Determining noncompliance

The Enforcement Branch has two main sets of tasks: determining whether a party is in non-compliance with certain obligations, and resolving disagreements between an

ERT and a party over inconsistencies in its greenhouse gas inventories, or in its system for accounting for transactions in the use of the flexibility mechanisms.

We will analyse the most serious of these tasks from a due process perspective: the assessment of whether a party has met its target by remaining within its assigned amount. This assessment by the Enforcement Branch of whether a target has been achieved can, by definition, only take place after the end of the commitment period. The first commitment period runs from 2008 to 2012, but the parties are allowed a certain grace period after the end of the commitment period, where they are allowed to acquire and transfer emission quotas in order to fulfill their targets.57 However, the reporting requirements that will provide the basis for assessing compliance with a party's commitments will be assessed regularly throughout the commitment period. Incentives to comply with these reporting requirements are provided through the links between the reporting requirements and the eligibility of a party to participate in the Protocol's flexibility mechanisms. This should mean that by 2012-14, when compliance with targets is first assessed, the Enforcement Branch will have already acquired a good deal of experience in assessing and incentivizing a party's performance.

At first glance, the task of assessing compliance with a party's target appears to be straightforward. Each Annex I party will have had established, before the start of the commitment period, an Assigned Amount, expressed in terms of tonnes of carbon dioxide equivalent.58 Emissions will be recorded and submitted by the party to an ERT for review on an annual basis. At the end of the commitment period, and following the additional grace period, a party's total emissions will be compared against its Assigned Amount and any additions or reductions to the party's national registry, which records transactions in emission reduction units (ERUs) from joint implementation projects, certified emission reductions (CERs) from the Clean Development Mechanism, assigned amount units (AAUs) from emissions trading, and removal units (RMUs) from afforestation, reforestation and deforestation-related activities. If the total reported emissions of regulated greenhouse gases exceed the party's Assigned Amount, plus or minus any transactions in ERUs, AAUs, CERs and RMUs, the party is in non-compliance.

It is difficult to anticipate what aspects of this calculus will come into dispute in the context of any particular case. The main enforcement consequence that applies to a failure to reach the agreed emission target is the application of a multiplier that yields a stiffer penalty relative to the size of the excess tonnes of emissions. There will be incentives for a party to contend every aspect of this calculus. National inventories of emissions and national registries of transactions that are self-reported by each party are checked annually by ERTs, with adjustments and corrections proposed by the ERTs. If a party disagrees with an adjustment or correction proposed by the ERT, the disagreement is to be resolved by the Enforcement Branch. Therefore, in theory, each Annex I party should arrive at the end of the commitment period with an uncontestable inventory, which can be compared against an uncontestable registry.

But the simplicity of this calculus, which suggests a high degree of automaticity, and the limited degree of discretion in the Enforcement Branch's decision making, masks an exercise that will require considerable judgment and discretion, particularly with regard to the calculation, assessment and adjustment of national inventories of emissions (see Chapter 3 by Mitchell and Chapter 4 by Berntsen and associates). Assessments made by an ERT, and reviewed by the Enforcement Branch, will not be on the basis of end-of-pipe measurements, but rather will be based on whether a party has followed good practice in applying formulae that estimate and extrapolate emissions from input and output data.

The guidelines for adjustments indicate that they shall be applied by the ERT:

only when inventory data submitted by parties included in Annex I are found to be incomplete and/or are prepared in a way that is not consistent with the Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories as elaborated by the IPCC good practice guidance and any good practice guidance adopted by the Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol.

Good practice, in turn, is a subjective judgement of whether a party's greenhouse gas inventories are:

accurate in the sense that they are systematically neither over- nor underestimated as far as can be judged, and that uncertainties are reduced as far as possible. Good practice covers choice of estimation methods appropriate to national circumstances, quality assurance and quality control at the national level, quantification of uncertainties, and data archiving and reporting to promote transparency.

The enforcement procedures concentrate both power and discretion in the ERTs and the Enforcement Branch. While any party can raise a question of implementation with regard to the compliance of any Annex I party with its target, it is anticipated that most enforcement procedures will be triggered by a question raised by an ERT. Even if a party does trigger the procedure directly against another party, it is likely that the reports of the ERT will be extremely influential in determining the outcome. As has been described, if a party contests the findings of an ERT, the disagreements will be resolved by the Enforcement Branch. In practice, this appears to mean that by the time a party reaches the final reckoning of its compliance, any interim objections it may have raised along the way will have already been resolved by the same body, the Enforcement Branch, that is now assessing the overall results.

In adversarial procedures, such as cases before the ICJ and (to a lesser extent) the WTO, due process is provided by balancing the arguments of the respondent against those of a claimant, through procedures moderated by rules relating to burdens of proof and admissibility of evidence. The Kyoto procedure is, however, essentially non-adversarial. Although the ERT will likely raise the initial question of implementation, its mandate precludes it from making any judgements as to non-compliance, and it does not have a role in prosecuting the case once the procedure has been triggered. This suggests that the party's main interlocutor will be the Enforcement Branch itself. This is very similar to the dynamic of the Montreal Protocol's Implementation Committee.

A party's case will first be weighed after a question of implementation is allocated to the Enforcement Branch. Any question of implementation regarding compliance with targets would be allocated to the Enforcement Branch. The Branch must then undertake a 'preliminary examination of the question before it' and ensure that the question is supported by sufficient information, whether the question is de minimis or ill-founded, and whether it is based on the provisions of the Protocol.

The Enforcement Branch must, therefore make a positive determination that the question does have a basis in fact and in law, suggesting that the burden of establishing a prima facie case lies with the ERT or the party that has raised the question. There is no guidance in this or other agreed text as to what constitutes 'sufficient information' or what would fall below a de minimis threshold of non-compliance. While a party concerned may comment on all information relevant to the question raised against it, it does not appear to have the opportunity to intervene until after the decision to proceed with the question has been made.

As has been described, the decision by the Enforcement Branch to allow a question of implementation to move forward will be governed by voting rules that require the Branch to make every effort to reach consensus. If efforts to reach consensus fail, the decisions are made by what is known as a double majority. Assuming all members of the branch are present and voting, any decision must be approved by three-quarters of the membership as a whole (at least eight of ten members) and a simple majority of the Annex I members (at least three of four Annex I members). Put another way, two Annex I members could, by preventing the Enforcement Branch from taking a positive decision on the prima facie validity of the question of implementation, prevent that question from moving forward. If Annex I members will be more sympathetic to Annex I parties (as many have assumed they will be) this voting rule, which is applicable to all of the Enforcement Branch decisions, seems to afford these parties a significant degree of procedural protection against unsubstantiated claims.

If a question of implementation regarding compliance with a party's target clears the preliminary examination, it will move forward into the general and specific procedures governing the Enforcement Branch. As has been described, the Annex I party is entitled to be represented before the Branch, to submit information to the Branch, and to have access to and provide its written comments on any information submitted by others. Other than this opportunity to comment on others' information, there are no evidentiary rules entitling the party concerned to challenge the admissi-bility or relevance of information that is submitted. Each finding of the Branch must, however, be accompanied by 'conclusions and reasons therefor', suggesting that the Enforcement Branch will have to provide a rational basis for why it accepted some information as valid, and why it rejected other information.

The decision of the Enforcement Branch with regard to a party's compliance with its target requires a positive determination by the branch. This will involve a determination of not only whether a party is in non-compliance, but also, presumably, could involve a determination of the degree, measured in number of tonnes of carbon equivalent, that the party is out of compliance. While there is no provision at this stage of the process for a decision that non-compliance is de minimis, because the size of the enforcement consequence is relative to the degree of non-compliance, a small amount of excess yields a minimal penalty. The presumption built into the text is that a party is in compliance, and the Branch's mandate is to determine 'whether a party included in Annex I is not in compliance with its target'. This deci sion, should consensus fail, will be governed by the double majority rule described above. Once again, two Annex I members (and any combination of three members) can block a determination of non-compliance.

The final due process protection offered to a party that has been found to have exceeded its assigned amount is the right to appeal. As has been noted, the grounds for an appeal are limited to decisions made by the Enforcement Branch in circumstances in which the party feels it has been 'denied due process'. The provision does not indicate by what standard of review the Enforcement Branch's decision will be reviewed, but the procedural requirement that it can only be overturned by a three-quarters majority of the COP suggests a very high degree of deference will be accorded to the Branch's judgements.

Table 2.2 Enforcement consequences

If the Enforcement Branch has determined that a party is not in compliance with...

Its quantified emission limitation or reduction commitment under Article 3, paragraph 1, of the Protocol

.the Enforcement Branch shall apply the following consequence to that party:

deduction from the party's assigned amount for the second commitment period of a number of tonnes equal to 1.3 times the amount in tonnes of excess emissions;

development of a Compliance Action Plan; and suspension of the eligibility to make transfers under the emissions trading provisions of the Protocol, until the eligibility is reinstated.

The methodological and reporting requirements under Article 5, paragraphs 1 and 2, and Article 7, paragraphs 1 and 4, of the Protocol declaration of non-compliance; and development of a compliance plan.

The eligibility requirements for participation in the flexibility mechanisms under Articles 6, 12 and 17 of the Protocol suspension of eligibility under relevant mechanism, until eligibility is reinstated.

The legal character of the enforcement consequences

As has been indicated, during the negotiations on the design of the compliance system, reaching agreement on the availability of enforcement consequences in response to non-compliance depended upon a tight and predictable relationship between identifiable categories of non-compliance, and the consequence that would be associated with that category of non-compliance. This relationship is reflected in the text on the mandate and on the consequences to be applied by the Enforcement Branch.

The Enforcement Branch shall be responsible for 'determining' whether an Annex I party is in non-compliance with the listed commitments. This corresponds with Article 18 of the Kyoto Protocol, which states that the relevant procedures and mechanisms shall 'determine and address' cases of non-compliance. The use of 'determine' suggests that the finding of the Enforcement Branch is final, unless overturned on appeal. But, were decision of the Enforcement Branch to be raised in the forum of another tribunal, such as the ICJ, the question could arise as to whether it would be considered res judicata. Although the Enforcement Branch has similarities with an international court, the decisions of the branch may not be considered to have the legal effects similar to those of an international court.59 Furthermore, the fact that the decisions of the Enforcement Branch are final does not necessarily mean that the concomitant consequences are legally binding. The meaning of 'binding' in this respect will be further examined below.

If the Enforcement Branch determines that there has been a violation of the listed commitments, Section XV of Decision 24/CP.7 of the Marrakesh Accords defines which consequences shall be applied in relation to each of the three groups of commitments. By using the word 'shall', the Enforcement Branch has no discretion in selecting the consequences it may find most suitable. While this lack of discretionary powers may promote foreseeability and prevent abuse of powers, the disadvantage is obviously that there is little possibility to design the consequences appropriate to the circumstances of each individual case.

Non-compliance with Article 5 (1) and (2) and Article 7 (1) and (4)

Article 5 (1) of the Kyoto Protocol establishes an obligation for Annex I parties to have in place a national system for the 'estimation of anthropogenic emissions by sources and removal by sinks' of the greenhouse gases covered by the Protocol. The inventory shall be based on the methodologies and adjustments provided in accordance with Article 5 (2). Article 7 establishes that Annex I parties shall incorporate in their annual inventory of emission by sources and removal by sinks the 'necessary supplementary information for the purposes of ensuring compliance with Article 3, to be determined in accordance with paragraph 4 below'.

It is established that the Enforcement Branch shall, when it has determined that a party is in non-compliance with these provisions, issue a declaration of non-compliance and require that the party submit a plan that includes an analysis of the causes of non-compliance, measures that the party intends to implement to remedy the non-compliance, and a timetable for implementing such measures. The party shall also submit progress reports on the implementation of the plan (XV (1), (2) and (3)). It is, however, provided that the consequences shall be applied 'taking into account the cause, type, degree and frequency of the non-compliance of that party'. This is consistent with Article 18 of the Kyoto Protocol, which also refers to the 'cause, type, degree and frequency of non-compliance'. The Enforcement Branch is thus left with discretion, not to decide on other kinds of consequences, but to design the designated consequences to the case at hand. It may even be questioned to what ex tent the use of these consequences is mandatory at all. The possibility for the Enforcement Branch to 'at any time, refer a question of implementation to the Facili-tative Branch for consideration' may be pointed out.

The Enforcement Branch's issuing of a declaration of non-compliance is a typical soft sanction, in the sense that its effect is the shaming of the relevant party. Such a finding should be considered binding, but not necessarily binding in the sense of the Kyoto Protocol, Article 18, requiring an amendment to the Protocol (see below). A declaration of non-compliance does not in itself establish new obligations on the party. While the requirement to develop a plan to remedy the non-compliance is also a relatively soft sanction, it has the legal effect of imposing a new obligation on the party. The same may be said for the requirement to submit progress reports.

Non-compliance with the eligibility requirements under Articles 6, 12 and 17

If the Enforcement Branch finds that an Annex I party does not meet one or more of the eligibility requirements of the flexibility requirements of Article 6, 12 and 17, it shall 'suspend the eligibility of that Party in accordance with the relevant provisions under those articles' (XV (4)). This must mean that all uses of the flexibility mechanisms are prevented, be they transfer or acquisition of quotas, or use of joint implementation or the CDM. However, the presumption must be that loss of eligibility only refers to the particular kind of flexibility mechanism with which eligibility requirements are not fulfilled. Unlike non-compliance with Article 5 (1) and (2) and Article 7 (1) and (4), there is no discretion to take into account 'cause, type, degree and frequency of non-compliance'. At the request of the party, the eligibility may be reinstated under the procedure in section X (2), but the decision lies with the Enforcement Branch.

The suspension of eligibility may be of considerable economic and political importance for the party concerned, and should thus be considered a hard sanction. The sanction is binding in the sense that such a decision prevents the party from being credited with transactions under the flexibility mechanisms in meeting its obligations under Article 3 (1). However, it will be further discussed below whether this consequence is binding in the sense that amendment under the Kyoto Protocol is required.

Non-compliance with the emission commitment under Article 3 (1)

As has been discussed, if the Enforcement Branch determines that the emissions of a party have exceeded the amount assigned to it in Article 3 (1) of the Kyoto Protocol, it shall declare that the party is in non-compliance with this provision, and shall apply the following consequences (XV (5)):

1 deduction from the party's assigned amount for the second commitment period of a number of tonnes equal to 1.3 times the amount in tonnes of excess emissions;

2 development of a Compliance Action Plan in accordance with certain requirements (paragraphs 6 and 7) in order to reachieve a status of non-compliance; and

3 suspension of the eligibility to make transfer as part of emissions trading under Article 17 of the Protocol, until the party is reinstated by the Enforcement Branch in accordance with the procedures in Section X (3) or (4).

The party shall submit a progress report on the implementation of the Compliance Action Plan on an annual basis (paragraph 7).

The soft, hard and/or binding character of the declaration on non-compliance, the development of a Compliance Action Plan and the submission of progress reports have been touched upon above. The new elements are the deduction of tonnes of emissions for subsequent years at a penalty rate, and suspension of the eligibility to make transfers under Article 17. It should be mentioned that the Marrakesh Accords distinguish between transfers and acquisitions of quotas.60 Accordingly, parties are only prohibited from selling, not buying quotas in cases of non-compliance.

It has already been argued that suspensions of eligibility to make transfers reflect hard enforcement consequences. They are also binding in the sense that any tonnes transferred in violation of the suspension are not valid, and thus the party will in practice have nothing to sell. The deduction of tonnes is obviously also a hard sanction; the legal question is whether this and the other consequences should be considered binding in the sense that they may require an amendment of the Kyoto Protocol under its Article 18.

But let us first consider the appropriateness of using fixed consequences rather than leaving the choice to the Enforcement Branch. It has already been stated that fixed consequences have the benefit of promoting predictability and preventing abuse of powers. It may furthermore be argued that at a general level, the consequences chosen are well designed as reactions to the relevant violations. But the use of fixed consequences prevents the choice of consequences designed to the specifics of each individual case.

Given the composition and the due process guarantees of the Enforcement Branch, there is good reason to argue that this branch should have been entrusted with the discretion to choose the appropriate consequences, rather than establishing certain mandatory consequences. It may also be asked whether the use of fixed consequences is consistent with Article 18 of the Kyoto Protocol, requiring an 'indicative list' of consequences, 'taking into account the cause, type, degree and frequency of non-compliance'.

The legal status of the enforcement consequences

As has been described in detail in Chapter 1, delegations debated heatedly whether, and, if so, how, to provide the enforcement consequences with legally binding force. The legal character of these consequences was directly linked to the form by which they were to be adopted by the parties. This link is made by the terms of Article 18, which provide that 'any procedures and mechanisms under this Article entailing binding consequences shall be adopted by means of an amendment to this Protocol'. The link is enforced by basic principles of international law, which generally require that a state must consent, in advance, to any international rule that can be considered to be binding on it. Although, by ratifying the Protocol, each party consents generally to the responsibilities that arise from its breach, it is far from clear that these, as a matter of treaty or custom, would necessarily and automatically equate to the enforcement consequences included in the Marrakesh Accords.

Delegations that supported legally binding consequences tried to find a way around Article 18's amendment provision, as this would have led to complex ratification procedures, and to the possible delayed and uneven application of the compliance system to those parties that were slow or chose not to ratify the amendment. The Marrakesh Accords leave both the issue of the legal character of the consequences, and the form by which they will be adopted, unresolved, agreeing instead that it is the prerogative of the COP/MOP 'to decide on the legal form of the procedures and mechanisms relating to compliance'.

It was clear from the deliberations that those who opposed the adoption of legally binding consequences viewed the language in Article 18 as a procedural guarantee that no party can be bound by enforcement consequences without the opportunity to consent, through ratification, to any procedure that might lead to those consequences. If this position prevails at COP/MOP 1 the result may be a two-track approach, whereby the COP/MOP adopts the compliance system by decision, and simultaneously adopts an amendment that will be open for ratification. The compliance system would become immediately operational, but the risk would remain that at the end of the commitment period, an Annex I party might be found to be in non-compliance but to have not yet ratified the amendment.

The implications of this remaining legal ambiguity may be different for each of the enforcement consequences. It should first be stated that the determination of non-compliance, although being a legal determination and having a shaming effect, does not in itself entail any consequences. Hence, it is less relevant to its effectiveness if this consequence is considered binding.

The suspension of eligibility to participate in the mechanisms raises different issues. The availability of the use of flexibility mechanisms may, for example, be regarded as a privilege granted by the treaty organs rather than a right flowing from the treaty itself. It may be argued that the relevant organs of the climate change regime should have similar powers to those enjoyed by organs of IGOs, particularly so-called 'implied powers'. If so, it might be said that it is within the discretion of these organs whether or not to grant such privileges, and to suspend them if the necessary conditions are not fulfilled.61 The requirements to adopt a Compliance Action Plan and submit progress reports on implementation may also be within the implied powers of the Kyoto Protocol's organs.

If assigned amounts for a second commitment period have been agreed by the time a penalty rate is applied to a party that has been found to have exceeded its assigned amount, the resulting removal of tonnes from that second assigned amount will be a new and real burden for a party. The ongoing integrity of the Kyoto regime depends upon that additional burden being viewed as a binding element of that second commitment period cap. Although the deduction in tonnes from the second commitment period may be considered internally binding for organs established under the Protocol, including the COP/MOP, parties that have withheld their consent to Marrakesh consequences may have a legal basis for arguing that they are not bound by these deductions.62 The language of Article 18 may provide a last bulwark of due process for those parties that have felt hard done by the Enforcement Branch.

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