Environmental Liability Directive

ESA Briefing

Scope
The Directive will apply:
- Strict liability for environmental damage or the imminent threat of environmental damage to protected species and natural habitats protected under EU law [1] (referred to as "biodiversity"), damage to water [2] and land contamination which creates a significant risk to human health caused by activities regulated by specified European legislation including the IPPC Directive, Waste Shipments Regulations and waste management operations permitted by the Waste Framework, Hazardous Waste, Landfill or Waste Incineration Directives; and
-  Fault/negligence based liability for any biodiversity damage or imminent threat of biodiversity damage caused by any other activities.

Environmental damage
Environmental damage is defined as damage that significantly adversely affects biodiversity or water or, in the case of land, contamination that creates a significant risk of human health being adversely affected.

The Environment Agency has suggested that, by its definition of significant, there would be less than 100 incidents which would come under the scope of the Directive each year and has identified a possible 22 instances where the Directive might have applied to the waste management sector over the past three years, including Category 1 pollution incidents at a composting facility, a metal recycling facility and an energy from waste plant.

Prevention and remediation
Operators will be required to take preventative action where there is an imminent threat of environmental damage. The Directive requires Member States to provide, where appropriate, and in any case where an imminent threat of environmental damage is not dispelled despite preventative measures, to inform the competent authority. The competent authority has the right to require the operator to take preventative measures where it deems it necessary.

Where environmental damage has been caused, the polluter must: 
- Inform the competent authority;
- Take necessary steps to immediately control, contain, remove or otherwise manage the damage;
-Take necessary remedial actions (see below for more details); and
- Save in certain specified circumstances, reimburse competent authorities who either restore damage or take action to prevent damage in default.

The cost of damage to the environment or cost of measures to prevent the imminent threat of damage is borne by polluter (save where an operator defence applies).

- For water and biodiversity damage, the Directive requires that the environment is remediated through, as appropriate, a combination of primary and complementary remediation, plus compensatory remediation for interim loss of resources or services. Where primary remediation is unable to restore the biodiversity or water to its baseline condition, then complementary remediation should be undertaken which requires an operator to provide a similar level of natural resources or services at an alternative site. Compensatory remediation is undertaken by the operator to compensate for the interim loss of natural resources and services pending recovery, e.g. if natural remediation is more appropriate, this compensation could consist of additional improvements at the damaged site or an alternative site; and

- For land damage, the Directive requires that measures are taken to remove, control, contain or diminish the contamination so that it no longer poses a significant risk of adversely affecting human health (taking into account site use etc). The Directive does not require complementary or compensatory remediation activities for land damage.

Operator defences
The Directive includes four key operator defences.  Two defences must be transposed into national law and two defences are optional for Member States to transpose.  The two mandatory defences (which means an operator would not be required to bear the costs of preventative or remedial actions) for environmental damage are where environmental damage:
- Was caused by a third party despite the fact that appropriate safety measures were in place; or
- Resulted from compliance with a compulsory order or instruction from a public authority (other than when relating to an emission or incident caused by the operator's activities).

The two optional defences available to Member States to transpose into national law are where the operator demonstrates that he was not at fault or negligent and the environmental damage was caused by:
- an emission or event authorised by, and in full compliance with, the conditions of an authorisation granted under UK law implementing specified European legislation including the IPPC Directive, Waste Shipments Regulations and waste management operations permitted by the Waste Framework, Hazardous Waste, Landfill or Waste Incineration Directives (known as the "permit defence"); or
- an emission or activity that the operator demonstrates was not considered likely to cause environmental damage according to the state of scientific and technical knowledge at the time when the emission was released or the activity took place (known as the "state of the art defence").

Defra has not indicated whether the two optional defences will be incorporated into national legislation. The consultation document due at the end of July is likely to set out the Government’s preferred transposition package.

Time limitations
The Directive will not apply to environmental damage:
- Caused by an emission, event or incident that took place before 30 April 2007; 
- Caused by an emission, event or incident after 30 April 2007 where it derived from a specific activity that took place and finished before then; or 
- If 30 years have passed since the emission, event or incident resulting in the damage took place.

Financial security
The Directive requires that Member States take measures to encourage the development of financial security instruments which would allow operators to fund remediation of damage caused. However, operators are not required to provide financial security or insurance under the current Directive. The European Commission will review the effectiveness of the Directive before April 2010 and a mandatory system of financial security may be proposed at that stage.

Other issues
-The Directive does not give private parties the right to compensation for environmental damage (e.g. for damage to property etc.);
-The Directive specifically excludes environmental damage (or imminent threat of) where liability for such damage is covered by listed international maritime, nuclear and transport conventions in force in the Member State concerned.  In addition, other key exemptions include environmental damage caused by: 
   - natural phenomenon of exceptional, inevitable and irresistible character; and 
  - pollution of a diffuse nature where it is impossible to establish a causal link between the damage and the activities of individual operators;
- Action can only be taken by the competent authority. Other bodies such as qualifying NGOs can submit observations relating to environmental damage (or the imminent threat of) to the competent authority and request that action be taken. The decision rests with the competent authority in all cases (although the NGO may challenge any lack of appropriate action in a judicial or other proceeding).

Implementation in the UK
The UK is required to implement the Environmental Liability Directive by 30 April 2007. Defra is currently preparing the first of two public consultations on transposition of the Directive into national law. The first consultation on policy options is due to be published at the end of July. The second consultation document on draft legislation is likely to be published in the winter of 2006/7.

Footnotes