Ferma says no to shared EU environmental liability fund

The European risk management representative body believes that any such shared compensation fund goes against the polluter pays principle enshrined in EU law and would likely reduce risk management efforts to protect the environment from commercial activities. It was responding to a consultation by the EC on the merits of a pooling scheme following proposals by the Hungarian government. Ferma's Secretary General Pierre Sonigo, who is responsible for the federation's environmental liability activities, said there are several reasons why a fund is not needed and could even increase the risk of pollution.hide"It is contrary to the polluter pays principle established in the Environmental Liability Directive (ELD)," he stated. "It is even likely to work against the process of risk management, rather than encouraging companies to take responsibility for the consequences of their own activities." He added: "In most of western Europe, there is good insurance coverage for environmental pollution risks including for environmental damages. Where the market is not so sophisticated or business finds the price unacceptable, it is not right to create a fund so that other countries should pay to share a risk which should be managed locally." Ferma is also concerned that the proposed mechanism for the fund would give no credit for prevention efforts or a good claims history. It fears such a scheme could interfere with further developments of the burgeoning Environmental Impairment Liability market that is now finally offering affordable and broad coverage for European environmental risks. Ferma also believes that the fund could not cater for all companies across Europe given the 'many variables that affect environmental risks and their insurance'. It would be 'impossible' to ensure the fund was suitable for all, it said. However, Ferma does accept that special solutions-such as the shared compensation scheme-may be appropriate for SMEs or specific industries. The federation clearly believes the fund would leave European companies at a competitive disadvantage compared with overseas rivals. "An added tax to fund the scheme would increase the production cost of goods in the EU," it said. Rather than focus on the proposals coming out of Hungary, Ferma believes the EC should take other concrete steps to ensure that environmental damage is recompensed. Perhaps the most interesting is its call for the Commission to initiate the development of a European database of environmental claims within the scope of the ELD. Many experts claim the effectiveness of the ELD in reducing environmental damage and ensuring that the polluter pays has been curtailed by evidence of prosecution and insurance claims that would inevitably raise risk management standards and the likelihood of financial security to cover losses. So this call from Ferma appears a good route for the authorities charged with protecting the environment. Ferma also said the Commission should promote awareness of available insurance coverage and other financial tools for risk management, such as self-retention. It could also reduce taxes on environmental insurance policies and promote better risk management in the industrial sector, concluded Ferma.

Ferma says no to shared EU environmental liability fund

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