UK: European Court of Justice Considers the ELD

On 9 March 2010, in Raffinerie Mediterranee (ERG) SpA v Ministero dello Sviluppo economico, the European Court of Justice ("ECJ") gave its first judgments on the Environmental Liability Directive ("ELD").

The case concerned the Priolo Gargallo area of Sicily. At some point in the past, the Italian authorities declared this area to be a "site of national interest for decontamination purposes".

This area included a smaller area called the Augusta Roadstead which had endured several incidents of contamination over the years as a result of a succession of petrochemical companies that had come and gone in the area since the 1960s.

Very significant remedial measures were ordered by the Italian regulators of the current petrochemical companies under Italian law. The measures appeared to relate not just to the pollution and damage that those companies had caused but also to that caused by their predecessors.

Some of the companies challenged the measures in the Italian courts, claiming that they had been imposed without distinguishing between past and present pollution or assessing responsibility of individual companies (i.e. without heeding the "polluter pays" principle now enshrined in EC law and in the ELD in particular) and without discussion with the companies.

After various proceedings and appeals under Italian domestic law, matters were stayed whilst several questions relating to the application of the ELD were referred to the ECJ.

The ECJ's judgment

The ECJ answered the questions in two sets, each dealt with in a separate judgment.

First, however, it began by looking at the ELD's temporal application, as it was important to establish whether the ELD applied to this damage scenario at all. The ELD clearly states that it 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 subsequent to 30 April 2007 when it derives from a specific activity that took place and finished before that date; and
• damage, if more than 30 years have passed since the emission, event or incident, resulting in the damage, occurred.

In the ECJ's view, any temporal scenario other than the three set out above is in principle covered by the ELD's liability mechanism. The ELD, therefore, applies to damage caused by an emission, event or incident which took place after 30 April 2007 where such damage derives either from activities carried on after that date or activities which were carried out but had not finished before that date.

The ECJ did not have enough information to determine whether the damage at the centre of the case, in respect of which the remedial measures were imposed, was temporally of a type that fell within the scope of the ELD. This was for the National Court to ascertain. If it was not, then the ELD did not apply, the matter was governed by national law and the opinion of the ECJ on the questions raised was not strictly relevant. If it was, then the ECJ answered the questions as follows.

The first set of questions

The first set of questions were essentially whether the "polluter pays" principle, which is a central theme in the ELD, precludes national legislation that allows regulators to impose remediation actions on operators because their premises are located close to a contaminated area without:

• carrying out a preliminary investigation into the occurrence of the contamination; or
• establishing a causal link between the damage and the operators; or
• establishing intent or negligence on the part of the operators.

The ECJ started by saying that a causal link between polluter and damage has to be established for the ELD to apply. However, the ELD does not specify how this is to be done, which means that member states have a degree of freedom in the causation rules that they adopt.

The ECJ held that it was acceptable for national legislation to allow a regulator acting within the framework of the ELD to operate on the presumption (also in cases involving diffuse pollution) that there is a causal link between operators and the pollution found on account of the fact that the operators' installations are located close to the polluted area.

However, in accordance with the "polluter pays" principle, in order for such a causal link to be presumed, that regulator must have plausible evidence capable of justifying its presumption, such as the fact that the operator's installation is located close to the pollution found and that there is a correlation between the pollutants identified and the substances used by the operator in connection with its activities.

Where the regulator has sufficient evidence to justify the presumption of a causal link, the situation falls within the scope of the ELD unless the operator can somehow rebut the presumption.

As to whether the regulator is required to establish fault, negligence or intent on the part of operators whose activities are held to have caused environmental damage within the scope of the ELD, the ECJ said that in relation to operators of hazardous activities within Annex III to the ELD (and whose liability is therefore strict), the regulator is not required to establish fault, negligence or intent on the part of those operators. However, that regulator must:

• carry out a prior investigation into the origin of the pollution found (it has a discretion as to the procedures, means to be employed and length of such an investigation); and
• establish, in accordance with national rules on evidence, a causal link between the activities of the operators at whom the remedial measures are directed and the pollution.

The second set of questions

Essentially these questions were as follows:

• Where damage is covered by the ELD, is the regulator allowed to impose on its own initiative a substantial change in the remediation measures that have been agreed following consultation with the operator and which have already begun to be put into effect, without that regulator having carried out a full cost benefit assessment before imposing those changes?
• Does the ELD, where it applies, preclude national legislation which permits the regulator to make the exercise by operators at whom environmental recovery measures are directed of the right to use their land subject to the condition that they carry out the works required by the regulator, even though that land is not affected by those measures because it has already been decontaminated or has never been polluted?

The ECJ held that the ELD must be interpreted as permitting the regulator to alter substantially remediation measures agreed following consultation with the operator and which have already begun to be put into effect. However, in order to adopt such a decision, that regulator:

• is required to give the operator the opportunity to be heard (except where the situation is urgent);
• is also required to invite the persons on whose land those measures are to be carried out to submit their observations and to take them into account; and
• must justify its decision on the basis of Annex II of the ELD.

It also held that the ELD does not preclude national legislation which permits the regulator to make the exercise by operators at whom environmental recovery measures are directed of the right to use their land subject to the condition that they carry out the works required by the regulator, even though that land is not affected by those measures because it has already been decontaminated or has never been polluted. However, such a condition must be justified by the objective of preventing deterioration in the area in which those measures are implemented or by the objective of preventing the occurrence or resurgence of further environmental damage on the land belonging to the operators.

Summary

This is an interesting case. The ECJ appears to think (although it leaves the question for the national court) that in the circumstances, the damage at the heart of the case might constitute damage covered by the ELD. The case therefore reminds us that in certain circumstances, the ELD can be relevant to "historic" pre-2007 pollution scenarios.

Overall, the ECJ seems to be saying that in relation to damage within the parameters of the ELD, member states' rules on isolating polluters and ensuring clean up can favour the regulator to a considerable degree and still be within the scope and the spirit of the ELD. In time, the judgment could lead to the introduction of more regulator-friendly enforcement procedures in individual member states.

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