Environmental Liability

From Max-EuP 2012

by Gerhard Wagner

1. The concept of environmental liability

The term ‘environmental liability’ is not used to characterize a self-contained area of the law but as a descriptive term to denote legal provisions which deal with the liability for damages caused by environmental elements, such as air, water or soil. The law of environmental liability is in a state of continual development and is defined by national, European and international legislative acts.

Within the scope of the term environmental liability, two different categories of damage have to be distinguished. First, damage to a private interest—such as personal integrity or property—which is caused by pollution. Here, the natural elements are merely a transmitter of harmful emissions. The second category, which is known as (pure) ecological damage, denotes cases where the harm is not to a private interest but to the environment itself.

The first type of damage has always been the concern of the law of torts or delict, albeit not under the term ‘environmental liability’. Since the days of antiquity private law has dealt with cases in which a person has suffered damage as a result of another person polluting the natural elements. Likewise, instances of ecological damage have followed mankind for its entire existence, eg the deforestation of Easter Island and of large swathes of Lebanon, or the extermination of north American mammals by population groups migrating there from Alaska. For centuries, however, the law of torts or delict has treated these cases of ecological damage with indifference. A remedy was only granted where the ecological damage also constituted damage to private property. Pure ecological damage caused to natural resources which were not held as private property—such as non-huntable animals, natural habitats and the climate—remained outside the scope of protection. This situation changed with the Directive of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage (Dir 2004/35). Within the European Union, it created a uniform framework of liability for certain categories of environmental damage (see 3. below). The directive was transposed into the German Environmental Damage Act (Umweltschadensgesetz) and into the English Environmental Damage (Prevention and Remediation) Regulations 2009.

2. National laws

The European Member States are, by and large, confronted with comparable environmental risks, which result in similar challenges for their respective liability regimes. The solutions chosen by the Member States range from the application and development of traditional systems of liability (such as fault-based or strict liability, and the law of nuisance) to the creation of specific causes of action for the remediation of environmental harm.

In all European jurisdictions the general provisions of tort liability also apply to damages caused by pollution. Some countries have modified and developed the principles of fault-based liability, eg by tightening the standard of care with regard to the operation of potentially hazardous facilities, or reversing the burden of proof with regard to breach of the duty of care where it is established that the defendant did not comply with administrative regulations aimed at environmental protection.

The relatively strong dependence of environmental liability on administrative regulations has led to a welcome gateway for the European legislature (legislative competence of the EU), which indirectly influences the national liability regimes of the Member States by setting standards of conduct within the sphere of administrative law. A recent example is the so-called ‘REACH’ Directive on the public law duties of persons dealing with chemicals which has had a major impact on the determination of the private law duties of care (Dir 2006/121 of 18 December 2006 amending Council Directive 67/548 on the approximation of laws, regulations and administrative provisions relating to the classification, packaging and labelling of dangerous substances in order to adapt it to Reg 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) and establishing a European Chemicals Agency).

Alongside tort or delict, strict liability was introduced in most European states, albeit with a focus on harm suffered by individuals as a consequence of pollution, such as personal injury or damage to property. Some Member States, such as Germany, Greece, Finland and Sweden, have enacted special statutes on environmental liability. For instance, the German Environmental Liability Act of 1990 imposes liability on the operators of potentially hazardous facilities (which are listed and specified in the statute) for damage caused through emissions which can cause harm to the body, health or property of a person. In other European states, such as France, Belgium or Italy, the pre-existing rules on strict liability found in the respective civil codes were applied to damage caused by pollution. In the English and Irish common law of torts, a rule on strict liability has been available since the House of Lords ruling in Rylands v Fletcher [1868] LR 3 HL 330. However, it is applied very restrictively. In addition, many European states have ‘sector-specific’ liability rules, dealing with particular activities only, eg the operation of power plants, mining or waste disposal.

The third approach to environmental liability—apart from fault-based liability and strict liability—is to develop the law of nuisance into an instrument of environmental protection. In Scotland and the Netherlands proof of fault is not required for someone to be answerable under the law of nuisance.

Generally, the national systems limit the scope of protection to life, body and health, and private property. In cases where land has been contaminated, the owner or third parties with a qualified interest (such as leaseholders (lease)) are entitled to damages. Prior to the enactment of the Environmental Liability Directive, pure ecological damage was not eligible for compensation in the majority of Member States unless the environmental resource in question was held as private property so that its owner would be entitled to damages. Exceptions to this rule (which survive to the present day) were to be found in Italy and Portugal. In Italy the state—and in Portugal even individual citizens—could sue for the remedying of ecological damage. Furthermore, according to the case law of some European Member States, such as Belgium, France, Spain and Sweden, the state, individuals or environmental organizations had legal standing to sue as long as they could demonstrate a qualified legal interest with regard to the impaired resource.

3. The European directive on environmental liability

a) Legislative history

The cornerstone of Union law on environmental liability is the Directive of 21 April 2004 on liability with regard to the prevention and remedying of environmental damage (Dir 2004/35) which had to be transposed into national law by 30 April 2007. The directive is the result of a 15-year process of deliberation that was preceded by a proposal for a directive on civil liability for damage caused by waste. This proposal envisaged strict liability for personal injury, damage to property and ecological damage caused by waste, with the concept of ‘waste’ including emissions of any kind. It met with strong resistance and was never enacted. Instead, the European Commission focused its efforts on creating a comprehensive scheme of environmental liability, the basic features of which were published in the White Paper on Environmental Liability. At that stage, the idea was to create a framework directive which would have imposed strict liability for any kind of damage caused by hazardous activities, ie personal injury and damage to property as well as ecological damage. It was not until 2002 that the European Commission abandoned this comprehensive approach and concentrated on proposing a directive that would deal exclusively with ecological damage, leaving aside personal injury and damage to private property.

b) Purpose

According to Art 1, the aim of the directive is to create a framework of environmental liability in order to prevent and remedy environmental damage based on the ‘polluter pays’ principle. The directive is not intended as a means of harmonization, but rather as an instrument of environmental policy. Accordingly, Art 16 allows the Member States to maintain or enact provisions that are more stringent than the directive in relation to the prevention and remedying of environmental damage.

c) Scope of protection and prerequisites for liability

The directive’s scope of protection is limited in several respects. To begin with, only harm to natural resources, ie ecological as opposed to private loss, is compensable. Article 3(3) states explicitly that the directive does not give private parties a right of compensation as a consequence of environmental damage. Therefore, the owners of a seaside hotel do not have a claim for damages if the summer season is spoiled due to excessive pollution of the seawater.

But even ecological damage is covered only fragmentarily, namely insofar as the damage can be classified as an impairment of protected species, certain natural habitats, or as contamination of the soil. If any of these infringements are caused by an activity listed in Annex III, such as the operation of a commercial activity that is considered to be hazardous to the environment, the operator faces the costs of remediation or prevention of any harm caused. For the activities not listed in Annex III, the operator is only liable for damage to protected species and natural habitats, and even then only under the added prerequisite of fault, ie intention or negligence.

d) Consequences of liability

If the ecological damage has not yet materialized, but there is an imminent danger of it occurring, Art 5 obliges the operator to take preventive measures. If the damage has occurred, the operator has an obligation to prevent further harm and to take all necessary remedial measures under Art 6. The scope and extent of the remedial measures required are detailed in Annex II of the directive. Annex II sets out a hierarchy of remedial measures, consisting of (1) ‘primary remediation’, which is a remedial measure which returns the damaged natural resource to, or towards, its baseline condition; (2) ‘complementary remediation’, meaning remedial measures which compensate for the fact that primary remediation does not result in restoring the damaged resource in full; and (3) ‘compensatory remediation’, which is any action taken to compensate for interim loss that occurs from the date of damage until primary remediation has achieved its full effect. For cases of soil contamination, Annex II markedly reduces the intensity of remedial measures, as the polluter only has to remove enough of the toxic substances to ensure that the land no longer poses a significant risk of adversely affecting human health.

e) Standing

According to Arts 5 and 6, only the competent government authorities may take action against the polluter. Private organizations and individuals have no right of action. However, non-governmental organizations promoting environmental protection are entitled to approach the competent authority and request that actions be taken against the polluter.

f) Allocation of costs

The polluter bears the costs of remediation and prevention, regardless of whether he remedies the harm or whether the competent authority takes action on his behalf. However, the polluter is released from this duty if he can establish that he acted without fault or—where liability is strict—if he can successfully invoke force majeure. Two further defences which were hotly debated during the legislative process, namely the so-called ‘permit’ defence and the ‘development risk’ defence, were left to be settled by the national laws of the Member States. Under the ‘permit’ defence, the operator is excused if he acted in full accordance with the conditions of an authorization granted by the competent authority, whereas the development risk defence refers to cases where, at the time of the emission, the risk of harm was not foreseeable.

g) Liability between public and private law

All in all, the directive supplies a system of liability that is closer to forms of public responsibility, enforced by the government under its police power, than to civil liability in tort or delict. In essence, the directive authorizes and obliges public authorities to prevent and remedy damage to collective interests. They can do so primarily by compelling operators to act or, alternatively, by taking remedial actions themselves. The directive does, however, incorporate some elements of civil liability regimes, such as the distinction between fault-based and strict liability, and the recognition of defences such as force majeure, development risk and acting in compliance with public authorization.

4. Conflict of laws

International cases involving environmental liability are governed by the Rome II Regulation (Reg 864/2007) as far as the applicable law is concerned. Article 7 supplies a special rule for claims based on liability for environmental damage. In contrast to the directive on environmental liability, Art 7 Rome II applies to both ecological damage as well as harm to private interests such as health, bodily integrity and personal property. On the other hand, Art 7 does not cover claims for the reimbursement of public authorities. Under Rome II, the claimant seeking compensation has the choice between the law of the country in which the damage occurred (Art 4 Rome II) and the law of the country in which the harmful act or event took place (Art 7 Rome II). As a result, Art 7 imposes a more stringent liability regime for cross-border pollution than for other cases of international torts. The polluter is answerable in damages even where he is not liable under the law of the place of damage, provided the law of the country in which the harmful activity was carried out supports the claim.

5. International Conventions

Several international conventions have a bearing on the law of environmental liability. Among those, only one follows a comprehensive, that is to say, not a ‘sector-specific’ approach, namely the Lugano Convention of 21 June 1993. It provides for strict liability of operators of hazardous activities for personal injury and damage to property, as well as for ecological harm, including the costs for prevention. This far-reaching regime was, however, never enacted.

Next to this comprehensive proposal, there are a number of sector-specific conventions. These have themselves only partially been enacted and can only be mentioned here cursorily. The common feature of these small-scale conventions is that they order strict liability solely for certain kinds of hazardous activities, provided that such activity has an international dimension. For example, the 1969 International Convention on Civil Liability for Oil Pollution Damage imposes strict liability on ship owners whose vessels are carrying oil in bulk (marine pollution (compensation)). The Convention is complemented by the 1971 International Convention on the Establishment of an International Fund for Compensation of Oil Pollution Damage. This convention protects victims of oil pollution by providing a fund to cover damage claims where the claim in damages exceeds the liability of the ship owner, where the ship owner is financially incapable of meeting his obligations, or where the claim is defeated as a result of an exclusion of liability.

Accidents in nuclear power stations and other nuclear facilities may have catastrophic consequences and are, therefore, a case for international regulation. As a result, a number of international conventions exist in this area, in particular the Paris Convention on Third Party Liability in the Field of Nuclear Energy of 1960, as amended by the Additional Protocol of 1964. The Paris Convention subjects the operator of a nuclear facility to strict liability subject to a cap of no more than 15,000,000 Special Drawing Rights (around €20,000,000). Furthermore, the scope of protection is limited to the private interests of life, health and property, making pure ecological harm not compensable. This was changed by the 2004 Protocol to the Paris Convention which brought ecological damage within the scope of protection of the Convention and increased the ceiling to €700 million.

6. Perspectives for harmonization

While the Principles of European Tort Law do not contain specific rules for environmental liability, the Draft Common Frame of Reference (DCFR) supplies a rule on civil liability for environmental harm. According to Art VI-2:209 DCFR ‘burdens incurred by the State or the competent authority in restoring substantially impaired natural elements such as air, water, soil, flora and fauna, are legally relevant damage’ and, therefore, compensable. This provision transforms the primarily public responsibility under the directive into a form of civil law liability. It also abandons the fragmented scope of protection in favour of comprehensive protection of natural resources. In doing so, the DCFR places private losses and harm to the environment on an equal footing.

Literature

Christian von Bar (ed), Internationales Umwelthaftungsrecht, vol I (1995); Günter Hager, ‘Europäisches Umwelthaftungsrecht’ (1997) 5 ZEuP 9; Rüdiger Wolfrum and Christine Langenfeld, Umweltschutz durch internationales Haftungsrecht (1999); Lucas Bergkamp, Liability and Environment (2001); Günter Hager, ‘Der Vorschlag einer europäischen Richtlinie zur Umwelthaftung’ (2002) JZ 901; Michael Faure (ed), Deterrence, Insurability, and Compensation in Environmental Liability (2003); Reinhard Hendler and others (eds), Umwelthaftung nach neuem EG-Recht (2005); Gerhard Wagner, ‘Die gemeinschaftsrechtliche Umwelthaftung aus der Sicht des Zivilrechts’ (2005) Versicherungsrecht 177; Monika Hinteregger (ed), Environmental Liability and Ecological Damage in European Law (2008); Monika Hinteregger, ‘Environmental Liability’ in Helmut Koziol and Rainer Schulze (eds), Tort Law of the European Community (2008) 103.

Retrieved from Environmental Liability – Max-EuP 2012 on 19 May 2022.

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