20 June 2000

EXECUTIVE SUMMARY

The Chemical Industry has taken note with interest of the adoption by the Commission of the White Paper on environmental liability (9 February 2000, COM (2000) 66 Final), and especially the approach based on non-retroactivity, operational control and insurability. It considers that there is a need for wide-ranging and comprehensive discussions between all parties concerned. However, CEFIC wishes to formulate clarifications and concerns regarding the possible consequences for this regime on the Chemical Industry.

I. PRELIMINARY REMARKS

Based on the Chemical Industry's Responsible Care Initiative, which is a commitment to continuously improve performance in all fields related to health, safety and the environment, the industry believes that pollution prevention and harmonisation of environmental standards are priority aspects of Community legislation. CEFIC expects that any future environmental liability rules will be in line with the principle of sustainable development, which promotes a sound balance between health, environmental, social and economic interests, for the well-being of the community.

CEFIC also believes, together with the Commission, that a regime of environmental liability has to be developed in the context of a step-by-step approach. Uncertainty is highlighted in many respects in the White Paper. As currently planned, the regime is based on quantitative criteria which are not yet defined and on EC legislation which can evolve and grow in number and scope in the near future. In this context, legal certainty and coherence can be threatened if the underlying principles of this regime are established without due thoughtfulness. CEFIC therefore urge the need to bear in mind that this White Paper is part of a cautious and gradual approach.

II. FUNDAMENTAL ISSUES RAISED BY ENVIRONMENTAL LIABILITY

• No retroactivity

The White Paper recognises that pollution from the past requires different solutions from future pollution. CEFIC considers that the exclusion of retroactive liability from the future regime is a positive achievement for the preservation of legal certainty, provided that the concept of "past pollution" is clearly defined.

• Operational control of the activity

CEFIC notes that it is a very beneficial point for the White Paper to link liability to operational control of the activity.

As a consequence of operational control which can involve various operators, CEFIC wishes to point out that an operator should only be held liable for the proportion of the damage which results from his own activities. In spite of this, CEFIC takes note that no mention is made in the White Paper of the solution to be adopted where several operators would be liable for the same damage.

• Causation

Identifying the existence of a causal link between the source of a damage and the damage itself is one of the most essential elements of civil liability. This needs to be maintained in any environmental liability scheme. CEFIC expresses its serious concern regarding the Commission’s suggestion to reconsider causation and the burden of proof. It believes more appropriate to leave it to national legal systems to consider the necessity and the extent of a possible alleviation of the burden of proof.

• Right to bring legal action

CEFIC stresses the need to prevent abusive, unjustified and disproportionate claims brought by public interest groups. Moreover, the decision to clean up the environment should fundamentally remain within the strict competence of the injured owner or, where the environment is not owned, of the State itself.

• Exemptions and limitations of liability

CEFIC notes that the White Paper pertinently proposes to allow "commonly accepted defences", such as Act of God. However, it observes that this document does not take any position as regards more specific defences, i.e. state of the art and development risk. CEFIC calls for the inclusion of these defences in the future liability system for the sake of predictability and innovation.

CEFIC requests that if activities have been conducted in conformity with a permit to operate granted by a public authority, liability should be based on fault. Activities and emissions not exceeding those covered in the permit should not be considered as "damage" for which the operator can be held liable.

• Necessary financial security scheme

CEFIC welcomes the good sense of the Commission in recommending a cautious and gradual approach to setting up a liability system as long as activities cannot be properly insured. A financial security scheme must be a prerequisite to the development of a liability regime. CEFIC therefore urges the Commission to promote solutions to develop insurance.

 

1. Environmental liability should be limited to damage to biodiversity and not extend to traditional damage
   

CEFIC is of the opinion that "traditional" damage is significantly covered by national civil liability regimes, which have been developed gradually as core elements of national legal systems, in the context of particular legal cultures.

In addition, to date, the legal regime attributed to traditional damage is really ambiguous, in so far as no indication is given in the White Paper concerning the criteria for defining the extent of damage to persons or property occurring through an environmental channel. Incoherence is even increased by the fact that the definition of traditional damage will remain under the Member States’ jurisdiction.

In this context, although the Commission feels that covering only environmental damage might result in inequitable consequences ("no or less remedies for health damage than for environmental damage caused by one and the same incident" point 4.2.1 of the White Paper), including traditional damage will most likely result in an inconsistent liability system. The well-established national regimes covering liability for traditional damage are likely to overlap and even combine with EC environmental liability, thereby creating further confusion.

2. Inclusion of contamination of sites must be exclusively linked to the existence of an identified and actual damage
   

Significant and specific liability regimes exist in Member States in the field of human health and property to cope with soil and water pollution. A need for harmonisation of the various domestic soil policies and clean-up standards may nevertheless exist. However, CEFIC raises strong doubts about the need to harmonise this field. Nevertheless, harmonisation would require a specific approach, taking into account the composite and particular technical state of soil. Assessment of the contamination is a complex and technical matter, which has to consider the composition of the soil (clay, gravel…) and its use (natural, residential or industrial).

Should contamination of sites be included in the future harmonised environmental liability regime, CEFIC strongly stress the prior necessity to define clearly soil pollution and to establish explicit methods assessing the seriousness of ecological damage. But, the definition of criteria for quantification of such damage falls exclusively within the standardisation competence of the Community. However, given the greatly varying nature of soil, the development of standards is not sufficient in itself to actually establish the existence of damage. Soil contamination can therefore be included in an environmental liability regime only if it is related to actual damage. Damage is a compulsory component of liability. If there was no damage as such, this harmonised set of standards would only be objective requirements, which would not trigger the environmental liability regime.

3. To promote the intelligibility of the regime, criteria to assess the degree of biodiversity damage should be developed prior to setting up a liability system
   

On the one hand, a clear definition of biodiversity has been given on the basis of objective criteria, i.e. a territorial criterion based on EC legislation calling for the establishment of the Natura 2000 areas. So far, however, these areas have not yet been created and the clear outlining of biodiversity is still only a possibility.

On the other hand, there are not yet any quantitative criteria to assess biodiversity damage either in the EC legislation or in the national legal systems. There are no generally acknowledged criteria and technical standards to quantify environmental damage to biodiversity and, therefore, to establish the degree of liability. Before developing any legally binding regime, it would thus be essential to set up clear criteria to quantify biodiversity damage and define precisely its significance, which would trigger environment liability.

4. To preserve consistency, should the liability regime be limited to dangerous activities or should it focus on the effect of any activity ?
   

CEFIC is pleased that liability is linked to operational control of the activity. It also appreciates the effort made by the Commission to ensure that legal certainty will be appropriately preserved when defining the activities covered.

However, CEFIC would like to raise the question of what is the essential aim of environmental liability. Is it the reparation of an environmental damage, whatever the author and the nature of its activity, or is it an artificial and imperfect system focusing exclusively on specific activities? For instance, would the contamination of a small river by a massive quantity of milk, in the absence of fault, likewise require an appropriate remedy?

Consequently, it is crucial to redefine what is an "activity that bears an inherent risk of causing damage" following an effects-based approach.

5. To prevent ambiguity, environmental liability should be based on operational control and should be proportionate
   

The proportionate nature of liability is an essential matter which is not tackled by the White Paper. As a logical consequence of operational control, an operator should only be held liable for his fair contribution to the total damage. Accordingly, he must have the right and the practical opportunity to demonstrate the extent of his own liability. Joint-and-several liability would transform the regime into a "deep pocket" approach, which would have a crucial effect on economic operators. Consequently, CEFIC feels strongly that this concept must be expressly excluded from the EC environmental liability regime.

6. To prevent unjustified claims, access to justice for interest groups must be exclusively limited to actions against decisions, acts or omissions of public authorities
   

The White Paper proposes to give public interest groups the right to bring claims against a suspected polluter as long as the State does not act at all or does not act properly. In addition, it proposes to give these groups the right, in urgent cases, to ask directly a court for an injunction, and to bring directly a claim for reimbursement of reasonable costs incurred in taking urgent preventive measures. CEFIC fears that the Industry might be particularly affected by abusive, unjustified and disproportionate claims brought directly by public interest groups. Moreover, the decision to clean up the environment should fundamentally remain within the strict competence of the injured owner or, where the environment is not owned, of the State itself.

7. To maintain the equality of terms, the regime should preserve a sound approach to the burden of proof of the causal link
   

Relying on the deep-rooted procedural principle actori incumbit probatio, CEFIC supports the proposition that the burden of proof should in principle be assumed by the plaintiff. The burden of proof constitutes an essential element of civil law resulting in the balance of the parties’ interests, and which has to be preserved in any liability scheme. It is crucial to highlight the danger of altering such a core principle that balances liability and the future regime must preserve the possibility for all the parties to defend their interests on equal terms.

However, there could be cases where it would be unreasonably hard for a plaintiff to fully establish the causal link. In these instances, it would be more appropriate to leave it to the national legal systems, who will implement the regime, to consider the necessity and the extent of a possible alleviation of the burden of proof.

8. To promote innovation, defences should include development risk and state of the art
   

CEFIC approves of the White Paper intending to allow "commonly accepted defences", such as Act of God. But, for the sake of innovation and creativity, the state of the art and the development risk defences should be included in the future liability scheme.

According to these defences, a producer should not be liable for an environmental damage if, at the time its activity was carried out, it was not possible to be aware of the detrimental impact on the environment because of the state of scientific and technical knowledge. Otherwise, liability will be unpredictable, with the consequence of seriously hindering industrial innovation, and resulting in stagnation of technology innovation. Liability will also unfairly limit the number of companies that can afford the high costs of insurance that development would then require.

In addition, CEFIC considers that if activities have been conducted in conformity with a permit to operate granted by a public authority, liability should be logically based on fault. The activities and emissions not exceeding those covered by the permit should not be considered as "damage" for which the operator can be held liable.

9. To promote the viability of the regime, insurability must be guaranteed prior to setting up a liability system
   
   To be realistic, a liability regime must be supported by an appropriate insurance scheme. This must be a prerequisite to the development of a liability system. CEFIC is pleased to note that the Commission is aware of this crucial aspect. Nevertheless, liability should be defined in such a way that insurers are able and willing to provide proper cover on reasonable terms not only to small companies, but also to those which have the resources to pay large premiums.

In this context, the Commission has the twofold duty of setting up a liability system suitable enough for insurance and giving insurers the incentive to provide appropriate cover by encouraging them to develop reasonable solutions. This could be achieved, as the Commission rightly pointed out, by capping liability, or by narrowing the scope of the activities covered and setting up criteria to define significant damage.