The EC Environmental Liability Directive (ELD) is based upon the "polluter pays" principle, whereby polluters bear the cost of remediating the damage they caused to the environment or the cost of measures to prevent imminent threat of damage. However, the directive does not cover economic losses resulting from the damage, such as bodily injury or property damage. As an environmental damage is considered a damage to protected species and natural habitats, soil and water.
Remediation of damage to water, soil, protected species or protected natural habitats shall be achieved through the restoration of the environment to its baseline condition. With baseline condition it is meant the condition of the natural resources if the environmental damage had not occurred. The ELD covers also interim losses, i.e. losses which result from the fact that the damaged natural resources are not able to perform their ecological functions. Remediation doesn't, however, include a responsibility to indemnify financial compensation to the public.
Operator's Liability
According to the ELD the operator is liable for all environmental damages regardless of the nature of the action that caused the damage. It doesn't make any difference if environmental damage has been caused by accidental pollution, gradual pollution or if the activity itself causes environmental damage (e.g. construction of railway that causes changes/damage to the surrounding environment).
The ELD provides two liability regimes: strict liability and liability at fault or negligent. Strict liability applies to operators who professionally conduct risky or potentially risky activities. These activities are listed in Annex III of the ELD. All other operators can be held liable only if s/he was at fault or negligent. It has, however, to be borne in mind that the ELD applies only to damages to the wider environment and "traditional damages" (bodily injury and property damage) to third parties whether caused by Annex III -activities or not shall be dealt with national civil liability legislation.
Implementation of the ELD in Finland
An environmental liability committee in Finland has prepared a proposal of a new environmental liability act late spring this year and it was on a consultation round during the summer. The deadline for transposition was 30 April 2007 and Finland among other Member States has missed it.
In the proposal few changes on the minimum directive has stated. From the two optional defences the committee has adopted only permit defence. If the operator demonstrates, that they were not at fault or negligent and that the damage caused was expressly authorised by the competent authority, a mitigation of damages can apply.
The ELD protects natural habitats and protected species only on Natura 2000 -areas. The Finnish proposal covers wider areas: according to the proposal also areas outside Natura 2000 are covered, if the competent authority finds it needed. The underlying reason is that it is possible that there are protected species and natural habitats also outside Natura 2000 -areas and it would be artificial to protect only those species and habitats that are on Natura 2000 -areas. The competent authority shall keep a register of protected areas outside Natura 2000 -areas.
The ELD doesn't' require operators to take out an environmental insurance. However, the directive requires the Commission to report in 2010 on the availability of such products and other financial securities and on the basis of this report the Commission will decide whether the ELD should be amended. In the Finnish proposal a compulsory insurance isn't required.
The ELD and insurances
Usually the current GLPL-policies don't cover damages derived from gradual pollution. Even if the damage is sudden & accidental, clean-up costs, on-site damages (own property) and biodiversity damages aren't covered in traditional GLPL-policy. So in general the traditional GLPL insurance only covers third party pollution damages partly, some legal defence costs and investigation costs. Because GLPL provides only limited coverage for pollution and ELD-damages, a clear need of specific ELD-product exists.
Criteria of insurability are legal clarity and certainty. In the current situation in most Member States the transposition is still unfinished and the legislative situation is confused. Adaptations are being considered to wordings, but can only be done as legislation evolves. With the Finnish Act still being on a consultation period, the final Act is not yet known. The development of appropriate insurance products will take some time, but the transposition of the ELD will likely accelerate this process. Some insurance markets have already proved this right (e.g. Germany). Although the legislative situation in Finland isn't clear yet, it can be expressed that the current insurance products doesn't cover these new environmental risks and that clients most likely will demand such coverage.
If P&C Insurance Company's respond to this demand is a Nordic project group, whose goal is to study the new legislative situation in the EU and create a common view to handle and cover the new risks introduced in the ELD.
Sources: Environmental Liability & Insurance -Conference in London 5.-6.7.2007
Elisa Korniloff
