COMMENTS ON THE DRAFT LIABILITY PROTOCOL
Submission by West Coast Environmental Law and the Basel Action Network (BAN) to the Ad Hoc Working Group of Legal and Technical Experts
April 19, 1999
Basel Action Network (BAN)
c/o Asia Pacific Environmental Exchange
1827 39th Ave. E.
Seattle, WA. 98112 USA
West Coast Environmental Law Association
1001-207 West Hastings Street
Vancouver, British Columbia
CANADA V6B 1H7
tel: 604 684 7378
fax 604 684 1312
- The net of "liable parties" should include the parties which are involved in the generation
- The protocol should re-establish joint liability of "liable parties"
- Strict liability should not be watered down
- Civil liability should attach to illegal traffickers
- To the extent practicable, the protocol should require "liable parties" to be covered by insurance
- There is a need for an international fund
- The scope of liability should extend to long-term effects of hazardous waste
- Article 11 Agreements should not be used to exempt the protocol
COMMENTS ON THE DRAFT LIABILITY PROTOCOL
West Coast Environmental Law (West Coast) has for the past 25 years been an active participant in many Canadian and international environmental law reform initiatives. West Coast has also frequently supported environmental litigation respecting hazardous waste, fisheries, and forestry issues. Our work is carried out by 5 lawyers and numerous volunteers. We have represented Canada’s environmental community on Canada’s delegation for the last three Basel COPs and have frequently consulted with Canada on the development of the liability protocol.
The Basel Action Network (BAN) is an international alliance of non-government organizations working together on issues of trade in toxic technologies, products and wastes.
West Coast and BAN believe that a liability protocol which provides for effective victim compensation is an essential but missing element of the Basel Convention. At the same time, we are concerned that the current version of the liability protocol will not provide victims with effective remedies. Nor will it pass liability to those parties ultimately responsible for the problems arising from the generation and transboundary movements of hazardous waste.
A Basel liability protocol, if implemented, can have two primary benefits: victims of pollution can recover compensation for damages and industry will be deterred from generating hazardous waste and handling such waste in an irresponsible manner. Additionally, a protocol with clear and uniform liability rules enables industry to take proactive measures and provides insurers with a basis from to determine risk and offer coverage.
Unfortunately, these benefits cannot be realized by the current version of the protocol. In fact, the current version will likely have the perverse effect of encouraging shipments of hazardous waste to developing countries. We respectfully urge the Parties to consider the following principles in the current session:
The net of "liable parties" should include the parties which are involved in the generation, transport and disposal of Basel hazardous wastes. Alternative 1 of Article 4 assigns liability to "notifiers" and "disposers". Neither definition ensures that generators or even transporters will be caught in the liability net. Generators and transporters would, if faced with the liability rules of this version, take measures to ensure that they are not are not "notifiers", i.e, they will shift the liability onto "exporters". We are equally concerned that the operational control test (Alternative 2) will not capture critical parties. Previous versions of the protocol properly included generators, transporters and disposers in the net of "liable parties".
The protocol should re-establish joint liability of "liable parties". Joint liability has a two-fold effect: it encourages parties to take precautions to ensure that other parties in the chained link will take responsible actions and it enhances the abilities of claimants to obtain full compensation. These salutory effects have been removed by the current version. Alternative 1 of Article 4 creates immunity lines between "notifiers" and "disposers". Nor does Alternative 2 (the operational control test) contemplate joint liability.
Strict liability should not be watered down. We support the application of strict liability in Article 4, but Article 5 (Fault-based Liability) appears to contemplate that in some instances fault-based liability can replace strict liability. Article 5 raises many questions which deserve further review.
Civil liability should attach to illegal traffickers. New Article 5 refers to "lack of compliance" as a basis for fault-based civil liability, which implies "illegal trafficking" (although this is not free of doubt). We urge the Parties to adopt express text enabling claimants to obtain compensation from illegal traffickers, even if these traffickers are not Article 4 "liable parties". The text should also state that illegal traffickers, when facing civil liability, should not be able to successfully assert defences which apply in criminal proceedings. Allowing illegal traffickers to use fault-based defences would, perversely, give them a higher degree of immunity than other liable parties.
To the extent practicable, the protocol should require "liable parties" to be covered by insurance. Questions over the availability of insurance should not create an obstacle to the development of a liability protocol. The questions will not be resolved in the immediate future, and the protocol should assign a ‘best guess’ insurance level and create a mechanism for revisiting that level. Nor should the Parties be deterred by arguments that insurance will be expensive – environmental damages can be very expensive, and industries who intend to do business with hazardous waste must be prepared to pay the price. Without this financial discipline, rogue operators will be encouraged to be part of the industry. A properly drafted protocol can enhance regulatory certainty in many jurisdictions, and enable insurers to determine risk.
There is a need for an international fund. Given the very high costs of environmental damage and the potential limits to insurance availability, it is imperative that a supplementary fund be established.
The scope of liability should extend to long-term effects of hazardous waste. The current version of the protocol fails to address one of the most critical problems associated with Basel waste issues – gradual and long-term soil and groundwater contamination attributable to irresponsible disposal and recovery operations. The current version fails to assign liability in the following scenarios: leachate contamination after supposed "completion of disposal" (eg. from landfills); residues from recovery operations; and insolvency and other forms of abandonment.
Article 11 agreements should not be used to exempt the protocol’s application. We see no legal or policy justification for this exemption (found in Article 3, Paragraph 3(f)). The perverse effect of this exemption will be that irresponsible parties will quickly turn to Article 11 agreements for the purpose of avoiding victim compensation.
Compared with previous drafts, the current version is weak and unworkable. There is no plausible justification for denying such weak remedies to victims in developing countries. The current version, if enacted, would also provide an incentive for export of hazardous wastes in contradiction to the aims of the Convention. This liability protocol would set a poor precedent for protocols planned in other international agreements. We respectfully urge the Parties to re-orient the protocol and, failing that, not to adopt the current version.
1. The net of "liable parties" should include the parties which are involved in the generation, transport and disposal of Basel hazardous wastes.
If the Basel Convention deals with one single and common circumstance, it is that a generator creates hazardous waste in the exporting state and a transporter ships the waste to a disposal or recovery facility in the state of import. All of these players should be included in the liability protocol’s net of potentially liable parties. The parties in this chain are partners in the venture of producing and disposing of waste and should not only enjoy the benefits but also incur the liabilities of the venture.
Neither of the "liable party" alternatives of Article 4 casts a sufficiently broad net of liability. With respect to Article 4 (Alternative 1), which casts liability on the "notifier" and "disposer", consider the following:
The Convention’s notification rule (Article 6 paragraph 1) identifies who a "notifier" might be:
"The State of export shall notify, or shall require the generator or exporter to notify, in writing, through the channel of the competent authority of the States concerned of any proposed transboundary movement of hazardous wastes or other wastes. …"
The exporting State therefore has the discretion for requiring either generators or exporters to give notification. The current liability protocol, if implemented, would in fact create an incentive for exporting States to impose notification requirements only on "exporters" if they are interested in protecting their domestic generators from the effects of the civil liability protocol.
Given the notification test, there is little assurance that even transporters would be caught in the liability net. The Convention defines an "exporter" to mean a "person who arranges for hazardous wastes … to be exported". There is no requirement that an exporter be the actual transporter. As was the case for generators, transporters would therefore have an incentive to take measures to ensure that they are not "notifiers".
The practical result of the "notifier" test will be that the liability for an incident will be visited on brokers. Victims of Basel hazardous waste incidents should be able to sue the generators of the damaging waste and the transporters who were involved, and not be limited to suing brokers (who in many cases could have less substantial resources with which to redress the damage). Letting generators and transporters escape liability is in direct contradiction to the fundamental goal of the Basel Convention to reduce the generation of hazardous waste.
The reliance on "notifier" contrasts with earlier versions. For example, Article 4 (Alternative 1) of the March 1995 draft properly cast liability with a ‘generator/exporter/other’ test.
The "operational control" alternative of Article 4 is also problematic. The person who has operational control at the time of the incident is often the one who can least afford to provide compensation. The operational control test will simply encourage generators to offload waste to persons who purport to be able to ship or treat waste.
2. The protocol should re-establish joint liability of "liable parties".
Parties within the net of "liable parties" should be jointly responsible for damage claims. The use of a joint and several liability regime would ensure that claimants would enjoy maximum flexibility in suing entities that have financial resources and that can be readily identified and located. Joint liability also serves as an incentive to parties who are linked in the common venture of getting rid of waste to carefully allocate the liability amongst themselves and in the process conduct the necessary due diligence to ensure that the other parties in the venture are responsible.
The current draft appears, at first glance, to provide such liability in Article 4, paragraph 3, which states that"a claimant shall have the right to seek full compensation for the damage from any or all of the persons liable".
Article 4, paragraph 3, however, is subject to a significant limitation found in another paragraph which has been recently added to the protocol. Paragraph 1 of Article 4 (Alternative 1) in effect undermines the joint liability rule of paragraph 4. The unjoining of the parties (notifiers and disposers) is obvious:
1. The person who notifies in accordance with Article 6 paragraph 1 of the Convention, shall be liable for damage until the disposer has taken possession of the hazardous wastes or other wastes. Thereafter the disposer shall be liable for damage.
If the State of export is the notifier or if no notification has taken place, the exporter shall be liable for damage until the disposer has taken possession of the hazardous wastes or other wastes. Thereafter the disposer shall be liable for damage.
Under this paragraph, the notifier ceases to be a liable person the moment that the disposer takes possession. One must wonder what is left of the joint liability rule of paragraph 3; at most, it will apply to either two or more notifiers or two or more disposers. We urge you to use express language to re-establish true joint liability to give claimants the right to obtain compensation from one or all of the parties described as "liable parties" (and which definition, we hope, will be expressly extended to generators and transporters) .
To achieve a fair allocation amongst liable parties in a true joint liability scheme, the protocol could direct the court to apply specifed criteria, eg. degree of due diligence of the parties, degree of involvement in the incident, etc. Previous versions included such criteria, but were subsequently deleted. The application of the allocation criteria, however, should not be used to deprive the claimants of full compensation if, for example, one of the liable parties becomes insolvent or is otherwise judgment-proof or where the harm is indivisible.
3. Strict liability should not be watered down.
Strict liability is an essential and common means of implementing polluter-pay civil liability. The strict liability principle of Article 4 has, however, appears to be derogated by new Article 5. The difficulty of assessing the potential effect of Article 5 on Article 4 is that the drafting does not convey a clear intention for either of the options; the drafting is very ambiguous and cumbersome. We encourage the Parties to seriously consider the underlying policy of the two options of Article 5 -- especially the effects on Article 4 -- before an informed decision is made on how the fault-based liability would apply.
Aside from the uncertain relationship of Articles 5 and 4, Article 5’s use of the term "lack of compliance" is problematic. It is by no means clear that "lack of compliance" means "illegal trafficking". For example, the latter arguably is a term which connotes criminal activity – the softer "lack of compliance" may reasonably be construed to mean something less than illegality.
If Article 5’s use of "lack of compliance" is intended to have the same meaning as "illegal trafficking", a number of specific concerns over how to handle illegal conduct in the context of a civil liability regime arise. We discuss these issues below.
4. Civil liability should attach to illegal traffickers.
The current version of the protocol does not address several important questions respecting the relationship of civil liability remedies and illegal trafficking:
Can a victim of pollution recover damage compensation from a person who has been convicted of illegal trafficking? In our view, the answer should be "yes".
Can a victim of pollution recover damage compensation from an illegal trafficker who falls outside of Article 4’s "liable parties"? Again, our answer is "yes".
Is a conviction adequate evidence of the illegality? Our answer is "Yes".
If not, is the claimant required to establish the illegality as a precondition for his or her civil action?
If the claimant has the onus of establishing illegality, can the defendant assert the defences which are normally available to persons charged with conducting illegal (i.e., criminal) activity? That is, can the defendant assert the due diligence defence? This should not be allowed. If so, the perverse effect would be that persons accused of illegal trafficking would enjoy more immunity than defendants in civil actions.
Can a victim sue a person who is allegedly an "illegal trafficker", but who has not been convicted? This should be allowed.
Can a victim sue an allegedly "illegal trafficker" even though the the alleged trafficker does not fall within the Article 4 "liable party"? Our answer is "yes".
In a civil claim against an alleged illegal trafficker, can the defendant trafficker assert the defences available in criminal proceedings? Our answer is "no".
Many other questions can be raised about the interplay of the protocol’s civil actions and illegal trafficking. With respect, these questions deserve serious attention. There is no justifiable basis for depriving claimants of the right to apply civil liability remedies against parties who are illegal traffickers. Nor should the protocol deprive claimants of remedies against parties who the claimants believes on reasonable grounds to be illegal traffickers.
5. To the extent practicable, the protocol should require "liable parties" to be covered by insurance.
As a matter of general principle, there is considerable merit to the notion that parties within the "liable party" net must carry a specified amount of insurance. We do not dispute the merits of requiring parties involved in the waste trade to carry adequate insurance, but it seems that insurance availability is a very uncertain matter today. The insurance industry has undergone dramatic changes in recent years and will likely continue to do so, making it very difficult (perhaps futile) to determine availability of insurance and minimum amounts of coverage.
Given these uncertainties, we make the following suggestions:
The lack of certainty over insurance availability should not bar setting some ‘best guess’ insurance requirement.
The fact that insurance is simply not available for illegal activity should not be a reason for not subjecting illegal traffickers to civil liability. If civil claims against an illegal trafficker cannot be satisfied, a supplementary Basel fund should be available.
The insurance industry is competitive and has demonstrated an ability to respond to new regulatory requirements which are reasonably clear. The guidance in the protocol, if implemented by the Parties, would go a good distance to addressing which parties are liable to whom and for which types of damage.
Arguments about the high costs of insurance for the hazardous waste industry should be discounted. The high cost of insurance is a reflection of the high risk and cost of environmental damage. The protocol should not facilitate easy entry into the waste shipment industry, particularly given the Convention’s fundamental objective of minimizing transboundary movements of hazardous waste. Rogue operators will cause the greatest problems and they will of course argue that they can’t afford insurance. If they cannot afford realistic insurance, they cannot afford to be in waste shipping business – a point no doubt shared by responsible and well-established members of the industry.
The Parties face two basic policy options: they can impose the main brunt of civil liability (and the corresponding requirement to carry insurance) on "liable parties" and rely less on a supplementary fund, or vice versa. We urge you to adopt the first option for two reasons. First, significant civil liability exposure has the effect of encouraging compliance, and secondly, serious questions have been raised in these sessions about the willingness of the Parties to organize an emergency fund.
6. There is a need for an international fund.
We strongly support the creation of an International Fund to supplement compensation for victims of incidents arising from the transboundary movement of hazardous wastes. We support the creation of the fund, even though the brunt of the liability must be imposed on "liable parties" in Tier I. It appears that insurance availability will be limited in Tier I, raising the need for a supplementary Tier II fund.
The Tier II Fund should be transparent and easy to access for victims. It should provide supplemental funding in instances where the liable parties are unable or unavailable to pay compensation. Further, it should be funded primarily from industry resources, which historically have created the greatest risk in the transboundary movement of hazardous wastes. Finally, the parties may want the Protocol to provide quick compensation in cases of emergency and during the clean-up phase.
Unfortunately, however, the fund concepts have not received much attention in the negotiations. Many of the fundamental elements such as who pays, who can apply for funds, and who determines pay-outs have not been addressed in any detail.
7. The scope of liability should extend to long-term effects of hazardous waste.
The current version of the protocol fails to address one of the most critical problems associated with Basel waste issues – gradual and long-term soil and groundwater contamination attributable to irresponsible disposal and recovery operations. This problem is as significant as the damage associated with sudden spills of hazardous waste.
To overcome the deficiency, we urge the Parties focus on the following three circumstances which could give rise to long-term contamination from Basel waste:
Leachate contamination after "completion of disposal". "Completion of disposal" is the end point of the protocol’s scope under Article 3.1. The term "disposal" means any operation in Annex IV of the Convention. One of these operations is D1 "Deposit into or onto land". According to this description, the disposal is completed at the moment that the Basel waste there is a "deposit". Illogically, the notion of disposal does not extend to securing and monitoring the landfill over the long-term. The same analysis applies to many other operations described in Annex IV. We urge the Parties to adopt the concept of "aftercare" of disposal sites, as was considered in previous versions.
Residues from recovery operations. The scope of the current version appears to end once the recovery operation as described in Annex VIB; it is silent on possible incidents attributable to residues from recovery operations. We urge the Parties to correct this gap. We also note that previous versions of the protocol contemplated that "completion of disposal extends to the disposal of the residues".
Insolvency of disposal or recovery operations. It is no surprise that some operators who fear environmental liability will consider evading responsibility by insolvency or other forms of abandonment. This phenomenon is certainly evident in Canada and, we suspect, in other jurisdictions. We urge the Parties to consider adopting rules which have been applied in some jurisdictions to deal with this complex matter (including holding secured creditors liable in certain instances or imposing personal liability on the directing minds of insolvent companies).
8. Article 11 Agreements should not be used to exempt the protocol.
Article 3.3(f) of the current draft proposes to exclude the Protocol in circumstances where Article 11 Agreements apply. We strongly disagree with this concept. The Convention exhorts parties to Article 11 agreements to apply the principle of "no less environmentally sound". The current definition of "environmentally sound management" specifies "taking all practicable steps … against the adverse effects which may result from such waste management". The Convention does not specify these "practicable steps". Nor does the Convention set out formal criteria for entering Article 11 agreements – an agreement arguably could be as simple as an exchange of letters between Parties. The Article 11 exemption would therefore be viewed as an attractive means by which rogue operators can avoid protocol victim compensation.