Polluter pays principle extended to oil spills

The European Court of Justice has held that oil accidentally spilt at sea can be considered waste under Community law, and that in certain circumstances the oil’s seller and the ship’s charterer can be liable for clean-up costs - whatever the position under international conventions. The decision reinforces the tendency of the Court to expand the ambit of Community waste legislation, even into areas traditionally covered by international law.

Commune de Mesquer v Total France SA and Total International Ltd (C-188/07 European Court of Justice 24 June 2008) was a reference from the French Court de Cessation. It followed a claim by the French municipality of Mesquer for compensation for damage caused by oil spilt from the Erika, which sank off the coast of Brittany in 1999.

The key question was the extent to which the EC Framework Directive on Waste was applicable in such circumstances. Directive 75/442 was in force at the time but was subsequently consolidated under Directive 2006/12, without changing the core principles at issue.

Total France SA had sold a consignment of heavy fuel oil to Total International Ltd for delivery to Italy. Total International chartered the Erika to transport the fuel. Under the 1969 International Convention on Civil Liability for Oil Pollution Damage, strict liability for damage caused by oil spills is imposed on the shipowner, but with a limitation based on the ship’s tonnage. No claim can be made against the ship’s charterer or operator unless the damage resulted from an intentional or reckless act or omission. Under a 1971 Convention, supplemented and amended in 1992 and 2003, an international oil pollution compensation fund, financed by oil industry contributions, was established to provide compensation up to specified limits from any incident.

The European Court first looked at whether the heavy fuel oil itself could be considered waste under the Directive. The fuel oil had been obtained as a result of the process of refining oil.

The court reviewed its previous case law on the meaning of waste and noted that in view of the Directive’s environmental objectives, it had adopted an expansive interpretation. In certain circumstances residue produce from a process, such as leftover quarry stone, without a firm market had been held to be waste. But in the current case, the residual substance was clearly capable of being exploited commercially and could be considered a genuine by-product rather than waste.

The answer to the first question was hardly surprising. The second issue was whether the oil, once it had been accidentally spilt at sea, should be classified as waste.

One of the categories of waste contained in the Directive included "materials spilled, lost, or having undergone other mishap, including any materials equipment, etc, contaminated as a result of the mishap". But as the court noted, inclusion in one of the categories was not in itself sufficient to classify the substance as waste. It was critical whether the waste holder could be said to have ‘discarded’ it within the meaning of the Directive.

The court had already held in the 2004 decision of Van de Walle (ENDS Report 356, p 44 ) that oil leaking from a petrol station and contaminating groundwater, and which could not be reused without reprocessing, could be described as waste that had been discarded. Although the decision was considered controversial, the court followed the same principle in this case.

Once the oil had been spilt into the sea there was little technical or economic possibility of reusing it. "It follows that such hydrocarbons accidentally spilled at sea are to be regarded as substances which the holder did not intend to produce and which he ‘discards’, albeit involuntarily, while they are being transported, so that they must be classified as waste within the meaning of Directive 75/442."

The spillage had taken place within the Exclusive Economic Zone of a member state so there was no question of the Directive not being applicable. Even if the spillage had taken place in open sea, the court implied that because it had washed up onto a member state’s land territory, the Directive was still applicable.

Having decided the Directive did apply, the court turned to the question of liability. Article 15 of the waste Directive provided that in accordance with the polluter pays principle, waste disposal costs must be borne by the waste holder who has waste handled by a waste collector or a waste undertaking, and/or the previous holder or producer of the product from which the waste came.

In the Van de Walle case, the court held that the manager of the service station selling the product and from which the hydrocarbons leaked should be regarded as the waste’s possessor and producer. On the same analogy, it followed that it was the ship-owner who had immediate possession of the oil before the spillage who should be regarded as the producer and holder of the waste within the meaning of the Directive.

But article 15 also allowed for the possibility of a previous holder or producer of the product from which the waste came as being liable. As a matter of principle, therefore, it was possible that the seller of the hydrocarbons and the ship’s charterer could be said to have produced the waste. In accordance with the polluter pays principle, their contribution to the waste’s creation, and in certain cases to the consequent risk of pollution, should make them responsible for bearing the disposal costs.

But it was up to the national court to decide whether the seller or charterer had contributed to the risk of the pollution, in particular if they failed to take measures to prevent such an incident. The introduction of what appears to be a negligence test was justified by the court’s reliance on the polluter pays principle: "A producer cannot be liable to bear that cost unless he has contributed by his conduct to the risk that the pollution caused by the shipwreck would occur."

The court noted that the Directive required liability to be placed on either the previous holder or the producer, and held that member states were obliged by national laws to ensure that the costs were allocated to one or other of the categories. The court accepted that under relevant international conventions, member states were still entitled to establish a compensation fund excluding liability for charterers and shipowners. But if the disposal costs were not borne by the fund, or exceeded its limits, then national law had to make provision for the cost to be provided by the producer of the product from which the waste came.

Regarding possible conflicts with the international regime that has been established, the court held that the European Community was not bound by the relevant treaties. It had not acceded to them, nor could it be regarded as having taken the place of its member states if only because not all were parties to the international conventions.

The court noted that the 2004 environmental liability Directive expressly did not apply to damage falling without the scope of a number of international conventions including those concerning oil pollution damage. But the waste Directive, even in its codified form, contains no such exclusion, and was therefore applicable.

The decision in Mesquer represents a further bold attempt by the Court of Justice to extend the ambit of the waste Directive in areas probably unforeseen by those drafting it.

Although the court has held that in effect charterers or producers will only be liable where their actions contributed to the risk of pollution, this appears to be a much stricter liability test than that provided for in the international convention, which requires intention or recklessness before a charterer can be liable. The decision could require a reassessment of the current international rules on liability, which some regarded as placing too light a burden of responsibility on charterers.

In June of this year, the European Parliament approved the Council’s common position with amendments on the proposed revised Directive on waste. Article 14 repeats the formula concerning the polluter pays principle, but provides that ‘waste management’ costs are to be borne by the original waste producer, rather than the holder as under the current legislation, or by the current or previous waste holders. Member states may decide that costs are to be borne partly or wholly by the producer and that distributors may share these costs.

"Waste management" is defined as the collection, transportation and disposal of waste, and it could be that were a similar issue to come before the court concerning the new Directive, it would hold that this is not intended to encompass clean-up and remediation costs.

But this is hardly in line with its previous case law now, and original producers of waste are likely to be increasingly concerned about their potential liability for clean-up costs where waste spillages occur.

Richard Macrory is professor of environmental law, University College London

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