Russian Constitutional Court Refers to the “Polluter-Pays” Principle and Reduces Liability by the Costs for Effective Mitigation

By Maksim Usynin, Research Assistant, PluriCourts

In the recent decision the Constitutional Court of the Russian Federation clarified the constitutional status of certain provisions of the Forestry Code and the environmental legislation imposing the civil liability for environmental damage. The Court declared that the amount of compensation should be lowered by the expenses for mitigation measures provided that they were effective. The streaming video of the proceedings in the Constitutional Court may be assessed via this link [in Russian].

Background and previous litigation

The claim was brought by the Zapolyarneft LLC (hereinafter – the Company), a subsidiary of Russian oil company Gazprom-Neft, which was fined for accidental spill-over in 2012. The spill-oil was discovered by the environmental watchdog (the Russian Federal Service for Supervision of Natural Resource Usage, hereinafter – the Service), who requested a compensation for the damage.

In the commercial court of first instance (Case No. А81-1083/2013), the company argued that the damage was effectively mitigated: the contaminated soil was exchanged with the clean one and certain de-contamination procedures were taken. Nevertheless, the Court stuck to the literal interpretation of Article 99(2) of the Forestry code which prescribed concurrently for the “mitigation of damage caused” and the “compensation of damage to the woods”. The Court declared that these obligations are different and impose double liability on the violator.

Furthermore, the mitigation measures cannot be set off as part of environmental liability, as the law provides with a special procedure for the assessment of damage, which has no reference for such a set-off. Under Russian law the compensation for environmental damage caused to forests is determined on the basis of costs for the re-cultivation works, or in accordance with the restoration plans, or, in their absence, on the fixed costs, established by the Governmental decree.

In the case at hand, the company implemented effective measures to mitigate the damage from the spill-over and restore the woods. However, the Court declared that the amount of compensation was lawfully determined on the basis of fixed costs and could not include the assessment of claimant’s costs for the voluntary mitigation.

The higher courts confirmed the decision.

The constitutional case

In the claim for the Constitutional Court, the Company pleaded that the strict usage of fixed costs in the assessment of compensation may not reflect the circumstances of a particular case (and therefore be higher or lower the actual amount needed for mitigation). This undermines the individual character of the polluter’s responsibility and does not guarantee the effective mitigation of the damage.

The Court stated that the “polluter-pays” principle is one of the fundamental principles of environmental law. The principle should be deduced from the constitutional duty to preserve nature and the environment and carefully treat the natural wealth (Article 58 of the Russian Constitution). According to the principle, the polluter shall pay for the measures of prevention, mitigation or liquidation of the environmental damage.

However, the Court urged a need for a balance between the duty to mitigate the damage and the duty of compensation. In oil spillover cases the emergency mitigation and liquidation measures are of crucial importance and can prevent the extensive damage. The Court concluded that the lack of flexibility in the assessment of the amount of the compensation does not guarantee the effective protection of the environment. Moreover, the strict compensation requirement can be used to suppress the economic rights and result in the deprivation of the right to a healthy environment.

The Court declared the disputed provisions as unconstitutional and ordered the legislator to amend them. As a matter of provisional application, the amount of compensation shall be reduced on the amount of damages incurred by the polluter for mitigation measures, provided that they were effective.

Comments

The polluter pays principle is well recognized in international environmental law. It is embodied in various international legal acts and national legislation (the historical overview of the principle may be assessed in the Survey of liability regimes, prepared by the Secretariat of the International Law Commission in 2004 [paras. 262-286]). However, the application of the principle in national legal systems is not unified, and the Russian discussion on the application of the principle in connection to the constitutional case identified several interesting questions.

Firstly, why and how much shall the polluter pay? If the compensation is determined similarly to the administrative fine (like it seems from the fixed costs system), then there are no grounds for reduction. However, if the law prescribes for a civil type of liability, then the mitigation measures may be considered in the assessment of compensation. In the first case the payment has mainly deterrent function, while in the second only compensatory function is stressed. The Constitutional Court seems to support the second approach.

Furthermore, what remedy is more effective – when the state receives a compensation for mitigation, and somehow proceeds with the mitigation, or when the polluter is motivated to mitigate by his own hands? Will the last variant be as secure and effective as the state-organized mitigation? It seems that the Court based its reasoning in the preventive action, empowering the polluter for mitigation for the public good.

Finally, the low amount of compensation, extensive litigation and serious businesses involved in the case may give a sign of strategic litigation. One may say that the authority in determining the compensation has shifted in part from state to private actors, who can now plead the sufficiency of their mitigation measures – and reduce state-imposed compensation by their costs.

 

Maksim Usynin,

Research Assistant, PluriCourts.

Tags: Environment, Investment By Maksim Usynin
Published June 3, 2015 12:22 PM - Last modified Jan. 10, 2017 2:07 PM
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