The Environmental Liability Directive

Myrthe Hanckmann Environmental Law & Policy 22-12-13 Thijs Etty

Introduction The Environmental Liability Directive (ELD) of the European Union is not without controversy. Not only the long road leading up to the final version of the Directive, but also the complications with implementation and enforcement are sufficient reason for a close research of the Directive in question. This paper will therefore include a short introduction of the ELD and its primary aim, after which the distinction between civil and environmental liability will be clarified. Subsequently a historical overview of the Directive will be provided that is crucial for the further workings of the Directive after which the current ELD framework will be set out in some detail, including the two different liability regimes. Thereafter Ill discuss the exceptions under the ELD and reflect on how this affects the effectiveness of the Directive, and the discussion will continue by describing the manner in which the main goal of the Directive is realised. Through prevention and remedying the environmental damage there are various ways to ensure limited permanent damage to the environment and its natural resources and services, but the intrinsic value of nature appears to have lost its importance under the Directive. The last part of this paper will include a detailed account on the implementation and enforcement process and its issues. This will be concluded with a critical analysis on the actual workings of the ELD, in particular considering the implementation issues, and a demonstration of the Directive in practice through a case-study involving a successful enforcement of the Environmental Liability Directive. The ELD The Environmental Liability Directive from the European Union aims to protect the environment by ensuring that the financial consequences of certain types of harm caused to the environment will be borne by the economic operator who caused this harm. (European Commission, 2013). The overall goal of the ELD is that the damage to natural resources is fully remediated and the services it provides should be returned to their baseline condition. Further workings of the Directive will be more explicitly explained later in this paper.

Environmental liability in the EU was designed as a framework for liability with the intention to prevent and remedy damage to water resources, plants, animals, natural habitats, and land damage. The liability within the framework is divided over actual or potentially damaging activities, and situation in which the operator was at fault or it was caused by negligence. The final aim of the environmental liability framework is to incorporate the polluterpays principle, which enables the public authorities to ensure that the responsible operator(s) bare(s) the financial consequences of the necessary preventive or remedial measures taken. (Europa, summaries of EU legislation, 2011). A possible issue with the concept of environmental liability lies in the establishment of causation and the determination of the actual costs of the environmental damage and/or its restoration. Due to this complex situation, a distinction has been made between environmental liability and civil liability, a complicated process that is described in more detail in the historical overview of the European Environmental Liability Directive. The main differences between environmental and civil liability concern the rights of private parties affected or otherwise involved. Environmental liability generally does not allow any rights to compensation for private parties (European Commission, 2013) or does it cover damage to property, person or pure economic loss. Hence, environmental liability, specifically in the case of the EU directive, only specifically encloses the environment and therefore excludes the traditional subject of civil liability. (Reiners, 2009). Historical overview There are three documents that mark the main road of the process towards the Environmental Liability Directive, which will be discussed below. Firstly the Green Paper on the Restoration of Environmental Damage of 1993, secondly the White Paper on Environmental Liability of 2000 and thirdly, the Proposal of the Commission for a Directive on Environmental Liability in 2002. The first steps of the development process towards the Environmental Liability Directive were taken some 20 years ago when the European Commission introduced a Green Paper on the Restoration of Environmental Damage of May 14, 1993. This Paper, initiated by the Commission focussed on

starting a discussion on remedial measures for environmental damage in order to investigate which road it should take in the future regarding environmental damage. (Reiners, 2009) Secondly, the Commission initiated a white paper, which was in sharp contrast with the earlier Green Paper. Where the Green Paper in 1993 mainly focussed on the issues of a possible environmental liability scheme, the White Paper of February 9, 2000, contained more concrete views on how the Commission could address the problems suggested in the Green Paper. It establishes key features of a possible environmental liability scheme in the European Union. Additionally, the White Paper went a step further and proposed that a Directive framework would be the most suitable option to authorize the liability regime. (Reiners, 2009). The last big step towards the present Directive was the Commission Proposal for a Directive of the European Parliament and of the Council on Environmental Liability with Regard to the Prevention and Remedying of Environmental Damage of January 23, 2002. (Reiners, 2009). This document stated in a comprehensive manner the ideas and features of the environmental liability regime, which were thoroughly discussed in the preceding years. The proposal also contained a major change from the former papers, namely it recommended a change from a civil liability system, to a public law system. (Reiners, 2009) Lastly, the final text of the Environmental Liability Directive was adopted by the European Parliament and the Council in a co-decision on April 21, 2004. The ultimately adopted Directive, was adjusted from the Commission Proposal after in went through the European Parliament and the Council of Ministers. Amendments later added to the Directive, these amendments were mainly in Annex III, which includes a list of actually or potentially activities, to which management of extractive waste was added in 2006. Another notable change in the ultimate version of the Directive was the inclusion of the Polluter-Pays Principle, which had not been included in the 2002 Proposal, even though it had been present during the entire process. In conclusion, in February 2004 the Environmental Liability Directive was announced to be the first EU law that was explicitly based on the polluter-pays principle. (Reiners, 2009)

The present Framework of the ELD As explained before, the ELD is based on the polluter-pays principle which provides a framework for the financial responsibilities of an operator, concerning environmental damage. Specifically the ELD allows Member States to designate competent authorities who will overlook the implementation and safeguard the enforcement of the Directive. They will also protect the interests of related operators and other relevant parties. The tasks of the competent authorities for example include, but are not limited to, determining the significance of the damage to the environment and establishing the remedial measures that the liable actor is required to take. In this case it is valuable to know what defines an operator and environmental damage within the Directive. An operator according to the ELD means any natural or legal, private or public person who operates or controls the damaging activity or, where this is provided for in natural legislation, to whom decisive economic power over the technical functioning of such an activity has been delegated, including the holder of a permit or authorization for such an activity or the person registering or notifying such an activity. (European Commission, 2013). This is a rather complicated definition but it basically establishes that a liable operator is any person who can be held responsible for the damaging activity. The environmental damage safeguarded in the Directive is divided into three categories encompassing: the damage of protected species or habitats, water, or land. The damage to protected species and natural habitats, covers any damage that has significant negative effects on the conservation status of such habitats or species. Specifically the protected species and natural habitats are described in the Birds Directive and the Habitats Directive. Secondly the environmental damage encompasses water damage which includes any damage that has significant negative effects on the ecological, chemical and/or quantitative status and/or ecological potential, as defined in the Water Framework Directive, of the waters concerned. (European Commission, 2013). The last category is land damage which covers any contamination of land that creates a significant risk to human health, as a result of the direct or indirect

introduction, in, on or under land, of substances, preparations, organisms or micro-organisms. (European Commission, 2013) Regimes Besides the framework shortly described before, the Environmental Liability Directive works within two regimes. In the first regime the Directive is concerned with activities deemed actually or potentially damaging, regardless of whether the responsible actor was at fault or was responsible by negligence, while the second liability regime focuses on damage done by operators not listed in Annex III and fault or negligence have to be proven in order for the Directive to apply. This is also known as the fault liability, which applies to all occupational activities and the strict liability, as listed in Annex III. As stated in the ELD Art. 2; the term occupational activity is defined as any activity carried out in the course of an economic activity, a business or an undertaking, irrespectively of its private or public, profit or non-profit character. (Bergkamp, 2013) Personally I find it slightly confusing to distinguish between the economic character of the activities covered by the ELD and the complete disregard of the activities of the individual, who just as well may have a significant impact on the environment. On the other hand I can appreciate the clarification on the profitable or non-profitable character of the activity, and how both are included within the scope of the Directive. Exceptions Possibly the most important and interesting part of the Directive is the exceptions. These play a major role in the ultimate workings of the Directive and determine its effectiveness. In Art. 2 of the Directive certain exceptions are described, for example damage to the environment as the result of actions taken with authorization under the Birds- or Habitats Directive is exempt from the Environmental Liability Directive, as well as damage to water if this damage is the result of new sustainable human development activities (Reiners, 2009). The difficulty here lies in the identification of authorized or illegal activities. Additionally there is another major exception from the Directive which greatly affects its effectiveness. For environmental damage to be covered under

the ELD, causation has to be proven. The Directive cedes to be applicable if it cant be proven who specifically caused the damage and to what extent. This is often the case with diffuse damage where it has been proven to be hard to establish a clear link between the environmental damage done, and the activities of the operator that possibly caused it. As a consequence the Directive doesnt encompass orphaned damage (Reiners, 2009). Orphaned damage is described as damage for which no polluter can be identified or for which the identified polluter is insolvent (Fogleman, 2006). Lastly, there is one exception concerning the link between the ELD and certain International Liability Conventions. This exception applies for certain activities that are not covered by the ELD, but fall under the Civil Liability Conventions, activities as listed in Annex III and IV. The liabilities concerning, for example, oil pollution damage, damage due to the transport of hazardous substances or dangerous goods, as well as nuclear energy can apply to be exempted under the ELD (Reiners, 2009). Personally I consider the above to be the most interesting part of the Directive, because it concerns its actual effectiveness. It is more often than not the case that it matters not what is included, but rather what is excluded. The exceptions described, and in particular the last examples mentioned concerning Annex III and IV, contain the biggest flaw of the Directive. Some of the most serious environmental damage, for example, is due to oil pollution, involving the environmental damage the ELD was originally designed for, but instead now it is still covered by the civil liability, in a way defeating the (original) purpose of the Environmental Liability Directive. Reflecting on the exceptions, I feel that although the initiative is great, the ultimate effectiveness will be relatively small. This will be demonstrated in the form of a case-study concerning Estonian water pollution that concludes this paper. Aim: prevention and Remedying After having explained the framework of the Directive and the exceptions to it, I will continue by describing the aim and actual workings of the Directive. The primary aim of the Directive is the prevention of environmental damage. The Directive states that there where environmental damage has not yet developed, but the competent authorities believe there is an acute threat of environmental

damage developing, the operator in question shall without postponement take all the necessary precautions and preventive measures, as well as inform the competent authorities, without delay, of all relevant details of the situation (European Commission, 2013). Remedying is the second main goal of the Directive and more complicated than the goal of prevention. It consists of two measures: firstly ensure immediate control and containment of the damaging factor(s) as to limit or prevent a further spread of the damage, and secondly, the operator in question shall take all the remedial measures necessary to restore the affected environmental resources to their baseline condition. The aim of the ELD is the physical reinstatement of the environment to its original form in order to be able to provide the same natural resources and services. In the case that its not possible for the original site to be fully restored, the liable operator is required to ensure a replacement of the damaged area in a identical situation. The remedial measures to return the affected area to its baseline condition are ordered into three different categories; primary, compensatory and complementary measures. The restoration of the original site to its original state is called primary remedial measures, whereas compensatory remediation takes place when the former isnt a possibility and a secondary site or species is found to ensure that a similar level of services and natural resources are accomplished. Thirdly there are the complementary remediation measures, these are included in the Directive as it recognizes that the restoration of the site or species to its original state takes time, and these so called interim-losses should be compensated for. This means that the environmental resources or services forsaken during the recovery period need to be compensated for (European Commission, 2013). Personally I find the remedial measures rather selfish. The main objective of remediation doesnt necessarily seems to be the restoration of nature to its former glory, because of the will to protect nature from environmental damage, but more a way to ensure that positive effects for human health and business seems to be fully restored and covered for. The emphasis for the remediation of the environment should be based more on the intrinsic value

of nature I believe, and reflecting on the Directive in this manner, it stands out that this is not necessarily the case. Implementation To continue the discussion on the actual workings of the Environmental Liability Directive, the implementation is a crucial part. The deadline for all the Member States for the implementation of the ELD was set April 20, 2007. To say the least, the implementation process has been difficult. At the time of the deadline there were merely three Member States who had actually implemented the Directive and transposed it into their national law, the Member States being Italy, Latvia and Lithuania. In 2008 the Commission filed various requests with the European Court of Justice concerning the failure to implement the Directive by the majority of the Member States. In a few cases the European Court of Justice ruled in favour of the Commission and judged the concerned Member States with failure to adhere to the obligation of implementation, however, several Member States were withdrawn from the Courts register before a judgement could be made. In 2009, 23 Member States finally notified the Commission of full implementation, hence so far only 4 Member States are still missing (Reiners, 2009). The issues regarding the implementation are varied but one of the main issues can be addressed to the effectiveness of the Directive, which was questioned by several Member States, for example due to vague and unclear formulations. Additionally the transposition of the Directive into already existing nation law could have further complicated the implementation process. In contrast, research has shown that the type of liability, changed from civil to public law, was not a major influence on the difficult implementation process. (Reiners, 2009) That the implementation process would be so cumbersome does not strike me as a surprise, seeing how I agree with the complaints of Member States regarding the effectiveness of the Directive. After extensive research into the topic and as I have explained before, the effectiveness of the ELD is heavily subject to the exceptions and the unclear wording. However, implementation could have been more swift had the Member States had any incentive to actually timely transpose the Directive into their national law, this is a possible point of

improvement. Finally I believe that even though the majority of the Member States has currently implemented the Directive, the actual enforcement of it is questionable. Enforcement According to the European Commission (2013) the operator that is responsible under the Liability Directive must bear the cost of the necessary preventive or remedial measures. There are currently two options of doing so, either directly or indirectly. When the operator takes direct financial responsibility for the environmental damage, he funds the measures he himself takes, or directly compensates a specialised party to take these measures on his behalf. The first is preferable to the second option of indirect financial responsibility where the competent authorities have taken preventive or remedial measures, themselves or by a specialised party, the financial costs will have to be reimbursed to them by the liable operator (European Commission, 2013). A possible complication with this scheme of financial responsibility is that although the Directive obliges Member States and operators to bare the financial consequences of environmental damage, no obligation is established for the insurance of these possible costs (Reiners, 2009). This is particularly relevant for activities that concern a potential danger to the environment. This complication in its turn could undermine the underlying polluter-pays principle, due to possible insolvency from the operator, after which the environmental damage will be orphaned and will cease to be covered under the Liability Directive. Reflecting on the enforcement of the Directive has led me to further understand the complications in the implementation process. The rather vague Directive does not stimulate implementation or enforcement, also the lack of an insurance mechanism in high risk activities leads to the undermining of the Directive and its main goals. However, implementation and enforcement have been proven to be a complicated issue and are therefore a recurring point of discussion. The first step to improve both the implementation and enforcement is to clarify the Directive and where possible provide Member States with an incentive to ensure their obligations under the Directive. The effectiveness of the Directive will be demonstrated in the case-study presented below.

Case-studies In order to provide an example of the Environmental Liability Directive in practice, the following will discuss a case-study, that can be considered as a success story for the ELD, but also manages to identify its weaknesses. The case concerns an accident with the transportation of specially marked diesel fuel in Estonia, where the cargo of the transport, around 6000 to 8000 litres of hazardous fuel produced an immediate threat to the surrounding surface and ground waters, indirectly causing a threat to human wellbeing. In this particular case the Environmental Board, the competent authority in Estonia designated by the Member State that is concerned with the enforcement of the ELD, was able to regulate sufficient preventive and remedial measures within 2 months after the incident. The remedial measures taken by the operator, in this case AS Olerex, proved to be adequate as four months after the accident the water quality was measured and found to clean of the polluting substance. This case can be seen as a successful enforcement of the ELD in which the situation was handled in mutual cooperation and in a timely manner by both the operator and the competent authorities (Justice and Environment, 2012). However, only two out of nine cases of environmental damage presented to the Estonian ELD regime, also called the Estonian Environmental Liability Act (ELA) were handled according to the ELD framework. (Justice and Environment, 2012) Personally I find it highly remarkable that so far only nine cases have been reported to the ELA, seeing how this would mean that there have barely been any accidents involving environmental damage. It is more likely so that they either have not been reported, the ELA officials were not deemed sufficiently capable to handle the case even if the ELA was applicable, or the situation was simply not covered under the ELD framework. The situation described here shows that the ELD, if competently applied could contribute to a timely way of handling environmental damage and its preventive and remedial measures, however the efficiency of the Directive can be questioned judging by the low number of cases actually handled by the ELD.

Conclusion After the discussion of the significance of the distinction between Environmental liability and civil liability I can conclude that I agree with the Commission choice to opt to regulate the liability in a public law system, rather than in a civil one. Currently the interests of private parties are protected by the competent authorities, but they have no direct influence on the workings of the ELD, and have no way of being compensated for the environmental damage, this possibly helps ensure the independence of the competent authorities and the working of the ELD. Furthermore reflecting on the history of the Directive it was noticeable that the Directive has had a complicated history which can provide a possible explanation of its current issues. The process of the Directive through the different layers of the European Union have severely watered down the ultimate Directive and explains the vagueness of certain part of the ELD. I believe the framework of the Directive I believe was nicely set up and quite clear cut, and the two different regimes provide ways to cover various distinct cases. However, the exceptions form a major point of discussion within the ELD, seeing how they are rather unclear and provide for a lot of loop holes and ways out of the financial responsibility that comes with environmental damage. The way that diffuse damage and orphan damages become exceptions under the ELD, instead of providing alternative measures to be taken seems like quite a weak point in the overall Directive, more so because this happens in a lot of situations. The aim of the Directive is clear and is supported by the polluter-pays principle, yet the actual implementation and enforcement show that this principle is rarely put into action. Additionally the remedial measures can be considered to have little regard for the intrinsic value of the environment and seem to be more focussed on the services and natural resources it provides to society. The implementation had a rough start with only three Member States succeeding in making the deadline, but currently 23 Member States have transposed the Directive into national law which is a positive development. The implementation can be problematic at times due to unwillingness and lack of

clarity in the Directive but there also several cases that have been successfully dealt with. The enforcement of the Directive, if implemented correctly, has been shown to be quite successful such as the in the case of AS Olerex in Estonia, but a recurring point of discussion seems to be the absence of an insurance obligation for high risk activities. This seems like a reasonable complaint to me and the Commission has issued a report researching the options, advantages and disadvantages of such an obligation. Finally I would like to conclude that the ELD certainly contains some very good points, namely the clear cut framework and the broad set up, mainly the large scope of the definition of environmental damage. The inclusion of protected species and habitats, as well as water or land damage demonstrates the wide scope of the Directive and the broad understanding of the importance of the environment. The goals of the Directive are well argued, especially the polluter-pays principle. It is therefore even more disappointing to see that this principle, which forms the bases and backbone of the Directive, can also be viewed as part of its downfall. The complications with the implementation and enforcement as well as the establishment of actual liability for me form the main point of discussion within the Directive. The exceptions I have argued to be to broad, vague and generally provide too many loop holes for the Directive to actually be effective. I think this is particularly unfortunate as the Directive once had the potential to be quite influential, however currently its been considered controversial and inefficient. In order for the Directive to improve its effectiveness, these issues concerning exceptions and implementation need to be addressed accordingly.

Works Cited
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