Overview  

The Environmental Liability Directive (ELD) aims to ensure that businesses focus on the environmental effects of their activities by encouraging operators to avoid causing environmental damage and to proactively remediate such damage rather than gambling on whether regulatory action will be taken once the damage occurs. It is based on the polluter-pays principle: ie it aims to ensure that the original polluter pays for remediation and not the taxpayer. Furthermore, it aims to establish something of a common liability framework throughout the EU for environmental damage, to prevent businesses taking advantage of less stringent environmental protection legislation by relocating to another member state.  

Member states had until May 2007 to implement the ELD; however, many did not meet this deadline. In the case of the UK, England implemented it on 1 March 2009 and Wales, Scotland and Northern Ireland hope to implement soon.  

Operators  

Liability falls on ‘operators’ – essentially any person who operates or controls an occupational activity. Member states may extend the definition to include persons delegated economic power over the functioning of such an activity.  

An occupational activity is one carried out in the course of an economic activity, a business or an undertaking, regardless of its private or public, profit or non-profit character.  

The scope of the ELD  

The ELD covers environmental damage caused by, or resulting from, the occupational activities of operators to:  

  • species and natural habitats protected under the 1992 Habitats Directive and the 1979 Wild Birds Directive;  
  • waters covered by the 2000 Water Framework Directive; and  
  • land contamination that creates a significant risk of harming human health.  

The ELD does not apply retrospectively or to damage caused by armed conflict, earthquakes or exceptional weather conditions. Furthermore, it expressly acknowledges that existing civil liability regimes will continue to cover traditional damage to individuals – whether involving personal injury or damage to property.  

For certain high-risk activities liability for all three categories of environmental damage is covered and strict liability applies. These high-risk activities include installations subject to the Integrated Pollution Prevention and Control Directive and waste management operations subject to the Waste Framework, Landfill or Waste Incineration Directives. Operators of other occupational activities may also be liable for damage to protected species and natural habitats if they are at fault or have been negligent  

What action must operators take?  

Responding to imminent threats of damage If there is an imminent threat of environmental damage, the operator must take measures without delay to prevent or minimise the damage. If these measures will not prevent the harm from occurring, operators are required to inform the national authorities as soon as possible. The measures to be taken will depend on the type of damage threatened. The national authorities may instruct the operator on what measures must be taken or take measures themselves if the operator fails to do so, cannot be found or is not required to bear the costs of doing so.  

Self-reporting and remediation obligations  

Once environmental damage has occurred, the operator must inform the relevant authority of the situation and take immediate steps to control and manage contaminants to limit or to prevent further environmental damage and adverse effects on human health. The national authorities can also require the operator to take remedial measures, or take measures themselves in the circumstances specified above. Annex II of the ELD sets out a common framework so that the operator can choose the most appropriate remedial measures:  

  • for remediation of damage to water or protected species or natural habitats, the ELD provides that remediation is to be achieved through the restoration of the environment to its baseline condition; and  
  • for land contamination, the ELD provides that, as a minimum, the relevant contaminants must be removed, controlled, contained or diminished so that the contaminated land no longer poses any significant risk of adversely affecting human health.  

Defences  

Operators are not liable for the cost of preventative or remedial action if the damage is caused by a third party, provided appropriate safety measures are in place, or if the damage results from compliance with an order or instruction from a public authority. The ELD also allows member states the discretion to exempt an operator from liability if the damage results from an authorised activity or if it can show that the emission or activity was not considered likely to cause environmental damage according to the state of scientific and technical knowledge at the time it happened.  

Third party requests for action  

In the face of actual or threatened environmental damage, third parties are entitled to ask the relevant authority to take action. Provided that the request for action demonstrates in a ‘plausible manner’ that environmental damage exists, the relevant authority must consider it.  

The Environmental Damage (Prevention and Remediation) Regulations 2009

Key features  

The Regulations apply only to England – as mentioned above, Wales, Scotland and Northern Ireland plan to implement soon. The Regulations apply to damage that occurs on or after 1 March 2009. They essentially transpose the key features of the ELD; the only widening in the scope of the Regulations relates to the inclusion of biodiversity damage to species or habitats on a site of special scientific interest (SSSI).  

Various enforcing authorities are involved under the Regulations. The Environment Agency (EA) is the enforcing authority for EA-permitted activities. Local authorities have enforcement jurisdiction for prevention and land remediation if activities are regulated by them. Otherwise, the EA is the enforcing authority for water damage, Natural England for land-based biodiversity damage, local authorities for land damage and the secretary of state for offshore biodiversity damage. If there is more than one type of damage, meaning that there is more than one enforcing authority, the Regulations are enforced by any or all of the specified enforcing authorities.  

Liability under the Regulations is joint and several – an operator is able to claim contributions from any other liable operator. The ‘permit’ and ‘state-of-the-art’ defences allowed under the ELD have been adopted. Certain types of pollution are excluded from the scope of the Regulations – eg oil pollution if liability is dealt with under existing international conventions on oil pollution and radioactivity covered under the Nuclear Installations Act 1965. The Regulations are without prejudice to any other legislation on damage to the environment.  

The term ‘damage’ is not defined in the Regulations but in the ELD it is defined as a measurable adverse change in a natural resource (ie protected species and natural habitats, water and land) or measurable impairment of a natural resource service (ie the functions performed by a natural resource for the benefit of another resource or the public) that may occur directly or indirectly.  

Criminal offences under the Regulations  

Under the Regulations it is a criminal offence to fail to:

  • take all practicable steps to prevent environmental damage and/or further damage;  
  • notify environmental damage (or other damage for which there are reasonable grounds to believe it is or will become environmental damage) and/or imminent threats of such damage; or  
  • comply with the requirements of a remediation notice.  

Consequences for businesses  

The Regulations impose a new set of obligations and liabilities on a wide range of businesses.  

  • The self-reporting obligations under the Regulations will mean that systems of internal reporting and risk assessment will need to be devised.  
  • In some cases, consideration will need to be given to advance assessment of possible risks of environmental and other damage and of the required actions that may need to be taken.  
  • Some operators may decide to undertake assessments of the baseline condition of their properties.  
  • Discovery of environmental damage (or other damage for which there are reasonable grounds to believe it is or will become environmental damage) during sale or purchase transactions may trigger notification requirements or lead the parties to the transaction to seek to allocate liability risks.  

Businesses that carry on activities that may lead to environmental damage should consider whether their existing insurance policies will provide cover for losses that are incurred as a result of complying with the obligations that arise under the Regulations.