Date of adoption: 21 April 2004 Entry into force: 30 April 2004 (OJ L 143/56-75, 30.04.2004)
What are the aims and requirements of the Directive?
The EU Environmental Liability Directive (ELD) seeks to establish a framework of rules, based on the polluter pays principle, for allocating liability in cases of harm done to certain aspects of the environment. The aim is to ensure that economic operators responsible for causing the harm bear the costs of preventing or remedying it. It does this by obliging competent authorities in the Member States to identify cases of actual or imminently threatened environmental damage, and then require the operators whose activities have caused that damage to remove the problem and restore the environment.
The Directive was enacted in April 2004, giving Member States three years (until 30 April 2007) to transpose it into national law. In the event, most Member States missed the transposition deadline, with the last one not completing the process until 2010 (see Implementation below).
The EU CCS Directive relies upon the ELD for allocation of liability where CCS operations result in damage to the local environment, so it could play an important part in the EU's overall CCS regime (see Relationship with the CCS Directive below).
There is a need for caution here, however. The ELD is only one part of a patchwork of differing liability rules that will face an operator in each EU Member State in the event that environmental damage occurs (see Relationship with national law below).
Scope of the Directive - public law only
The ELD is a public/administrative law instrument; that is to say, liability is enforced solely by public authorities, in the form of duties on the operator to prevent and remedy environmental damage. Private civil claims for harms such as personal injury and property damage are expressly excluded from its remit (Art 3(3)).
Earlier drafts of the Directive did include rights to bring civil actions, but those provisions were removed before the Directive was passed into law. Private injury claims could still arise in cases of damage caused by CCS activities, but they will be adjudicated under the civil law rules of each Member State and will not be subject to any of the limitations or protections afforded to operators under either the CCS Directive or the ELD.
Types of harm covered
The Directive addresses three types of damage:
to protected species and habitats,
to water and
to land.
The scope of each of these is defined in terms of previous EU laws.
Harm to species and habitats is confined to those listed in certain annexes to the Wild Birds Directive (79/409/EEC) and the Habitats Directive (92/43/EC), although Member States are given the discretion, if they so wish, to extend the ELD's application to include any habitat or species not covered under those EU laws, but designated for equivalent protection under their own national legislation.
Damage to water sources extends to those covered under the Water Framework Directive (2000/60/EC). Damage to land is limited to cases which pose a threat to human health (since at the time there was no EU law regulating environmental protection of land).
Thresholds & definitions
The Directive contains a number of quite complex definitions concerning the level of damage that would trigger its application.
The key term, 'environmental damage', is given a specific definition for each of the three types of harm:
damage to protected species and habitats is any damage which has significant adverse effects on the reaching or maintaining of favourable conservation status, as that concept is defined under the Wild Birds and Habitats Directives;
water damage is any damage that significantly adversely affects the ecological, chemical and/or quantitative status and/or ecological potential of the waters covered, with those concepts relying on technical definitions in the Water Framework Directive; and
land damage is any land contamination that creates a significant risk of human health being adversely affected.
The Directive also includes a definition of the general term 'damage', as a measurable adverse change in a natural resource or measurable impairment of a natural resource service which may occur directly or indirectly (with 'natural resource' defined as covering the three aspects of the environment cited above). 'Natural resource services' are defined as the functions performed by a natural resource for the benefit of another natural resource or the public.
In addition to actual environmental damage, the ELD also requires preventive measures to be taken where there is an 'imminent threat of damage', the latter being defined as a sufficient likelihood that environmental damage will occur in the near future.
Types of activity covered
The ELD applies only to occupational activities, rather than private or residential ones, with 'occupational activity' defined as any activity carried out in the course of an economic activity, a business or an undertaking, irrespective of its private or public, profit or non-profit character.
Such activities are then divided into two categories:
those listed in Annex III of the Directive, which are subject to statutory regulation under other specified EU environmental laws; and
any other occupational activities.
The main thrust of the ELD applies only to the first of those categories, the Annex III activities. Annex III covers a wide range of industrial sectors and functional activities, which are regulated under EU law because of their potentially hazardous nature. These are subject to strict liability for all three types of harm (protected habitats and species, water and land).
Annex III includes activities regulated under: the Integrated Pollution Prevention and Control (IPPC) Directive, the Groundwater Directive, the Water Framework Directive, and various other directives and regulations covering waste management, discharge of dangerous substances, transport of dangerous goods, industrial air pollution, genetically modified organisms (GMOs), dangerous substances and preparations, and transboundary shipment of waste. Under the CCS Directive, the operation of storage sites pursuant to that Directive has been added to this Annex III list.
Other occupational activities, not included in Annex III, are subject to much lighter liability rules under the ELD. They will be held liable only for harm to protected species and habitats (ie, not for damage to water or land), and only where the operator involved has been at fault or negligent.
In both cases, ELD liability is without prejudice to any more stringent provisions in other EU laws regulating the relevant operation. Some EU laws, such as the waste and IPPC directives, contain clean-up requirements of their own which in certain circumstances could pre-empt the application of the ELD rules. It also needs to be remembered that national and regional laws within each Member State will continue to apply wherever they go beyond the ELD rules.
The liable party
Under the ELD, liability for both preventive and remedial action is channelled to the operator in control of the activity which causes or threatens to cause the environmental damage.
The definition of the 'operator' is in line with those in several other EU laws: 'any natural or legal, private or public person who operates or controls the occupational activity or, where this is provided for in national legislation, to whom decisive economic power over the technical functioning of such an activity has been delegated, including the holder of a permit or authorisation for such an activity or the person registering or notifying such an activity.' The equivalent definition in the CCS Directive follows this closely up to the word 'delegated', but does not include reference to the holders of permits and authorisations, etc.
Unlike many national liability laws, there is no provision for involving other categories of potentially responsible party, such as the owners or occupiers of contaminated sites, or the producers of the substances that have caused the harm. There is, however, tacit recognition that the identity of the responsible operator might not always be simple. The directive refers, in one of the defences, to the possibility of offloading liability on to a third party who has caused the relevant harm (Art 8(3)(a)), and acknowledges, in Article 9 on cost allocation in cases of multiple party causation, that national regulations might address the issue of apportioning costs between 'the producer and the user of a product'.
More broadly in multiple party cases, the ELD leaves the critical issue of apportioning liability between the parties entirely to the Member States, leaving them to make an important choice between systems of proportionate or joint and several liability (see Implementation below).
Response obligations
Articles 5 and 6 set out the obligations that the operator and the competent authority must meet in cases of imminent threat and actual damage.
Where damage is imminently threatened, but has not yet occurred, the operator has to take the necessary preventive measures without delay and, where appropriate or where the threat is not fully dispelled, must also inform the competent authority as soon as possible. On its part, the competent authority may, at any time, require the operator to provide information or to take the necessary preventive measures, specify the measures that have to be taken or carry out the measures itself. In the first instance, the authority must require the operator to take the measures, but it can perform them itself where the operator fails to comply, can not be identified or for some reason is not required to bear the costs under the ELD.
Where damage has already occurred, the operator must, without delay, inform the competent authority, take all practicable steps to contain, remove or manage the contaminants, etc, and take the necessary remedial measures in accordance with Article 7 of the Directive. The competent authority can, at any time, require the operator to provide supplementary information on the damage or to take specific containment or remedial action. Alternatively, it can carry out those actions itself, as a last resort, where the operator fails to comply, can not be identified or is not required under the ELD to bear the costs.
In principle, subject to certain exceptions (see below), the relevant operator must bear the costs of the preventive or remedial actions taken under the ELD. The competent authority has a duty to recover any costs it has incurred in relation to such actions. These include the costs of assessing the damage or threat of damage and the preventive or remedial options, and the administrative, legal and enforcement costs, costs of data collection and other general costs involved in effective implementation of the Directive, including monitoring and supervision, etc.
Remediation standards
The main principles for remedial action under the ELD are set out in Annex II of the Directive. This distinguishes two separate approaches: one for damage to water or protected species and habitats, the other for damage to land.
The key objective of remedial action for water or species and habitats is to return the damaged natural resource to its 'baseline condition'. That means, not some pure, unpolluted state, but the condition that would have existed had the environmental damage in question not occurred. Baseline is to be restored, if necessary, by means of three distinct types of remediation: primary, complementary and compensatory:
primary remediation means measures which return the damaged natural resources or impaired services to, or towards, their baseline condition;
complementary remediation means measures taken elsewhere to make up for the fact that primary remediation has not been able fully to restore baseline condition for the directly harmed natural resources or services; and
compensatory remediation means action taken to compensate for the interim loss of natural resources and/or services from the date when the damage occurred until primary remediation has achieved its full effect.
Within this scheme, the basic idea is to restore the damaged site to baseline condition, either through active remedial intervention or by means of natural recovery of the site. Where such primary remedial measures either do not achieve baseline or take some time to reach that state, further action in the form of complementary or compensatory remediation (or both) must be taken to offset the temporary or permanent loss of natural resources.
The competent authority is, however, allowed to limit the extent of remedial obligations if: (a) the remedial measures already taken ensure that there is no longer any significant risk of adverse effects on health, water or protected species and habitats, and (b) the cost of further remedial action in order to achieve baseline or a similar level would be disproportionate to the environmental benefits to be obtained.
Interim losses are defined as 'losses which result from the fact that the damaged natural resources and/or services are not able to perform their ecological functions or provide services to other natural resources or to the public until the primary and complementary measures have taken effect'. Under this heading, Annex II explicitly rules out financial compensation to members of the public. Compensatory remedial actions are to consist of investments in natural resources, rather than any kind of financial payment.
In cases of damage to land, the main objective is removal of any significant risk of adverse effects on human health. This is to be done by removing, controlling, containing or diminishing the relevant contaminants, so that the land no longer poses such a risk, taking account of land use or other regulations in force when the damage occurred or, where those are lacking, the nature of the affected area and its expected development.
The procedure for remedy selection is set out in Article 7. In all cases, this envisages the operator identifying potential remedial measures, in accordance with Annex II, submitting them to the competent authority for approval and the latter deciding measures that should be implemented. The authority is allowed to prioritise some remedial actions over others, where it is not possible to carry out everything simultaneously.
As part of this process, the authority must invite all parties with an interest in the case (as defined in Art 12(1) - see below), including owners of the affected sites, to submit observations on the proposed remedies, and must take those comments into account.
Defences & exceptions
The ELD contains a broad range of defences to liability, but the Member States have discretion over whether or not to allow some or all of them and, as a result, there are marked differences on this point (see Implementation below).
The first two defences come in Article 4 ('Exceptions'). These specify that the Directive does not cover either damage or an imminent threat, where it is caused by:
an act of war (armed conflict, hostilities, civil war or insurrection), or
an act of God (a natural phenomenon of exceptional, inevitable and irresistible character).
Four further defences are given in Article 8 ('Prevention and remediation costs'). The first two specify that an operator will not be required to bear the costs of preventive or remedial action where he can prove that the damage or imminent threat:
was caused by a third party and occurred despite appropriate safety measures being in place, or
resulted from compliance with a compulsory order of a public authority (other than an order in response to an emission or an incident caused by the operator himself) (Art 8(3)).
The other two defences are much broader, but are left to Member States' discretion. A Member State can allow the operator not to bear the costs of response action where he can demonstrate that he was not at fault or negligent, and that the environmental damage is caused by either:
an emission or event expressly authorised by, and fully in accordance with, a permit or authorisation issued under one of the EU laws cited in Annex III (permit or regulatory compliance defence); or
an emission or activity which the operator can show was not considered likely to cause damage according to scientific and technical knowledge at the time (state-of-the-art defence) (Art 8(4)).
There is continuing debate about whether these Article 8 provisions relieve the operator of the obligation to take preventive or remedial measures. Some commentators believe that they do, while others argue that they simply give the operator the right to recover his costs after he has undertaken the necessary response action.
In addition to the defences, there are also several types of activity which are excluded from the ELD regime. It does not apply to damage or threats of damage arising from events covered by the international marine pollution conventions or activities regulated under international nuclear treaties. Nor will it apply to pollution of a diffuse nature unless a causal link can be established between the damage and the activities of individual operators, and there is a further exclusion for national defence and international security activities, as well as those intended to protect from natural disasters.
Time limitation
The Directive includes two kinds of time limitation on liability:
on cost recovery actions, there is a five-year limit from the completion of remedial/preventive measures, or identification of the liable party (whichever is the later), for the authority to bring cost recovery proceedings; and
on past or historic damage, there are two forms of exclusion: (i) for damage caused by an emission, event or incident that either took place before 30 April 2007 (the deadline for Member States to transpose the Directive into national law) or derives from an activity that finished before that date; and (ii) where more than 30 years have passed since the causative event occurred.
Public participation - request for action
The ELD does not give individuals or environmental groups the right to sue polluters directly for liability and clean up, but Article 12 gives them the right to request enforcement action from the competent authorities and to get a reasoned response. It specifies that anyone (a) affected or likely to be affected by environmental damage, or (b) having a sufficient interest in environmental decision-making concerning the damage, or (c) alleging that their rights have been impaired, where that is provided for under national law, can submit to the competent authority evidence about actual or threatened environmental damage and request that the authority take enforcement action.
Although the Directive leaves the Member States some discretion over who qualifies for this right, it makes clear that non-governmental organisations promoting environmental protection, which meet any requirements under national law, should be deemed to have an interest and to have rights capable of being impaired.
Where a request for action includes plausible evidence that damage has occurred, the authority is obliged to consider the request, to give the relevant operator a chance to comment, and, as soon as possible, to inform the complainants of its decision about enforcement action, along with its reasons. The interested parties must then be given access to a court or other independent and impartial public body to review the procedural and substantive legality of the authority's decisions, acts or failure to act.
While this provision on requests for action is mandatory in cases of actual damage, Member States are given discretion on whether or not to apply it in cases of imminent threat.
Financial security
There is no obligation to provide insurance or other financial security under the ELD. Such a requirement was proposed by some parties during its passage through the EU legislative process, but was not included in the final text. Instead, Member States are required only to encourage the development of financial security instruments and markets in this field, including financial mechanisms to cover insolvency, 'with the aim of enabling operators to use financial guarantees to cover their responsibilities' under the Directive.
In order to monitor how well this provision is working, the European Commission was obliged to report, by the end of April 2010, on the actual remediation of environmental damage and on the availability at reasonable cost and conditions of financial security for activities covered by Annex III. That report was also to review options for introducing compulsory financial security and, if appropriate, make proposals for adding such a requirement to the ELD regime. In the event, the Commission published that report in October 2010 (COM(2010) 581) (see Implementation below).
Relationship with the CCS Directive
Article 34 of the CCS Directive adds the operation of storage sites for the geological storage of carbon dioxide, pursuant to its provisions, to the list of activities subject to strict liability in Annex III of the ELD.
Various other articles in the CCS Directive affirm the operator's responsibility to carry out preventive and remedial action as required under the ELD, where damage that comes within its scope is threatened or has occurred. That responsibility remains even after active storage operations have ceased, throughout the post-closure period until responsibility is transferred to the competent authority in the formal transfer process. After transfer, the authority takes on any liabilities under the ELD, unless the operator's responsibility is re-opened on grounds of fault (see Liability under the CCS Directive).
ELD liabilities do not have to be covered under the compulsory financial security provision in Article 19 of the CCS Directive. On the other hand, Guidance Document 4, issued by the European Commission in March 2011, recommends that operators' contributions to the post-transfer financial mechanism should include a sum to cover the competent authority's exposure to ELD liability risks after the transfer of responsibility for a storage site has taken place (see CCS Directive Guidance Documents).
Relationship with national law
The ELD is not a self-sufficient liability regime. It supplements, rather than replaces, a large body of Member State laws on environmental damage and liability, many of which apply more stringent liability rules to a broader range of activities and responsible parties. Those national and sub-national rules differ from country to country, and will continue to apply where they are either broader or stricter than the Directive. Article 16 of the Directive expressly confirms that Member States are entitled to maintain or adopt more stringent provisions concerning prevention and remedying of environmental damage, a position that was already enshrined in the environmental chapter of the EU Treaty. It even suggests as examples of where national law can go further, the extension of the ELD rules to a wider range of activities and the identification of additional responsible parties.
In addition, as a result of the prolonged and contentious debate that preceded its adoption into law, the Directive contains a large number of gaps and ambiguities, as well as areas left to Member State discretion. There are consequently significant differences in the way it has been implemented in the Member States. Although the basic rules are common to all of them, key aspects of the regime, such as the available defences and the scope of strict liability, vary substantially (see Implementation below).
Implementation
Member States were given three years (until 30 April 2007) - an unusually long time for an EU Directive - to transpose the ELD into national law, but most of them still missed the deadline, some by several years. A key reason for the delays was the difficulty of integrating the provisions of the Directive into the complex web of existing liability rules within each Member State. The last transposition measure was not received by the European Commission until July 2010.
As a result, the regime had hardly had time to get started when the Commission produced the first report on its implementation in October 2010. That report was required to address two issues: the effectiveness of the ELD in remedying environmental damage and progress that had been made on development of financial security products and markets to cover these risks. Because of the newness of the regime, much of the information it contained was about differences between the Member States in the way the Directive had been transposed, rather than practical experience with its functioning.
Among other things, the Commission implementation report noted the following:
on damage to protected species and habitats, 14 of the 27 Member States had extended the scope of damage covered to include equivalent resources protected under national or regional laws;
on the definition of the liable party, 26 Member States had gone beyond the definition given in the Directive, with six giving this concept a particularly broad scope;
on the optional broad defences to liability (permit compliance and state of the art), fewer than half the Member States decided to allow both defences, but equally fewer than half decided not to allow either of them; three decided to allow the permit defence, but not the state-of-the-art defence, while one allowed the latter but not the former; one Member State decided to allow both as mitigating factors to be taken into consideration, rather than full defences to liability;
on the scope of activities subject to strict liability under the ELD, nine Member States extended the scope beyond what is listed in Annex III, while nine others decided to exempt the spreading of sewage sludge from waste management operations for agricultural purposes, an option permitted under Annex III;
on apportionment of liability in multiple party cases, most Member States opted for joint and several liability, whereas five chose proportionate sharing; and
on financial security, eight Member States decided to introduce mandatory security, with differing starting dates up to 2014; however, in the three countries where such a requirement was supposed to come into force in 2010, the deadline was postponed because the necessary arrangements were not yet in place.
Other aspects covered in the 2010 report included: the low number of cases brought under the ELD regime at that stage, the steps taken by Member States on technical guidance and stakeholder awareness, and the range of initiatives taken by governments and the markets on provision of financial security. On the last point, the report then reviewed possible options for introducing some kind of compulsory financial security, but concluded that such a step would be premature.
Some of this information was updated at a European Commission workshop for stakeholders in November 2011 (see Useful Links below).
Key legal issues concerning CCS
The ELD regime exposes CCS operators to potentially broad liabilities for environmental damage associated with their activities. Although the present Directive has relatively weak provisions on several key aspects of liability, it nevertheless contains some elements, notably interim losses and compensatory remediation, which could prove very expensive for CCS projects in the long run. It is also reasonable to assume that its powers will not remain dormant in the years to come
The thresholds for actionable environmental damage that trigger enforcement action under the Directive are still ambiguous, making it difficult to quantify risk exposure over several decades into the future.
There is some doubt about the meaning of the clause inserted into the ELD by Article 34 of the CCS Directive. Article 34 speaks of the 'operation' of storage sites pursuant to the CCS Directive being added to Annex III of the ELD, which would place the operation of storage sites under the ELD's full strict liability provisions. An important question is what counts as 'operation': is it limited to the active operation, or even the active injection, period of a storage site? Or does it cover the whole life of a project, from site selection until post-closure transfer of responsibility to the competent authority?
Although at present there is no requirement under the CCS Directive to provide insurance or financial security cover for ELD risks, that is largely because the ELD itself does not have compulsory security provisions. There is continuing political pressure to introduce such mandatory security into the ELD regime at some time in the future and at that stage CCS storage operators would have to obtain ELD cover, on top of what is already required.
It needs to be remembered that the ELD is not a uniform regime across the EU, both because ELD implementation differs significantly between the Member States and because there are larger differences between their respective national liability rules, as well as inevitable variations in enforcement practice. In that context, it is also important to note that exclusion from ELD liability, because of one of the defences or exceptions, etc, will not necessarily mean that no liability exists, since there are other laws in each Member State that could come into play.