In May 2007, the German Parliament, the Bundestag, resolved the Environmental Damage Act (Act concerning the Prevention and Remedying of Environmental Damage - Umweltschadensgesetz). The Act will enter into force on November 10, 2007. The Act implements the provisions of the Directive 2004/35/EC of the European Union of April 30, 2004, concerning environmental liability with regard to the prevention and remedying of environmental damage, into German law.

Objective of the Legislator

The new Act aims to close an existing liability gap in German law. Of course, there are several liability clauses in German law which are scattered throughout various acts governing private law and also public law (inter alia in the German Civil Code, the Federal Soil Protection Act and the Environmental Liability Act). However, these provisions require that damage occurs to legal assets which are owned by other companies, individuals or the state. In the view of the legislator, damage to legal assets in the public domain (e.g. animals, plants, water, soil, etc.) have been inadequately covered until now. For this reason, the legislator decided to enlarge environmental liability to environmental resources which cannot be assigned to the ownership of a particular party.

The new Environmental Damage Act is not intended to replace the existing civil and public law criteria of liability. The existing acts remain in force, and are only amplified by the Environmental Damage Act. Furthermore, the new law does not apply for existing environmental damage, contamination or occurrences which took place before April 30, 2007.

The Directive 2004/35/EC obliged all EU Member States to pass corresponding laws by April 30, 2007, in order to ensure that comparable duties of liability exist in all legal systems of the EU. Germany did not quite adhere to this time limit. However, on the date of expiration of the period (April 30, 2007), only approximately half of the EU Member States had introduced the necessary legislative steps for implementation of the Directive.

Duties Under the Environmental Damage Act

General pre-requisites for responsibility

The new statutory term "Environmental Damage"

The Environmental Damage Act applies where environmental damage occurs which has been caused by a responsible party. Environmental damage within the meaning of the Act includes: 

  • Damage to species and natural habitats 
  • Damage to water 
  • Damage to soil through an impairment of the soil functions

For the purpose of closer definition of these terms, the Act refers to the respective specific laws (Federal Nature Protection Act, Federal Soil Protection Act and the Federal and State Water Acts). This is to ensure that the duties under the Environmental Damage Act do not impose stricter requirements in relation to the avoidance of impairments to the environment than is already owed under the general environmental provisions. However, the legislator has also taken advantage of the introduction of the Environmental Damage Act, to amplify the Federal Nature Protection Act and the Federal Water Act by new legal provisions (sec. 21a Federal Nature Protection Act and sec. 22a Federal Water Act). In the view of the German legislator this was necessary in order to implement the European specifications, and at the same time to avoid differing criteria applying in the various environmental laws.

For which environmental damage is there liability?

Under the Act, responsibility only exists for environmental damage if the environmental damage is caused by an occupation or activity. According to the definition of the Act, this covers all commercial activities, irrespective of whether they are of private or public character. Both natural persons and legal entities may be responsible. Under the new legal provisions of the Act, the authorities are accordingly able to demand measures to avert danger and remedial works not only from enterprises but also from individual persons.

The Act facilitates the burden of proof of fault for authorities in relation to the party whose occupational activities resulted in the environmental damage. For all acts listed in Annex 1 to the Act as being potentially dangerous, the duties under the Act already apply if it can be proven that the environmental damage was caused by the occupational activities of the responsible party. Contrary to the former law, no additional proof of fault is necessary. For all occupational activities not mentioned in Annex 1, proof of deliberate intent or negligence continues to be necessary in order to precipitate liability. Moreover, under the Act, only responsibility for damage to species and natural habitats is substantiated by such activities, and not responsibility for damage to soil or water.

It should be noted that the Act does not provide for any minimum limits of damage. Even slight damage to species, natural habitats, soil or water may precipitate liability.

The Individual Duties of the Responsible Party

Duty of information

In the case of any immediate danger from environmental damage, the responsible party is initially obliged to inform the competent authority immediately (without culpable delay), of the danger emanating from the damage. The same applies for any damage which has already occurred. The responsible party must inform the authorities of all significant aspects of the facts, whereby he is, however, entitled to a right of refusal to provide information in so far as relates to details of personal responsibility. The authority may, for their part, demand from the party responsible that he produce all information and data necessary to assess the danger or damage. Also in relation to the duty of providing information, the restriction applies that only the circle of persons which carries out an activity listed in Annex 1, and thereby a potentially "dangerous" activity, must provide information concerning dangers for all legal assets protected by the Act (species, natural habitats, soil and water). In the case of other occupational activities, the duty of information is restricted to cases of imminent threat of damage to species or natural habitats.

Duty to avert danger

Parallel to the duty of providing information, a duty of the responsible party arises to avert the danger of damage. He must, without delay, undertake all necessary measures of prevention. The competent authorities may also impose such measures upon the responsible party. It is to be recommended that the responsible party agrees the measures to avert the danger with the competent authorities from the outset, in order to avoid the risk that the authority itself acts, and possibly orders other measures.

Duty to limit and remedy damage

Where damage has already occurred, the responsible party is further under a duty to limit and prevent damage. Everything necessary must be undertaken through measures of limitation of damage in order to bring the cause of the damage under control, and to prevent any further extension of damage. The second set of obligations, remedial measures, are laid down in considerable detail and, unfortunately, also unclearly. The Act makes reference to various provisions, in part also to other acts and regulations. In relation to damage caused to soil, the remedial concepts of German soil protection law apply. For the remedying of damage to water, protected species and natural habitats, the Environmental Damage Act makes reference to the new provisions in sec. 21a, para. 4 Federal Nature Protection Act and sec. 22a, para. 2 Federal Water Act which, for their part make further reference to the Annex to the Directive on Environmental Liability 2004/35/EC. In general, there are two phases in relation to remedial measures. Within the scope of primary rehabilitation, the original condition is to be restored either completely or as near completely as possible. Should it not be possible to restore the damaged resources or their functions to the original condition, a supplementary rehabilitation is necessary. This may include measures at another location in order to compensate the damage in both quantitative and qualitative respects. Prior to carrying out the remedial measures, the responsible party must ascertain what remedial measures are necessary and submit the same to the authorities for their consent. The authorities will then decide upon the nature and scope of the remedial measures. On the basis of the new provisions, the competent authority will also have the duty to inform further affected persons and recognised associations authorised to make applications (e.g. environment associations) of the anticipated measures, and to give them the opportunity to respond.

Burden of Costs and Measures of Exculpation

The costs for the measures of avoidance and rehabilitation are, as a basic principle, to be borne by the party responsible. However, the Act leaves the actual details (including provisions as to exemption from costs, reimbursement of costs, periods for payment, periods of limitation etc.) to the implementation provisions still to be issued by the German Federal States.

The European Directive permits the EU Member States to provide for additional exceptions to liability if the party responsible proves that its installations and processes correspond to the latest state of technology, or that the activity causing the damage was permitted by an authority. Since most environmental damage occurs through approved processes, this is the most important decision the German government had to take when implementing the directive. The German Government planned in a first draft of the Act to fully implement these exceptions into German law, which would drastically have reduced the area of applicability of the new Act. Following pressure from the German Federal States, this provision was, however, then deleted from the Act actually passed. The German States had feared that in the event of such farreaching exceptions, the costs for remedying most of the environmental damage would have to have been borne by the taxpayer. The new Act now expressly leaves it to the provisions of the individual States whether they - for their respective State - wish to exercise their powers in relation to the exceptional provisions. This leads to complicated legal consequential problems, since the States may now regulate these questions on a differing basis. This means that courts will need to clarify whether an exemption from liability for authorised activities of one particular Federal State also excludes liability for such damage as arises in another Federal State which has not exercised a right of exemption from liability. Conversely, it will also be necessary to clarify whether, notwithstanding an exemption from liability in one Federal State, liability may arise if the cause of environmental damage was created in another Federal State. Such questions should therefore be clarified with the competent authorities and, where appropriate, also with insurance companies prior to the conclusion of liability insurance policies. It could be delusory for a company to rely upon an exemption from liability under State legal provisions.

Where there is more than one responsible party, the settlement of costs is made according to the principles of joint and several liability. The claims to settlement lapse by limitation after three years.

Powers of the Parties Affected and Legal Protection

Of course, parties affected have the possibility of defending themselves against liability under the new Act through corresponding possibilities of legal protection where, for instance, claim is made against them as responsible party, although they have not caused the damage, or they are exempt from liability under a provision of State law.

The Act also provides that recognised environmental associations have the right to apply to the competent authority to have remedial measures carried out. For this purpose, a founded substantiation of the application is necessary making the occurrence of damage credible. Furthermore, such environmental associations have the right under the provisions of the Environmental Act concerning Judicial Remedies, in force since December 8, 2006, to lodge an appeal against measures or against an omission on the part of the authority.

Provision of Cover and Insurance

Art. 14, para. 1 of the Directive on Environmental Liability (2004/35/EC) provides that the Member States should introduce incentives for the creation of instruments and markets for the provision of cover, including financial measures in the case of insolvency. Initially, the Federal Government accordingly had the intention of placing a statutory obligation on those companies typically affected by the Act to take out liability insurance against claims under the Act. In the course of the parliamentary discussions, however, arguments were brought forward that the corresponding insurance offers from the insurance market were still unsatisfactory (inter alia since it is very difficult for the insurers to estimate what scope the risks created by the Act will take). The German Parliament finally decided to delete the corresponding passage in the draft bill of the German government. In the debates in the German parliament, attention was drawn to the fact that it should be left to the companies themselves as to whether and upon which conditions they wish to take out insurance against the liability risk substantiated through the Act.


The Act introduces new criteria of liability for companies. It is the legislator’s aim to allocate to the party causing the damage the costs for damage to environmental assets in the public domain which were previously borne by the taxpayer. In this respect, the legislator has introduced stricter environmental demands in relation to emissions, occurrences, incidents and damage which arose or will arise after April 30, 2007, and has introduced a series of new duties on the part of companies. In particular, there is a new duty not only to be financially liable for damage which has arisen, but also to have to take measures which eliminate the damage or compensate the same at another point in nature. It can be assumed that many questions raised by the Act will lead to problems of liability and possibly to legal disputes. This may well apply for questions as to the condition in which the resources or the habitat or the population were prior to the occurrence of the damage, as to what prior contamination the same were exposed, how the contribution of causality on the part of the respective party causing the damage is to be weighted and with what means a restoration is possible. Particularly problematic is the fact that the legislator has left it to the individual States to provide for exemptions from liability, which may accordingly be provided differently in each of Germany’s 16 Federal States. For the first time, the recognised environmental associations also receive the right to be able to demand the implementation of remedial duties. This may possibly also have affect the preparedness of the authorities in the future to agree to pragmatic solutions.

Companies which deal with environmentally hazardous materials are encouraged to take the entry of the Act into force as a reason to examine their existing insurance cover for liability. It is, however, problematic that it is also difficult for the insurance market to evaluate the new liability risks, so that the selection of adequate insurance products is not simple, neither for the companies, nor for the insurance market.