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Commercial Angles' Newsletter - June 2001

Environmental Liability Proposals

The European Commission published a White Paper in February 2000 setting out a proposed structure for a uniform system of determining environmental liability. Under Article 174(2) of the EC Treaty the Community policy on the environment is to be based on the precautionary principle and on the principles that preventative action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay. The White Paper is, however, limited in that it is a framework directive intended to act as a basis until a more comprehensive liability regime is established in the future. The limitation is deliberate as the Commission wishes to ensure that the risks arising from the regime are better calculable and manageable.

Purpose of the White Paper

The individual members of the EU already have their own legislation in place covering damages to persons and property and clean up and remediation of contaminated sites. However the measures are not uniform across EU. The White Paper intends to increase the consistency across EU and also to address the issues of damage to nature and the wider environment (biodiversity), which have been largely ignored by member states. The new environmental liability regime is intended to ensure that polluters are held responsible for environmental damage, thus prioritising the protection of the natural environment and, in the Commission's opinion, limiting adverse health implications for all Europeans.

Types of damage

The White Paper proposes that the regime will cover environmental damage - site contamination and biodiversity damage - and traditional damage to health and property. The regime will protect areas and species designated by member states under the Wild Birds Directive and the Habitats Directive - collectively covered by the Natura 2000 Network, which encompasses about 10% of the EU territory.

Only significant damage will be covered by the regime and liability will not be retroactive.

In relation to contaminated sites, liability will only attach where the contamination arises from the performance of EU-regulated hazardous activities.

Liability for biodiversity damage will only apply in Natura 2000 areas and will comprise two tiers: member states will be responsible for ensuring decontamination and restoration of biodiversity by applying damages paid by the polluter. However, if the state does not act effectively, public interest groups will have the right to act against the polluter. In urgent cases, public interest groups will probably have the right to act, through court injunctions making the polluter do certain acts or abstain from certain actions, without reference to the member state. It is this provision which could cause problems to companies. Who decides what is "significant damage" or what is "urgent"?

Types of liability

Liability will attach where a polluter can be identified, the damage can be quantified and where a causal connection can be demonstrated.

Strict liability, where fault does not have to be demonstrated, will attach to polluters where damage relates to the performance of EU-regulated hazardous activities.

Fault-based liability will apply to biodiversity damage in Natura 2000 areas resulting from unregulated activities, with the state paying the bill if fault can not be established. In fault-based liability cases, compliance with the conditions of a permit or state-of-the-art or development risk exclusions will not serve as a defence. Third party and Acts of God defences will still suffice as a defence.

Who is liable

Liability will attach to the controllers of the activity which caused the damage. In the case of companies, the controller will be the company and not the individuals directing the company.

Insurance

A system of compulory insurance against environmental liability is not proposed in the White Paper.

Next steps

The consultation period on the White Paper ended on 1 July 2000. It is expected that a draft directive will be issued by the Commission in the second half of 2001.

Articles from previous newsletters