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What are the implications of a new EU environmental directive?

Businesses and organisations remain largely unaware of the full potential implications of the Environment Liability Directive now in force, according to Mark Brumwell, partner and head of the environmental practice at lawyers Dundas & Wilson LLP in London, Edinburgh and Glasgow. In the Ray Bradbury story, A Sound Of Thunder, time travellers who stood on a butterflys wing affected the course of history. Legislation is now catching up on the same principle and calling into account all businesses whose operations might affect the environment. For avoidance of doubt, thats ALL businesses and the EU Directive on Environmental Liability which came into effect in May 2007 spares no-one the burden of responsibility for any changes they may deliberately or inadvertently cause in the world about them. And for anyone who still thinks their business is too small, too pure or too administrative to be affected by the new legislation, let me make clear that the new Environmental Directive covers air, land and water and anything living therein. Its almost impossible to do any sort of business and NOT have an effect. The difference being, that now there is legislation which goes way beyond previous laws affecting contamination, to now cover responsibility for causing almost any form of ecological change whatsoever. The Directive on Environmental Liability is extremely wide-ranging; covering land contamination where it affects human health, protected species, natural habitats, water and ecology. And it brings a raft of new obligations for dealing with the un-owned environment. The Directive requires organisations to make effective restitution where their operations pose any environmental challenge. And for an environmental lawyer, the biggest current challenge is how to deal with assets which have never before been valued in financial terms at least. How do you value the loss of an otters habitat in order to make appropriate restitution? How do you value the loss of one acre of natural habitat for a wild orchid, or a moth? In the spirit of the new law, prevention is better than cure, and the Directive is looking for companies to actively seek ways to take preventative action to preserve the ecological status quo. As a prerequisite therefore, ALL businesses need to be aware of their new responsibilities and, as a matter of urgency, should be actively assessing the potential impacts of the new legislation. A whole new category of environmental economists is starting to emerge to deal with the challenge of the new legislation. They will carry out impact assessment studies and work out the financial costs of any proposed development with an environmental impact. They will also put a value on appropriate restitution where any new build or business development causes unavoidable change to the area in which it will operate. Those who do damage the environment may be able to take advantage of some limited defences. For example, businesses will not be liable if pollution is released due to natural events, such as storms or high winds. A similar defence is available if the pollution is released due to armed conflict. A business will also be able to escape liability if they can demonstrate that the damage was caused by an activity expressly authorised by competent authorities and they were not at fault or negligent. Clarification of what exactly will be required for these defences is expected to be provided in the UK implementing legislation, which has yet to be drafted. The Directive also permits two further discretionary defences; that the polluting activity is authorised by a permit or that scientific and technical knowledge at the time did not predict that harm would arise. The extent to which these defences will be available will be set out in the UK implementing legislation, once drafted. The only comforting news for businesses is that there are no plans at present to make the legislation retrospective. However, as of now, any organisation or any company of any size should be in no doubt that their environmental responsibilities became backed by law, effective from the beginning of May this year. Any plans for business development should now include an element of environmental impact study, backed by an analysis of any additional costs which might be entailed. Case law is almost non-existent at the moment but there have been some past examples suggesting a rough guide that for every hectare of land affected by deforestation for example, one and a half hectares should be replanted. Where more complex changes cannot easily be replaced however, the proposed standards have generally been tougher and we have seen ratios of compensation as much as 4:1 on the value of lost habitat for a wide range of animal and plant species. Roughly speaking, there are three types of restitution covered by the Directive; PRIMARY REMEDIATION ; where conditions can be restored to their original state following interruption by human intervention COMPLIMENTARY REMEDIATION; where the original site may suffer change but investment is made elsewhere to effectively compensate for this change, eg creating an alternative habitat and moving species affected. COMPENSATORY REMEDIATION; where losses of natural resources cannot immediately be dealt with, companies may incur further charges to provide interim measures to minimise environmental disruption. This may be particularly significant in larger civil engineering projects for example when there is a need to have a large site presence during construction. The detailed obligations of the Directive suggest that a much more sophisiticated approach will be needed than we have seen in the past for the valuation of the lost or damaged environment and the required restitution measures. Valuations based on environmental economics are likely to become more prevalent. The appropriate body(ies) to apply these sanctions in the UK is still being debated, with the likely frontrunner being the Environment Agency at the moment. The new legislation does have teeth however and its not just something on the horizon, the legal responsibilities under the Directive are real and apply already, even though the implementing UK regulations havent yet been introduced. Our advice for businesses in the first place is to be aware of the change in the law and to seek appropriate advice early on to assess the full costs of any planned developments. Taking environmental impact into account is no longer merely a matter of conscience. Mark Brumwell is a partner and head of the environmental practice at lawyers Dundas & Wilson LLP in London, Edinburgh and Glasgow.

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