Marsh Warns EU Environment Regs Expose UK Firms to Increased Risks

March 19, 2009

Marsh has analyzed the possible effects of new European legislation designed to protect the environment. The broker points out that “businesses in the UK will now have to pay for any significant damage that they cause to the environment following the introduction of the European Union’s Environmental Liability Directive (ELD).

The ELD was enacted into English law March 1, and will be complemented by separate legislation for Scotland, Wales and Northern Ireland later this year.*

Marsh states: “One of the most far-reaching pieces of environmental legislation in recent times, the ELD is based on the ‘precautionary’ and ‘polluter pays’ principles, which mean that an operator of any potentially polluting activity will be obliged to take proactive action to prevent, and where necessary, remediate any environmental damage.

This is broadly defined as follows:
— Damage to protected species and natural habitats, including Sites of Special Scientific Interest
— Damage to water, including the ppollution of groundwater and surface waters
— Land contamination through pollution that creates a significant risk to human health

“Where there is an imminent threat of environmental damage, organizations are now required to immediately take all practicable steps to prevent environmental damage occurring, and to notify the relevant authority if such preventative actions do not eliminate the environmental threat,” Marsh points out. ” If environmental damage has already occurred, then further damage must be prevented. Failure to do so, or a failure to comply with a remediation notice served by the authority, is now a criminal offense.”

Cliff Warman, Leader of Marsh’s Environmental Practice in Europe, the Middle East and Africa, explained: “For the first time, the ‘value’ of the environment as a resource is being recognized under law and the new regulations apply to all commercial activities, both public and private sector.

“Importantly, the scope of environmental damage covered by the ELD is not restricted to pollution-related incidents and now includes any type of damage caused to natural habitats, such as any physical damage caused by construction activity.

“Also, if the type and scale of damage caused means that the environment cannot be fully restored back to its original condition, then a polluter may be required to undertake additional remediation elsewhere in order to compensate the environment as a whole for the degradation that has been caused.

“This could include a requirement to undertake interim measures whilst the clean-up and rehabilitation is under way, or even the creation of an alternative ‘natural’ habitat elsewhere.”

In addition he warned that “these types of new environmental liabilities are not likely to be covered by any standard third party liability or property insurance policy, and may even be specifically excluded.

“The costs relating to the mitigation and remediation of environmental damage could be significant, so it will be vital that organizations quantify their potential environmental exposures and assess the requirements for specialist environmental insurance.”

Source: Marsh – or
*Neither the European Union nor, its main rule making body, the European Commission (EC), can directly write or amend the laws of EU members. They issue “directives” that set rules, policies and other measures. EU members are required by the treaties that govern the EU to adopt those measures as part of their own legal system, unless they have obtained a special exemption from doing so. As these exemptions are numerous, this frequently results in different versions of the same regulations in different EU member countries.

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