EC-commissioned study finds ELD struggling to make polluter pay

The study-used as the basis for top-level discussions on the ELD's strengths, weaknesses and future direction in Brussels last week-suggests that the ELD is not delivering on its polluter pays principle or bringing risk managers and their companies to task. The workshop, held on 16 January and hosted by Hans Lopatta, Policy Officer on legal issues at the EC who is charged with driving through the ELD, considered next steps to boost the scope, reach and teeth of the pan-European regime. Authors of the report asked those in attendance, including policy makers at the EC, to consider whether mandatory financial security for ELD liabilities should be in place across all member states, whether certain operator defences should be removed and if the damage threshold over which the Directive kicks in should be lowered.hideThis study on implementation challenges and obstacles facing the ELD was launched in 2012 by the EC. It aims to evaluate the strengths and weaknesses of the current ELD regime using fresh empirical and analytical research. It focuses on findings from seven EU member states-Denmark, France, Germany, Hungary, Poland, Spain and the UK. Entitled BIO Intelligence Service (2012), Implementation challenges and obstacles of the Environmental Liability Directive, background document for workshop for European Commission - DG Environment, the document was used to fuel discussion among stakeholders on the effectiveness of the ELD and challenge them to come forward with new solutions. According to the report carried out by BIO Intelligence Service in collaboration with ELD legal expert Valerie Fogleman from Stevens & Bolton LLP, 'the transposition of the ELD into the national law of member states has not resulted in a level playing field but, instead, a patchwork of liability systems for preventing and remediating environmental damage across the EU'. It finds that 'the lack of knowledge of the ELD among many operators, the public and even competent authorities and environmental non-governmental organisations; a failure by operators to recognise differences between the ELD's implementation in different member states; and a failure by them to have insurance or other financial security to cover ELD Liabilities-or to recognise the need for it-[is] leading to the potential for the cost of further ELD incidents to fall on the public purse in member states that have not adopted mandatory financial security'. This suggest that things are not all well with the ELD and that mandatory financial security may increasingly be eyed by the authorities as a vehicle to ensure that environmental damage is paid for by the polluter, or operator, rather than by the peoples of Europe. The study goes on to ask: "Should the introduction of mandatory financial security be maintained as an optional provision, or are there grounds to introduce mandatory financial security at EU level for some type of operations. Should harmonisation between member states be encouraged on this aspect?" This will of course pique the interest of risk managers at those companies who would fall under any such mandatory security scheme. In a further damning indictment of the effectiveness of the ELD, the interim report finds that ELD cases remain 'rare and sometimes non-existent (Denmark), except for some countries (Poland)'. According to data collected from ELD practitioners, including competent authorities and NGOs, there are 'major discrepancies' in the level of enforcement between the seven member states studied. In news that will worry the authorities-as well as insurers and brokers that have constantly warned risk managers that ELD cases are real and on the rise-there have been no ELD cases to date in France and Denmark. There have been a small number, less then ten, of ELD cases in Germany, in the UK, less than fifteen, and in Spain, where there have been fewer than four. In Poland, however, there have been over 400 cases. In Hungary the study found it difficult to distinguish between prosecutions under the ELD and pre-existing legislation. The study concludes that to date there are still only a 'few cases' of environmental damage for which the ELD regime has been applied, but added that cases in which it was applied led to remediation measures. So it appears the ELD has teeth when operators fall under its scope but that it is struggling to find application. According to the EC commissioned study, the major reason for a lack of cases is the inability to demonstrate that damage exceeded the severity threshold fixed by the ELD regime, particularly for water and biodiversity damage. Another reason for a lack of cases is that specific activities causing the damage have not been included in Annex III of the Directive. Annex III covers heavy polluting operators and activities, placing them under strict liability for damage. Also, in cases where the ELD could have been applied, pre-existing legislative frameworks were used, adds the study. According to the study there are 'significant procedural and substantive variations in the ELD regime between member states'. Procedural variations include: Transposition of the ELD as a standalone legislation or by incorporating its provisions into pre-existing legislation: with the likelihood that competent authorities will continue to apply pre-existing-and usually less stringent-legislation when only standalone ELD legislation exists Designation of one or more competent authorities: with the designation of many authorities being likely to make it more difficult for personnel in those authorities to become experienced in implementing the ELD regime than personnel in a single authority or a limited number of authorities Transposition of the ELD into federal systems of some member states versus other legal systems in other member states: with the resulting increase in variations in the ELD regime when more than one set of legislative provisions is adopted Publication of guidance and other documentation: with such publication aiding competent authorities in implementing the ELD regime and operators in complying with it but obviously not in countries where guidance is not offered. The substantive variations include: Optional provisions in the ELD that specifically envisage differences in national ELD regimes: resulting in some-but not all-member states adopting, among other things, the permit defence, state-of-the-art defence, and mandatory financial security Provisions in the ELD that specifically provide for the application of existing national law in member states: resulting in differences in the definition of an 'operator', the scope of liability (joint and several or proportionate liability) and the scope of interested parties entitled to submit comments to competent authorities Specific authorisation in the ELD for member states to adopt more stringent provisions: resulting in stricter liability systems, broader regimes applying to more environmental damage and additional responsible parties, in some member states The application of national law concepts, such as the standard of liability for which member states may go beyond the standard of liability determined by the ELD and the level of causation, to fundamental legal concepts in the ELD: with the result that crucial components of the ELD liability system differ between member states Imprecise language in the ELD: resulting, critically, in application of the defences in the ELD to liability (in which case an operator with a valid defence is not required to remediate environmental damage and then has the right-if practicable-to seek reimbursement for its costs); another crucial implication of the ELD regime to biodiversity damage, with the interface between the ELD and Birds and Habitats Directive being particularly imprecise Adaptation by member states in transposing provisions in the ELD into national law: resulting in differences in the scope of the ELD regime, in particular, the scope of exceptions (eg in the adoption of defences to costs or to liability and the choice of exception) Additional provisions in national legislation to rectify conflicts in the ELD: resulting in differences such as when an operator must carry out emergency actions when it is not known if the damage to be abated exceeds the threshold in the ELD Additional provisions in national legislation to fill gaps in the ELD: resulting in establishment in some-but not all-member states of registers of databases of ELD incidents, and the grant of access to third-party property to carry out preventative and remedial measures The failure to meet the 30 April, 2007 deadline for transposition of the ELD: which has resulted in a later effective date for the transposing legislation in some member states and, thus, a gap in the time in which the ELD can apply. "It is too early to draw firm conclusions on the implications of the above variations for the effective implementation of the ELD. Their effect is, however, beginning to show, particularly in the number of ELD cases, which varies from none in various member states to over 400 in Poland," finds the report. "The difference in the number of cases cannot be attributed only to some member states having pre-existing wide-ranging environmental liability legislation (as has often been suggested), stronger enforcement of environmental legislation, and/or operators in such member states having invested in environmental management systems for their operations," it adds. Other reasons include the land area designated as Natura 2000 sites. The study also lists the strengths and weaknesses of the ELD. In its favour are straightforward processes to deal with environmental damage, the fact it fills gaps in pre-existing environmental legislative frameworks, has stronger powers to ensure the fulfilment of operator responsibilities and deals with several types of environmental damage at the same time. It also fosters adoption of preventative measures, in general better remediates damage compared with pre-existing legislation, ensures provisions to support recovery costs and encourages cooperation between stakeholders. The study adds: "In some member sates it has contributed to an increase in awareness of operators of the environmental risks of their activities and of insurers to tackle this issue and develop policies to provide cover for ELD liabilities." But equally many weaknesses and obstacles to the Directive's success can be found. These include a lack of expertise and knowledge to define environmental damage and access remediation measures, a lack of resource within competent authorities to implement the regime and few available tools to support ELD implementation-from notification of environmental damage to the closing of a case. There is also low-level cooperation between stakeholders and the Directive is being held back by the existence of other liability regimes and legislation that can be applied in its stead. The current political and economic and financial environment may also be holding it back, the study suggests. As well as suggesting that pan-European mandatory financial security, at least for some risks, should be considered by the EC, the study also threw up other key questions for Mr Lopatta and other stakeholders to consider. These were presumably discussed at the meeting last week and may give some indication of future moves by the authorities to help ensure that the ELD makes the polluter pay for environmental damage. The authors asked if the optional provisions, in particular those that permit several defences, should be removed to encourage harmonisation. It questioned whether the severity threshold, especially for water biodiversity damage, could be eliminated and whether the ELD's scope should be extended to broaden the definition of an operator or the scope of liability. It asks how competent authorities can gain experience and how awareness among stakeholders can be increased. In particular, how operators can be encouraged to carry out environmental risk assessments. This latest study on the ELD follows conclusions drawn from an EC report in 2010. It found then there was a lack of awareness amongst operators and other stakeholders groups of the ELD, insufficient information exchange between stakeholder groups and a lack of ELD experience and ELD cases. Things may have not have changed much since then, but the EC, to its credit, is making efforts to bolster the ELD, with several other initiatives planned for this year. Risk managers and their companies will wait with baited breath to see what direction the EC takes, particularly on the issue of mandatory financial security.

EC-commissioned study finds ELD struggling to make polluter pay

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