The broad reach of Brazil’s civil liability system exposes any natural or legal person who can be directly or indirectly connected to environmental damage to a seemingly endless chain of potential liability.

In an effort to protect the environment as a common asset for all, various federal, state, and municipal laws impose joint, several, and strict civil liability on those who somehow cause, facilitate, or contribute to the occurrence of environmental damage. This approach means that the liability applies regardless of any fault, negligence, or willful misconduct.

Under this system, multiple players are often caught in the causation chain. Unsurprisingly, this includes direct parties such as landowners and occupiers, and operators of environmentally damaging activities. But beyond this, liability can potentially extend to “indirect polluters” such as purchasers, contractors, or financiers of activities, products, and services that result in environmental damage.

In a market where complex supply chains and sophisticated financing structures are the norm, how far does the potential exposure to environmental civil liability extend in practice?

It is common for civil lawsuits to be initiated against multiple parties as the burden of proof lies not on the claimant but on the alleged polluters, who are deemed to be in a better position to produce evidence about the true cause of the damage.

Parties with the deepest pockets tend to be pursued as the relief ordered will either be indemnification or repair of the damage caused to the environment and to affected third parties. A liable party may have a right of recourse against other parties if it is able to prove they were responsible; however, recovery claims are rarely successful because it is often impossible to establish the true cause of environmental damage, particularly when it is the result of multiple parties’ actions (or inactions) over long periods.

Adding to the ease of initiating a civil claim without the pressure of satisfying the burden of proof is the extensive range of persons who can initiate a claim. This includes an injured natural or legal person, the Public Attorney’s Office, governments at all levels, and non-government organizations.

Whether or not a court finds a direct or indirect polluter liable of course depends on the circumstances of each case. Some guidance is provided by a 2009 decision of the Superior Court of Justice (STJ REsp 650728/SC Ministro Herman Benjamin, Segunda Turma,- DJe 02/12/2009). Although non-binding, the judgment considered the potential chain of causation and confirmed that equivalent civil liability for environmental damage attaches to the following:

  • those who acted
  • those who did not act when they were supposed to do so
  • those who failed to act
  • those who did not care about others acting
  • those who financed what others did
  • those who benefited from what others did.

This decision raised particular concern for the banking sector, which had previously taken comfort from a line of decisions from the lower courts that held that civil liability did not extend to financiers as “indirect polluters” (where the borrower held, and complied with, all necessary licenses and approvals).

Mindful of the divergent judicial interpretations, public and private banks in Brazil adopt a cautious approach to financing projects that carry a potential risk to the environment by imposing environmental compliance requirements through their lending agreements. Typically, these include requirements to comply with management principles and performance standards set out in the UNEP Principles for Responsible Investment, the Green Protocol, and the Equator Principles.

There is no guarantee that the imposition of such requirements will be sufficient to defend a civil lawsuit, but for the moment they are a bank’s best line of defense in avoiding civil liability for environmental damage.