Climate Finance under the Green Climate Fund
By Brigitta John Vallickad September 14, 2022 28 Mins Read
The adoption of the Glasgow Climate Pact on 13 November 2021[1] put the spotlight once again on climate change and the efforts taken by government and non-government parties towards adaptation and mitigation of the effects of climate change. The pact consists of a range of agreed items, including strengthened efforts to build resilience to climate change, to curb greenhouse gas emissions and to provide the necessary finance for both. Nations reaffirmed their duty to fulfill the pledge of providing 100 billion dollars annually from developed to developing countries[2] and in this regard, many developed countries prepared a Climate Finance Delivery Plan (Plan) for meeting the USD 100 Billion Goal by 2025.[3] This plan reiterated that climate finance plays a critical role in supporting developing countries to address climate change. The Plan also noted that the Green Climate Fund (GCF) was a key channel for climate finance delivery and supporting mitigation and adaptation actions in furtherance of the goals of the Paris Agreement.[4] It notes that since the GCF became fully operational in 2015, its Board has allocated USD 10 billion to 190 projects.
In this context, it becomes relevant to revisit our earlier post on Climate Finance and Arbitration, where we inter alia looked at how the GCF finances climate change adaptation and mitigation efforts, through Funded Activity Agreements and Grant Agreements. GCF provides funding under a Funded Activity Agreement upon approval of a proposal for funding received from an Accredited Entity responsible for overseeing, supervising, managing and monitoring the GCF-approved project. GCF provides grants and technical assistance under a Grant Agreement through National Designated Authorities, to developing countries to strengthen their institutional capacities, governance mechanisms and planning and programming frameworks, to develop a transformational long-term climate action agenda.[5] In this post, we will examine these Agreements in a little more detail, with a special focus on the dispute resolution provisions thereof.
All the Funded Activity Agreements and Grant Agreements universally adopt arbitration (preceded by negotiation, in the case of Funded Activity Agreements) as their mechanism for dispute resolution.
Funded Activity Agreement
A Funded Activity Agreement is executed between GCF and an Accredited Entity. In order for any entity to partner with the GCF as an Accredited Entity, it needs to be recognized as such by GCF's Board and an Accreditation Master Agreement needs to be executed between GCF and the Accredited Entity. The Accreditation Master Agreement sets out the terms and conditions for an Accredited Entity's use of GCF resources, and the Accredited Entity's accountability.[6] Once a funding proposal submitted by an Accredited Entity is approved by the GCF Board, the GCF Secretariat will negotiate with the Accredited Entity to sign a Funded Activity Agreement. Any Funded Activity Agreement executed between the GCF and an Accredited Entity will incorporate the terms of the relevant Accreditation Master Agreement.
In the following paragraphs, we will examine one such Funded Activity Agreement, namely the one between the United Nations Development Programme (UNDP) as the Accredited Entity and the GCF dated 12 March 2020, pertaining to "Building Climate Resilience of Vulnerable Agricultural Livelihoods in Southern Zimbabwe".[7]
The funds generated under this Funded Activity Agreement are being used to support the government of Zimbabwe in strengthening the resilience of agricultural livelihoods of vulnerable communities in southern Zimbabwe to increasing climate risks and impacts. The funds are intended to be used to overcome technical, financial, institutional and capacity barriers to enable smallholder farmers, especially women to (1) access sufficient, reliable sources of water to enhance the climate resilience of agricultural production; (2) adopt climate-resilient agricultural practices and cropping systems; and (3) access and utilize climate information to more effectively manage climate risk in rain-fed and irrigated agricultural production. This project is estimated to benefit around 2.3 million people across Manicaland, Masvingo and Matabeleland South provinces. The description of the project (the Funded Activity) is set out in the funding proposal submitted by the UNDP, which is also annexed to the Funded Activity Agreement. The detailed description of the Funded Activity, including the various sub-activities that are required to be undertaken to achieve the intended purpose of funding, is set out in a schedule to the FAA.[8]
GCF provides finance in the form of grants, loans, results based payments, equity and guarantees.[9] Some projects may be co-financed with other private or public sector institutions, including governmental organizations, banks and/ or financial institutions.[10] For the Funded Activity in Zimbabwe discussed herein, the funds provided by GCF are in the form of a non-reimbursable grant[11] and this project is being co-financed by the Government of Zimbabwe and the UNDP.[12]
The implementation of the Funded Activity under the Funded Activity Agreement is carried out by an Executing Entity named in the agreement. In this case, Zimbabwe's Ministry of Lands, Agriculture, Water and Rural Resettlement (the Ministry) is the Executing Entity and UNDP is required to execute a Subsidiary Agreement with the Ministry for the implementation of the Funded Activity.[13] The actual implementation of the project under the Funded Activity Agreement requires the coordination and support of various government bodies. For the project in Zimbabwe, since the objective inter alia is to make reliable irrigation sources and climate information available to smallholder farmers, it will require the support of Zimbabwe's Meteorological Services Department as well as the Department of Irrigation. The Ministry as the Executing Entity coordinates and manages the activities of these government bodies in such a way that it meets all the requirements for the flow of GCF proceeds in accordance with the Funded Activity Agreement.[14]
The Accredited Entity is obligated to monitor and supervise the Executing Entity and ensure that the Executing Entity is acting with due diligence and efficiency.[15] Under the mechanism of the Funded Activity Agreement, GCF disburses the grant amount to the Accredited Entity, which then in turn disburses these sums to the Executing Entity. The schedule of disbursements as well as the specific costs component that the disbursements are required to cover, are all set out in detail in a schedule to the Funded Activity Agreement.[16] In case there is any change or modification to the scope of the Funded Activity or the use or allocation of GCF's funds provided under the Funded Activity Agreement, the Accredited Entity is required to immediately notify this to GCF.[17] The Accredited Entity is also required to monitor the progress of the project and keep the GCF informed regarding the evaluation of the project.[18] The Accredited Entity is paid a fee, which is a percentage of the total grant amount, for the costs incurred by it in respect of services performed in connection with the Funded Activity. These fees are intended to be used to support the implementation of GCF projects and other eligible GCF-related activities.[19] Under the Funded Activity Agreement for the Zimbabwe project, UNDP's fee is 7% of the grant amount. This percentage varies from case to case, and the Policy on fees for accredited entities and delivery partners sets out the modality of how this percentage is determined.[20]
The Funded Activity Agreement also specifies the preceding conditions which have to be fulfilled in order for funds to be made available to the Accredited Entity, as well as the additional representations, warranties and covenants made on behalf of the Accredited Entity.[21] Any misrepresentation, breach of warranty or non-performance of a covenant constitutes an Event of Default under the Funded Activity Agreement.[22] Other Events of Default inter alia would be if the Accredited Entity becomes insolvent, or is ordered to be wound-up, or its assets are attached, or if a finding is made by an investigative or adjudicative body that the Accredited Entity engaged in fraudulent, corrupt, coercive, collusive, abusive or obstructive practices. If goods and services for the Funded Activity were procured in a manner inconsistent with the policies and processes set out under the Accreditation Master Agreement or the Funded Activity Agreement, this would also constitute an Event of Default.[23]
The consequences for an Event of Default are set out in Clause 20 of the Accreditation Master Agreement executed between GCF and UNDP, and could inter alia result in termination of the Funded Activity Agreement, suspension of payments under the Funded Activity Agreement, a claim for restitution of GCF funds and/or a claim for financial damages.[24]
The governing law[25] and dispute resolution[26] provisions of the Accreditation Master Agreement apply mutatis mutandis to the Funded Activity Agreement. Pursuant to clause 28.02 of the Accreditation Master Agreement, the applicable law is public international law, which includes:
any relevant treaty obligations that are binding reciprocally on the Parties;
the provisions of any international conventions and treaties (whether or not binding directly as such on the Parties) generally recognized as having codified or ripened into binding rules of customary law applicable to states and international institutions, as appropriate;
other forms of international custom, including the practice of states and international institutions of such generality, consistency and duration as to create legal obligations; and
applicable general principles of law.
The Dispute Resolution clause under the Accreditation Master Agreement is a two-tiered clause: first, the parties shall negotiate any dispute, controversy or claim. Second, if no agreement is found, such a dispute, controversy or claim is to be settled by arbitration in accordance with the PCA Arbitration Rules 2012.[27] The numbers of arbitrators deciding the dispute is three, the place of arbitration is Seoul, South Korea, the language of the arbitration is English, the decision of the tribunal is to be final and binding and the tribunal cannot award punitive damages.
We have looked at the governing law and dispute resolution provisions of other publicly available Funded Activity Agreements, and they all apply mutatis mutandis the governing law and dispute resolution provisions of the respective Accreditation Master Agreements .[28] We have also compared GCF's template Accreditation Master Agreement (which may then be suitably modified when executed with different Accredited Entities), as well as the Accreditation Master Agreements executed between GCF and other Accredited Entities and have noted that the governing law and dispute resolution clauses are mostly similar in all the different Accreditation Master Agreements.
GCF's template Accreditation Master Agreement provides for a choice of governing law other than public international law (English law, Hong Kong law, any other law),[29] and its dispute resolution clause provides for a choice of Rules under which the arbitration could be settled (UNCITRAL, PCA, ICC), as well as a choice between a sole arbitrator and a three member tribunal, and a choice of different cities for the seat of arbitration (Seoul, The Hague, São Paulo, Singapore, Hong Kong).[30]
In practice, we have found the following combinations:
The Accreditation Master Agreement between GCF and the Food and Agriculture Organization provides for arbitration in the Netherlands under the PCA Arbitration Rules 2012.[31] Simirlaly, the Accreditation Master Agreement between GCF and the United Nations Industrial Development Organization[32] and the Accreditation Master Agreement between GCF and the United Nations Environment Programme.[33]
The Accreditation Master Agreement between GCF and the Inter-American Development Bank provides for a negotiation period of 120 days and arbitration under the UNCITRAL Rules with its seat in London and the Secretary-General of the PCA as the appointing authority.[34]
The Accreditation Master Agreement between GCF and Centre de Suivi Ecologique provides for arbitration under the UNCITRAL Rules with its seat in Seoul; however it does not disallow the arbitral tribunal from awarding punitive damages.[35]
The Accreditation Master Agreement between GCF and the International Union for Conservation of Nature and Natural Resources is governed by English law and provides for arbitration by a tribunal comprising of one arbitrator, under the ICC Rules with its seat at The Hague.[36]
The Accreditation Master Agreement between GCF and the Cassa Depositi e Prestiti Società per Azioni provides for arbitration under the ICC Rules, governed by English law, seated at the Hague.[37]
Despite the small differences, all the Accreditation Master Agreement universally adopt arbitration (preceded by negotiation) as their mechanism for dispute resolution. In turn, this is also adopted mutatis mutandis in the respective Funded Activity Agreements. The preference for arbitration may be due to the several benefits that arbitration offers in comparison to state court litigation. This includes confidentiality, neutrality of venue, choice of arbitrators amongst others. We have not come across information in the public domain regarding any disputes under the Funded Activity Agreements executed between GCF and any of the Accredited Entities.
Grant Agreement
Grant Agreements are concluded between National Designated Authorities and the GCF, to set out the terms and conditions on which the GCF will provide a grant to the National Designated Authorities, under the GCF's Readiness and Preparatory Support Programme ("Readiness Programme").[38]
National Designated Authorities may make a proposal for readiness support on their own or with the assistance of a 'delivery partner'. i.e. a partner that can implement the project. While preparing the proposal idea, the National Designated Authorities would ideally discuss the idea with the GCF Secretariat since the Secretariat could provide useful context and guidance on best practices, and may also advise on nominating delivery partners.
Following approval of a readiness request, legal arrangements are concluded in the form of a Grant Agreement with the grant recipient which includes and incorporates the Standard Conditions for Readiness and Preparatory Support Grants. In the following paragraphs, we will examine one such Grant Agreement between GCF and Jamaica acting through its Ministry of Economic Growth and Job Creation as the National Designated Authority (or the Recipient), executed on 1 February 2018.[39]
Under this Grant Agreement, GCF agreed to provide a grant of USD 582,000 to the National Designated Authority ("Grant") for the purpose of "Mobilizing Private Sector to Support Low-Carbon and Climate Resilient Development in Jamaica and other CARICOM States." The approved proposal is annexed to the Grant Agreement Funds generated under the Grant Agreement would be used to support the private sector, particularly small and medium enterprises which account for 50% of employment in the Caribbean, to build climate resilient communities.[40]
The Grant Agreement stipulates how the proceeds of the Grant are to be applied, namely that the Grant is to be used for financing Eligible Expenditures, and used for their intended purposes in accordance with the generally accepted principles of economy, efficiency, transparency and accountability, and that the Readiness Support is carried out with sound administrative, technical, financial, business and development practices, in accordance with the terms and conditions of the Grant Agreement, the Standard Conditions and the Policy on Prohibited Practices (both defined in the Grant Agreement).[41]
The Grant Agreement also stipulates the conditions on which payment of Grant proceeds are made and when and how each payment is to be made. In order for payment to be disbursed, a written disbursement request as well as a report on implemented activities needs to be submitted.[42] In this way, GCF can track and monitor the progress of how its funds are being applied and can also ensure accountability of the National Designated Authority. Additionally, an audit is carried out from time to time to ensure that the funds are not being mismanaged and are being effectively and efficiently employed for the purpose stipulated in the Grant Agreement.[43] The Grant Agreement also imposes confidentiality obligations on the parties and stipulates under what conditions confidential information may be disclosed.[44]
The May 2016 Standard Conditions for Readiness and Preparatory Support Grants provided by the GCF ("Standard Conditions") constitute an integral part of the Grant Agreement and the terms thereof are incorporated into the Agreement.[45] In case any of the terms of the Standard Conditions are modified for the purpose of the Grant Agreement, these modifications are then specified in the Grant Agreement.[46] The Grant Agreement discussed in the present instance, i.e. the Grant Agreement between Jamaica and GCF, contains a copy of the Standard Conditions. As specified in Article 1 of the Standard Conditions, they apply to any Grant Agreement between the Fund and a Recipient, unless explicitly provided otherwise in the Grant Agreement.[47]
The Standard Conditions stipulate what would be considered Eligible Expenditures under the Grant Agreement, namely payments for reasonable costs of Goods or Services required for the Readiness Support and procured in accordance with the Grant Agreement, and payment for expenditures incurred on or after the Effective Date and prior to the expiration of the term of the Grant.[48] The Standard Conditions inter alia also set out the representations, warranties and covenants of the parties.[49] The Recipient is required to maintain a proper system of financial management and have its financial statements audited periodically by independent auditors and furnish such audited financial statements, as and when required, to GCF.[50] The Recipient is responsible for the prudent application of the Grant, and has to ensure that no part of the Grant is used to support or promote violence, aid terrorists or terrorist-related activity, to conduct money-laundering activities or to fund individuals or organizations known to support terrorism or that are involved in money-laundering activities.[51]
Article 13 of the Standard Conditions sets out the grounds on which GCF may terminate disbursement of funds under the Grant. These inter alia include failure by the Recipient to perform any of its obligations under the Grant Agreement and rectify such failure within a period of 60 days, or that it has become improbable for Readiness Support activities to be carried out under the Grant Agreement.[52]
Article 18 of the Standard Conditions contains the dispute resolution provision under the Grant Agreement. Section 18.01 provides for resolution of disputes under the Grant Agreement by arbitration under the 2012 PCA Arbitration Rules. The tribunal is to comprise of three arbitrators and the place of arbitration is Seoul, South Korea. Section 18.02 provides that the tribunal shall apply rules of law and principles it determines to be appropriate, including relevant treaty obligations, provisions of international conventions and treaties, international custom and applicable general principles of law.[53]
We have looked at several other Grant Agreements executed between GCF and other National Designated Authorities and the terms of each of these Grant Agreements are largely similar. The Standard Conditions apply to all Grant Agreements. As mentioned above, if any changes to the Standard Conditions are to apply, these are specifically mentioned in the Grant Agreement. For example, in the Grant Agreement executed between GCF and Barbados dated 8 October 2018, the arbitration clause of the Standard Conditions has been modified to provide for arbitration of disputes under the ICC Rules, with the place of arbitration as The Hague.[54] In all Grant Agreements, arbitration is the mode of dispute resolution.
As the discussion on climate change continues to intensify, the financing of resilience and adaptation initiatives only assumes more significance. GCF is one of the largest contributors of climate finance and examining the agreements under which it provides financing gives an insight inter alia into the kind of initiatives that are financed as well as the terms and conditions on which climate finance is provided. As the number of resilience and adaptation initiatives increase, the quantum of financing provided for these initiatives will also increase. The GCF will continue to play a larger role in providing climate finance under the terms and conditions of its various agreements. As commerce in this sector increases, it is likely for disputes and/ or disagreements to arise between parties. Since arbitration as a mode of dispute resolution is the preferred choice for all parties under GCF's agreements, it will be interesting to see how the dispute landscape evolves and if there will be an uptick in climate finance arbitration. We will provide you further updates here at Global Arbitration News.
[1] https://unfccc.int/sites/default/files/resource/cop26_auv_2f_cover_decision.pdf
[2] https://unfccc.int/process-and-meetings/the-paris-agreement/the-glasgow-climate-pact-key-outcomes-from-cop26
Chapter III of the Glasgow Climate Pact noted that the current provision of climate finance for adaptation was insufficient to respond to worsening climate change impacts in developing countries, and urged developed countries to scale up their provision of climate finance, technology transfer and capacity building. It further called upon developed countries to at least double their collective provision of climate finance to developing countries from 2019 levels, for adaptation measures, by 2025. It also encouraged the mobilisation of finance from multilateral development banks, financial institutions and the private sector.
Chapter V of the Glasgow Climate Pact urges developed countries to provide enhanced support for mitigation actions and also noted that developed countries had failed to follow through on their pledge under the Copenhagen Accord to jointly mobilise USD 100 billion by the year 2020. It urged developed countries to fully develop on this goal by 2025. The Glasgow Climate Pact also saw the initiation of deliberations on a new collective quantified goal on climate finance through Decision-/CMA.3.
[3] https://ukcop26.org/wp-content/uploads/2021/10/Climate-Finance-Delivery-Plan-1.pdf
[4] At p. 7
[5] https://www.greenclimate.fund/readiness
[6] https://www.greenclimate.fund/accreditation/process
[7] https://info.undp.org/docs/pdc/Documents/ZWE/GCF%20Agreement%20_FP127.pdf
[8] Schedule 1 of the FAA.
[9] https://www.greenclimate.fund/sites/default/files/document/gcf-b27-inf03.pdf
[10] https://www.greenclimate.fund/sites/default/files/document/policy-cofinancing.pdf
[11] Clause 3 of the FAA. The total grant provided by GCF under the FAA is USD 26,574,567
[12] See the definition of "Co-financer(s)" under the FAA
(h) "Co-financier(s)" means the following co-financier(s) of the Project:
(i) The Host Country for an amount of USD 20,038,820 (twenty million thirty-eight thousand eight hundred and twenty US Dollars), out of which (1) USD 14,247,800 (fourteen million two hundred forty-seven thousand eight hundred US Dollars) are in the form of a grant; and (2) USD 5,791,020 (five million seven hundred ninety-one thousand twenty US Dollars) as in-kind contribution; and
(ii) The Accredited Entity for an amount of USD 1,205,000 (one million two hundred five thousand US Dollars) in the form of a grant.
The in-kind contribution provided by the Government of Zimbabwe includes man hours spent on training farmers, meetings and engagement with private sector entrepreneurs, knowledge generation and dissemination etc. This can be gleaned from paragraph 8 of the Funding Proposal, which is Annex 1 to the Funded Activity Agreement.
[13] Schedule 3 of the Funded Activity Agreement.
[15] Clause 2 of the Funded Activity Agreement.
[17] Clause 5 and Clause 6 of the Funded Activity Agreement.
[19] See the Policy on Fees for Accredited Entities and Delivery Partners dated 9 February 2018. See Annex III, available at https://www.greenclimate.fund/sites/default/files/document/gcf-b19-29.pdf
[20] See https://www.greenclimate.fund/sites/default/files/document/gcf-b19-29.pdf
[21] Clause 9 and Clause 10 of the Funded Activity Agreement.
[22] Clause 11 of the Funded Activity Agreement.
[23] Clause 19 of the Accreditation Master Agreement, available at https://www.greenclimate.fund/sites/default/files/document/ama-undp.pdf
[25] Clause 28 of the AMA.
[27] 29.02 The Parties will attempt in good faith to resolve any dispute, controversy or claim arising out of or in relation to this Agreement through negotiations between a duly authorized senior representative of each of the Parties with authority to settle the relevant dispute. If the dispute, controversy or claim cannot be settled amicably within sixty (60) days from the date on which either Party has served written notice on the other of the dispute, then Clause 29.03 shall apply.
29.03 Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, that is not been resolved through negotiation pursuant to Clause 29.02 above, shall be settled by arbitration in accordance with the PCA Arbitration Rules 2012, and:
(a) the appointing authority shall be the Secretary-General of the PCA;
(b) the number of arbitrators shall be three;
(c) the place of arbitration shall be Seoul, Republic of Korea;
(d) the language to be used in the arbitral proceedings shall be English;
(e) the arbitration decision shall be final and binding on the Parties and there shall be no appeal; and
(f) the arbitration panel shall not award punitive damages.
[28] The FAA between GCF and the UNEP for REDD+ Results-based payments in Paraguay for the period 2015-2017 dated 21 November 2019 https://open.unep.org/docs/gcf/GCF%20FAA%20for%20Paraguay_21.11.2019%20.pdf (See Clause 11); The FAA between GCF and UNDP for the Tuvalu Coastal Adaptation Project dated 31 May 2017 https://www.adaptation-undp.org/sites/default/files/resources/tuvalu_gcf_faa_executed_faa_may_31_2017.pdf (See Clause 12); The FAA between GCF and UNDP for Integrated Flood Management to Enhance Climate Resilience of the Vaisigano River Catchment in Samoa dated 9 June 2017 https://www.climateandforests-undp.org/sites/default/files/resources/annex_1_signed_faa1.pdf (See Clause 12).
[29] https://www.greenclimate.fund/sites/default/files/document/accreditation-master-agreement-template_0.pdf (updated as of 28 May 2021)
Clause 28 Governing Law
28.01 [This Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by [[English][Hong Kong][xx] law.] [This Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by public international law English law.]
28.02 For the purposes of resolving any dispute, controversy or claim arising out of or in relation to this Agreement, in applying public international law, sources shall be taken for these purposes to include:
(a) any relevant treaty obligations that are binding reciprocally on the Parties;
(b) the provisions of any international conventions and treaties (whether or not binding directly as such on the Parties) generally recognized as having codified or ripened into binding rules of customary law applicable to states and international institutions, as appropriate;
(c) other forms of international custom, including the practice of states and international institutions of such generality, consistency and duration as to create legal obligations; and
(d) applicable general principles of law.]
28.03 The governing law for the Subsidiary Agreements may be agreed by the parties thereto.
[30] Arbitration
29.02 The Parties will attempt in good faith to resolve any dispute, controversy or claim arising out of or in relation to this Agreement through negotiations between a duly authorized senior representative of each of the Parties with authority to settle the relevant dispute.
If the dispute, controversy or claim cannot be settled amicably within sixty (60) days from the date on which either Party has served written notice on the other of the dispute, then Clause 29.03 shall apply.
29.03 Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, that is not been resolved through negotiation pursuant to Clause 29.02 above, shall be settled by arbitration in accordance with the [UNCITRAL][PCA][ICC] Arbitration Rules, and:
(a) the appointing authority shall be [the Secretary-General of the PCA][in accordance with the ICC Arbitration Rules];
(b) the number of arbitrators shall be [one][three];
(c) the place of arbitration shall be [Seoul, Republic of Korea][The Hague, the Netherlands][Sao Paolo, Brazil][Singapore][Hong Kong];
(d) the language to be used in the arbitral proceedings shall be English; and
(e) the arbitration decision shall be final and binding on the Parties and there shall be no appeal.
[31] https://www.greenclimate.fund/sites/default/files/document/ama-fao.pdf See Clause 28 (Governing Law) and 29 (Enforceability and Arbitration).
[32] https://www.greenclimate.fund/sites/default/files/document/ama-unido.pdf See Clause 28 (Governing Law) and 29 (Enforceability and Arbitration).
[33] https://www.greenclimate.fund/sites/default/files/document/ama-unep.pdf See Clause 28 (Governing Law) and 29 (Enforceability and Arbitration).
[34] https://www.greenclimate.fund/sites/default/files/document/ama-idb.pdf See Clause 28 (Governing Law) and 29 (Enforceability and Arbitration).
[35] https://www.greenclimate.fund/sites/default/files/document/ama-cse.pdf See Clause 27 (Governing Law) and 28 (Enforceability and Arbitration).
[36] https://www.greenclimate.fund/sites/default/files/document/ama-iucn.pdf See Clause 27 (Governing Law) and 28 (Enforceability and Arbitration). Clause 28.01 provides that the AMA is to be governed by English Law, and Clause 28.02 lists the sources of public international law that may be referred to while resolving any dispute, controversy or claim. The express choice of English law does not exclude the application of public international law. Customary international law which comprises a body of norms that establish minimum standards of protection, constitutes part of the Common Law by incorporation. In this regard, see Cambodia Power Company v. Kingdom of Cambodia and Electricité du Cambodge, ICSID Case No. ARB/09/18, Decision on Jurisdiction, 22 March 2011, para 333 et. seq.
[37] https://www.greenclimate.fund/sites/default/files/document/ama-cdp.pdf See Clause 27 (Governing Law) and 28 (Enforceability and Arbitration).
[38] https://globalarbitrationnews.com/climate-finance-and-arbitration/
[39] https://www.greenclimate.fund/sites/default/files/document/readiness-grant-agreement-jamaica-2.pdf
[40] Annexure 1 to the Grant Agreement.
[41] Article 4 of the Grant Agreement.
[45] Article 1 Section 1.01 (a) and Section 1.02 (k) of the Grant Agreement.
[47] Section 1.01. Purpose. The purpose of these Standard Conditions is to set forth the terms and conditions generally applicable to readiness and preparatory support grants made or to be made by the Fund to a Recipient. They apply to any Grant Agreement between the Fund and a Recipient, unless explicitly provided otherwise in the Grant Agreement.
[48] Article 3, Standard Conditions.
[51] Article 10, Standard Conditions.
[52] Section 13.02. Cancellation by the Fund. The Fund may, by notice to the Recipient, terminate the right of the Recipient to seek disbursements with respect to an undisbursed amount of the Grant, and cancel such amount, if any of the following events occurs:
(a) The Recipient shall have failed to perform any of its obligations under the Grant Agreement, and such failure has not been remedied within sixty (60) days.
(b) As a result of events which have occurred after the date of the Grant Agreement, a situation has arisen which makes it improbable that Readiness Support activities can be carried out or that the Recipient will be able to perform its obligations under the Grant Agreement.
(c) The Fund determines, after consultation with the Recipient, that an amount of the Grant will not be required to finance the Readiness Support as set out in the Grant Agreement.
(d) At any time, the Fund determines that the procurement of any contract to be financed out of the proceeds of the Grant is inconsistent with the policies and processes set forth or referred to in the Grant Agreement, the Policy on Prohibited Practices or these Standard Conditions.
(e) At any time, the Fund determines, with respect to any amount of the proceeds of the Grant, that Prohibited Practices were engaged in by representatives of the Recipient (or any other recipient of the proceeds of the Grant), without the Recipient (or other recipient of the proceeds of the Grant) having taken timely and appropriate action satisfactory to the Fund to address such practices when they occur.
(f) The Fund has declared the Recipient ineligible to receive proceeds of any financing made by the Fund or otherwise to participate in the preparation or implementation of any project or program activity financed in whole or in part by the Fund, as a result of: (i) a determination by the Fund that the Recipient (or any of its directors, officers, employees or agents) has engaged in a Prohibited Practice in connection with the use of the proceeds of any financing made by the Fund; and/or (ii) a declaration by another financier that the Recipient is ineligible to receive proceeds of any financing made by such financier or otherwise to participate in the preparation or implementation of any project financed in whole or in part by such financier as a result of a determination by such financier that the Recipient (or any of its directors, officers, employees or agents) has engaged in fraudulent, corrupt, coercive,
collusive, abusive or obstructive practices (as may be defined by such financier) in connection with the use of the proceeds of any financing made by such financier.
[53] Section 18.01. Arbitration. Any dispute, controversy or claim arising out of or relating to the Grant Agreement, including any issue as to the breach, termination or invalidity thereof, shall be referred to and finally resolved by arbitration in accordance with the Permanent Court of Arbitration, Arbitration Rules 2012 (as may be revised and for the time being in force).The arbitral tribunal shall comprise of three arbitrators. The place of arbitration shall be Seoul, Republic of Korea and the language to be used in the arbitral proceedings shall be English. The arbitral tribunal shall use its best efforts to make a final award in the arbitration no later than 24 months following the constitution of the arbitral tribunal.
Section 18.02. In resolving the disputes between the parties, the arbitral tribunal shall apply rules of law and principles it determines to be appropriate, including:
[54] https://www.greenclimate.fund/sites/default/files/document/readiness-grant-agreements-barbados.pdf
Section 7.01. The Standard Conditions are modified as set forth below and all other terms and conditions of the Standard Conditions shall remain in full force and effect as provided therein:
(a) Section 17.01 is modified to read as follows:
"Section 17.01. Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement, of the breach, termination Or invalidity thereof, shall be settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce, and:
(a) the number of arbitrators shall be three, appointed in accordance with the said Arbitration Rules;
(b) the place of arbitration shall be The Hague, the Netherlands;
(c) the language to be used in the arbitral proceedings shall be English; and
(d) the arbitration decision shall be final and binding on the parties and there shall be no appeal".
The arbitral tribunal shall use its best efforts to make a final award in the arbitration no later than 24 months following the constitution of the arbitral tribunal."
Author Brigitta John Vallickad
Brigitta John is a member of the Dispute Resolution team at Baker McKenzie in Frankfurt. Ms. John holds an LL.M. in International Dispute Settlement from the University of Geneva and the Graduate Institute of International and Development Studies. She has more than 13 years of post qualification experience in international arbitration as well as civil and commercial litigation. She can be reached at [email protected].
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