B. Legal Status
2 It was not until the 1992 United Nations (‘UN’) Conference on Environment and Development that the polluter pays principle for the first time secured international support. Principle 16 Rio Declaration on Environment and Development (‘Rio Declaration’; Stockholm Declaration [1972] and Rio Declaration [1992]) provides, in somewhat qualified terms, that:
3 The principle is defined in broadly similar terms in the Convention for the Protection of the Marine Environment of the North-East Atlantic of 1992 (‘OSPAR Convention’; Marine Environment, International Protection), the Convention on the Protection and Use of Transboundary Watercourses and International Lakes of 1992 (‘Water Convention’), the 1995 Convention for the Protection of the Marine Environment and the Coastal Region of the Mediterranean (‘Barcelona Convention’; Mediterranean Sea), the Protocol to the Convention on the Prevention of Marine Pollution by Dumping Wastes and Other Matter of 1996 (‘1996 London Protocol’), and in Art. 19 (1) Energy Charter Treaty of 1991 (‘EChT’). Some treaties simply refer to ‘the polluter pays principle’ without attempting to define it.
4 Given this wording, it cannot easily be said that the polluter pays principle is intended to be legally binding. Principle 16 Rio Declaration appears to lack the normative character of a rule of law (North Sea Continental Shelf Cases [Federal Republic of Germany/Denmark; Federal Republic of Germany/Netherlands] [1969] ICJ Rep 3 para. 72). This appears to have been the view of the Permanent Court of Arbitration (PCA), which held that
5 Moreover, while some treaties require parties to ‘apply the polluter pays principle’ (eg Art. 2 (2) (b) OSPAR Convention, Art. 3 (4) Convention on the Protection of the Marine Environment of the Baltic Sea Area of 1992 (‘Helsinki Convention’); Baltic Sea; Art. 2 (4) Convention on Co-operation for the Protection and Sustainable Use of the Danube River of 1994 (‘Danube River Protection Convention’); Danube River), and Art. 4 Barcelona Convention), others use the softer language of guidance (eg Pmbl International Convention on Oil Pollution Preparedness, Response and Co-operation, 1990 (‘OPPRC Convention’); Art. 2 (5) Water Convention; Art. 3 1996 London Protocol; Art. 4 Convention on the Protection of the Rhine of 1999). However, the preambles to the OPPRC Convention, the 1992 Convention on the Transboundary Effects of Industrial Accidents of the United Nations Commission for Europe (‘UNECE’), and the Protocol on Civil Liability and Compensation for Damage Caused by the Transboundary Effects of Industrial Accidents on Transboundary Waters to the 1992 Convention on the Protection and Use of Transboundary Watercourses and International Lakes and to the 1992 Convention on the Transboundary Effects of Industrial Accidents (‘Kiev Protocol’) describe the polluter pays principle as a ‘general principle of international environmental law’, and in this soft law form it has influenced the development of international law (Environment, Multilateral Agreements).
6 The polluter pays principle appears in a limited range of post-Rio treaties dealing with pollution of international watercourses (International Watercourses, Environmental Protection), marine pollution, transboundary industrial accidents (Environmental Accidents), and energy. Although there are examples where it has been used more broadly in national environmental policy and legislation—Art. 191 Consolidated Version of the Treaty on the Functioning of the European Union (2008) provides that ‘Union policy … shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay’-it is impossible to point to any general pattern of State practice. Implementation has largely been left to national rather than international action. As a result, both the choice of methods-taxation, charges, liability laws-and the degree of implementation, have been very variable, and few States have been fully consistent in their policy. The most that can be said is that States, intergovernmental regulatory institutions, and courts can and should take account of the principle in the development of environmental law and policy, but they are in no sense bound by international law to ‘make polluters pay’. Moreover, reference to the public interest in Principle 16 Rio Declaration leaves ample room for exceptions, and thus for continued governmental subsidy. As adopted at Rio, the polluter pays principle is neither absolute nor obligatory.
C. The Polluter Pays Principle in Practice
7 How could the polluter pays principle be used and developed in its more limited incarnation as a guiding principle? This is a more difficult question than it might first appear. Taxation is a relatively crude way to recoup the external costs of environmentally harmful activities. Charges to meet the cost of preventing, reducing, or restoring environmental damage can be more accurately targeted, but their impact in deterring environmentally harmful activities will vary. Experience with disposal of oily residues from ships shows how charging can be counter-productive if it makes the polluter more likely to dump the waste in order to cut costs. The United States practice of attempting to internalize environmental costs, by making the polluter rather than public agencies directly responsible for conducting the clean-up and restoration after accidents such as the Exxon Valdez, may also be counter-productive if the result is a dilatory and inadequate response. Charges and taxes cannot easily be targeted at accidental damage, nor can they be applied to transboundary polluters (Hazardous Wastes, Transboundary Impacts). In this sort of case there may be no practical alternative to State-organized action, with the taxpayer recovering the costs through liability laws and compensation schemes.
8 Thus full implementation of a polluter pays approach may entail consideration of civil liability and compensation, especially if accidental damage to the environment is to be included (OECD [1992]). The Draft Principles on Allocation of Loss in the Case of Transboundary Harm arising out of Hazardous Activities of the International Law Commission (ILC) note that
9 The extent to which civil liability makes the polluter pay for environmental damage depends on a variety of factors. If liability is based on negligence, not only does this have to be proved, but harm which is neither reasonably foreseeable nor avoidable will not be compensated, and the victim or the taxpayer, not the polluter, will bear the loss. The same is true of strict liability if limited in amount, as in internationally agreed schemes involving oil tankers or nuclear installations (see the 1992 Protocol to Amend the International Convention on Civil Liability for Oil Pollution Damage of November 29, 1969 and the 1992 Protocol to Amend the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage of December 18, 1971; 1960 Paris Convention on Third Party Liability in the Field of Nuclear Energy and 1997 Protocol to Amend the 1963 Vienna Convention on Civil Liability for Nuclear Damage; Nuclear Energy, Peaceful Uses; Nuclear Waste Disposal). The limit for environmental damage in Antarctica set by Art. 9 Annex VI Protocol on Environmental Protection to the Antarctic Treaty is a mere 3 million Special Drawing Rights (‘SDRs’): rather less than the sum paid by the Union of Soviet Socialist Republics to Canada for cleanup costs after the Cosmos 954 satellite crashed in the Arctic.
10 Moreover, a narrow definition of damage may exclude environmental losses, which cannot easily be quantified in monetary terms, such as wildlife, or which affect the quality of the environment without causing actual physical damage. An illustration of this problem is the case of Merlin and another v British Nuclear Fuels Plc (Queen’s Bench Division [1990] 2 QB 557) where a house was rendered radioactive but the operator of the installation responsible was absolved from liability because there had been no damage to property within the terms of the statute, despite the building’s loss of market value (but compare Blue Circle Industries Plc v Ministry of Defence Court of Appeal (10 June 1998) [1998] 3 AllER 385). A significant amount of environmental injury is likely to remain uncompensated under civil liability in English law, and the same is true of some other legal systems, though not uniformly. See also Art. 1 (1) Environmental Liability Act of 1990, which confines liability to cases of ‘death, personal injury or property damage’. To this extent, the polluter remains free to off-load certain environmental costs even under a strict liability regime, but compare the more generous approach to environmental compensation under the US Oil Pollution Act (33 USC §§ 2701-2761 [1994 Supplement V 1999]), under US tort law (see Commonwealth of Puerto Rico v SS Zoe Colocotroni United States Court of Appeals [1st Cir, 12 August 1980] 628 F 2d 652), and under Art. 1 (6) Protocol to Amend the International Convention on Civil Liability for Oil Pollution Damage of November 29, 1969. See also the claims made in respect of the Greek tanker Patmos, and the USSR tanker Antonio Gramsci (International Oil Pollution Compensation [‘IOPC’] Fund, Annual Report 1990 23, 27), and the Cypriot tanker Haven (IOPC Fund, Annual Report 1999 42; International Oil Pollution Compensation Fund). In all three cases the IOPC rejected claims for unquantified environmental damage calculated in accordance with theoretical models.
11 A more fundamental problem with broader use of the polluter pays principle is that it does not indicate who is the polluter, and cannot as such determine liability (Smets [1993] 357). OECD and the ILC treat the operator of a hazardous installation as the ‘polluter’ in cases of accidental damage. On this view, the operator of an oil tanker is the polluter and should be responsible if the ship sinks. But it can equally be said that the cargo causes the damage and that the cargo owner is in that sense the polluter. Sensibly, the present internationally agreed scheme of liability and compensation for oil pollution treats both the ship’s owner and the cargo owner as sharing responsibility, while excluding the liability of any other potential defendant in order to facilitate recovery by plaintiffs (1992 Protocol to Amend the International Convention on Civil Liability for Oil Pollution Damage of November 29, 1969 and 1992 Protocol to Amend the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage of December 18, 1971). In this case what matters is how the responsibility is shared, and how the compensation is funded. Asking who the polluter is will not answer these questions, nor will it do so in other complex transactions such as the carriage of hazardous wastes, a point fully recognized by the ILC Draft Principles and in the 1999 Protocol on Liability and Compensation for Damage Resulting from Transboundary Movements of Hazardous Wastes and Their Disposal, and the Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances (HNS) by Sea of 1996.
12 An altogether different problem arises in the case of nuclear accidents. Here it is usually clear who the polluter is-the operator of the nuclear installation-but the adoption of a polluter pays approach to liability is simply not economically feasible, and would not be in the public interest. In the event of a serious accident, the scale of absolute and unlimited liability would be uninsurable, and quickly bankrupt even the largest utility company. Unless the losses are to fall mainly on the innocent victims, some other approach to allocating them must be found, almost certainly by involving other States which use nuclear power. Thus, in Western Europe, the uninsured risks are borne first by the State in which the installation is located and then above a certain level by a compensation fund to which participating governments contribute in proportion to their installed nuclear capacity and gross national product (Paris Convention on Third Party Liability in the Field of Nuclear Energy and Protocol to Amend the 1963 Vienna Convention on Civil Liability for Nuclear Damage). In this case, the basic concept is not one of making the polluter pay, but of an equitable sharing of the risk, with a large element of State subsidy. An even more extensive departure from the polluter pays principle has emerged with regard to Eastern European nuclear installations. The costs of remedial measures are so high, and the local economies so weak, that Western European governments, who represent one large group of potential victims of any accident, have funded the work needed to improve safety standards. The same approach has been adopted by the Dutch and other riparians on the Rhine in order to persuade the French to reduce pollution from their potassium mines (Convention on the Protection of the Rhine Against Pollution by Chlorides of 1976). Here, it is in effect the victim who pays. The same is true of Annex VI Protocol on Environmental Protection to the Antarctic Treaty. Like the nuclear liability conventions this is a regime of shared responsibility, insofar as affected States may end up bearing significant costs not covered by the operator’s liability. The relatively low liability limits mean that the costs of more serious emergencies will in practice be shared between the operator and States Parties, or drawn from the compensation fund at a much earlier stage than would be the case under the International Convention on Civil Liability for Oil Pollution Damage (with Annex and Official Russian and Spanish Translations), the Paris Convention on Third Party Liability in the Field of Nuclear Energy, the Protocol to Amend the 1963 Vienna Convention on Civil Liability for Nuclear Damage, or the Convention Supplementary to the Convention on Third Party Liability in the Field of Nuclear Energy of July 29, 1960.
13 Thus the polluter pays principle and the general policy of internalizing environmental costs cannot be treated as a rigid rule of universal application, nor are the means used to implement it going to be the same in all cases. A great deal of flexibility will be inevitable, taking full account of differences in the nature of the risk and the economic feasibility of full internalization of environmental costs in industries whose capacity to bear them will vary. As one author comments, ‘[t]he main difficulty with the full internalisation policy is that it cannot be implemented in practice unless some agreement is reached on the respective rights of the polluters and the victims’ (Smets [1994] 131). Considerations of this kind account for the heavily qualified nature of Principle 16 Rio Declaration. Whatever its legal status, or its relationship to? sustainable development, the polluter pays principle cannot supply guidance on the content of national or international liability without further definition.
D. Conclusions
14 The ILC Draft Principles represent an application of the polluter pays principle in its most developed form. Rather than making States directly liable in international law as originally envisaged, they make the polluter liable in national law. Three important points stand out when comparing the ILC Draft Principles to other civil liability and compensation schemes. First, strict liability is the universally accepted standard (Principle 4 ILC Draft Principles) albeit with minor variations in the permitted defences. Second, while the ‘operator’ of the harmful activity should be primarily liable, ‘where appropriate’ liability may be imposed on some other person or entity (Principle 4 ILC Draft Principles). Thus the ILC accepts that channelling liability to a single owner or operator is not always a realistic option. Third, also in ‘appropriate cases’, additional compensation funding should be provided by industry, or if necessary by States, but there is no preferred approach (Principle 7 ILC Draft Principles). The diversity of arrangements currently in place is illustrated by comparing the Protocol on Liability and Compensation for Damage Resulting from Transboundary Movements of Hazardous Wastes and Their Disposal of 1999, the International Convention on Civil Liability for Bunker Oil Pollution Damage of 2001, the Kiev Protocol, and the 2005 Annex VI Protocol on Environmental Protection to the Antarctic Treaty. None of these agreements adopts the same approach to loss allocation, yet all can plausibly be described as applying a polluter pays approach.
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