The European Community's Approach to Environmental Liability

Marco Mazzeschi
Mazzeschi, Novelli & Porcari
Milan, Italy

Introduction
On February 2, 2000, the European Community ("EC") Commission published a White Paper ("WP") on environmental liability. The WP sets out the structure for a future EC environmental liability regime and describes the key elements needed for making such a regime effective and practicable. The Commission evaluated various options in order to enforce the principles outlined in the WP. It found that the best viable and coherent option would be through the adoption of a new framework EC Directive providing for strict liability for damage caused by EC-regulated activities, with defenses, covering both traditional and environmental damage, and fault-based liability for damage to biodiversity caused by non-dangerous activities. This article reviews some of the salient elements of the environmental liability regime envisioned by the WP.

Polluters Must Pay
The WP confirms that the only way of implementing the main principles of environmental policy contained in article 174/2 of the EC Treaty, above all the "polluter pays" principle, is to impose liability on the party or parties responsible for the activity that bears risk of causing damage. The implementation of such principles would create incentives for more responsible behavior from firms. The Commission recognizes that a number of conditions need to be met to avoid loopholes for circumventing liability (e.g., by transferring hazardous activities to thinly capitalized firms that become insolvent in the event of significant damage).

No Retroactivity
The EC regime should only work prospectively. Damages that become known after the entry into force of the new regime should be covered unless the act or omission that results in the damage has taken place before the entry into force. It should be left to Member States to deal with historic pollution and other forms of pollution for which liability would not be a suitable instrument (e.g., in cases of diffuse damage or where the polluter cannot be identified). Italy, for example, recently approved a law (Decree 417/99) stating that in the event the polluter does not carry out the clean up or cannot be discovered the authority can directly carry out the necessary clean up or may alternatively see that the obligation to carry out the works is recorded as a burden on the property ("onere reale") in the real estate certificate relating to the site itself (and therefore easily subject to monitoring by any third party). The authority would also have a right of priority ("privilegio") for the reimbursement of any expenses incurred. This means that an innocent party, even though not technically considered liable for historical pollution, would face a significant reduction in the value of the site if not ready to clean up the site (although still retaining the right to request reimbursement from the actual polluter).

Damages
The new regime encompasses "environmental damage" in the form of both (i) damage to biodiversity; and (ii) damage in the form of contamination of sites. The Commission points out that it is also important that traditional damage (i.e., damage to health or property) is covered, provided that it is caused by dangerous activities defined under the regime. Covering only environmental damage under the new EC regime while leaving liability for traditional damage entirely to the Member States might result in inequitable results. For instance, it may lead to no or fewer remedies for health damage than for environmental damage caused by one and the same incident.

What Does the Regime Cover?
The regime would cover a wide range of activities, chiefly those regulated in the following categories of EC legislation:

• discharge or emission limits for hazardous substances into water or air;
• prevention and control risks of accidents and pollution (IPPC Directive and Seveso II Directive);
• waste;
• biotechnology; and
• transport of dangerous substances.

The Commission recognizes that many such activities are currently regulated by Community environmental legislation and the new liability regime would therefore provide extra incentives for observation of national laws implementing Community environmental legislation.

Genetically Modified Organisms ("GMOs")
The Commission pointed out that there are some activities (such as those with respect to GMOs) that are not dangerous per se but have the potential, in certain circumstances, to cause health damage or significant environmental damage. For this reason, it is considered appropriate for such activities to come within the scope of a Community-wide liability regime. In these cases, the precise definition of the regime, for instance the defenses to be allowed, might not be the same for all activities related to GMOs, but may have to be differentiated according to the relevant legislation and the activities concerned.

Type of Liability
The new EC regime should be based, as a general rule, on strict liability even though the Commission acknowledges that fault-based liability may seem more economically efficient than strict liability, since incentives towards abatement costs do not exceed the benefits from reduced emissions. On the other hand, recent national and international environmental liability regimes tend to be based on the principle of strict liability because of the assumption that environmental objectives are better reached that way. Damage to biodiversity should be covered by liability whether it is caused by a dangerous activity or not. It is proposed, however, to apply fault-based instead of strict liability to those damages caused by a non-dangerous activity.

Defenses
The Commission makes clear that the positive effects of strict liability should not be undermined by allowing too many defenses or by an impossible burden of proof on the plaintiff. Commonly accepted defenses should be allowed such as Act of God (force majeure), contribution to the damage or consent by the plaintiff, or intervention by a third party (such as the case of an operator causing damage by an activity that he conducted following a compulsory order given by a public authority).

Burden of Proof and Equity
The Commission recognizes that in environmental cases it may be more difficult for a plaintiff and easier for a defendant to establish facts concerning the causal link (or the absence of it) between an activity carried out by the defendant and the damage. The Commission recommends that, as already happens in several national environmental liability regimes, the new EC regime would need to establish one or other forms of alleviation of the traditional burden of proof. Some room might be granted to the court (or any other competent body) to evaluate whether it is inequitable that a polluter be required to pay the full compensation for the damage caused (such as the case when the operator can prove that the damage was entirely and exclusively caused by emissions explicitly allowed in his permit or the case when the operator had done everything possible to avoid the damage).

Who Should Be Liable?
Under the proposed regime, the person who exercises control of a covered activity through which the damage is caused, namely, the operator, would be liable. Where the activity is carried out by a company, liability will rest on the "legal entity" and not on the managers or other employees involved. Lenders not exercising operational control should not be liable.

Contaminated Sites
Most Member States have special laws or programs to deal with the clean up of contaminated sites, both historic and new. The Community regime should aim at implementing the environmental principles (polluter pays, prevention and precaution) for new contamination and to reach a certain level of harmonization with respect to clean-up standards and clean-up objectives. The main qualitative criterion to establish whether clean up of a contaminated site is necessary will be: does the contamination lead to a serious threat to man and the environment? The primary clean-up objective should be removal of any serious threat to human health and the environment. Acceptable thresholds would be determined according to best available techniques under economically and technically viable conditions. Another objective should be to make the soil fit for actual and plausible future use of the land. Only if clean up were not feasible for economic or technical reasons would full or partial containment be a possibility. An obligation common to all sorts of damages should be that damages or compensation paid by the polluter for restoration or clean up have to be effectively spent for that purpose. If restoration is not, or is only partially possible, for technical or economic (cost-benefit) reasons, compensation should be spent on comparable projects of restoring or improving protected natural resources.

Access to Justice
Member States will have the responsibility to: 1) act if the environment is, or threatens to be, damaged and 2) have the duty to ensure restoration of biodiversity damage and decontamination in the first place. Public interest groups promoting environmental protection should have the right to act on a subsidiary basis, i.e. only if the State does not act at all or does not act properly. In urgent cases, interest groups should have the right to ask for a court injunction directly in order to make the (potential) polluter act or abstain from action, to prevent significant damage, or avoid further damage to the environment. For this purpose, they should be allowed to sue the alleged polluter without going to the State first. However, only interest groups complying with objective qualitative criteria should be able to take action against the State or the polluter, however. The Commission recognizes that the involvement of recognized independent experts and scientists can play a fundamental role and that – due to high costs to be inevitably incurred in granting interest groups right of access to justice – it would be worthwhile to explore how out-of-court solutions (such as arbitration or mediation) could be used in this context.