Agers demands changes to Spain’s environmental liability law

The law under the microscope, which is a 2007 transposition of the European Liability Directive, takes several different forms in Spain as regional governments adopted their own interpretations of the text. This is making life hard for organisations forced to comply with the rules.

As such the Spanish Environment Ministry has launched a reform effort. Agers were amongst those interested parties invited to contribute opinions towards a first draft of changes.

The main goal of the proposals presented by Agers is simplification of the rules. It wants, for example, all regional governments around the country to accept one single financial guarantee against environmental damage, which is not the case today.

hide

In Spain’s model of a decentralised federal state, regional governments, known as autonomous communities, have plenty of leverage to decide the rules that apply within their borders, including environmental law.

This means that companies sometimes need to put in place different financial guarantees for each of the autonomous communities in which they operate. More often than not the guarantee is in the form of an insurance policy and the accumulation of policies means more cost for buyers.

Agers also want to harmonise application of the law in the 17 autonomous Spanish communities. Each regional government has implemented its own interpretation of the law, sometimes adding optional articles contained within the original European directive that the national document does not included.

Rules concerning risk analysis procedures should also be simplified across the country and methods to evaluate the severity of environmental loss harmonised, the association has urged authorities.

“We still see lots of gaps in the law. Gaps in the way risks are evaluated and modified, for example,” said Mario Ramirez Ortúzar, a member of Agers’ board and part of the working group that elaborated the association’s proposals. “There are many things that still need to be defined, and we hope that the autonomous communities make their decisions in a unified way. If that does not happen we can find 17 different ways to apply the law.”

He added: “When there is a loss a company needs to be aware of the way that the law is applied in the autonomy where it took place. In some of them public bodies take charge of the proceedings as soon as the incident is communicated. In others companies communicate the incident and then never hear back from the regional government.”

Getting ready to meet all the different demands adds costs for companies in the form of red tape. “Large companies adopt the best possible procedures and spare no money to be prepared to face an environmental loss, so we are always prepared to meet the requirements of any public body,” Mr Ramírez said. “But for small companies that operate in several autonomous communities, it must be very difficult to be prepared.”

Spain’s Environmental Liability Law came into force in April 2007. It is a demanding law for all parties involved, experts agree, and tends to be mostly used in cases of large environmental damage.

Small, low-value environmental damage is more often punished via other, simpler laws, relating to the disposal of residuals and similar topics.

“It is not an easy law for the public bodies to apply, and this fact prevents its full development somewhat,” said Ángel Escorial Bonet, also on the board of Agers and member of the working group that formulated its environmental wishes.

In some of Spain’s autonomous communities there is a dearth of qualified staff to provide the guidance companies need to meet its tough requirements.

The situation is better in places like Catalonia and the Basque Country, where environmental bodies are seen as very professional and capable of working with corporations.

However, in these two communities, where mechanisms to verify and punish environmental damage are developed, the risk faced by companies is consequently more acute.

“When a loss is too low, it sometimes costs more money to apply the procedures of the law than to pay for the reparation of the affected areas,” Mr Escorial said.

The law specifies that companies have a financial guarantee in place to pay for any environmental loss. Although this can take many forms, most medium and large companies are opting to arrange the guarantees via the insurance market.

Ever since the implementation of the law the insurance industry has been able to develop its environmental liability insurance offering, to a point where companies can find the capacity required and rates have been on the slide for some time.

“There are good enough coverages available in the market today, and premium rates are very reasonable, compared to other insurance lines,” Mr Escobar said.

Prevention is another area that the law has tried to boost and the new text will likely create more incentives to do so. The changes proposed by Agers aim to simplify environmental risk analysis procedures, which previous legislation has turned into such a complex task that sometimes carrying out these duties is more costly than eventual losses, Mr Escobar pointed out.