The Directive applies to environmental damage, meaning any damage that has significant adverse effects on reaching or maintaining the favourable conservation status of such habitats and species; water damage, which is ecological, chemical or quantitative deterioration from the water quality status and/or ecological potential established by the Water Framework Directive 2000/60/EC; and land damage, which is any soil or subsoil contamination that creates significant risk to human health, caused by or being an imminent threat of certain high-risk occupational activities, these being the most significant industrial, municipal and transportation activities, including the energy industry, metal manufacturing and processing, mining, chemical industry and waste management.
The Directive also applies to damage to protected species and natural habitats, meaning a measurable adverse change in a natural resource or measurable impairment of a natural resource service which may occur directly or indirectly, caused by or being an imminent threat of any other, non high-risk occupational activity, provided that the operator has been at fault or negligent.
Economic damage, on the other hand is excluded from the scope, and the Directive does not give private parties a right of compensation as a consequence of environmental damage or of an imminent threat of such damage. Such compensation, if any, shall be sought in existing national legislation. Furthermore, the Directive sets minimum requirements; Member States may maintain or adopt more stringent provisions on the prevention and remedying of environmental damage, including identifying other high-risk occupational activities and/or additional responsible parties.
Liability for action under the Directive falls only upon the operator, the person or entity operating or controlling the facility involved in the occupational activity or, where this is provided for in national legislation, to whom decisive economic power over the technical functioning of such an activity has been delegated. Operators shall, without delay, take necessary preventive action, in case of imminent environmental damage. If such imminent threat is not dispelled, the operator shall inform the competent authority (to be established by national legislation implementing the Directive). The competent authority is empowered to: require operators to provide information on any imminent threat of environmental damage; require operators to take preventive measures; instruct operators on the specific necessary preventive measures to be taken; or adopt itself the necessary preventive measures if the operator fails to comply, cannot be identified or is not required to bear the costs under the Directive.
Where environmental damage has occurred, operators shall, without delay, inform the competent authority; take all practicable steps to immediately control, contain, remove or otherwise manage the relevant contaminants and/or any other damage factors; and take the necessary remedial measures, where primary remediation, in principle, means the restoration of the environment to its baseline condition, i.e., the condition that would have existed had the environmental damage not occurred; complementary remediation is remedial measure taken in relation to natural resources or services to compensate for the fact that the primary remediation does not result in fully restoring the damaged resources/services; and compensatory remediation is action taken to compensate for interim losses of natural resources or services that occur until primary remediation has been fully achieved.
The competent authority is empowered to: require operators to provide supplementary information on any damage occurred; take, require operators to take, or give instructions to the operator concerning the mitigation of the effect of such damages; require operators to take the necessary remedial measures; instruct operators on the necessary remedial measures to be taken; or adopt itself the necessary remedial measures if the operator fails to comply, cannot be identified or is not required to bear the costs under the Directive, but only as a means of last resort.
Bearing of costs
Prevention and remediation costs shall primarily be borne by the operator. Such costs incurred by the competent authority shall be recovered by it, inter alia, via security over property or other appropriate guarantees from the operator who has caused the damage or the imminent threat of damage.
An operator shall not be required to bear the costs when he can prove that the environmental damage or imminent threat of such damage was caused by a third party and occurred despite the fact that appropriate safety measures were in place, or resulted from compliance with a compulsory order or instruction from a public authority, except for orders or instructions consequent upon an emission or incident caused by the operator’s own activities.
Member states may also allow the operator not to bear costs where he demonstrates that he was not at fault or negligent and that the environmental damage was caused by an emission or event expressly authorised by competent authorities, or that the emission or activity causing the damage was not considered likely to cause environmental damage according to the state of scientific and technical knowledge at the time of the incident.
Request for Action
The Directive allows persons adversely affected, or likely to be affected, by environmental damages, or having sufficient interest in related environmental policy, furthermore environmental NGOs qualified by default to have sufficient interest to submit observations to, and request that the national competent authority take action for prevention or restoration. Operators shall be given the opportunity to share their views with respect to the request for action and the accompanying observations. The decisions taken by the competent authorities in the framework of such procedures must be subject to review before courts or other impartial public bodies.
Financial Security Instruments
Within six years after the entry into force of the Directive, the European Commission will issue a report about developing a possible mandatory insurance scheme. In particular, the Commission will address the following issues: a gradual approach to mandatory financial security as well as a ceiling for liability and exclusion of low risk activities from a mandatory guarantee system. Only in light of the report and of an extended impact analysis will the Commission decide whether or not to propose a mandatory financial guarantee system. For the time being, member states are required to encourage insurance companies to develop financial security instruments and markets and operators to use them.
Current Hungarian environmental liability regime
Most of the provisions of the Directive already exist in current Hungarian environmental protection legislation, and in certain cases, a wider scope of protection is achieved than what is set by the Directive. Section 345(1) of the Hungarian Civil Code forms the basis of liability for environmental damage, stipulating that activities leading to environmental damage are deemed hazardous activities. Such liability is more stringent than the general liability minimum set by the Directive, relief may only be sought if it is proven that (i) the damage occurred due to an unavoidable cause, and (ii) that it falls beyond the realm of the hazardous activity. Any person causing damage to, polluting or inducing an imminent threat to the environment, or performing an activity in violation of environmental regulations shall bear civil, administrative and criminal liability. Such damage includes personal injury and damages to private property, damages falling outside of the scope of, and therefore not affected by the provisions of the Directive. Hungarian legislation has also adopted the polluter pays principle. Under Chapter IX of the Environmental Protection Act LIII of 1995 the polluter shall abstain from illegal conduct, be liable for damages caused, and shall restore the environmental conditions existing prior to the activity, or in certain cases to the level determined in specific legislation. Failure of these steps shall result in the competent authority or the court limiting, suspending or prohibiting its activity until determined conditions are met. Furthermore fines may also be imposed.
The liability system for damage to the environment under national legislation is based on objective liability, and as such is therefore more stringent than the minimum requirement set by the Directive. This means that in the event of damage to protected species and natural habitats, the subjective elements of fault or negligence of the person performing the activity is not assessed. National legislation therefore allows for the competent authority to point the finger without examining (and proving) the subjective content behind the illegal conduct, whilst allowing for such persons to gain relief from liability provided that they name the person(s) responsible, i.e. the person performing the polluting activity or the actual owner or possessor of the property or mobile source of pollution causing damage to the environment, and that they prove beyond doubt that liability does not rest with them, e.g. if damages resulted from compliance with a compulsory order or vis major.
In a Supreme Court decision of 1996 the court found the operator of a sewerage treatment plant that let untreated sewage into a river liable for the perishing of waterlife consequent to the oxygen deficiency that occurred. The operator held that it was not liable, or at least the liability should be shared jointly with the prosecuting party, and in their case presented that reasons falling outside its activity led to the damage in fish stock, namely that a municipal sewerage treatment plant was not constructed in time; that due to a government decision, the water flowing into the river was diverted, and the water affairs authorities did not take the necessary steps to warn the operator; furthermore that the prosecuting party, having noticed the rise in pollution levels, did not notify the operator so that it could stop the flow of waste in time, thus mitigating losses. The court found that the prosecuting party could not identify the operator when it noticed the rise in pollution levels as there were several sewerage treatment plants operating in that region, therefore it found no legal basis for the sharing of liability. Furthermore the court found that the case presented by the operator regarding the artificial lowering of the water level was legally unfounded. Expert opinions showed that the decrease in water volume in itself did not give rise to oxygen deficiency, furthermore the operator had the necessary aeration facilities, therefore it could have compensated for the lack of oxygen. Objectively there was no unavoidable cause that prevented the operator to take the necessary steps to prevent the occurrence of damage, and it could be expected from such an operator to monitor water pollution concentration levels (cf. decision no. Gfv. VI. 30.808/1996).
It can be held that prior to implementation of the Directive, the current environmental liability regime exceeds the baseline requirements brought under the obligation of harmonisation, and given that pursuant to Article 16 of the Directive, these more stringent provisions provided in relation to the prevention and remedying of environmental damage may be maintained after implementation, the national environmental liability regime may remain as is. Historically, the objective liability for damage to the environment was established by jurisprudence, and in the mid-1970’s this practice was adopted by growing legislation in the area of environmental protection. Hence the current liability regime was enacted in the previous Environmental Protection Act II of 1976, resulting in the necessary modification to provisions on liability for hazardous activities in the Civil Code in 1977. Henceforth jurisprudence would call upon Section 345(1) of the Civil Code, and rarely upon the equivalent provisions of the Environmental Protection Act.
There are also national provisions exceeding the minimal requirements of the Directive in the area of financial security instruments. Current legislation already provides for obligatory measures to be taken in specific cases. For certain activities the person burdening the environment is required to provide financial security, and in certain cases to conclude appropriate environmental liability insurance. On a voluntary basis, persons burdening the environment may also allocate appropriate reserves in their books for likely or anticipated environmental damage.
Hungarian criminal law allows for operators to be held liable in relation to crimes against the environment. The approach adopted by Hungarian legislators is based on the premise that the organisation as such does not assume the role of accused in the criminal proceedings; instead special measures are instigated in order to confiscate financial gains in connection with the crime and to deter organisations from such conduct. Pursuant to the criminal actions against organisations Act CIV of 2001, such measures may be instigated if a director or officer of the organisation intentionally committed the crime within the activity of the organisation, or a member or employee of the organisation intentionally committed the crime within the activity of the organisation and the director or officer could have prevented it due to supervisory or control obligations, and the crime was committed with the intent of, or such crime resulted in financial gain for the organisation. Measures may also be instigated if the crime committed resulted in financial gain for the organisation, and the director or officer of the organisation had knowledge of such crime. The measures that may be instigated are:
– the imposing of a fine amounting to three times the financial gain determined but at least 500.000 HUF (approx. 2.000€);
– the restriction of all or a part of the activities of the organisation for 1, 2 or 3 years, during which period the organisation may not publicly collect deposits, is banned from public procurement, may not be a party to concession contracts, may not qualify as a charity organisation, may not receive local or national public funding, or funds from other governments, the EU or other international organisations and such funds brought in connection with the crime have to be reimbursed, may not partake in lobby activities and may not pursue the economic activities determined by the court;
– the organisation is terminated and removed from the registry if the organisation performing its activities either legally or illegally was established in order to cover the crime, or the actual activity of the organisation was pursued in order to cover the crime.
The status of implementation is that the Hungarian government is currently forwarding the proposed modifications discussed above to parliament; therefore it is unlikely that the implementation shall be completed by the deadline set by the Directive, the end of April. Still, no major modification are required to current legislation given that most provisions are already in line with the Directive, therefore harmonisation is required with regard to the following minor issues:
– the definitions of the Environmental Protection Act require some alignment with the terms used by the Directive, therefore the term environmental damage needs to be more precisely specified, and the terms imminent threat of damage, preventive action, remedial action and natural resources services need to be introduced;
– with regard to provisions guaranteeing the recovery of costs borne by the competent authority in lieu of the polluter, it is proposed that the Environmental Protection Authority be entitled to mortgage the property of the polluter for the benefit of the State if preventive or remediation action costs were funded by the State budget;
– as already discussed, national legislation already has provisions for compulsory financial security instruments, therefore in this regard the proposed modification shall make it possible for operators otherwise not obliged, to allocate financial security instruments or conclude insurance on a voluntary basis in order to provide cover for their liability;
– also some specification is required to make it clear as to what costs the person causing the damage is liable to bear with regard to the necessary preventive or remediation action costs, including the costs of assessing the damage or threat of damage;
– and finally, without affecting the current liability regime, a refinement of the necessary preventive or remediation steps to be taken by the polluter shall also be implemented.