The Environmental Liability Directive (ELD) establishes a framework of environmental liability based on the ‘polluter pays’ principle in order to prevent and remedy environmental damage.
The ELD takes an administrative approach to ensuring that an operator (company) whose operations cause environmental damage is financially liable for remediating such damage. The aim of this approach, which is distinct from tort law or civil liability regimes that are specific to each Member State’s legal system and which address traditional damage, is to induce operators to adopt measures to minimise environmental damage in accordance with the principle of sustainable development.
The ELD defines environmental damage as damage to protected species and natural habitats (biodiversity) and damage to water and to land (soil). Operators must take preventive actions if there is an imminent threat of environmental damage. If such damage has occurred, they are under a duty to remedy the damage and to bear the related costs. Certain limited exceptions and defences are allowed.
The ELD entered into force on 30 April 2004 but the transposition process has been very slow, leading to several judgments by the European Court of Justice (ECJ) against Member States. A major reason for the slow transposition process is the necessary co-existence of the environmental liability regime established by the ELD with pre-existing liability rules, sometimes overlapping the scope of the ELD. Implementation challenges and obstacles of the ELD have been examined by BIO Intelligence Service in a study for DG Environment.
In 2010, the European Commission published a report looking at the effectiveness of the ELD, the availability of financial security at reasonable cost and the conditions attached to insurance and other financial security for Annex III activities. The EC concluded that sufficient justification did not exist for introducing a harmonised system of mandatory security but the issue will be looked at again before 2014.
Environmental liability insurance remains the most popular means of covering ELD-related liability.
In October 2010 there was a major industrial disaster in western Hungary. The operator was unable to cover the costs and if the Hungarian government had not intervened it would have faced bankruptcy, which would have meant the loss of thousands of jobs. This resulted in a Hungarian call for a European industrial risk-sharing facility to be set up. BIO Intelligence Service carried out a study to look into this and other alternatives in more detail, entitled Study to explore the feasibility of creating a fund to cover environmental liability and losses occurring from industrial accidents".