EU Pollution Law. It is time for small firms to clean up their act

Within the next five years, the European Union will almost certainly adopt some of the world's toughest anti-pollution laws and any firms not prepared for them could find themselves in very hot legal water.

Earlier this year, the European Commission published a White Paper in which it set out its initial plans for a new EU directive on 'environmental liability'. The initiative is designed to put into place the so-called 'polluter pays' principle, a guiding tenet of EU environmental policy which states that individuals or firms that pollute the environment should be made to pay to clean up the damage they cause.

The Commission's suggestions have already been criticised by both EU industry lobby UNICE and a number of pro-environment groups. UNICE is concerned that a new law based on the White Paper would impose harsh legal constraints on European firms while the green lobby says the Commission has not been tough enough.

The Commission argues that EU legislation is needed because national environmental protection laws only really deal with the problem of damage caused to people and property. They do not tackle adequately more complex issue of general environmental damage, the institution argues. Recent ecological disasters such as the Erika oil slick off the French coast earlier this year, or the recent cyanide spill from the Baia Mare mine in Romania, have convinced the Commission that new laws are needed to fill the current legal deficit.

Economic actors have focused on their responsibilities to other people's health or property, but have not tended to consider their responsibilities for the wider environment, the Commission said when it published the White Paper. The institution says polluters should be held liable for both 'traditional' damage to people or goods and for 'environmental' damage.

Under its complex definition of this second concept, companies would be held liable for causing environmental damage if they polluted the area immediately surrounding one of their factories, for example. But they could also face legal action if they polluted any sites designated as protected areas under two pieces of EU legislation - the 1979 directive on the protection of wild birds, and areas listed in the Union's Natura 2000 programme. It is estimated that such nature reserves currently cover around 10% of EU territory.

The Commission also wants the planned new law to be based on the principle of 'strict liability' when pollution is caused by firms involved in activities legally defined as 'hazardous'. This means that it would not be necessary to prove that a polluting firm was at fault before imposing penalties on it.

One of the most controversial aspects of the Commission's White Paper as far as UNICE is concerned is the suggestion that non-official organisations such as environmental pressure groups, should be allowed to bring legal action against polluting firms. UNICE is worried that such a move could lead to a slew of malicious lawsuits. It says that only official bodies, such as local or national governments, should have the right to start legal proceedings under the planed new law. UNICE calls on the Commission to refrain from giving public interest groups the right to bring direct claims against companies, the business lobby said in a detailed response to the White Paper.

The Commission has stated clearly that it believes any EU environmental legislation should not be retroactive. In other words it should not be possible to bring lawsuits using the new directive for pollution caused before the law has been passed. UNICE welcomes this suggestion in principle, but says that in practice it is sometimes hard to decide exactly when pollution damage was caused. The White Paper does not explain how 'new pollution' should effectively be distinguished from 'old pollution', the organisation complains.

Another area of the White Paper that has industry worried is the question of insurance. The Commission insists that companies must be able to insure themselves against any possible lawsuits brought under the new law, but UNICE is worried that this could prove very difficult in practice. It argues that the legislation the Commission is calling for would be so tough that certain companies working in particularly hazardous sectors would find it almost impossible to get adequate cover.

But despite UNICE's protestations it seems almost certain that some sort of environmental liability legislation will be adopted in the very near future. Public awareness of environmental problems has never been higher and across Europe voters are pressuring politicians to crack down on polluters.

When EU environment ministers had a first chance to look at the Commission's White Paper in March, they gave the plan a clear 'thumbs up'. Spurred on by this encouragement, EU environment Commissioner Margot Wallström has said she intends to put forward a formal legislative proposal on environmental liability before the end of next year.

The best course for EU firms in the current political climate would seem to be to accept that tough new rules are on the way and use the next few years to ensure they will be in a position to respect them when they arrive.