Some Comments on the Finnish Proposal for an Act on Compensation for Environmental Damage (Government Bill 1992:165)

 

 

By Professor PETER WETTERSTEIN

I. Introduction
The Finnish Government has submitted a bill to Parliament for an Act on Compensation for Environmental Damage (infra the Proposal). Up to now — and until the Proposal becomes law — the question of civil liability for environmental damage has to a large extent been governed by general rules of tort [especially the Tort Act of 1974 (412/74)] and rules of neighbouring law [Act on Neighbour Relations of 1920 (26/20)]. Also, the Water Act of 1961 (264/61) has been of significance in this context. In addition, there are in Finland special rules concerning e. g., liability for nuclear plants and liability for oil pollution damage.1 Consequently, the rules on liability for environmental damage are not comprehensive, they lack uniformity and it has been difficult to obtain an overview of them.
    There are several arguments in favour of comprehensive rules on environmental impairment liability. First of all, technical advantages derive from such rules. Rules on liability that cover a wide field of environmental damage are gathered together in one act. The rules are easier to apply, e. g., fewer definitions and limitations are required. Such rules might also lead to economy of litigation, i. e., the awarding of compensation would be facilitated and made faster. There is also the matter of the information effect of comprehensive rules; legislation assembled in one act would further information about the liability rules — and hence also preventive aims. It is more difficult to obtain information about splintered and, in part, uncodified rules of liability. Moreover, questions concerning liability for damage to the environment are of great practical importance and in connection with them we encounter new

 

1 See e. g., P.Wetterstein, Damage from International Disasters in the Light of Tort and Insurance Law. General Report submitted to the AIDA (Association Internationale de Droit des Assurances) 8th World Congress on Insurance Law in Copenhagen, June 18– 22, 1990, Copenhagen 1990, p. 43 f.

legal problems. These include such questions as basis of liability, person liable, burden of proof, compensable damage and the right to claim, insurance and complementary compensation arrangements, etc. Consequently, an assembled body of carefully considered rules covering these problems is of advantage to all: the injured party, the insurer, the courts, etc. But it must also be admitted that there are some difficulties surrounding comprehensive legislation.2 Internationally there is a growing awareness of the need for comprehensive rules on environmental impairment liability. Such legislation has already been enacted in e. g., Sweden (Act on Environmental Damage of 1986),3 Norway (Pollution Act of 1981 with amendments concerning compensation for pollution damage of 1989),4 Germany (Environmental Liability Act of 1990),5 and USA [especially the Comprehensive Environmental Response, Compensation and Liability Act, 1980 (CERCLA), amended in 1986 by the Superfund Amendments and Reauthorization Act (SARA),6 and the Oil Pollution Act of 1990 (OPA)7]. Comprehensive legislation is in preparation in Denmark.8 Further, there are two international instruments of interest in this respect, namely the amended EC proposal for a Council Directive on Civil Liability for Damage Caused by Waste of 1991 (however, shelved pending further decisions) and the Convention on Civil Liability for Damage Resulting from Activities Dangerous to the Environment drawn up within the Council of Europe in 1993.
    It is of course important that we get comprehensive rules for environmental impairment liability also in Finland. It is not enough to have special rules for different areas of liability combined with general rules of tort. It is further important that the comprehensive rules have the widest possible application.
    In the following, I shall make some comments on the Finnish proposal for an Act on Compensation for Environmental Damage.

 

2 Liability for environmental damage may arise in connection with many different forms of activity and in many diverse shapes. It is difficult to gather it together under one roof in comprehensive legislation. The resulting damage can also vary greatly. See supra, fn. 1, at p. 47 f. Cf. also T. Falkanger, Innfasingen av miljøansvaret i sjøfarten — modeller for samspill og motstrid. MarIus Nr. 195. Miljøskader og risikofordeling — sjøfartens løsninger i dag og i morgen. Oslo 1993 p. 37 f. 3 Miljöskadelag (1986:225). 4 Lov av 16. juni 1989 nr 67 om endringer i lov av 13. mars 1981 nr 6 om vern mot forurensninger og om avfall (forurensningsloven) m. v. 5 Promulgated as art. 1 of the Act Concerning Environmental Liability of December 10, 1990, 1990 BGB1. I 2634. 6 42 USC s. 9601 et. seq. 7 33 USC s. 2701 et. seq. 8 See Betænkning om erstating for miljøskader. Betænkning Nr 1237. København 1992.

Of special interest in this area is the question of compensable damage. Some comparisons with foreign solutions will also be made.

 

II. The Proposal
II.1. Applicability
According to § 1 of the Proposal, compensation for damage caused to the environment by activity performed on a specific area shall be payable. Environmental damage means damage caused by 1. pollution of water, air or land, or by 2. noise, vibration, radiation, light, heating or smell, or by 3. other comparable disturbance. This is a wide definition covering a large area of environmental infringements. The proposed Act does not cover liability based on contract. Compensation for damage which is regulated by special legislation is also excluded (§ 2). The Proposal further clarifies the relationship to the Water Act and rules on neighbouring law. Furthermore, the proposed Act has a supplementary reference to the Tort Act. This means that the Tort Act is complementary to the Proposal.
    As was mentioned, the Proposal is applicable to pollution from a specific area. The notion specific area is somewhat vague. However, it seems that here is primarily meant activity harmful to the environment — even very short lasting — performed on real property (land and water).9 The proposed Act does not cover pollution from means of transport.
    As a comparison it may be mentioned, that Sweden has restricted the area in which the comprehensive legislation is applied to activity on real property that pollutes air, water or land or causes damage to the environment through noise, vibration or comparable disturbance.10 The Norwegian legislation is more comprehensive, i. e., it is not restricted to pollution from real property. The application is limited by special legislation and by contract.11 The Finnish legislation regarding liability for environmental damage caused during transport of hazardous and noxious substances by rail, road and air (Act on Liability for Damage Caused by Rail Traffic of 1898, Traffic Insurance Act of 1959 and the Act

 

9 Government bill 1992:165 p. 19. 10 Also the Danish proposal is limited to pollution from activity on real property or structure. See A. Vinding Kruse, Nye ansvarsregler og deres betydning for miljø- og andre skader, navnlig søskader. MarIus Nr. 195. Miljøskader og risikofordeling — sjøfartens løsninger i dag og i morgen. Oslo 1993 p. 65. 11 See T. Falkanger, supra, fn. 2, at p. 31 ff.

on Air Traffic of 1923) is old and inadequate. For example, the very important question of compensable damage is poorly regulated in these rules. Usually there is only a reference to general rules and principles of tort law, primarily the Tort Act. However, this Act lacks a notion of compensable damage that takes into account the needs of modern environmental law. For example, are there reasons to treat the compensation question regarding pure economic losses (i. e., economic losses unconnected with personal injury or property damage) or costs of reinstatement of the environment (see infra) differently, depending on whether the pollution is caused from a specific area or means of transport? I doubt it.
    Therefore, I would have favoured a solution like the Norwegian one, i. e., an Act which is not restricted to pollution from a specific area. The proposed Act should be applicable as a complementary regulation in cases of special legislation, for example, legislation concerning means of transport. Because maritime liability is largely regulated by rather adequate, albeit not perfect, international treaties (see infra), there is not the same need for supplementary application.
    However, if/when Finland will accede to the Convention on Civil Liability for Damage Caused During Carriage of Dangerous Goods by Road, Rail and Inland Navigation Vessels (CRTD) of 1989, the situation regarding transport covered by this treaty (however, air transport falls outside) will improve. According to Art. 1.10. of the CRTD Convention both ”loss of profit” and ”costs of reasonable measures of reinstatement actually undertaken or to be undertaken” resulting from environmental impairment are compensated. The notion of compensable damage in the CRTD Convention follows the definition of ”pollution damage” in the 1984/92 Protocols to the International Convention on Civil Liability for Oil Pollution Damage, 1969 (CLC). The wording of the definition makes it clear that loss of profit from impairment of the environment is recoverable — also when the loss is unrelated to damage to the claimant’s property.12 Further, the costs incurred in restoring the environment after a pollution incident are compensable.13 Finland has ratified the CLC14 and is planning to

 

12 In the case of a pollution incident affecting a coastline, both fishermen losing income and hoteliers, restaurateurs and shopkeepers who obtain their income from tourists at seaside resorts will be able to recover — provided that they are able to prove that they have suffered loss of profit as a result of such impairment. See P. Wetterstein, Environmental Impairment Liability in Admiralty. A Note on Compensable Damage under U.S. Law. Åbo 1992 p. 90 ff. with references. 13 See supra, fn. 12, at p. 154 f. 14 See Act on Liability for Oil Pollution Damage of 1980 (401/80).

ratify also the 1992 Protocol.15 The maritime liability situation will further improve if/when the work on the draft International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS Convention) comes to a successful end.16 In the HNS draft (Art. 1.6.) compensable damage has been defined by solutions similar to those contained in the 1992 Protocol to the CLC.

 

II.2. Strict liability
The Proposal includes a rule on strict liability. Today liability for environmental damage is in Finland basically based on fault. Reference may here be made to the Tort Act of 1974. But there are some exceptions to the fault rule: strict liability has been adopted in the rules of neighbouring law, nuclear liability,17 oil pollution liability (see supra), etc.
    The principle of strict liability is in conformity with modern trends in environmental impairment liability law.18 Strict liability (combined with liability insurance) is an important component in a modern, practicable and functional system of compensation. When strict liability is applied, the injured party’s burden of proof is lightened since strict liability includes the unproven fault or any other tortious behaviour. Thus strict liability facilitates expeditious compensation and mitigates long drawn-out legal proceedings. Further, the effective application of the ”polluter pays” -principle19 presupposes adoption of strict liability. In accordance with this principle it is primarily the polluter who bears the cost of damage since it would seem reasonable that the person who gains economic advantage from an activity should also bear the expenses

 

15 Protocol of 1992 to Amend the International Convention on Civil Liability for Oil Pollution Damage, 1969. See IMO LEG/CONF. 9/15, 2 December 1992. 16 On the work, see P. Wetterstein, Trends in Maritime Environmental Impairment Liability, (unpublished paper) p. 13 ff. with references. 17 Finland has ratified both the 1960 Paris Convention on Third Party Liability in the Field of Nuclear Energy and the 1963 Convention Supplementary to the Paris Convention of 29th July 1960. 18 In recent years, strict liability seems to become the rule with respect to pollution damages in a growing number of countries. See e. g., the legislations and proposals supra, text to fn. 3–9. See also supra, fn. 1, at p. 50 ff. 19 Originally the ”polluter pays” -principle seems to have developed within public law — i. e., as a tool of environmental policy to avoid distortions of competition in international trade from externalization of pollution prevention costs. Later it has influenced the law of torts to indicate the increasing role of civil liability to compensate pollution damage from the past and to set responsibilities for the future. See J.Wansink, Environmental Liability Insurance in Europe and the United States, (1989) 3 Environmental Liability Law Quarterly, pp. 69–72. The ”polluter pays” -principle is supported by both the OECD and the EC.

and costs occasioned by the activity.20 Further, such liability may promote preventive goals.21 However, when strict liability is accepted as a part of a functional system of compensation for environmental damage, it seems necessary to limit the liability in view of the fact that society should be prepared to bear a certain degree of damage and discomfort without receiving compensation. A rule that compensation is payable for all damage or inconvenience following upon pollution cannot be upheld in a modern industrial society. This is the price we have to pay for our high standard of living and technical progress. The ”point de départ” would seem to be that compensation is to be paid only for unreasonable damage or inconvenience. Considerations of this type are contained in the legal systems of most countries.22 Accordingly, there is a rule in the Proposal (§ 4) that compensation for environmental damage shall only be payable if it is considered unreasonable to tolerate the disturbance with regard to local conditions or to its occurrence generally in similar conditions.23 This obligation to tolerate disturbances is not applicable to personal injury or more significant property damage. Neither does it affect damage caused by criminal or intentional behaviour.
    How the ”limits of tolerance” should be formulated in detail poses considerable difficulty. Such difficulty is linked primarily with the general consideration of how far it seems desirable or necessary to exempt polluting activity from the obligation to pay compensation for damage and inconvenience. The question of how the limit should be fixed, is how society sets its priorities. From the legal point of view it is probably more or less impossible to formulate a detailed practicable rule for when compensation shall be deemed payable. We may try to establish certain general guidelines and then it will be up to the courts to decide in casu when liability to pay compensation exists.24 However, it may be

 

20 The cost of liability is generally, in the final analysis, passed on to consumers; in this way the burden of risk and costs is spread, which must be regarded as a desirable trend (cf. product liability, which is also based on strict liability). Further advantages of strict liability are that such a system encompasses a somewhat broader range of events resulting in damage than a system of liability based on fault. 21 See supra, fn. 1, at p. 137 and supra, fn. 10, at p. 64. 22 See supra, fn. 1, at p. 56 ff. 23 There are similar provisions in the other Nordic environmental impairment liability acts. See e. g., B.Bengtsson, Det allmänna miljöskadeansvaret. MarIus Nr. 195. Miljøskader og risikofordeling — sjøfartens løsninger i dag og i morgen. Oslo 1993 p. 23. 24 See also G.Aasland, Fra oljeutblåsning til motorveistøy. Erstatningsspørsmål ved forurensning. Forhandlingene ved det 30. nordiske juristmøtet. Oslo 15–17 august 1984. Del I p. 62. In the in casu judgements reached by the courts the following aspects should be borne in mind: Is it a question of a marked deterioration of the environment? What is the cumulative pollution burden? At what time was the activity first set up? What are the technical and economic possibilities of preventing or limiting pollu-

noted that in a system based on fault it seems not to be necessary to have a rule allowing a certain degree of environmental pollution and nuisance without compensation. Such considerations are included in the very judgement of care.25 It is, therefore, somewhat surprising that the ”limit of tolerance” in the proposed Act seems to be applicable to smaller property damage and pure economic losses even when caused by negligent behaviour. For the person suffering damage this is a deterioration compared to the Tort Act.26 I would have favoured a solution whereby all negligently caused damage is recoverable (cf. the Swedish Act on Environmental Damage).27

II.3. Person liable
According to § 7 of the Proposal, strict liability is laid upon the operator28 of the activity causing the environmental damage. Also persons comparable with an operator (taking into consideration control, financial etc. aspects) have strict liability, e. g., a parent company could be held liable for activities of its subsidiary.29 Further, the transferee of an activity is liable if he knew about the damage or disturbance (or the risk of it) at the time of the transfer. If the environmental damage is caused by two or more persons they will be held jointly and severally liable.
    It is important that comprehensive legislation should attempt to define as precisely as possible the person/s liable for damage caused. This is especially true in the case of the type of damage discussed here where liability is strict and where the matter of liability insurance plays an inseparable part. In the efforts to introduce an efficient and practical system of liability one should try to ensure that as few liability policies as possible are needed.30 Further, it is

 

tion? What is the geographical size and extent of the damage or pollution? Etc. See also supra, fn. 9, at p. 24 f. 25 See NOU 1982:19. Generelle lovregler om erstatning for forurensningsskade. Oslo 1982 p. 53. 26 However, the Tort Act (Chap. 5 § 1) stipulates that compensation shall be paid for pure economic losses only if caused by some criminal act, by an administrative organ in the exercise of its authority or if there exists especially strong cause. Concerning ”especially strong cause” see e. g., P.Wetterstein, (red.) Finsk jurisdiktion över främmande fartyg. Del II. Åbo 1986 p. 776 f. with references. 27 The Act contains a provision (§ 1) that damage which has not been caused with intent or by negligence may be compensated only to the extent that the disturbance giving rise to the damage cannot be considered reasonable with respect to conditions existing in the locality or its common occurrence in comparable circumstances. 28 The operator is generally liable also in a more international setting. See supra, fn. 1, at p. 63 ff. By ”operator” is usually meant the person who is in charge of the activity and enjoys the right to income from the activity. 29 See supra, fn. 9. at p. 26 f. 30 In the case of two or more persons being liable, there is risk of overlapping insurance, i. e., all of them seek to maintain liability insurance to protect themselves from

important that the presumptive claimant should know who is liable. Clarifying the person liable seeks to reduce disputes about liability and delays in settling claims. This is also a good thing from the preventive viewpoint.
    When it comes to the question of who should be held liable the person running the activity and/or gaining economic benefit from it should be liable for the damage caused (cf. the ”polluter pays” principle).31 Thus the solution adopted in the Proposal seems acceptable.
    Since the proposed Act seems to cover environmentally harmful activity in general, the interesting question is whether it is appropriate to apply the strict liability to private persons not engaged in business or commerce. Even though the damage caused in connection with private activities is usually limited in extent and is also covered by the ”limits of tolerance” referred to above, strict liability in this field might seem unnecessarily onerous. There is not the same need to apply a rule of strict liability in this field as when it is a question of economic activity. Viewpoints on the spread of insurance and risk do not bear the same weight when it comes to private activities. Even though the arguments for strict liability for private activities are undeniably weaker, there are, however, certain technical considerations in favour of not distinguishing between business and private activities. Such a solution obviates complicated and difficult problems in drawing a line between the fields in which the system of liability would apply.32 Further, even if strict liability for private persons in many cases may seem unreasonable, it should be noted that legislation concerning compensation in many countries, e. g., the Nordic countries,33 contains provisions making it possible to adjust liability to reasonable amounts.

 

II.4. Proof of causality
An important question when it comes to efforts to develop a practical and functional system of compensation for environmental damage is naturally that of proof. A basic condition for a claimant to be able to claim compensation is that it is considered proven

 

large claims for compensation. This kind of multiple coverage of the same risk means increased costs and recourse actions. 31 See supra, fn. 19. 32 It may be mentioned that both the Swedish Act on Environmental Damage and the Norwegian Pollution Act seem to cover both business and private activities. However, the Danish proposal, see supra, fn. 8, is restricted to business or public activity (§ 3). See also Art. 2.1. of the draft Convention on Civil Liability for Damage Resulting from Activities Dangerous to the Environment (Council of Europe). 33 For Finland see the Tort Act, Chap. 2 § 1.

that there exists a causal link between the damage and the incident or activity. In complicated cases, however, it is often difficult for the claimant to prove such a causal link. This is especially true in cases involving environmental damage where experience has shown that it is very difficult to establish with certainty that certain environmental damage has resulted from a given activity.34 It may require complex technical, chemical or medical investigations to determine the cause-effect relationship. It is a typical feature of many pollution incidents that their effect is insidious. Many incidents involving personal injury may also be of the kind that the consequences become apparent only after a very long time, e. g., injuries caused by radiation.
    In most countries the burden of proof lies on the claimant. In addition to showing proof of the damage experienced the claimant must show that there exists a causal link between the incident or activity (industrial accident, toxic discharge, etc.) and the damage. In this respect it would seem that there is a trend towards easing the claimant’s burden of proof, also internationally. In many countries considerations such as reasonableness and appropriateness seem to have taken on greater importance in judging the claimant’s burden of proof.35 As far as Nordic court practice is concerned the courts have sometimes refrained from requiring full proof of a causal link and have only required a certain degree of probability of a causal connection between the cause and the damage.
    In the Swedish Act on Environmental Damage the legislators have striven to lighten the burden of proof that lies on the claimant to the extent that it is enough that there exists ”a predominant probability” of a causal link (in view of the nature of the disturbance, the harmful effects, other possible causes of damage and other circumstances) between a hazardous activity and damage (§ 3). In this way the claimant’s chances of receiving compensation are improved. The liability rules for environmental damage would

 

34 Among the difficulties of proof it may be noted that it is often unclear whether the damage originates from activity a, activity b, activity c, etc. or whether it is the cumulative effect of the different activities that has caused the damage. An example of this is that the fish in a river die as a result of severe pollution. For example, in the Sandoz case (1986) there was the question of how it could be proved that the damage was caused by the fire and not by the general level of pollution of the Rhine or other discharges concurrent with the Basel accident. It should also be borne in mind that some materials are not pollutants in themselves but become so when mixed with other elements. The same element may have different effects in different situations. Perhaps the most common situation in environmental damage is that the specific cause of damage is unknown. The general degradation and acidification of our environment leads to large-scale damage and it is often impossible to determine the cause/s (e. g., in the case of sulphur emissions). See supra, fn. 1, at p. 88 f. 35 See supra, fn. 1, at p. 89 f.

lose a lot of their practical significance if considerable demands were placed on claimant’s burden of proof. Furthermore, it is said in the motives for the Act that it is most often enterprises that cause environmental damage and they usually have better possibilities than the claimant to bring evidence as to the nature of the cause of damage.36 The Finnish Proposal contains a similar rule. The claimant has to prove that there exists ”a probability” of a causal link (in view of the nature of the activity and the damage, and other possible causes of damage) between an activity and damage (§ 3). According to the motives for the proposed Act ”probability” means a proof clearly over 50%.37 However, it is open to doubt whether the Swedish and Finnish solutions in fact lead to any marked improvement for the claimant. The Nordic countries — and most other countries — have accepted the principle of free judgement of proof (which means that the actual possibilities of bringing proof are taken into account) and therefore it seems that the same result could be achieved without an express rule of law.38 The question is to a large extent dependent on the policy adopted by the courts toward the claimant when it comes to compensation claims of the present type. But an express rule of law may have a certain influence on court practice. It may clarify and ”stabilize” this practice. Also preventive aspects and reasons of economy in litigation seem to favour express legislation. But it is justified to ask whether legislation should go even further than the Proposal (and the Swedish Act).
    By way of comparison it may be noted that the Norwegian Pollution Act lays down that anyone causing pollution which by itself or in combination with other sources may have caused the damage shall be deemed to have caused the damage unless it is established that another cause is more likely (§ 59). This constitutes a rule with reversed burden of proof in these cases. The rule aims at a situation where it has emerged that pollution possible to cause damage has occurred. However, it is unclear whether the damage can have some other cause. The question is who shall bear the risk in such a case. According to the Norwegian solution it is considered more appropriate that the lack of clarity should hit the polluter than to lay the burden of proving a causal link on the claimant.39

36 See further NJA II 1986. Ersättning för miljöskador. Stockholm 1988 p. 133 ff. 37 See supra, fn. 9, at p. 23. 38 See also supra, fn. 1, at p. 92. 39See further NOU 1982:19. Generelle lovregler om erstatning for forurensningsskade. Oslo 1982 p. 99 ff. and Ot prp nr 33 (1988–89). Om lov om endringer i lov 13 mars 1981 nr 6 om vern mot forurensninger og om avfall (forurensningsloven) m. v. (Erstatningsansvar ved forurensningsskade). Oslo 1989 p. 61 ff.

In choosing between the rule in the Finnish Proposal and the Norwegian solution I would be inclined to favour the latter. This is because the Norwegian legislation gives the claimant enhanced possibilities of successfully pursuing his claim.40 It is important that the rules on proving causality be formulated so that the comprehensive rules on environmental impairment liability do not lose a lot of their practical significance.

 

II.5. Compensable damage
The Proposal contains rules on compensable damage (§ 5). Compensation for personal injury and property damage is payable according to Chap. 5 in the Tort Act of 1974. In this respect the Proposal does not include any changes. However, when it comes to economic losses unconnected with personal injury or property damage, i. e., pure economic losses, the Proposal enlarges the right to compensation. Such losses shall be compensated with the exception of insignificant losses.41 Economic losses of this type may hit, for example, a hotel owner when his turnover drops as a result of pollution affecting the area near the hotel.42 The wording ”insignificant losses” leaves it to the courts to decide when compensation is payable. According to the motives for the proposed Act citizens should not be encouraged to pursue claims for insignificant losses.43 However, damage caused by criminal behaviour is always compensable according to the Proposal.
    The wording of § 5 seems to include also so-called third-party damage, i. e., losses affecting a person as a result of primary damage to another person (personal injury or property damage). Nordic tort law has been restrictive in giving a person who has not directly suffered loss the right to claim compensation.44 From the compensation viewpoint it is difficult to see a difference between a situation where a hotel owner has suffered economic losses from noise, smell, air pollution etc and a situation where, for example, the turnover drops as a result of pollution of a nearby beach (property damage for the landowner). The hotel owner should get compensation in both situations. This important question would

 

40 The German Environmental Liability Act also contains provisions for an easing of the burden of proof for the claimant. If under the facts of the individual case an installation is capable of causing the damage, it shall be presumed that the damage was caused by this installation (§ 6). The possessor of such installation may rebut the presumption by pointing out and proving exonerating circumstances. The presumption does not apply if the installation was operated as designed, i. e., if the special operating duties are observed and there is no disruption of operations. 41 For the situation under the Tort Act see supra, fn. 26. 42 Cf. also supra, fn. 12. 43 See supra, fn. 9, at p. 25. 44 See supra, fn. 1, at p. 74 ff.

have demanded a clarifying discussion in the motives for the Proposal.
    However, even if a rather broad right to compensation for pure economic losses seems to exist under the Proposal, the courts will have to find criteria (e. g., by using ”traditional” test for tort liability, involving factors such as proximate cause, foreseeability and remoteness) in order to arrive at a reasonable delimitation of the right to compensation for such losses. Further, as a successful claim for pure economic losses under Finnish law generally presupposes that an individual defined right have been infringed,45 it remains unclear under the Proposal whether compensation is awarded when the right is exercised on a public basis. I have especially in mind claimants exercising their common public rights and suffering economic losses, e. g., people exercising common public rights in their everyday living (using roads, waters and lands for travelling, fishing, hunting, picking berries and mushrooms, etc.).
    Since environmental damage may often result in economic losses, it is necessary in my view to consider extending the right to compensation to encompass infringement of common public rights. Risk spreading and preventive considerations, cf. the ”polluter pays” -principle, would seem to favour such a right. But compensation should be restricted to those who suffer economic losses in the exercise of their commercial activity — also ancillary business — because they are unable to enjoy their common public rights.46 Such losses may hit, for example, commercial fishermen and people who are dependent upon unrestricted travel in their business. Also people who are dependent upon the ecosystem for their subsistence should be able to recover.47 Consequently, a clarification on these points would have been desirable in the Proposal.48 The Proposal also stipulates (§ 5) that other environmental damage than losses connected with personal injury or property damage or pure economic losses shall be compensated to a reasonable amount (in view of the time the disturbance/damage lasts and the possibilities of the claimant to avoid or prevent the damage). In the motives for the proposed Act compensation for non-

45 This is the case also from a more international viewpoint, see supra, fn. 1, at p. 74 ff. 46 It is not possible to compensate everybody who suffers from not being able to enjoy common public rights. For the discussion see supra, fn. 1, at p. 79 f. 47 Cf. the American OPA (Oil Pollution Act of 1990) which provides for compensation also to those considered ”subsistence” users of natural resources for their losses ”without regard to the ownership or management of the resources” (33 USC s. 2702 (b)(2)(C)). For example, eskimos could claim for damage to fish stocks. 48 It may be mentioned that the Norwegian Pollution Act has also arrived at the solution of awarding compensation to those who suffer economic loss in their business — also ancillary business — as result of an infringement of common public rights (§ 57).

economic loss, i. e., inconvenience in exercising a right (cf. compensation for nuisance on the basis of neighbouring law), is mentioned.49 When environmental disturbance makes difficult or limits the exercise of such a right, it seems reasonable and justified to award compensation. However, compensation for non-economic loss (e. g., discomfort because of noise, smell, vibration, etc.) is a difficult area because of the difficulty of evaluating the damage. Therefore it is stipulated in the Proposal that such compensation shall be awarded to a reasonable amount.
    However, this kind of damage often has consequences of an economic nature, e. g., in the form of reduced market value for real estate, and the claimant can then, in certain circumstances, be entitled to compensation for such economic loss.50 Further, to some extent non-economic losses are compensated because the authorities can lay claims against the person liable for reasonable costs for restoration of the environment.
    Even though it is not appropriate or practical to give everyone whose common public rights have been infringed the right to claim individual compensation (supra), there are solutions that indirectly look after their interests. According to § 6 of the Proposal the authorities have the right to claim reasonable51 (in view of the disturbance and the benefit of the restoration measures) costs from the person/s liable for measures undertaken to restore the environment.52 Restoring e. g., the polluted land/water is the

 

49 See supra, fn. 9, at p. 25 f. 50 Supra, fn. 36, at p. 136. Cf. also supra, fn. 9, at p. 21. 51 It may be mentioned that even the most vigorous advocates of restoration cost recovery recognize that restoration cost should not be used when it yields a result that is grossly disproportionate to the actual damages. See F.B.Cross, Natural Resource Damage Valuation, (1989) 42 Vanderbilt Law Review, p. 334. Cf. also Art. 4.2. of the amended EC proposal for a Council Directive on Civil Liability for Damage Caused by Waste (Doc. COM(91) 219 final — SYN 217): one cannot claim restoration measures if their ”costs substantially exceed the benefit arising for the environment from such reinstatement and other alternative measures to the reinstatement of the environment may be undertaken at a substantially lower cost”. However, in order to conclude that restoration costs are grossly disproportionate to the resource value one needs a measuring stick against which these costs are tested. The choice of yardstick methodology is central to the ultimate measure of damages. If the reasonableness of restoration costs is tested against a valuation methodology that tends to produce low natural resource values, restoration may often seem excessively costly. On valuation methodologies see supra, fn. 12, at p. 147 ff. 52 It may be mentioned that restoration or replacement damages have been defined as the costs necessary to return the natural resource services to the baseline level provided in the absence of damage. See 43 CFR Subtitle A (10-1-91 Edition) § 11.14. (U.S.). The calculation is based upon the most cost-effective alternative for reaching this objective, and the alternatives considered must include a ”no action” option that relies upon natural recovery alone. See Note, Developments in the Law. Toxic Waste Litigation, Harvard Law Review, Vol. 99, 1986 p. 1570 f. However, environmentalists and polluters may take a different view on the extent of the measures to be taken and scientists may disagree on the chances of success of certain measures. See H.Bocken, Learning from

best method of preserving the environment. Restoration of the environment mitigates pollution damage of a non-economic nature suffered by the public. The environment is restored as far as possible so that fishing, berry picking, swimming, etc. — the exercise of common public rights — are once more possible.53 When possible, restoration can be made on the site where the resources were harmed. Situations giving rise to claims for restoration might be exemplified by the discharge of toxic wastes into lakes and watercourses causing damage to the fish and other wild life. Restoration measures needed after such an incident might include restocking the waters with young fish, replanting new flora and cleaning the banks. However, according to the wording of § 6 the proposed Act seems to cover only costs of restoration measures actually undertaken — not future costs (but cf. § 9 of the Proposal, infra, which contains a rule concerning compensation for future damage). My belief is that a right to claim compensation also for measures to be undertaken would enhance the possibilities of safeguarding the interests of the public/society. Compensation could be claimed ”in advance” from the polluter. This is also the solution in many international treaties.54 It is of course important that restoration costs have been made expressly compensable under the Proposal. But is recovery of these costs enough in view of the need to protect the environment and compensate damage caused to natural resources? To be really effective recovery should capture the full value of the harm done

 

Europe. Developments with respect to the compensation of damages caused by pollution, (unpublished paper) p. 20. 53 However, there are also problems involved in restoring and replacing natural resources: the determination of the baseline to which resources are to be restored, the often huge expenses involved, the time it takes for the ecosystem to resemble superficially its original condition (if at all possible), etc. See more F.B.Cross, supra, fn. 51, at p. 298 ff. 54 See e. g., the Convention on Civil Liability for Damage Resulting from Activities Dangerous to the Environment of 1993, Art. 2.7. and the ECE Convention on Civil Liability for Damage Caused During the Carriage of Dangerous Goods by Road, Rail and Inland Navigation Vessels, 1989 (CRTD), Art. 1.10. It may be noted that the words ”or to be undertaken” were added to the definition of ”pollution damage” in the International Convention on Civil Liability for Oil Pollution Damage, 1969, (CLC) by the amending Protocol of 1984 (which has been replaced by a Protocol of 1992), Art. 2.3. The reason for this addition was the experience of the IOPC Fund (International Oil Pollution Compensation Fund, which was created in connection with the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971, (FC)) that, in some cases, measures to reinstate the environment had to be deffered, due to lack of financial resources, until payment of compensation had been made by the shipowner or the IOPC Fund. Now payment may be made under the CLC and the FC in such cases. See M.Jacobsson & N.Trotz, The Definition of Pollution Damage in the 1984 Protocols to the 1969 Civil Liability Convention and the 1971 Fund Convention, (1986) 17 Journal of Maritime Law and Commerce, p. 488.

to the environment.55 Should, e. g., the diminution in value of natural resources pending restoration and the reasonable cost of assessing natural resource damages been made expressly compensable under the proposed Act? If we strive for full protection of natural resources, compensation should be paid also for lost use values56 and the costs for assessing natural resource damages — these costs can be quite substantial.57 Further, if restoration of the environment is not possible or if it is not economical,58 the obligation should be laid upon the polluter to make financial compensation. In this case diminution in use values would include compensation to the public for non-reparable damage such as the permanent loss of wildlife and fisheries — alternatively, the obligation might be laid upon the polluter to provide an alternative area elsewhere in the same general vicinity.59 However, before awarding damages, it will be necessary to arrive at a methodology for evaluation of the harmed resources.60

 

55 The award of natural resource damages can provide an effective tool for the protection of the environment. The right to recover such damages can force the internalization of many pollution costs and thus create a deterrent to future environmental harm. F.B.Cross, supra, fn. 51, at p. 339. 56 Diminution of use values is based upon the reduction in the level of services the injured resources provided to another resource or to the public (e. g., fishing) as a result of the disturbance. It does not address any private economic damages related to the indirect economic effects on individuals, businesses, etc. See further, supra, fn. 12, at p. 168 ff. with references. Use value is more precise and less speculative than other types of resource value because it measures actual behavior, rather than attitudes. See F.B.Cross, supra, fn. 51, at p. 282 f. 57 It may be mentioned that the U.S. Oil Pollution Act of 1990 (OPA), which is a very comprehensive and progressive piece of legislation, provides for compensation to the ecosystem. The compensation covers not only the costs of removal, i. e., the costs of cleaning up spilled oil, but also ”the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of, the damaged natural resources”. In addition ”the diminution in value of those natural resources pending restoration” and ”the reasonable cost of assessing (natural resource) damages” are recoverable (33 USC s. 2706 (d)(1)(AC)). On the OPA see further, supra, fn. 12, at p. 145 ff. 58 See supra, fn. 51. 59 Cf. the American OPA, 33 USC s. 2706 (d)(1)(A). On the interesting question of compensating so-called existence value and intrinsic value (non-use values), see supra, fn. 12, at p. 149 ff. F.B.Cross, supra, fn. 51, at p. 281, describes these values as follows: ”Existence value acknowledges that the presence of natural resources, even unused, may have value to humans. For example, some people may want to preserve the availability of resources for future generations. Intrinsic value recognizes that natural resources may have value independent of humans, based on their status as natural creatures or objects”. An assessment of natural resource damages that takes into account also non-use values may result in extensive amounts of damages. 60 The measurement of damages for purpose of liability for loss or destruction of natural resources touches one of the most topical and major problems of the whole environmental impairment liability question. Considerable difficulties — both philosophical, legal and practical — are involved in evaluating damage to the environment, for example, when it comes to the cost of restoration not yet undertaken or compensation for irreparable natural resources. But placing a monetary value on natural objects, including living animals, aesthetic views, and water purity, may be essential if one is to fully protect natural resources. There are at least two sets of questions in defining a measure for natural resource damages, i. e., what to measure, and how to measure it. For the discussion see supra, fn. 12, at p. 141 ff. It may be added that economists have

The Proposal provides the public authorities the right to claim restoration costs — in addition to a private person whose individual rights have been infringed. However, it might be worth considering to give the right to claim natural resource damages also to certain environmental interest groups/organizations.61 After all, there are some limitations to the possibilities authorities have of effectively safeguarding the interests of their citizens. The authorities may lack the political will and preparedness to tackle the problems in earnest. They might be too ”tied” to the interests of industry. Environmental organizations, on the other hand, often function as ”watchdogs” over industries and activities hazardous to the environment62 and they could form an important part in a comprehensive system to protect the environment. Further, it may be mentioned that internationally there is a trend to extend to environmental interest groups/organizations the right to recover natural resource damages — at least regarding restoration costs.63

II.6. Other provisions
In § 9 of the Proposal there is a rule concerning compensation for future damage. If, with respect to environmental damage, the amount of compensation payable can be estimated in advance, compensation shall, when requested, be determined for future damage. Such compensation may be determined as a single sum or as a certain annual amount. If circumstances considerably change

 

developed four leading procedures for valuing natural resource damages: 1) restoration and replacement costs, 2) market valuation, 3) behavioral use valuation, and 4) contingent valuation. Although no procedure is accepted universally as a perfect methodology, all of these methods have some merit and promise for measuring the monetary value of natural resources. See F.B.Cross, supra, fn. 51, at p. 297 ff. 61 The general opinion seems to be that the goods of nature are common property (res communis) and that nobody has individual rights to them. Thus the private citizen cannot normally act as a plaintiff to recover environmental damages. The general solution is to entitle public authorities to act as plaintiff. See e. g., supra, fn 1, at p. 76 ff. 62 Cf. M.J.Uda, The Oil Pollution Act of 1990: Is There a Bright Future Beyond Valdez?, (1991) 10 Virginia Environmental Law Journal, p. 432. 63 For example, the Norwegian Pollution Act § 58 offers a solution by which public authorities (primarily the municipal pollution control authority) and private organizations/societies with legal interest in the matter have the right to claim reasonable costs from the defendant/s for restoration of the environment. Further, Art. 4.3. of the amended EC proposal for a Council Directive on Civil Liability for Damage Caused by Waste gives ”common interest groups or associations, which have as their object the protection of nature and the environment” the right to seek the remedies (e. g., injunctions to prevent damage or impairment or to order the reinstatement of the environment/reimbursement of costs lawfully incurred in reinstating the environment) available in the Directive (Art. 4.1 (b)), within the conditions laid down by national law. See also Art. 18 of the Convention on Civil Liability for Damage Resulting from Activities Dangerous to the Environment (1993) which entitles ”Any association or foundation which according to its statutes aims at the protection of the environment and which complies with any further conditions of internal law of the Party where the request is submitted may, at any time, request: – – – d. that the operator be ordered to take measures of reinstatement”.

after the amount of compensation has been determined, the amount may be adjusted in accordance with what is reasonable in view of the change in circumstances. § 10 of the Proposal contains a rule on payment for real property. If, as a result of an environmental disturbance a property loses its usefulness to its owner, partly or completely, or if the use of it causes significant inconvenience, the property or part of it shall at the owner’s request be bought by the person liable.
    Finally, according to § 13, the proposed Act will only be applicable to environmental damage caused by activity after entry into force of the Act.

 

III. Conclusions
The Proposal can be critized for not being progressive enough. The proposed rules seem to follow rather strongly a ”traditional” tort law approach. For example, they focus primarily on cases where proprietary or other individual rights, as opposed to common public rights, have been infringed. In my opinion there is every reason to review the traditional attitude in tort law and to weigh the possibilities of affording increased protection to common public rights. In general more emphasis should be placed on protecting interests (cultural, societal, etc.) in addition to rights. Therefore, I would be in favour of explicit rules like those adopted in the Norwegian Pollution Act, i. e., awarding compensation to those who suffer economic loss in their commercial activity, also ancillary business, as result of an infringement of common public rights (e. g., fishermen). Further, private organizations with legal interest in the matter should have the right to claim reasonable compensation from the person/s liable for restoration of the environment.
    Additionally, other solutions of the Norwegian legislators would seem acceptable also from the Finnish point of view. I have especially in mind the supplementary application of the comprehensive compensation rules on means of transport and the reversed burden of proof concerning causality. In addition I would have favoured a wording in the Proposal covering also reasonable costs for future reinstatement of the environment. On the whole the definition of compensable environmental damage needs much discussion: How far beyond mere reinstatement of the environment should the obligation to pay compensation extend? Should also lost use values — or perhaps even lost non-use values64 — be compensable? What methodology for evaluation of the harmed

 

64 See supra, fn. 59.

natural resources should be used? These are just some of the questions that need to be answered.
    Insurance questions are not dealt with in the Proposal. Insurance plays a major role in the evolution of a modern society. Liability insurance is a ”natural” constituent of a modern liability regime with strict liability, channelling of liability, etc. Liability insurance both protects the person suffering damage against insolvency of the liable party and realises a spreading of the losses to the benefit of the person liable. Especially regarding environmental damage and personal injury liability insurance is required.
    The question of whether liability insurance (or other financial security) should be made compulsory is interesting. Hitherto more general compulsory liability insurance has not been usual in Europe.65 To a certain extent, however, many countries have accepted the principle of compulsory insurance for environmental impairment liability — principally on the basis of international conventions.66 Although there are good arguments for a more general compulsory liability insurance scheme, there are also problems and difficulties. I make a reference to the discussion.67 Further, there is a need to establish a complementary system of compensation in the form of an insurance mechanism,68 a fund (with private and/or public funds) or something similar. Such an arrangement would be an important component in a functioning system of compensation when compensation at the ”primary level” is insufficient (e. g., in cases of insolvency, application of statute of limitations, discontinuance of polluting activity, unidentified pollutant/polluter). The claimant is ensured compensation and money

 

65 On the other hand, in the USA, for example, evidence of financial responsibility is required under both CERCLA (Comprehensive Environmental Response, Compensation and Liability Act, 1980) and the OPA (Oil Pollution Act, 1990). See supra, fn. 12, at p. 82, 114. For other countries with compulsory liability insurance, see e. g. supra, fn. 1, at p. 128 with references. Further, it may be mentioned that the Danish proposal for comprehensive environmental impairment liability legislation also contains provisions on compulsory liability insurance. See supra, fn. 10, at p. 63. 66 The 1969 CLC obliges the shipowner to maintain liability insurance (or other financial security) when carrying a cargo of more than 2,000 tons of oil in bulk (Art. VII). The rules for nuclear liability also stipulate that the operator of the plant shall maintain insurance (or other financial security) for the liability covered by the conventions (1960 Paris Convention Art. 10 and 1963 Vienna Convention Art. VII). A provision on compulsory financial security has also been adopted in the ECE Convention on Civil Liability for Damage Caused During Carriage of Dangerous Goods by Road, Rail and Inland Navigation Vessels, 1989 (Art. 13), the amended EC proposal for a Council Directive on Civil Liability for Damage Caused by Waste, 1991 (Art. 11), and in the Convention on Civil Liability for Damage Resulting from Activities Dangerous to the Environment, 1993 (Art. 12). 67 See supra, fn. 1, at p. 128 ff. 68 For example, in Sweden there is (since July 1, 1989) an insurance financed by industry to provide complementary compensation to claimants under the Act on Environmental Damage of 1986. See supra, fn. 1, at p. 151 with references.

can quickly be obtained for clean-up measures, etc. Furthermore, financing the complementary compensation system by means of charges, taxes, etc., levied on industry means that the risk is widely spread.69

69 On complementary compensation arrangements see more generally supra, fn. 1, at p. 136 ff. with references. It may be mentioned that the Finnish Ministry of Environment is studying the question of complementary insurance/fund. See Complementary Scheme for Compensating Environmental Damage. Extract from the report of an ad hoc Environmental Economics Committee. Helsinki, May 1993.