Scottish Government

SECTION 1
INTRODUCTION

1. This consultation paper sets out proposals for the transposition of the Environmental Liability Directive ² ( ELD) into domestic legislation. A copy of the Directive is at Appendix I and a copy of the Regulatory Impact Assessment ( RIA) is attached at Appendix 2.

2. This is the first of two public consultations. This first consultation focuses upon policy intentions flowing from the Directive. This paper takes those proposals as far as possible for the present but we need the consultation exchange with stakeholders to fill gaps and to answer (and ask) questions. A second consultation next year will complete the policy and offer draft legislation, both prepared in the light of responses to this consultation. A separate public consultation is being undertaken for England, Wales and Northern Ireland.

3. The main requirements can be read directly from the Directive but the transposition is less straightforward because the Directive cuts across regimes for which there are already some requirements for repairing damage in existing legislation. The Directive addresses mostly damage significant in terms of established EU legislation and for which there will be a new approach, within which polluters, rather than society at large, acknowledge and pay for remediating damage caused by their operations. The existing controls will continue to apply for most circumstances, based upon established regulation, licensing, offences, penalties and enforcement.

4. To provide a sense of scope and scale for this transposition we attach a partial Regulatory Impact Assessment ( RIA). That has been prepared using data from past incidents in Scotland, data from UK sources and outcomes from work done by the contractor working on both UK and Scottish RIAs. The initial picture from such work is of few cases in Scotland (perhaps up to 10 per year) posing threats or overcoming preventative measures and meeting a ELD threshold based (mainly) upon established EU legislation (birds, habitats and water framework directives), although such cases may have major implications. There will be uncertainty about the findings of the Scottish RIA because it founds substantially upon past experience and involves statistical techniques. Nonetheless, it should be illustrative of possible or perhaps likely impact of ELD in Scotland. We have used as much information as has been available to us and ask consultees to view the findings as a first and perhaps incomplete estimate. We will welcome additional or alternative information from consultees.

What is the Environmental Liability Directive?

5. The original impetus for development of the Directive was a concern at damage to the environment from a number of large scale incidents in Europe in the 1980s and 1990s, sometimes affecting more than one Member State; and concern at the loss of protected species and natural habitats ( hereafter 'biodiversity'). The Directive thus focuses upon those higher-level European aims. 'Normal' day-to-day activities should continue under existing arrangements.

6. The principal aim is to establish a new kind of civil law mechanism based upon the "polluter pays" principle. Certain operators who cause a risk of significant damage to land, water or biodiversity will have a duty to avert such damage occurring or, where damage does occur, a duty to reinstate the environment. The role of overseeing that the provisions of ELD are carried out will fall on 'competent authorities' ( CAs), which are likely to be from existing public authorities with responsibilities for the environment such as SEPA, SNH or local authorities. An operator will have to notify the appropriate CA of any imminent threat of damage or of actual damage to the environment caused by it while carrying out its business and of its plans to avert or repair the damage. Information on perceived threat or damage may also be presented to a CA, seeking action, by persons or bodies affected, or likely to be affected, including environmental NGOs - see also paragraphs 31 and 87-91 below in relation to an option.

7. For this purpose, the operator is the person who operates or controls the occupational activity which poses a threat of damage or causes actual damage. The operational activity is defined quite widely, extending to any activity carried out in the course of economic activity, a business or undertaking, irrespective of its private or public, profit or non-profit character.

8. This approach makes it different from civil law remedies such as delict - the claiming of compensation from someone whose actions have done us harm - in that the harm (and redress) is to the environment, with no individual victim and no claim of personal loss. Instead, an operator will have to notify the CA of the imminent threat of or actual significant damage and of its plans to avert or repair the damage. The new regime will not operate by creating more regulation or offences, although there will have to be some fall-back provision of offence and penalty to penalise evasion of duty to notify, avert or remediate damage. The competent authority has some discretion in deciding whether to take action. There is no requirement for the CA to act in place of the operator, although it may do so. When it does act in place of the operator, the CA is required to recover the full costs of that action from the operator or, if appropriate, from a third party.

Scope of ELD

9. ELD is described in relation to significant damage to biodiversity (protected species or habitats) of European importance in terms of the Birds Directive and the Habitats Directive, to water bodies in terms of the Water Framework Directive and to land where public health is at significant risk of being adversely affected. There are links between those media, eg damage from land to water; and coastal and marine environments demonstrate similar relationships between land water and biodiversity. Because liability at European level is described in terms of occupational activities and nature of damage, there is no identification of geographical boundaries. Nonetheless, over time operators and CAs may well perceive risk differently between some areas and others.

10. It should be noted that the threshold for liability for damage to biodiversity is based upon maintaining standards across the natural range of a species across the EU, or across the Member State as appropriate. So liability for damage under ELD may arise for an operator because of a general risk to a species or habitat across the EU or because of circumstances of a species or habitat in Scotland or UK.

Obligations of the operator

11. The operator must:

Responsibilities of the competent authority

12. The competent authority

In cases of imminent threats -

In respect of environmental damage -

For both imminent threats and environmental damage, the competent authority must recover its costs from the operator, although it may decide not to do so if the costs of such action would exceed the amount to be recovered or the operator cannot be identified.

Who is liable and how

13. The ELD introduces strict liability for environmental damage to land, water and bio-diversity from occupational activities subject to EU regulation, listed in Annex III to the Directive and fault-based liability for damage to protected species and natural habitats ('biodiversity') from all other occupational activities. "Strict liability" means that it is sufficient that there is a causal link between the occupational activity and the environmental damage; it is not necessary to establish fault or negligence. "Fault-based liability" means that the operator of the occupational activity has, through a deliberate action or negligence has caused the environmental damage.

14. The liability is to avert an imminent threat of significant damage, and to remediate significant damage where this does occur. Where significant damage occurs, an operator must take all practicable steps immediately to control, contain, remove, or otherwise manage the potential causes of damage, to minimise the effects. This is not part of the longer-term remediation, which is the requirement to return the damaged biodiversity or water to its condition immediately before the damage occurred and to remove any significant risk of adverse effect on human health. In the case of land damage, the requirement is only to remove the threat of adverse effects on human health.

15. The ELD provides that, in respect of biodiversity and water, remedying the environmental damage will be principally through restoration of the environment to (or towards) its baseline condition, known as 'primary remediation'. If primary remediation does not result in fully restoring the damage, then complementary remediation will be required, on the damaged site or elsewhere, to make good the deficit. In addition, the ELD provides, again in respect of biodiversity and water, that compensatory remediation will be required, on the damaged site or elsewhere, to compensate for interim losses of service or amenity in the period between damage and full primary remediation.

16. The above requirements are summarised in the following table:

Table 1.1: Basic ELD requirements

Impact

17. In general the Directive establishes a regime which operates at a strategic European level. For the promotion of common criteria and uniform application, it adopts definitions and standards which are common with those in other EU regimes. The threshold for significant damage is relatively high, and for biodiversity and water relate to existing protection requirements as set within the EU Birds, Habitats and Water Framework Directives. That is likely to mean that relatively few cases will arise to which the ELD will apply. It will not apply to everyday occurrences. Cases that are caught may have a major impact and involve large sums for remediation. For application of ELD in Scotland, therefore, particular attention will need to focus on those environmental resources and services which are known to be important or sensitive, particularly in relation to the directives just mentioned. The European context is not just geographical: it is as much about a consistent legislative framework.

18. The draft Regulatory Impact Assessment ( RIA) pages 64-73, attached at appendix 2, suggests that the impact of the Directive over the first years of its application, might be as follows:

19. However, this is a topic with a small evidence base and the RIA uses assumptions based upon past cases, the experience of which might not be replicated in future, as more recent approaches to risk and prevention take effect. The RIA also suggests how the impact might fall between sectors of business - although this too is subject to change. The assessment of future damage has to be viewed therefore with a certain amount of uncertainty. Although based upon best information available, projections need to be seen against a background of the limited data.

20. There will be an impact also in terms of the civil law approach. Operators are expected to assess their potential liability responsibly and to make arrangements to deal with threats and damage if and when they occur. If incidents causing significant damage do not occur then the cost to operators would be the cost of periodic assessment, precautionary measures or insurance, as they think appropriate. There is no obligation upon operators to insure or otherwise provide for the costs of remediation of significant damage, although increasingly some may choose to do so as appropriate products come on the market. See also paragraph 23 below in relation the EU intention in this respect. Note that there is no application, registration / approval up-front, hence no direct costs of such. There is no direct regulation of operational activities under ELD, in addition to that under existing legislation, eg PPC or waste management. There is a need to create offences, eg of failing to notify or of failing to carry out the specific requirements of a CA.

21. The onus upon operators to be open about threats arising and damage done may be a challenge too far for some, the implications of which shift the immediate costs to others. Significantly, a competent authority may decide to act to minimise the threat or damage and to seek and pursue the liable party to recover its costs. The Directive requires recovery of costs, including via security over property or other guarantee. Where a valid exemption or defence under ELD is presented by an operator, remediation will need to follow provisions of any existing EU or domestic legislation.

22. For discussion of consequences where the operator cannot be found, is insolvent or is otherwise excused liability see section C 'Recovering costs'.

23. Article 14 requires Member States to take measures to encourage the development of financial security instruments. Experience of progress over time in creation of suitable products and financial market development will determine what more, if anything, needs to be done by the EU to create harmonised mandatory financial security.

Exceptions

24. The ELD does not apply to damage or immediate threat

• from an incident for which liability or compensation falls within the scope of International Conventions listed in Annex IV to the Directive (oil or dangerous substances pollution)
• where an operator is entitled to limit his liability in accordance with national legislation implementing the Convention on Limitation of Liability for Maritime Claims ( LLMC) 1976 (oil pollution)

• caused by an act of armed conflict, hostilities, civil war or insurrection or
• caused by a natural phenomenon of exceptional, inevitable and irresistible character or
• covered by the Euratom Treaty or by instruments listed in Annex V to the Directive (radioactive substances)

• of a diffuse nature where it is not possible to establish a causal link between the damage or threat and the activities of individual operators;
• from activities the main purpose of which is to serve national defence or international security; and
• from activities sole purpose of which is to protect from natural disasters.

25. The Directive does not apply to

• damage caused by an emission, event or incident that took place before 30 April 2007

• damage caused by an emission, event or incident which takes place after 30 April 2007 but which is derived from a specific activity that took place and ended before 30 April 2007

• damage if more than 30 years have passed since the emission, event or incident giving rise to the damage, occurred.

26. The third bullet above places a limit upon the period during which a past emission, event or incident is relevant to bringing damage within the terms of ELD.

Defences

27. There are also two defences for operators against meeting the cost of preventive or remedial measures taken where the operator can prove that the threat or damage

• was caused through the activity of a third party, despite the fact that the appropriate safety measures were in place.
• arose from compliance with a compulsory order by a public authority.

Optional additional provisions at Member state discretion

28. The Directive allows four circumstances in which Member States may decide to adopt slightly different provisions to the basic requirements of the Directive.

29. First, Article 2.3 allows a Member State to extend the scope of 'protected species and habitats' to include any that are protected by national law. In effect, that would include Sites of Special Scientific Interest designated by Scottish authorities and not already protected under EU Natura 2000. See paragraphs 45-47.

30. Then Article 8.4 of the Directive gives additional defences to operators where

• damage arose despite compliance with a permit where the operator is not at fault or negligent or
• damage arose from an emission, use of a product, or an activity which according to the state of scientific and technical knowledge at the time was not considered likely to give rise to such damage.

See paragraphs 61 - 70.

31. Finally, Member States may decide not to apply the requirement in Article 12 paragraphs 1 and 4 - response to observations or a request for action received by a CA from a person affected or likely to be affected, by an immediate threat of damage or from an environmental NGO. See paragraphs 87 - 91.