The comprehensive review of the Environmental Liability Directive (ELD) that is now underway could lead to a revision of this important legislation early next year with new requirements for companies, possibly including mandatory financial security. This will be the subject of a roundtable discussion at the FERMA Seminar, so that FERMA can fine tune its comments to the Commission on behalf of members.

The ELD has been fully operational in every member state since 2010 requiring that damage to biodiversity, waters and soil is remediated or compensated according to a “polluter pays” principle. For industry, the review can raise several concerns, including the potential for:

  • The introduction of a legal requirement for every business in the EU to be able to demonstrate its capacity to pay for environmental damage for which it is responsible. Such mandatory financial security could be done through the use of bonds, letters of credit, insurance or internal provisions.
  • The creation of a strict liability regime for all operators. This contrasts with the current provisions where strict liability applies only to a restricted list of dangerous activities. Others are liable only when a fault or negligence has been demonstrated.
  • An extension of the scope of the environmental damages falling under the ELD regime, for example adding new categories like damage to air quality or the accidental release of alien invasive species.

The roundtable discussion will focus largely on the first two issues and we will look at such questions as:

  • Do you think a mandatory financial security or an insurance scheme at EU level would help mitigate the consequences of an environmental damage in your country?
  • What would be the consequences for your organisation of a mandatory financial security scheme regarding the coverage of environmental damages?
  • What are the most suitable instruments (insurance, provisions, letter of credit, bonds) to demonstrate that European industry can cover its environmental liability?

Eight member states (Bulgaria, the Czech Republic, Greece, Hungary, Portugal, Romania, Slovakia, and Spain) have already voluntarily implemented mandatory financial security with various criteria, exemptions and thresholds. In FERMA’s opinion, introducing a mandatory financial security in all EU member states would:

  • Set another budget constraint on companies, affecting their development;
  • Divert investments. It will have a negative impact on investment related to prevention and risk management. In the current economy, industries cannot invest simultaneously in prevention and secure millions of euros of guarantees (in insurance policies or bank guarantees);
  • Not solve local issues of governance regarding the implementation of the ELD and oth