Court actions and arbitrations in Canada are increasingly dealing with climate-change-related issues, including the impact of severe weather and changes in regulation. Disputes about construction delays and disruptions, insurance coverage, and supply chain impacts — combined with changes in regulation and academic commentary on the law of climate change — suggest a potential shift in Canadian law.
Below are five key takeaways from these developments:
Project Delays. Performance-based contracts often contain clauses permitting delays for unforeseen events, including abnormal weather. As climate change increasingly affects weather patterns, it will become more difficult to distinguish between normal and abnormal weather and assess the foreseeability of related delays. This places a premium on clear and strategic contract drafting.
Disruptions to Supply Chains. Supply chains are vulnerable to disruptions caused by extreme weather. Parties who utilize supply chains in regions susceptible to extreme weather events, such as earthquakes or floods, may face delays. Contracts will have to contemplate weather-related disruptions to avoid liability for related delays.
Insurance Implications. Commentators predict the costs associated with climate change will lead to gaps in insurance coverage, such as the widespread absence of overland flood insurance during the 2013 Calgary floods. Other unpredictable and extreme weather events may lead to similar gaps that can culminate in disputes between insurers and insureds over the exact nature of climate-related coverage.
Changes in Regulation. In 2021, the Supreme Court of Canada recognized that regulating carbon emissions was a matter of national concern. This decision signalled an increase of federal jurisdiction over climate-change regulation. However, the court was cautious to limit federal jurisdiction to a minimum national price for carbon emissions. This limitation may be the first of many disputes to come between provincial and federal actors over climate-change regulation.
Increased Disclosure Obligations. In October 2021, the Canadian Securities Administrators (CSA) issued a request for comment for a proposed national instrument. If implemented, corporations would be required to annually disclose climate-related information about their governance, strategy, risk management, metrics and targets. Failure to comply could result in charges and proceedings before the CSA. Disclosure could also play a factor in litigation against issuers.
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