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New Environmental Regulations will make the polluter pay

The European Environmental Liability Directive 2004/35/EC is scheduled to be transposed into British law in December 2008. A consultation process is currently in progress and runs to the 27th May 2008. According to the Draft the Regulations are set to extend the liability of property owners to encompass the consequences of damage to the environment, including the impact of fire fighting activities.  

The liability issues this raises for businesses, potentially making owners liable for costly clean up programmes is not helped by a recent court ruling which determined that a company was not able to recover the costs of an environmental clean-up from their insurers. 

In May 2003 a major fire at Bartoline caused £600,000 of environmental damage when two water courses were contaminated with chemicals from the factory mixed with fire fighting foam and water. The Environment Agency, which owned one of the water courses, charged Bartoline for the costs of the emergency clean-up. Bartoline's insurer, Royal Sun & Alliance, refused the claim arguing that their accidental damage policy did not cover the clean-up costs resulting from environmental damage. RSA won the case and although RSA eventually reached an out of court settlement with Bartoline before an appeal was heard the ramifications for businesses looking to insure against the risk of environmental damage are clear.  

There are no financial limits to the liability set within the Draft Directive, and as the Bartoline case suggests many businesses may find they are not adequately insured for such an incident. Taking out additional insurance specific to environmental risk is an option but given the potential unlimited liability, higher risk undertakings may find insurance cover is expensive or unavailable. 

The aim of the Directive is to encourage pollution prevention as well as to remedy environmental damage to habitats and species protected by EC law including: species or habitats on a notified site of special scientific interest; land such that it threatens human health and to water resources. The Directive is expected to cover all significant cases of environmental damage and will apply the principle that the polluter must pay. In practice this means that soil must be decontaminated until it no longer poses a significant risk to human health and if a damaged site cannot be restored then the polluter must pay to enhance another site.

You can find out more and download the draft Directive at http://www.defra.gov.uk/corporate/consult/env-liability-regs/index.htm

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