May 2nd, 2012

Continental European Legislative and Judicial Trends: Environmental Damages in Italy - Moving Towards a No Fault Liability System?

Posted at 1:00 AM ET

David Lewin, Managing Director
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EU Directive and Italian Statutory Provisions

With EU Directive n.35/2004 on Environmental Liability (ELD), the European legislator aimed to establish a harmonized legal framework based on the principle that “the polluter pays.” The main objective of ELD is to prevent and remedy environmental damage, which is defined as damage to protected species and natural habitats (nature), damage to water and damage to land (soil).

Normally, the liable party is the operator that performs occupational activities. Operators that perform certain dangerous activities, as listed in Annex III of the ELD, are strictly liable (without fault) for environmental damage. Operators performing other occupational activities are liable for any fault-based damage they cause to nature. Operators may benefit directly from certain exceptions and defenses, for example, force majeure, armed conflict and third party intervention. They may also benefit from defenses introduced via transposition, such as permit defense and state of the art defense.

Another feature of the directive is that the operators subject to strict liability are also obliged to provide for a direct remedy for damages caused by their activity.

The directive was implemented in Italy in 2006 with D.Lgs n.152/2006. The Italian statute replaced a previous bill (D.Lgs n.22/1997) that provided a very similar set of rules in terms of the structure of liability. In particular, as far as the abandonment of polluted waste is concerned, Article 192 of D.Lgs n.152/2006 (former Article 14 of D.Lgs 22/1997) stipulates all parties that cause environmental damages by the abandonment or stockage of certain waste are liable and must provide remedies.

The provision also states that the owner of the land where polluted waste is stocked is jointly and severally liable together with the operator causing those damages, provided the landowner acted with negligence or willfully. In any case, on land where polluted waste is stocked, a statutory fixed charge for the entire value of the property is levied in order to secure reimbursement for clean-up costs borne by a public authority.

The system conceived under the ELD is substantially different from the one provided by Italian law.

The ELD stipulates that:

  • An operator that carries on the occupational activities specified in Annex III of the ELD is strictly liable for the pollution caused by its acts, whether or not it is negligent or intends to cause damages.
  • Other operators engaged in different occupational activities are liable when they have caused pollution negligently or intentionally.

Italian statutory rules provide that:

  • Liability for environmental damage is based on negligence, requiring this element in order to hold parties liable.
  • The owner of the property is jointly and severally liable with the operator if the landowner acted negligently or intentionally.

On various occasions, the EU Commission expressed its disappointment and concern about the way Italy implemented the ELD into domestic law. The absence of a strict liability system has been interpreted as an infringement of the spirit and provisions of the directive. While the Italian government introduced some important amendments to the Environmental Code in 2010, it is still not a strict liability system.

Renewed awareness about the weakness of this Italian legislation may explain why the Italian Supreme Court set forth in a recent decision some important principles on the specific issue of negligence by the owner of a property where polluted waste was produced and abandoned by a tenant operator.

Supreme Court Decision

In a ruling dated March 22, 2011, n.6525, the Italian Supreme Court issued important and innovative principles in a case that focused on a landlord’s responsibility for pollution caused by a tenant.

The facts of the case include:

  • The owner of a piece of land had leased its property to a tenant.
  • The tenant left a significant quantity of polluted waste on the land.
  • The property owner, being aware of the situation, negotiated an agreement where the tenant would clean up the land within a fixed number of months. A penalty would be applied if it failed to do so.
  • A public prosecutor investigated the situation.
  • The investigator began a criminal proceeding and seized the area.
  • For quite a long time, the stocked polluted waste remained on the land, situated unfortunately close to a riverbank. Six years after the tenant had left the property, a flood hit the area and spread the waste, which contaminated the surrounding neighborhood.

According to provisions of the Italian Environmental Law (Article 14 of D.Lgs n.22/1997), the owner of land where polluted waste is stocked is jointly liable with the tenant operator that actually caused the pollution - only if the landowner acted negligently or intentionally.

Therefore, the owner claimed that he was not liable because he had made the tenant operator sign an agreement promising that he would clean up the property. He also noted that the land had been put under seizure and that the flood was not foreseeable. The property owner was confident in his presentation to the court that he had made his best efforts to compel the operator to clean up the leased land and that the events leading to more widespread pollution in the area had been beyond his control.

However, the court found the owner liable for the cost of cleaning up on the following grounds:

  • Article 14 of D.Lgs n.22/1997 (and similarly Article 192 of the more recent D.Lgs n.152/2006) states that:
  1. It is forbidden to abandon, stock on land or disperse polluted waste of any kind into water.
  2. The person who commits the said actions is jointly and severally liable with the owner of the land, the mortgagee or the tenant if they acted negligently or intentionally.
  3. The liable persons must remove, recycle or clean up the waste.
  4. The mayor of the city may issue an order compelling the liable persons to perform clean-up activities within a fixed period of time. Failure to do so will result in the City Council completing clean up at its own effort and expense, which will be reimbursed by the liable persons.
  • The property owners will be found negligent when their acts or omissions contributed to allowing the activities described above. These actions or omissions may involve either expressly permitting the operator to carry on forbidden activities or not taking possible action after receiving notice of forbidden activities taking place.
  • Evaluating the extent of liability of the owner or the tenant of the land must be done in a rigorous and extensive manner so that the potentially liable persons are found negligent when they do not take all reasonable actions required to guarantee safe custody of the property.
  • When land is leased to a third party, the owner can nevertheless be found liable for omission if he does not take legal action (whether ordinary or through interim injunctions) to force the tenant to remove, recycle or clean up the rented property.
  • The owner is not to be discharged from his duties if the land has been seized by a criminal court. If this is the case, the owner should inform the judge about the dangers and suggest the most appropriate actions to be taken to prevent the pollution of the seized land as well as the surrounding areas.

Commentary

This recent court decision sets forth some innovative principles that are not completely in line with traditional jurisprudence opinions on the matter of attributing liability based on fault. In simple terms, the Supreme Court affirms the principle that a landowner can be found jointly liable in negligence if he did not initiate the most effective legal proceedings against a tenant operator in order to force compliance with relevant environmental laws.

Moreover, according to the court ruling, a signed agreement stating that the tenant operator will take care of removal and clean-up activities is not sufficient for the landowner to discharge his duties. On the contrary, such an agreement can be considered as implied permission for the tenant to carry on polluting activities for the period agreed in the contract.

The Supreme Court also affirmed that the public prosecutor seizing the land where the waste is kept does justify inactivity by the landlord. Instead, the landowner is expected to communicate the possible risks from the waste.

On the other hand, according to general principles of civil liability in different matters of law, a person cannot be found liable for omission of an action if he could not execute the action since the land area in question was under someone else’s control. Similarly, in the case of public authority seizure of an area, the owner of the property cannot be found liable if he does not insist on trying to interfere with such authority. These general principles, which stem from the fundamental rule stating “ad impossibilia nemo tenetur,” may ultimately lead to an overruling of the principles set forth in Supreme Court decision n.6525/2011.

The Supreme Court is aware that the EU criticized the Italian legislation on environmental damage for being structured on fault-based liability rather than the strict liability system of the EU directive. As a result, the court is taking a very rigorous approach to the application of environmental laws and therefore putting the legal framework in jeopardy. Furthermore, property owners should take this new trend in Italian jurisprudence seriously when leasing properties to operators that may be subject to Italian environmental code provisions.

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