accord outlier and slacker into one of the leading jurisdictions in the world for the great re-set. If I was an American, however, I might say I was from Missouri, meaning that we shall see, but I am sceptical. In Canada, our federal governments over the last three or so decades have dedicated billions and billions of dollars to various forms of incentives, tax breaks and credits, along with corresponding regulations to enhance clean energy technologies such as wind, solar, hydro, geothermal and tidal. These expenditures are on top of provincial initiatives already in place for alternative energy such as British Columbia’s Site C dam project and Ontario’s Green Energy Act. What have we achieved over roughly 30 years of such expenditures? In fact, renewable energy’s share of total energy produced in Canada has not budged. In 1990, when the federal government started spending significant amounts of money on clean energy, renewables (not including hydro) accounted for 5.1% of all energy supplied. In 2021, the latest year for which there are figures, renewables account for 4.8% of all energy produced. This lack of progress is not going to go unchallenged and I predict increasingly vigorous actions to move the climate change agenda forward. My sixth dispatch from the front also arises from the US Inflation Reduction Act. The magnitude of spending contemplated by that legislation on clean energy initiatives, including the electrification of automobiles, is enormous by any standard. How is it to be achieved? Routine reading of missives from your investment account advisors may have alerted you to the implications. Electric cars, for example, utilise very large amounts of copper as well as cobalt, platinum and palladium. If no new fossil fuel vehicles can be sold after 2035, I have seen reports that we will require at least three copper mines to be brought on stream in Canada alone. From exploration through to fully developed mines requires anywhere from 5 to 15 years and significant investment. A recently published article brought to my attention claims: The average smartphone contains at least 40 elements from the periodic table including cobalt and six rare earth minerals that make the screen glow. The average electric car uses six times more critical minerals than a combustion car. An onshore wind plant needs nine times more mineral resources than an equivalent gas-fired power plant. An e-bike is more mineral intensive than an ordinary bike. That same article contains these startling statements: Every electric vehicle contains about 75 kilograms of copper or three times more than a conventional vehicle. A single wind turbine generally contains 500 kilograms of nickel. That nickel requires 100 tonnes of steelmaking coal to be refined. And every crystalline silicon solar panel contains 20 grams of silver paste. It takes 80 metric tons of silver to generate approximately a gigawatt of solar power. (In power terms that’s equivalent to 9,000 Nissan Leafs. And finally, one more reference to the magnitude of this change in energy production: "Since 400 BCE, various civilizations dug up 700 million tonnes of metals (everything from bronze to uranium) prior to 2020. But a so-called green transition will require mining another 700 million metric tonnes by 2040 alone… Current copper reserves stand at 880 million tonnes. That’s equal to approximately 30 years of production. But the industry will need 4.5 billion tonnes of copper to manufacture just one generation of renewable technologies, estimates Michaux. That’s six times the volume of copper mined throughout history." Nothing since the building of our transcontinental railways in the late nineteenth century or the development of transcontinental pipelines in the mid-twentieth century or possibly the dredging of the St. Lawrence Seaway in the 1950s, suggests we currently have the financial or governmental commitment necessary to achieve the required objectives. While the mining sector predicts a boom in which very large pricing increases for these metals are expected, we should also understand that mining is not a benign activity. It is intrusive and expensive. Platinum and palladium are more expensive than gold. Lithium mining is beginning to flourish but not always in desirable jurisdictions. When I mention cobalt, think of the Congo. Again, we can readily anticipate that these potentially massive developments in how we transport ourselves will be accompanied by equally massive developments in acquiring the minerals required to allow such developments to occur. My seventh and final dispatch from the front concerns the rising up of aboriginal or indigenous people around the planet. In March this year, an arbitration claim was brought to the Permanent Court of Arbitration on behalf of the Mapuche Nations against the state of Chile. The claim is that Chile has committed many abuses including deprivation of ancestral territory, misuse of treaties by extractive industries, causing desertification, drought, fires, and pollution. These, in turn, are said to lead to a systematic extinction of Mapuche culture, including misuse of anti-terrorism laws against the Mapuche, criminalising social protest, and the use of private security to protect the interests of private landowners. They seek the return of their original territories and respect for signed treaties. On September 13 2007, the UN General Assembly passed a resolution creating the United Nations Declaration on the Rights of Indigenous Peoples or UNDRIP. 144 countries voted in favour, four against. Those four were Australia, Canada, New Zealand, and the US. There were 11 abstentions. But I have to say that times have changed. The British Columbia legislature unanimously adopted UNDRIP in 2019. In Canada, our Parliament has passed a bill implementing UNDRIP which received Royal Assent on June 21 2021. Among other things, UNDRIP provides for the free, prior, and informed consent by indigenous people for certain activities which likely include pipelines or mining, for example. Legislation in Ontario requires mining project sponsors to confer with First Nations. In any event, our courts have created and upheld a clear duty for full and well-informed consultation between the Federal Crown and First Nations concerning matters affecting their territories and cultural interests. These developments may be very welcome as societies like ours, or Australia’s or New Zealand’s, grow and evolve in their embracing of reconciliation with indigenous peoples. But, as we evolve in this way, there will undoubtedly be increasing tensions between the stated goals for managing climate changes and respect for traditional societies and their rights. With these few illustrative ‘dispatches’ in mind, let us consider their implications for dispute resolution specialists such as those of you here today. In my view, we arbitrators and mediators are going to be kept busy. The mammoth sizes of the necessary projects alone will almost certainly give rise to disputes. Add in the additional factor of urgency and it seems very evident that there is going to be a certain amount of turmoil as our societies seek to regulate and direct and stimulate the transition from fossil fuels to alternative, potentially more sustainable, forms of energy. Top all this off with the usual heavy-handedness and clumsiness of governmental actions, especially when voter and consumer expectations have been raised to such heights, and I can almost guarantee there will be disputes emerging from these events. One of the most attractive qualities of arbitration is its potential for innovation and flexibility in how we go about resolving disputes. I have in recent years encountered some very novel ways of working as an arbitrator with the parties’ expert witnesses, holding, for example, case management conferences with the parties’ experts present and communicating directly with the tribunal. As we consider the full implications of this likely ever-widening scope for disputes in the push for new energy infrastructure, we will need to open our minds to ever-developing ways of dealing with disputes that include significant societal impacts well beyond the immediate disputes. In some instances, we may need to encourage and perhaps participate in dispute panels for some of the larger projects. We will also need to foster early or even frequent mediation interventions to keep these projects rolling. I refer to the advocacy for dispute boards and dispute avoidance boards by my fellow Canadian, Wolf von Kumberg, who has written: Just as we will have to be innovative in rethinking the way we approach our environment and lifestyles to meet the needed drastic reduction in emissions, traditional methods of dispute resolution will have to be recalibrated to meet the challenges of creating a green environment. (Wolf von Kumberg, “The Use of Conflict Avoidance Boards in Green Projects: A Conflict Avoidance Blueprint for Global Environmental Sustainability”, Business Law International Vol. 23 January 2022 at p. 46). If states and societies are to meet their stated objectives, even if not all do so, the planet is undergoing an epic historic shift. This transformative shift will not be cheap or easy. From whatever source these activities arise, they will entail colossal resources, urgency and radical developments. Permit me to repeat, there will be disputes. And whatever the techniques we may collectively develop for resolving this new generation of disputes, you as arbitrators or mediators will be needed. As an introductory tone for these remarks, it occurred to me to recite, briefly, some poetry: The time has come, the Walrus said To talk of many things Of shoes - and ships - and sealing wax - Of cabbages - and kings - And why the sea is boiling hot And whether pigs have wings Most of you will recognise this bit of doggerel as one of the verses from Lewis Carrol’s poem, The Walrus and the Carpenter. I will leave it to you to decide whether this whimsical poetry applies in any way whatsoever to our subject today. But, for you who may not recall, please note that the Walrus and the Carpenter ate the oysters! So finally, if you wish, you are welcome to adopt my little private mantra, “don’t worry, Dad, there’s still plenty to do!” David R Haigh KC Independent Arbitrator, Calgary 3 June 2023 at the LCIA 'Tylney on Tour' Symposium in Vancouver