Picture a situation where a company engaged in mining activities has gone into bankruptcy. Preconditions for a profitable mining business are no longer present; no new operators for the mine have been found either. The applicable mining laws provide that the decommissioned mine, including its surrounding areas, should be cleaned, remediated and landscaped into a state that meets the public safety laws. However, the financial assurances, once provided by the company, are insufficient to cover the costs of remediation. Neither does the bankruptcy estate possess sufficient funds to meet the costs of remediation.
Despite of all regulatory efforts to prevent environmental degradation, an unfortunate chain of events may lead to a situation like the above, real-life example case. Compared to the overall volume of environmentally risky activities, such nuisance is rare – however, if it hits, both environmental and financial consequences can be severe. Hereby, this blog post discusses the Finnish secondary environmental responsibility regime, especially in the light of sustainability.
Regulatory basics of environmental responsibility
As background, infringement of environmental responsibilities may give rise to public, civil (including contractual) as well as criminal liability. As used in this text, the wording ‘environmental responsibility’ comprises liability issues as well as responsibilities that effect mere by means of financial burden. The perspective is in public law, thereby focusing on measures enforced in favour of public environmental interests.
In Finland, the relevant regulation regarding environmental responsibility is based on the Polluter Pays Principle, according to which the expenses of performing necessary measures to safeguard the environment should be borne by the polluter. Thereby, the polluter whose operation has caused damage to the environment is primarily responsible for the remediation.
The Polluter Pays Principle is enacted through environmental legislation, which obliges the operators, property owners and holders to take the environment into account in a comprehensive manner. For example, the operators shall have knowledge of the environmental impacts and risks of their operations and shall organise their operations in such a way that environmental pollution can be prevented in advance. Monitoring, conducted both in advance and subsequently, is a key element to ensure compliance of these obligations. For some environmental responsibilities (such as waste management and after-care obligations), the operators must place financial assurances.
What if responsibilities are evaded?
However, monitoring and financial assurances may not always ensure a preferred outcome. Sometimes the responsible party may just remain unknown or otherwise out of reach of the authorities. Should the responsible operator fall into bankruptcy (as in the above example), the remaining assets may not suffice to fulfil the environmental responsibilities and, in any case, are most likely strained with several conflicting interests. The environmental responsibilities of bankruptcy estate (another complex topic, falling somewhat in between of environmental and insolvency law) will not, however, be further covered here.
All in all, if the responsible party cannot be held liable, should one leave the polluted environment as is – that is, polluted indefinitely?
The answer is, of course, that one should not. Without any response measures the state of the environment would continue to impair the public environmental interests, possibly with only worsening consequences.
Eventually, environmental responsibility comes down to the constitutional statute regarding responsibility for the environment. Further to providing a declaration-like collective responsibility, the statute orders public authorities to endeavour to guarantee for everyone the right to a healthy environment. Hence, the public authorities should ensure that functioning mechanisms are in place to response environmental degradation in all situations.
Secondary responsibility – a complementary regime to ensure remediation
This brings us down to environmental responsibility as ‘primary’ and ‘secondary’. In environmental law, the primarily responsible polluter’s – which typically is the operator – environmental responsibilities are complemented by a so-called ‘secondary environmental responsibility’. Simply put, the secondary responsibility regime refers to responsibilities of another than the primarily responsible. It may only actualise in situations where the primarily responsible is unknown or otherwise may not efficiently be held responsible, for example, due to bankruptcy (yet not meaning that the bankruptcy would relieve the polluter or receivership of its environmental responsibility).
The regime comprises both obligations to act in favour of the environment – for example, clean-up or remediate – as well as separate funding mechanisms. Currently, the statutory funding mechanisms are the Finnish Oil Pollution Compensation Fund and the secondary environmental damage insurance. Along with compensating the damaged victims, they aim at securing due remediation of the polluted environment.
Regime requiring a reform
Despite of the particular funding mechanisms, the example case like incidents have required repetitious public intervention during the recent years. The public authorities have handled measures such as treatment of insufficiently stored dangerous waste and chemicals and closure of mine sites. Indeed, as a ‘very last resort’ mechanism, the Finnish State budget funding entails that general tax revenues are being used to remediate the polluted environment. In that case, the financial burden falls on the taxpayer and further welfare losses follow should the costs of rectifying the environment come to prevent the provision of other services from public revenue.
As the profits generated by the polluting activity were gained by risking public environmental interests in the first place, this outcome appears unjust – thereby not sustainable. For some time now, this has increasingly concerned the environmental authorities as well as the public. Once the need to develop the secondary environmental responsibility regime was included in the current Government Programme, a new legislative project was initiated early this year. At this point, however, it is still early to predict the approach that will be taken in the legislative project.
Challenging quest for equity
All in all, the secondary responsibility regime is somewhat burdened by its applicability to cases that are already – more or less – forfeited. If the only thing left to do is to clean-up the mess and pick up the tab, the preconditions for a sustainable arrangement are challenging.
Yet as regards to sustainability, the regime entails substantial notions of equity that appear both on intergenerational and intragenerational level. In terms of intergenerational equity, sustainability implies that we should not leave the environment in polluted state: the problem should not be passed on to the future generations, being innocent of today’s environmental hazards. Clearly, this aspect speaks in favour of having some kind of regime in place to secure remediation.
Dealing with the equity among the current generations, intragenerational equity, on the other hand, demands fairness in allocating the remediation related financial burden here and now. Along with the Polluter Pays Principle, it involves that neither the individual injured parties nor the society at large should be left to bear the financial burden simply due to the lack of applicable primary and secondary regimes. On the other hand, neither should such a regime acquire the financial burden too easily, thereby allowing a responsible polluter to evade responsibility. The starting point should strongly appoint to holding the polluter – as the primarily responsible party – responsible. In this respect, any talk about secondary regimes stays mere complementary.
From a sustainability perspective, designing a secondary environmental responsibility regime is a balancing act. The regime’s implications come down to its scope of application and regulatory details, which ought to be crafted carefully, and implemented with caution.
This being said, however, having all the environmentally risky activities in operation entails that also an adequate secondary regime is kept in place – to serve as back-up, securing appropriate protection of the environment.
Mari Pihalehto is PhD Student at the Faculty of Law and Helsinki Institute of Sustainability Science (HELSUS), University of Helsinki.
References and further reading (in Finnish)
Tuomainen, Jouko – Pihalehto, Mari – Kautto, Petrus – Kokko, Kai – Linna, Tuula – Vähä, Emmi – Pyy, Outi: TOVARAMA – Toissijaisen ympäristövahinkovastuun rahoitusmallien vertailu (Valtioneuvoston selvitys- ja tutkimustoiminnan julkaisusarja, 2020:14)
Ympäristöministeriö: Toissijaisten ympäristövastuujärjestelmien kehittäminen (Työryhmän mietintö, Ympäristöministeriön raportteja 2014:23)
Ympäristövahinkojen toissijaisten vastuujärjestelmien kehittämisen lainsäädäntöhanke (’TOVA-lainsäädäntöhanke’ meaning the new legislative project)
Tuomainen, Jouko: Pakollisen ympäristövakuutusjärjestelmän kehittäminen – välitilinpäätös ja vaihtoehtoiset polut tulevaisuuteen (Suomen ympäristökeskuksen raportteja 2011:21)
Kokko, Kai: Konkurssipesän julkisoikeudellinen ympäristövastuu (Edilex series 2020/13)
Kokko, Kai – Mähönen, Jukka: Yritysten ympäristövastuu (Ympäristöjuridiikka 2015/1)