August 2004
The polluter pays
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EHJ August 2004, pages 258-259

Tina Garrity reports on a new EU directive ensuring costs of environmental damage are met by those who caused it

The polluter pays - EHJ August 2004, pages 258-259 Tina Garrity reports on a new EU directive ensuring costs of environmental damage are met by those who caused it Who should pay for past environmental damage? It has taken the European Commission over 10 years to tackle this thorny issue, but now, at last, after countless meetings and debates between EU institutions, industry and environmentalists, a directive has been hammered out, agreed and published.

It all started back in 1993 with the publication of a green paper on remedying environmental damage. Not everyone is happy with the outcome, so the EC has had to build in a strict review mechanism. But, despite the disagreement, the final directive does represent a small, initial step forward in tackling the controversial issue of who should pay for past pollution.

At the heart of the EU's environment policy is the polluter pays principle. So, it is logical that the foundation of the new directive should be based on the idea that an operator who causes environmental damage or poses an imminent environmental threat should be held financially liable. It is hoped this will incentivise operators to minimise the risks of environmental damage to reduce their financial liabilities.

All well and good, but this can only work when there is one or more identifiable polluter and the damage done is concrete and quantifiable. The directive makes it clear that liability is not a suitable instrument for dealing with widespread and diffuse pollution, where it is impossible to link negative environmental effects with the failings of individual entities.

One of the difficult tasks in drafting legislation has been to define what exactly is meant by environmental damage. The directive covers three main types:

  • damage to protected species and natural habitats which has significant adverse effects on conservation
  • damage which significantly affects the supply, ecology or chemical makeup of water
  • any damage to land that poses a significant risk to human health as a result of "substances, preparations or micro-organisms" being introduced directly or indirectly "in, on or under land". Damage is defined as "measurable adverse change in a natural resource or measurable impairment of a natural resource service which may occur directly or indirectly."

The directive applies to actual or threatened damage caused by a defined list of occupational activities. These include processes subject to IPPC permits, waste management operations, discharges to certain types of water and water abstraction. It covers activities involving dangerous substances and preparations, as well as plant protection and biocidal products. It applies to authorised activities under the air pollution from industrial plants directive (84/360/EEC), to activities involving the contained use or deliberate release of GMOs, and to transboundary waste shipments covered by regulation 259/93. Also covered is damage or imminent damage to protected species and natural habitats caused by other types of occupational activities whenever the operator has been at fault or negligent.

Environmental damage caused by acts of armed conflict, defence, international security, hostilities, civil war or insurrection are exempted. Damage caused by natural phenomenon of an "exceptional, inevitable and irresistible character" is also exempted as is action taken to provide protection from natural disasters. Other exclusions include incidents covered by certain international conventions and instruments. The only instance where liability for damage caused by diffuse pollution will apply is where a direct causal link with an individual operator can be established.

The directive does not apply to cases of personal injury, to damage to private property or to any economic loss. It does not affect any right regarding these types of damages nor will it give private parties a right of compensation for any damage or imminent damage caused. It will only apply to damage caused after 30 April 2007, when the directive is implemented.

Article 5 of the directive says operators must take immediate action to prevent the imminent threat of damage. Where the threat persists, despite the preventive measures taken, member states must ensure that operators inform the competent authority as soon as possible. The authority can ask for information on any imminent or suspected environmental threat and ask for preventative measure to be taken, take measure itself or instruct the operator on what to do.

If environmental damage occurs, the operator must inform the authority. It must also take every step to contain the threat, limit the damage and risks to human health, and take remedial measures. The authority has the same powers as those outlined for preventive measures. The operator has to identify potential remedial measures with the help of the directive's technical annex and to submit these to the authority for approval, except when the authority itself has taken action.

The precise measures to be taken will be determined by the authority with the cooperation of the operator. Where several instances of damage have occurred, the authority will decide what has to be dealt with first. It must take account of the nature, extent and gravity of the various instances and the possibility of natural recovery, as well as any risks to human health. Those affected or likely to be affected by the damage, those having a sufficient interest in environmental decision making relating to the damage, those alleging an impairment of a right (where a member state's administrative procedural law requires this as a precondition) and those upon whose land remedial measures would be undertaken must be invited to submit their observations which the authority must then take into account. The grounds upon which any required preventive or remedial measures are based must be notified to the operator forthwith.

The operator will bear the clear-up costs unless it can be proven that a third party was responsible for the damage or that all appropriate safety measures were in place. As long as the order was not issued after an emission or incident caused by the operator, it will also have a case for non-payment if it can be proven the damage happened as a result of complying with a compulsory order or instructions from a public body. Other exemptions are where the operator can prove it was not responsible, where damage was caused by complying with EU law or where the damage was unforeseeable according to the state of scientific and technical knowledge at the time. In such cases, member states must take the appropriate measures to enable the operator to recover the costs incurred.

When the cost of recovering funds is greater than the sum recovered or where the operator cannot be identified, the authority is exempted from recovering costs. The authority can recover its own costs through inter alia, security, property or other guarantees. Where multiple parties are to blame, national laws will be used to apportion costs. It has five years to recover costs from the operator being identified or of measures taken under the directive being completed.

The directive allows anyone likely to be affected by the damage, anyone with "sufficient interest" in environmental decision making relating to the damage or anyone alleging an "impairment of a right" (where a member state's administrative procedural law requires this as a precondition) to request action from the authority. Member states define "sufficient interest" and "impairment of a right". The directive sets out the broad details of how this request for action process will work. Those affected or likely to be affected by the damage must be allowed access to a court or other impartial public body competent to review the procedural and substantive legality of the authority's actions.

One of the negotations' sticking points was the need for operators to insure themselves against claims. The Greek presidency was unable to find a compromise, which would have phased in a requirement for operators to take out mandatory cover over a six-year period. MEPs were keen for cover to be mandatory but the UK and other member states objected over the affordability and availability of cover.

A deal was struck whereby member states will encourage the development of financial security instruments and markets, including financial mechanisms in case of insolvency. The EC must, by 30 April 2010, report on the directive's effectiveness in terms of actual remediation of environmental damages, the availability at reasonable costs and on conditions of insurance and other types of financial security. The report will consider financial security elements such a gradual approach, a ceiling for the financial guarantee and exclusion of low-risk activities. In light of the report, and of an extended impact assessment, including a cost-benefit analysis, the EC must, if appropriate, submit proposals for a system of harmonised mandatory financial security. Defra hopes to begin the formal UK consultation process on implementation in the autumn with a view to making regulations sometime after November 2006.