POLLUTER PAYS PRINCIPLE Guided By: Dr. Manjula Batra
SUBMITTED BY: MD. ABID HUSSAIN ANSARI TH
B.A. LL.B. (HONS.) 6 SEMESTER
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Acknowledgement Firstly, I would like to express my profound sense of gratitude towards the almighty “ALLAH” for providing me with the authentic circumstances which were mandatory for the completion of my project. Secondly, I am highly indebted to Prof. Dr. Manjula Batra at Faculty of Law, Jamia Millia Islamia University, New Delhi for providing me with constant encouragement and guidance throughout the preparation of this project. Thirdly, I thank the Law library staff who liaised with us in searching material relating to the project. My cardinal thanks are also for my parents, friends and all teachers of law department in our college who have always been the source of my inspiration and motivation without which I would have never been able to unabridged my project. My father, a lawyer with large access to books of value has been of great help to me. Without the contribution of the above said people I could have never completed this project.
Mohd. Abid Hussain Ansari th
B.A.LL.B (Hons) 6 Semester rd
3 Year
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Table of Contents
1. Introduction to Environment Law………………………………………………………… Law………………………………………………………… 4 2. Defining Pollution………………………………………………………………………… Pollution………………………………………………………………………… 6 3. Environment Protection Legislations in India……………………………………………. India……………………………………………. 6 4. Internal Law and the Distribution Distribution of Legislative Power………………………………… Power…………………………………..8 5. International Law and Constitutional Duty……………………………………………… Duty……………………………………………… ..9 6. Statutes Enacted In India Pursuant to The International Environmental Law………… Law…………...10 ...10 7. The Polluter Pays Principle……………………………………………………………… Principle……………………………………………………………… 11 History……………………………………………… ……………………………………………………… ……………………………..11 ..11 8. Early History…………………… 9. Naming the Principle……………………………………………… .....12 Principle………………………………………………………………… ………………….....12 10. Adoption of the PPP by the OECD……………………………………………………… OECD………………………………………………………13 13 11. OECD‟s Recommendation Revisited…………………………………………………… Revisited…………………………………………………… 14
12. Liability Regimes To Implement The Polluter Pays Principle………………………… Principle…………………………..18 ..18 13. Flaws in the PPP………………………………………………………………………… PPP………………………………………………………………………… 20 Principle…………...22 ...22 14. The Problem with Indian Environment Law and the Polluter Pays Principle………… India…………………………………………………………...25 ...25 15. The Evolution of PPP in India………………………………………………………… 16. Indian Judiciary and PPP……………………………………………………………… PPP……………………………………………………………… ...26 17. The Principle as A Feature of Customary International Law…………………………… Law……………………………38 38 18. The Role of Market Based Instruments………………………………………………… Instruments………………………………………………….40 .40 19. Conclusion……………………………………………………………………………… Conclusion……………………………………………………………………………… .43 20. Bibliography…………………………………………………………………………… Bibliography…………………………………………………………………………… ..45
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Introduction to Environment law It is interesting to note that natural resources had been stored virtually untouched in the Earth for millions of years. But since the start of the industrial revolution vast amounts of these resources had been exploited within a period of just a couple of hundreds of years at unimaginable rates, with all the waste from this exploitation going straight in the environment (air, water, land) and seriously damaging its natural processes. Although pollution had been known to exist for a very long time (at least since people started using fire thousands of years ago), it had seen the growth of truly global proportions only since the onset of the industrial revolution during the 19th century. Environmental degradation in India has been caused by a variety of social, economic, institutional and technological factors. Rapidly growing population, urbanization and industrial activities have all resulted in considerable deterioration in the quality and sustainability of the environment. Environmental ethics have also formed an inherent part of Indian religious precepts and philosophy. Worship of nature - Sun, Moon, Earth, Air and Water - was not merely a primitive man's response to the fear of the unknown, unkno wn, but it arose from the deep reverence shown to the forces of nature which sustained and preserved human life on earth. The basic tenet that underlies this deep reverence for nature is the belief that life is a singular, continuous and uniform phenomenon and even a small change in one part of the eco-system is likely to 1 reverberate throughout. Guru Nanak , said „Pawan Guru, Pani Pita Mata Dhart Mahat, Divis
Raat Doi Dai a, Khele Sagal Sagal Jagat' ( ( Air is like God, Water is father and Earth Ea rth is the other. It is
through the harmonious interaction of all these three vital ingredients that the whole universe is being sustained). sustained). The ancient Greeks, on the same reasoning, revered the Earth as Gaia, the Earth Goddess. The importance of Judiciary in a democratic setup for protection of life and personal rights can hardly be overestimated. India has a highly developed judicial system with the Supreme Court having plenary powers to make any order for doing complete justice in any cause or matter and a mandate in the Constitution, to all authorities, Civil and Judicial, in the territory of India to act in aide of the Supreme Court. The scope of Writ Jurisdiction of the High Courts is wiser than 1
(Founder of the Sikh Religion, 1469-1539)
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traditionally understood and the judiciary is separate and independent of the executive to ensure impartiality in administration of justice. The judiciary has a central role to play in this thriving democracy and shuns arbitrary executive action. The higher judiciary has been empowered to pronounce upon the legislative competence of the law making bodies and the validity of a legal provision. The range of judicial review recognized in the higher judiciary in India is the widest and most extensive known to any democratic set up in the world. Liberty and Equality have well survived and thrived in India due to the pro-active role played by the Indian judiciary. In considering the role of the judiciary in environmental governance, there are two issues that need to be considered. The first is the role the judiciary in the interpretation of environmental law and in law making and the second is the capability of jurists to effectively interpret the increasingly cross-linked issues brought to their attention. For the judiciary, probably the burden of implementation is greater, as they must not only interpret laws that incorporate the Rio Principles of sustainable development, including the polluter pays principle, the precautionary principle, and the principle of continuous mandamus in the corpus of international and national law; inter- and intra-generational equity; importance of traditional values and ideas; interpretation of constitutional rights including the right to life and the right to a healthy environment, etc., but also have to weigh these against economic and political principles. Environmental Law is a developing branch of law in India and has not yet established its roots firmly in the soil of the Indian judicial system though we can definitely say that such roots have struck water. This growth is conspicuous by the remarkable activism on part of the judiciary and the legislature in the latter part of the 20th century. A large number of socio-economic problems faced in the nation were discussed by the courts in various cases over a broad range of issues which cropped up from time to time, with the eventuality that old laws were sharpened to meet the changing societal needs. New laws were framed to meet the emerging challenges — the Environment Protection Act of 1986 being a watershed. The legislative and executive efforts have been notable over the past two decades towards including the Principles of Environmental Protection in the Legal Jurisprudence in India — most th
notably the 46 Amendment to the Constitution of India in 1976 which explicitly laid down Environmental Protection as a part of the Constitutional Mandate and the enactment of the Environment Protection Act of 1986. Though there have been initiatives taken by the Legislature 5|Page
and the Executive, the Judiciary has taken a lead in this race through careful judicial thinking of the Supreme Court which has been providing more tools both qualitative and quantitative to deal with issues related to Environmental Protection. Due to the non-compliance of its own laws by the State machinery, the Judiciary invented a new method of Judiciary-driven implementation of the regulations in India. The courts have also done their share by liberally interpreting the various provisions of the Constitution and other statutes towards ensuring social justice. DEFINING POLLUTION
There are legislative definitions of what constitutes a pollutant in the Water (Prevention and Control) Act, 1974, the Air (Prevention and Control of Pollution) Act, 1981 and the Environmental Protection Act, 1986. The Water Act defines pollution as "such contamination of water....likely to create a nuisance or liable to render such water harmful and injurious to health" and the definitions in the subsequent legislations are similar. It is evident from these definitions that the emphasis is on the fact that pollution must have a tendency to cause harm, or must actually cause harm. Emissions per se are not pollution. Properly understood, pollution is the coercive imposition of a harmful waste product or emission onto another person or their property; it is a " trespass" under the principles of common law. If the trespass is so minor that it creates no harm or inconvenience to the property owner, it will normally be tolerated. Today's pollution dilemma is often the result of what is essentially a unive rsal " easement " granted by the 2
State to polluters, even to producers of significant and damaging pollution. Hence, as the definition of pollution is commonly understood, for the pollutant to result in or cause pollution there must be some consequent harm or threat of harm.
Environment Protection Legislations in India With a view to protecting and improving the environment, different legislations have been made and different regulations, rules have been issued. The Government of India, through its Ministry of Environment and Forests is administering has enacted nation-wide comprehensive laws. One of the major environmental enactments came just two years after the Stockholm Conference in 1974. The Water (Prevention and Control of Pollution) Act was passed for the purpose of prevention and control of water pollution and for maintaining and restoring the wholesomeness 2
Making the Polluter Pay, http://www.cei.org/ebb/polluterlhtml.
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of water. The Water Act represented India's first attempt to deal with an environmental issue from a legal perspective. From this period onwards, the Central Government has been considered as highly environmentally active. In 1976, the Constitution of India was amended to insert a separate fundamental duties chapter. The 1980s witnessed the creation of many eco-specific organizations. In the year 1980, the Forest (Conservation) Act was passed for the conservation of forests and to check on further deforestation. The Air (Prevention and Control of Pollution) Act of 1981 was enacted by invoking the Central Government's power under Art253. The Air Act contained several distinguishing features. The preamble of the Air Act explicitly reveals that the Act represents an implementation of the decisions made at the Stockholm Conference. Also, a notification relating to Noise Pollution (Regulation & Control) Rules was made in the year 2000 with the objective of maintaining Ambient Air Quality Standards in respect of noise. In the wake of the Bhopal gas tragedy , the Government of India enacted the Environment (Protection) Act, 1986. The laws that existed prior to the enactment of EPA essentially focused on specific pollution (such as air and water). The need for a single authority which could assume the lead role for environmental protection was answered through the enactment of EPA. It is in the form of an umbrella legislation designed to provide a framework for Central Government to coordinate the activities of various central and state authorities established under previous laws. It is also in the form of an enabling law, which delegates wide powers to the executive to enable bureaucrats to frame necessary rules and regulations. Apart from this, several notifications and rules have also been made, some of which include the Hazardous Wastes (Management and Handling) Rules in 1989, the Biomedical Wastes (Management and Handling) Rules in 1998, Recycled Plastics (Manufacture and Usage) Rules 1999, Environment (Silting for Industrial Projects) Rules 1999 and the Municipal Solid Wastes(Management and Handling) Rules in 2000.In addition to these eco-specific legislations, realizing that there is no comprehensive legislation dealing with biodiversity in India, and to fulfil its international obligation under the Convention on Bio-Diversity, the Government of India has enacted the Biological Diversity Act, 2002.
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It is a paradox that despite the presence of such diverse laws, the pollution rate has crossed the dead line. This is probably because of the reason that the law is so complicated and vague that even the experts may not know the intricacies of it. The Judiciary in India has been taking steps for directing state agencies, to strictly adhere to the legislations in protecting the environment and totally arresting the various manmade disasters. The Judiciary has taken such steps especially, because of the various public interest litigations arisen out of manmade disasters such as Bhopal Gas tragedy etc. It was held in M C M ehta v. , that one of the principles underlying environmental law is Union of India and others sustainable development. This principle requires development to take place which ecologically sustainable. It was further held that there are two essential features of sustainable development such as precautionary principle and polluter pays principle. The precautionary principle was elucidated by the Supreme Court in Vell ore Citi zens' Welf are Forum v. Union of I ndia and states that the state government and its agencies much anticipate, prevent, and attack the other causes of environmental degradation. States should not take up any activity and measure which is not environmentally benign. It seems that lack of sufficient funds allocation to the Ministry of Environment and Forests, lack of sufficient number of qualified and trained staff such as academicians, legal professionals, medical experts and technologists in the Ministry and its subordinate offices all over the country, lack of commitment of the people and awareness about the environment protection and improvement, complicated procedures for approvals and authorizations of the Pollution Control Boards, are the main reasons for ineffective implementation of environments laws. If proper reforms are made in this area, probably the environmental laws will be implemented effectively thereby ensuring problem free environment. Internal Law and the Distribution of Legislative Power
Article 245 of the Constitution of India deals territorial Jurisdiction of the legislative power, confers the power to the parliament to make laws for the whole or any part of the territory of India. Article 246 deals with the subject matter of laws, empowers the parliament to have 'exclusive' power to make laws with respect to the Union list. The parliament has exclusive power to legislate on all conceivable international matters which have been enumerated under the Union List. Under this list main entries relating to international matters are: foreign affairs (entry 10), United Nations Organization (entry 12), participation in international conferences, 8|Page
associations and other bodies and implanting of decisions made thereat (entry 13), and entering into treaties and agreements with foreign countries and implementing of treaties, agreements and conventions with foreign countries (entry 14) etc. Under Article 253 the parliament has exclusive power to make any law for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference, association or other body. These provisions suggest that the parliament has sweeping power to legislate on international matters. However, this power of the parliament, according to the Supreme Court, cannot override the fundamental rights enumerated under Part III of the constitution. Under the constitutional scheme the union government's executive power is co-extensive to the legislative power of the parliament (Article 73). According to the Supreme Court treaty making is regarded as an executive power rather than legislative activity. International Law and Constitutional Duty
Though Part IV (Article 37 to 51) of the Indian Constitution, known as the Directive Principles of State Policy, is not enforceable by any court but principles contained therein are fundamental in the governance of the country and it "shall" be the duty of the State to apply these principles in making laws (Article 37). Article 51 specifically deals with international law and international relation, inter alia, provides that the „state shall endeavour to foster respect for 3
international law and treaty obligations.' In Telephone Tappi ng Case , the Supreme Court by invoking Article 51 developed right to privacy as a fundamental right under Article 21. Here, the court took inspiration from the privacy provision of the Covenant on Civil and Political Rights. However, in environmental matters, it appears, no such use of Article 51 has been done by the courts. Here, it may be recalled that the courts have invoked Article 48-A (duty of the state to protect environment) to develop a fundamental right to environment as part of the right to life under Article 21.
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People's Union for Civil Liberties, v. U.O.I. (1997) 1 SCC 301 In several leading cases the Indian courts have been guided and inspired by Article 48-A and developed a general fundamental right to environment under Article 21. See, M.C. Mehta v. Union of India (Kanpur Tanneries Matter) AIR 1988 SC 1037 at 1038; Rural Litigation and Entitlement Kendra v. State of U.P. AIR 1988 SC 2187 at 2199: Kinkari Devi v. State of H.P. AIR 1988 4 at 8; Bichhri Village Case AIR 1996 SC 1446 at 1459, Sachindanda Pandey, v. State of W.B. AIR 1987 SC 1109 at 1114-1115; T. Damodar Rao v. Municipal Corp., Hyderabad, AIR 1987 A.P. 171 at 181 etc. 4
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Statutes Enacted in India Pursuant to the International Environmental Law In India many important environmental statutes have been enacted to ratify or to fulfill national obligations under the international environmental treaties, conventions and protocols etc. Hereinafter, an effort has been made to present a table which contains a list of international environmental laws and relevant Indian environmental statutes showing close linkages between the same.
S. No.
International Environmental Laws
Relevant Indian Environmental Statutes
1.
The Stockholm Conference, 1972
The Air Act, 1981
2.
The Stockholm Conference, 1972
The Environmental Protection Act, 1986
3.
The Rio Conference, 1992
The Public Liability Insurance Act, 1991
4.
The Rio Conference, 1992
The National Environmental Tribunal Act, 1995
5.
Convention of Biological Diversity, The Biological Diversity Act, 2002 1992.
6.
Convention of International Trade in The Wild Life Protection (Amendment) Act, Endangered Species of Wild Fauna and 2002 Flora, 1973.
Although the detailed discussion on executive ratification or legislative exercise in India, in pursuant to the international environmental obligations, is outside the main objective of this article. Yet, it would be relevant to briefly point out, with approval, the stand taken by Prof M.K. Ramesh that in India such ratification or enactment has often been done either without necessary national preparation or under compulsion to conform to the conditionalities of international 5
financial institutions like World Bank. The ratification or enactment of environmental statues in India, without real commitment to implement the same by the executive, has resulted into judicial interventions and activism in the field of environmental law.
5
M.K. Ramesh, 'Environmental Justice Delivery in India: In Context', 2 (2) Indian Journal of Environmental Law, December 2002, 9 at 12.
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The Polluter Pays Principle "The „polluter pays principle‟ states that whoever is responsible for damage to the 6
envi ronment should bear t he costs associated with it ."
" I f anyone in tenti onall y spoils the water of another ... let hi m not onl y pay damages, but 7
pur if y the str eam or ci ster n wh ich contain s the water..."
- Plato
EARLY HISTORY
Pollution is as old as our planet itself if one considers even the commonly accepted definition of pollution: “…the introductions by man, directly or indirectly, of substances or energy into the environment resulting in deleterious effects of such a nature as to endanger human health, harm living resources and ecosystems, and impair or interfere with amenities and other legitimate uses 8
of the environment.”
However, in the early days pollution was not a concern. The discharge of gases or wastes into the air and water was considered totally legitimate. Water and air were used as
„sinks‟
9
and it was 10
believed that neither air nor water was a scarce resource and therefore, their use was free to all.
At the time of the industrial revolution in Europe there were no safety regulations. Workers lived and died in squalid and dangerous conditions. Cities disappeared for months on end in impenetrable fog created by the coal-fired furnaces. However, when the side effects of pollution were felt the concern for damage to the environment, human health, and property started. Pollution became a common concern and economists were in the forefront of those who were looking for solutions. In economic terms the emission of gases from a factory that causes damage to the environment is a „social damage‟ and the cost of such damage is a „social cost‟ . This cost 6
Taking Action, Chapter 2, p. 3. Published by the United Nations Environmental Programme [sic], found at www.rona.unep.org.action.02.htm. 7 The Dialogues of Plato: The Laws, vol. 4, book 8, section 485(e), translated by Jowett B, Oxford: Clarendon Press (4th ed.), 1953. 8 OECD Council Rec. C (74) 224 of 14 November, 1974. 9 Unfortunately it is still the same in the developing countries. 10 WOODROOF, M. G, “Pollution Control: Why not Co st Allocation? 21 Drake Law Review, 1971, pp. 133, 146.
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is not paid by the polluter but by the society as a whole which pays a price in terms of damage to aquatic environment, human health, property, loss of species, etc. Such a cost is external to the private cost of the polluter and is therefore, an „external cost.‟ The effect of this external cost is 12 known as „externalities‟ in economic literature. The resultant inequality of social costs and
private costs indicates that economic resources are being improperly allocated in society. The misallocation of such resources is because of their improper cost allocation. Pollution in economic terms means the improper cost allocation. Thus the cost of these resources is not reflected in the product price. The producer instead of processing the waste discharges it into the air because processing will cost him extra money. This tends to induce overproduction and overconsumption of the items produced cheaply. For decades economists have been struggling to identify and measure externalities. Different economists proposed different solutions to the problems of externality. They have generally adopted the position that complete efficiency could be attained only if all external costs were somehow internalized to the firms that produced them. Economists suggested different economic incentives to force the polluter to internalize the external costs so that the complete production costs of the goods are reflected in the prices. In economic literature it is known as the „inter nalization of external costs‟. Thus, the potential solution to the problems of externality is the basis of the PPP. NAMING THE PRINCIPLE
The various economic instruments for cost allocation of pollution abatement discussed by the economists for decades were leading to the conclusion that the polluter should pay for pollution abatement and should add this cost to the production cost of the goods. In this way it should be passed on to the consumer. Incentives were required to motivate the polluter to internalize the external cost so that the complete production cost should be reflected in the price of the goods. The different economic incentives which are the potential solutions to the problems of externality were given a single 11
THOMPSON, DONALD N, the Economics of Environmental Protection, Cambridge, Massachusetts, 1973, p. 8. (Hereinafter Thompson, 1973) 12
It is also called as “spill over effects”, “spill over costs”, “third party effects”, “side effects”, or “external diseconomies”. KNEESE, A. V, The Economics of Regional Water Quality Management, The John Hopkin Press, Baltimore, 1964, p. 40, DAVIS & WHINSTON, “Externalities, Welfare and the Theory of Games”, Journal of P olitical Economy, No.70, June, 1962, pp. 241-262, and THOMPSON, 1973, p. 8.
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name the “Polluter Pays Principle” by the economists. Thus the means and economic instruments of pollution reduction advocated by environmental economists got the status of a principle. Because there existed almost a consensus among the economists that polluter should pay to abate pollution and should internalize the external costs of po llution. This was the birth of a new economic principle which got wide acceptance very quickly. Thus, there was almost a general agreement among the environmental economists about this phenomenon and they ther efore, accepted it as „the basis or fundamental ground for other doctrines to be deduced from it‟. In other words, the doctrine was qualified to be called a “Principle” and this is the reason 13 why it is referred to as an “economic principle” . This was the birth of a new “economic
principle” but to lawyers it gave the perception of civil liability for getting compensation for the
victims of pollution. To the economists the PPP is still the internalization of external costs of continuous pollution and to the lawyers it is the internalization of damage costs that the PPP applies to both. In the 1990 International Convention on Oil Pollution Preparedness, Response and Cooperation the PPP was 14 called the “general principle of international environmental law” , but since it is not 15
sufficiently grounded in State practice, therefore, it is better to call it a principle of environmental policy and not environmental law. ADOPTION OF THE PPP BY THE OECD
The OECD seminar held in summer 1971 about the “Problems of Environmental Economics” paved the way for the formal adoption of the PPP by this organization. The Council of the Organization for Economic Cooperation and Development formally recommended on 26 May 1972 the PPP to be the „Guiding Principle Concerning the International Economic Aspects of 16 Environmental Policies‟ . Thus after almost 50 years later Pigou‟s ideas were put into practice
13
“Forward” to the OECD Monograph, The Polluter Pays Principle, OCDE / GD ( 92) 81, p. 5, and SMETS, HENRY, “ Le principe pollueur payer, un principe economique erige en principe de droit de l' environment?”, R.G.D.I.P., Avril June 3, no. 2, p. 340. (Hereinafter Smets, 1993). Today the PPP is regarded as a “legal principle.” 14
Preamble of the Convention
15
BOYLE, A. E, “Making the Polluter Pay? Alternatives to State Responsibility in the Allocation of Transboundary Environmental Costs”, in International Responsibility for Environmental Harm, Graham & Trotman, 1991, p. 376. For details; Munir, The Polluter Pays Principle, chapter 5. 16 OECD, Guiding Principles Concerning International Economic Aspects of Environmental Policies, C (72) 128. (hereinafter OECD, 1972, C (72) 128)
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by applying them to environmental policies. The most important paragraph of the OECD‟s recommendation goes thus: The principle to be used for allocating costs of pollution prevention and control measures to encourage rationale use of scarce environmental resources and to avoid distortions in international trade and investment is the so-called “Polluter Pays Principle” . This principle means that the polluter should bear the expenses of the abovementioned measures (that is; pollution prevention and control measures) decided by the public authorities to ensure that the environment is in an acceptable state. In other words, the cost of these measures should be reflected in the cost of goods and services which causes pollution in production and/or consumption. Such measures should not be accompanied by subsidies that would create 17
significant distortions in international trade and investment. OECD‟S RECOMMENDATION REVISITED
The OECD‟s interpretation of the PPP seems to have influenced reference to it in other international contexts; therefore, the OECD‟s concept of the PPP needs more elaboration. The OECD‟s guiding principles seem to be based on trade and economic efficiency considerations 18
rather than the improvement of the protection of the environment. Despite the shortcomings the recommendation does recognize the justifiability of member states taking far-reaching actions to protect their environments. Unfortunately, it was only a recommendation without having any binding effect. Moreover, its meanings were not clarified. The Polluter Pays Pri nciple is an international guideline for environmental policy formulation and environmental liability. It simply implies that the person who damages the environment must bear the cost of such damage. Since pollution is often an externality and imposes a social cost, it does not get reflected in its entirety in the private cost of the polluters, leading to more pollution
17
Ibid
18
KÅGESON, “The Polluter Pays Principle”, On the General Principles of Environment Protection, Stockholm, SOU
1994:69, p. 73. (hereinafter Kågeson, 1994).
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than is economically optimal. The Polluter Pays Principle is an attempt to make polluters bear 19
the “real” social cost, thereby bringing pollution to th e optimal level.
Polluter Pays Principle has become a popular catchphrase in recent times. 'If you make a mess, it's your duty to clean it up'- this is the main basis of this slogan. It should be mentioned that in environmental law, the 'polluter pays principle' does not refer to "fault." Instead, it favors a curative approach which is concerned with repairing ecological damage. It's a principle in international environmental law where the polluting party pays for the damage done to the natural environment. It is regarded as a regional custom because of the strong support it has received in most Organization for Economic Co-operation and Development (OECD) and European Community (EC) countries. International environmental law itself mentions little about the principle. In recent days, the polluter pays principle is seen as a way of internalizing pollution-related costs within the context of the economic rationality of the enterprise. There is a close relationship 20
between a country's environmental policy and its overall socioeconomic policy. Furthermore, under this principle it is not the responsibility of government to meet the costs involved in either prevention of environmental damage, or in carrying out remedial action, because the effect of this would be to shift the financial burden of the pollution incident to the taxpayer. But State practice does not support the view that all depollution costs should be borne by the polluter, 21
particularly where transnational dispute is involved.
Most of the industrial factory owners do not perceive an improvement in environmental conditions to be in their interest. If that interest is to be promoted it is not enough to merely remind them of their social responsibilities. Towards this purpose the Supreme Court in 1996
19
Førsund R. Finn., “The Polluter Pays Principle and Transitional Period Measures in a Dynamic Setting”; The
Swedish Journal of Economics, Vol. 77, No. 1, Public Finance: Allocation and Distribution, (March 1975), pp. 56-68; downloaded from JStore at http://www.jstor.org/stable/3439327 on June 5 2 008. 20 This is a part of the International Environmental Agreements Compendium, compiled 1995 by the Pollution Prevention and Pesticide Management Branch, Ministry of Environment, Lands and Parks, British Columbia, Canada. 21 http://www.thedailystar.net/law/2007/january/04/depth.htm
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and 1997 delivered five landmark judgements adopting the polluter pays principle in India as an improvement over the absolute liability principle. The assignment focuses on the above mentioned cases together and much more with developments in international treaty law that have contributed towards the evolution of the polluter pays principle. An improvement in environmental quality should be made in the interest of industrialists. The polluter pays principle is an extension of the principle of absolute liability. The principle of absolute liability is invoked regardless of whether or not the person took reasonable care and it makes him liable to compensate those who suffered on account of his inherently dangerous 23
activity. The polluter pays principle extends the liability of the polluter to the costs of repairing the damage to the environment. The polluter pays principle broadens the ambit of the principle of absolute liability. The importance of this principle is that the damage to the environment may be remedied and this is extremely essential to sustainable development. The polluter is liable to pay 24
the cost to the individual sufferers as well as the c ost of reversing the damaged ecology.
Few people could disagree with what seems at first glance to be such a straightforward proposition. Indeed, properly construed, this is not only a sound principle for dealing with those who pollute but is an extension of one of the most basic principles of fairness and justice: people should be held responsible for their actions. Those who cause damage or harm to other people should " pay" for that damage. This appeal to our sense of justice is why the " poll uter pays principle" (PPP) has come to resonate so strongly with both policy makers and the public.
As a general rule, sound economic analysis of pollution and environmental problems must also be based on the principle of responsibility. Forcing polluters to bear the costs of their activities is good economics too; it not only advances fairness and justice, but also enhances economic efficiency. In other words, with appropriate policies based on a PPP, we should not have to give up the economic efficiency of a free market system based on private property in order to obtain environmental protection, nor vice versa. 22
Indian Council for Enviro-Legal Action and others v. Union of India, (1996) 3 see 212 , Vellore Citizens' Welfare Forum v. Union of India, (1996) 5 see 647, M.C. Mehta v. Union of India (1997) 2 see 353, M.C. Mehta v. Union of India, (1997) 2 see 411 and M.C. Mehta v. Kamal Nath, (1997) 1 see 388. 23 M.C. Mehta v. Union of India, (1987) 1 see 395 24 Indian Council for Enviro-Legal Action v. Union of India. (1996) 3 see 212 at 215.
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But as with most such general principles, the devil is in the details. In this case, the details relate to three basic questions that any application of the PPP must answer. First, how do we define pollution and therefore a polluter? Second, how much should the polluter pay, once he is identified? Third, to whom should the payment be made? The answers to these questions are at the heart of whether any application of the PPP will be either just or economically efficient. A correctly construed polluter pays principle would penalize those who injure other people by harming their persons, or by degrading their property. Too often, however, the PPP is misdefined and misused to suppress private economic activity that benefits the parties directly involved and does no specific damage to other people, but which offends those who oppose human impact on the environment and prefer to leave resources undeveloped. The objective is to restrain the resource use at the expense of the property owners and consumers without cost to those who wish to see the resources remain idle. Under such a misapplication of the PPP, very often "a polluter" is not someone who is harming others, but is someone who is simply using his own property and resources in a way that is not approved of by government officials or environmentalists. In such cases there is no harm to be measured and no real victims to compensate. Consequently, the amount to be paid is not determined by the extent of any actual damage done. Rather, it is set at a level that curbs the politically disfavoured activity to the degree desired by its opponents. And finally, the payment (whether there are real victims or not) typically goes to the government in the form of a tax. In other words, in most cases, the PPP is used as cover to promote a political or ideological agenda rather than to ensure that real polluters pay compensation to real victims of their activities. The economic rationale of the Polluter Pays Principle is that “prices of goods (depending on the quality and/or quantity of environmental resources) reflect, more closely, their relative scarcity 25
and that economic agents concerned react accordingly” . The principle had been recommended by many European academics and the OECD since the 26
1970s and was formally adopted in Europe in the 1987 Act. The OECD was also responsible 27
for metamorphosing this economic principle into an established legal principle . 25
OECD: “On guiding principles concerning international economic aspects of environmental policies”, C ( 72) 128, 1972, Paris, France. Also see, OECD: “The polluter pays principle. Note on the implementation of polluter pays principle”, 1974, Paris, France. 17 | P a g e
The Polluter Pays Principle originally applied only to those actually “polluting” the environment with emissions etc, in the strict sense of the word. However, the principle has now been applied to any activity, which contributes to deterioration of the environment, rather than being strictly limited to polluting activities. On some occasions, this is also referred to as “Extended Polluter Pays Principle”.
The Polluter Pays Principle is typically enforced by direct regulation or economic incentives, which leads to the polluter bearing the cost for abatement of pollution. There are command and control measures wherein the government may specifically allow or disallow certain products, methods, or scientific techniques to polluters. The second method used to make polluters face the true social cost of pollution is taxation. This usually involves a direct tax on every unit of pollution or on every unit produced by the polluting production activity. Both involve some kind of direct government interference directly or indirectly via taxes. A third method of internalizing pollution is through market based instruments by specifying property rights between the polluter and the victim. Liability regimes to implement the Polluter Pays Principle
Liability for damage caused to the environment by the polluter is another method of using the Polluter Pays Principle in environmental and legal policy. I will try to focus more on the liability principle, as opposed to direct regulation and economic incentives, while discussing the Polluter Pays Principle. The two forms of liability typically seen in environmental pollution and degradation is strict 28
liability, or no fault liability, and negligence . Under strict liability, the injurer is liable irrespective of the presence or absence of fault or negligence (i.e only harm must be demonstrated). On the other hand, under the negligence rule, both harm and fault must be established attributable to the injurer.
26
Single European Act, 17 Feb. 1986, 1987 OJ (L 1 69) 1 OECD: “The Polluter -Pays Principle: OECD Analy ses and Recommendations”, Doc. OCDE/GD(92)81, 1992, Paris, France, at 9 28 There may be other charges faced according to the civil and criminal laws of the particular jurisdiction, but these are the dominant rules of liability. 27
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I understand from the economic analysis of strict liability and negligence that strict liability is efficient because, under this rule, the injurer fully internalizes the harm ensuring that the due level of care is taken. Negligence is efficient because the injurer can be induced to take exactly 29
the specified amount of care and this amount can be set efficiently . However, we note that negligence is the dominant rule in tortuous liability as opposed to strict liability, which is reserved usually for cases involving hazardous activity. In the context of environmental liability, in the last few decades, international and national 30
environmental liability laws are invariably based on strict liability . The proponents of the strict ternalization,” which requires that the social cost of an liability rule also focus on " cost in
activity is charged to the polluter. This goes hand in hand with the Polluter Pays Principle, which 31
mandates the cost internalization principle . The economic rationale for this is that strict liability is better for harm which is unilateral and where only the injurer can take the due care to prevent such harm. This is typically what is seen in environmental pollution and degradation, and consequently, we are now seeing a convergence towards using strict liability in cases of environmental pollution and d egradation. While both strict liability and negligence rules induce the injurer to take the optimal amount of care, the advantage of strict liability in environmental cases is that only the harm must be observable. The level of care is irrelevant and therefore need not be established in a court of law, thereby reducing evidentiary requirements. The other reason for the increasing use of strict liability in environment protection, especially in an age where all governments are trying to curb industrial pollution, is that in a market setting, negligence may prove inefficient compared to strict liability.
29
Shavell Steven, Liability for Accidents, National Bureau of Economic Research Working Paper No. 11781, November 2005, Cambridge, MA USA, downloaded from NBER at http://www.nber.org/papers/w11781 on July 18 2008. 30 Commission of the European Communities. Communication from the Commission to the Council and Parliament: Green Paper on Remedying Environmental Damage, COM(93)47 final. Brussels, 14 May 1993. 31
Bergkamp Lucas, “Liability and Environment Private and Public Law Aspects of Civil liability for Environmental Harm in an International Context”, Draft 10, April 2001, downloaded from http://papers.ssrn.com/paper.taf?abstract_id=266365 on July 5 2008
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“If strict liability is not imposed f or the residual damages caused by partially controlled polluting activity, these damages will not be reflected in the price of commodities produced by such activity. As a result, commodities with whose production pollution is associated will be under-priced relative to commodities whose production causes no pollution, resulting in 32
resource misallocation.”
shows that in a market setting, in the long run, under the negligence rule, there will be Polinsky excessive entry in the market by parties or firms prone to inflicting injury, thereby increasing the probability of pollution and/or environmental damage. On the other hand, under the strict 33
liability regime, there would be an excessive entry of victims. Since most countries have their goal as reducing and penalizing pollution (as opposed to an optimal number of victims and lawsuits), strict liability seems to be the better choice as a liability rule. Therefore, economists, lawyers and policy-makers in the last few decades have converged towards implementing the Polluter Pays Principle and using the strict liability regime for the same. This is a distinct shift from the fault-based liability system and has in place a better incentive system for both injurers and victims.
Flaws in the PPP It is true that polluter pays principle has a positive effect to reduce pollution. The principle seems quite relevant for pollution that occurs during industrial activity, although it remains inefficient in the case of historical pollution. Most developing countries, however, have not yet subscribed to the PPP as a main environmental policy guideline. As Rege (1994) points out, this is due to adverse economic conditions. Legal theorists discovered few loopholes of this rule. The flaws are as follows:
Firstly, ambiguity still exists in determining ' who is a poll uter' . In legal terminology, a 'polluter' is someone who directly or indirectly damages the environment or who creates
32
Krier James E. and Stewart Richard B., “Environmental Law and Policy: Readings, Materials and Notes”, 1978, 2d
ed., Indianapolis, USA. 33
0 Polinsky A.Mitchell, “Strict Liability vs. Negligence in a Market Setting”, Journal of American Economic
Association, May 1980 on page 363.
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conditions relating to such damage. Clearly, this definition is so broad as to be 34
unsupportive in many situations.
Second, a large number of poor households, informal sector firms, and subsistence
farmers cannot bear any additional charges for en ergy or for waste disposal. Third, small and medium-size firms from the formal sector, which mainly serve the home
market, find it difficult to pass on higher costs to the domestic end-users of their products. Fourth, exporters in developing countries usually cannot shift the burden of cost
internalisation to foreign customers due to elastic demand. Lastly, many environmental problems in developing countries are caused by an
overexploitation of common pool resources. Access to these common pool resources (in line with the PPP) could be limited in some cases through assigning private property rights, however, this solution could lead to severe distributional conflicts. All of these problems make it difficult to implement the PPP as a guideline for environmental policy in developing countries. Despite the fact that Polluter Pay Principle was publicized by early conservationists as a means to reduce ecological pollution, still many consider it as a 'vague 35
idea'. Some put forward their argument that under this principle a polluter fulfils his obligations when he pays at least some of administrative expenses of the agencies who regulate pollution 36 activities. „ Ex xon Val dez' case is the best example of this criterion of Polluter Pays Principle.
Others argue that it can only be satisfied by polluters when they will pay the total depollution cost. And the rest support the view that tax (like 'Carbon Taxes') should be legitimised on the 37
users of the natural resources that cause atmospheric hazards.
34
For example, Mr.Aryaan owns a BMW .If his BMW emits harmful gas in the atmosphere, he will be directly liable for the emission .Furthermore, the manufacturer of the vehicle will be indirectly liable for committing ecological damage too and so the retailer of the vehicle and the fuel supplier, and the government who created 'conditions relating to the damage' by building roads a nd neglecting public transport regulations. 35 http://www.unece.org/ie/intersol/documents/s.8e.pdf (Who can pay for depollution ? an economic approach) 36 In 1989, an oil tanker owned by Exxon spilled out over 300,000 barrels of crude oil into the sea and caused significant environmental hazard. Exxon was forced to pay $125 million in fines to the federal government and the state of Alaska and $900 million into a fund for environmental projects controlled by government, habitat protection, and scientific research, among other things 37 Barrister Abu Hena Mostofa Kamal, "Polluter pays principle and its limitations"
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The Problem with Indian Environment Law and the Polluter Pays Principle A problem that is very specific to India is that “leg al redressal through private law may not be an option for most of the poor, illiterate, uneducated and rural masses because often they are 38
unaware of their rights and of legal procedures” . There is also certain disillusionment prevalent because courts in India are unable to provide relief and redressal to citizens due to legal delays, higher litigation costs, complicated legal procedures, and a general apathy towards smaller, less urgent, cases.
39
While the Polluter Pays Principle using the absolute liability regime has designed a better incentive and cost internalisation structure; it is not perfect and h as its own set of drawbacks. The first problem faced by all liability regimes is that like the harms of degradation on the environment are externalised, so are the benefits of environmental litigation. Therefore, often the damage borne by an individual is very small and the compensation he shall receive from the courts shall also be small, whereas the cost of environmental litigation is usually high. Thus, there is the problem of
“rational disinterest ”
as the expected compensation may not be enough 40
to induce any individual victim to sue the injurer . This problem of rational disinterest is further exacerbated in the case of health problems, when the victims are insured. This problem is particularly heightened in India, where the common man already suffers much disillusionment towards the Indian judiciary and the criminal justice system. This problem has been partly mitigated by allowing class-action tort or PIL. It is however seen in practice that most legal 41
systems have very little exposure to such litigation . Second, the outcome of civil liability “would be inefficient if the tortfeasor has the opportunity of settling with the a few potential litigants in return for continuing his polluting activity. This small portion of the victims could become a credible threat and appropriate due compensation out-of-court from the tortfeasor leaving the majority to their fate. Here only a part of the social 38
6 Prasad P.M., “Environmental Protection: The Role of Liability System in India”, Economic and Political Weekly,
January 17th 2004, on page 257 39
Ibid
40
Ott Claus and Schäfer Hans- Bernd, “Special Problems in Civil Liability”, The Economic Analysis of Civil Law, 2004, Edwar Elgar Publishing Ltd, UK; Ott Claus and Schäfer Hans- Bernd , “Widening the Scope of Environmental Liability”, Erling Ide and Roger van den Bergh, Eds, Law and Economics of the Environment 1996, (J & F), page 109 114 41 9 Schäfer Hans- Bernd, “The Bundling of Similar Interests in Litigation. The Incenti ves for Class Action and Legal
Actions Taken by Associations,” European Journal of Law and Economics, 2000, page 183 22 | P a g e
cost is internalized by the tortfeasor by means of paying compensation to group A. This leaves the economy still in a sub-optimal equilibrium where the socially damaging activity is over42
supplied”.
Thirdly, even in strict liability regimes where one does not need to prove fault; causation must be proved and attributed to the injurer. To begin with, there may be many given sources or causes for a particular pollutant and it may not be possible to impute the source to the injurer. And more often than not, environmental damage is cumulative and it is difficult to attribute the share of damage. The problem is exacerbated further in those cases where there is a latency period between the event of pollution and the time when the harm manifests itself on the victim. It is also difficult or impossible to determine harm in cases where the environment increases the 43
probability of a certain disease, but may not be the only manifest cause.
A fourth, more crucial problem often faced by courts is that the injury suffered by an individual due to the pollution must be protected by a legal right. In the case of environment, it becomes difficult to delineate clear property rights especially when it concerns an injury like deforestation, as opposed to something more explicit such as chemical poisoning. The fifth problem is that in many cases where the damage is large with many victims suing for compensation, the injurer might be judgment proof. This implies that he may be insolvent or may not have the required solvency to pay for the full damage caused by his actions. This problem may be mitigated by using insurance for environmental liability. Finally, there is the problem of assessment of damages, which is often faced by courts. This partly follows from the inability to delineate property rights and partly from the problem of cumulative pollution over many years by many polluters. In many cases, the effects of certain environmental harms are still unknown and therefore it becomes more difficult to estimate damages.
42
0 Raja, A.V and Rathinam, Francis, “Economic Efficiency of Public Interest Litigations (PIL): Lessons from India”
Munich Personal RePEc Archive, MPRA Paper No. 3870, June 2005, Munich Germany, downloaded from MPRA at http://mpra.ub.uni-muenchen.de/3870/ on July 17 2008. 43 OECD: “Recommendation of the Council concerning the Application of the Polluter -Pays Principle to Accidental Pollution C (89)88.”, 1989, Paris, France.
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The extended Polluter Pays Principle demands that the polluter not only ceases to pollute or reduce his activity; but also pays for the reversal of the environmental degradation in the past. The Principle is an important economic tool as it reduces pollution by cost internalisation. This principle is particularly effective for current pollution or the current polluting activities of a firm. However, in a situation where the firms are liable to clean the environment, the Principle looks less efficient. The problem of causation, which exists in the Polluter Pays Principle, is 44
magnified in the extended Polluter Pays Principle especially in matters of historical pollution.
Even if causation is determined, in a country like India, a large number of poor households, informal sector firms, and subsistence farmers cannot bear any additional charges for energy or for waste disposal. Even where firms and farmers are able to bear the costs, an additional problem arises because for exporters, their competitiveness in foreign markets is compromised or they have to bear the 45
entire cost of ecological restoration and this drives them out of the market.
44
Guelton Sonia, “Who can pay for depollution ? an economic approach”, Laboratoire d'Observation de l'Économie
et des Institutions Locales, TRADE/WP.8/AC.1/SEM.7/2002/4/S.8, 2002, downloaded from www.unece.org/ie/intersol/documents/s.8e.pdf on July 28 2008. 45 Interpretation of Polluter Pays Principle (PPP) In India, October 9 2007, available at http://www.legalserviceindia.com/article/l54-Interpretation-of-Polluter-Pays-Principle.html accessed on 21 July 2008.
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The Evolution of PPP in India Despite the potential that the polluter pays principle holds to protect the environment, it was not 46 a part of the law in India till it was invoked in the En viro-L egal A ction case as late as 1996. In
47
this case the court affirmed the principle of absolute liability as stated in the Oleum Gas L eak
and extended it. The court lay down, "The polluter pays principle demands that the case financial costs of preventing or remedying the damage caused by pollution should lie in the undertakings which cause the pollution or produce the goods that cause the pollution." The judgement of the above case on the polluter pays principle and the justification for invoking it was re-affined by another Bench in 1996, in the case of Vell ore Citi zens Welfar e F oru m v. 48
. In these cases the use of the polluter pays principle has been justified via the Union of I ndia 49
50
51
constitutional mandate, statutory provisions and international customary law.
The Indian judiciary has both acknowledged and implemented the Polluter Pays Principle in many decisions on environmental pollution. On the other hand, it has also made the state pay for damages and asked it to recover the same from the polluter. Indian environmental policy and judicial decision making differs significantly from the rest of the common law legal system. This section gives an insight into the legislative and judicial standards and principles for environment law in India and discusses the Indian Supreme Court [Hereinafter “SC”] interpretation and enforcement of the Polluter Pays Principle and no-fault liability. This will enable us to analyse the efficiency of a system requiring the state to pay damages to the victim and allowing it to recover the same from the polluter.
46
Ibid 3 (1987) 1 see 395 48 Supra 3, hereinafter referred to as the Oleum Gas Leak Case, (1996) 5 see 647. In this case tanneries and other industries in the state of Tamil Nadu were discharging untreated effluents into the agricultural fields, roadsides, waterways and open lands. The untreated effluents were finally discharged into the river Palam, which was the main source of water supply to the resident of that area. 49 Under Article 21 and Article 47: The most relevant provision invoked was Article 48-A, which states that the State will endeavour to protects and improves the environment and Article 51-A (g) which ensures the protection of the natural environment. 50 The Water Act, 1974; the Air Act, 1981 and the Environmental Protection Act, 1986 51 Infra 47
25 | P a g e
Indian Judiciary and PPP 52
"We are interested not only in the development but also in the enforcement of law"
- Justice Christopher G. Weeramantry [Vice President of the ICJ] 53
In India, the rule followed on strict liability was first laid down in Ryland v. Fletcher . In this case, the rule laid down was that if a person employs non-natural use of land, then he is strictly liable for the damage caused by any escape of matter from that land. The law already provides exceptions to this rule.
54
However, in the wake of the Bh opal Gas Tragedy , the SC felt the need to evolve new jurisprudence to keep up with a developing and highly industrialised economy. In 1985, during the situation involving an industrial oleum gas leak in New Delh i , the SC evolved a new principle called the principle of Absolute Liability. “Where an enterprise is engaged in a hazardous or inherently dangerous activity resulting, for example, in the escape of toxic gas, the enterprise is strictly and absolutely liable to compensate all those who are affected by the accident and such liability is not subject to any of the exceptions which operate vis-à-vis the 55
tortuous principle of strict liability.” Therefore, it is clear that the SC has removed all exceptions and given a v ery strict meaning to no-fault liability. In 1995, the courts used this rule in case of workers working in asbestos mines exposed to extreme health hazards. The SC used the absolute liability principle and held that even if the mine owners were not at fault, by bringing their workers in contact with hazardous substances, they were vulnerable to liability. The SC ordered many asbestos mines and industries to pay 56
compensation to workers who had contracted asbestosis.
52
www.e-wasteproject.org/docs/del_usha.pdf Rylands v Fletcher L.R 3 H.L. 330 (1868) 54 The five exceptions to strict liability are - If the victim consented to the harmful substance present or contributed to the escape of the substance on the land; If the injurer employed non-natural use of land for the common benefit of the injurer and the victim and the injurer was non negligent; If the escape and damage is caused by the act of a third party; If the escape is caused due to an Act of God or by natural circumstances without human interference where no foresight or prudence could avoid damage; The rule of strict liability may be excluded by a statute or a statutory authority 55 MC Mehta v Union of India AIR 1987 SC 1086 at 1099 56 Consumer Education and Research Center v Union of India AIR 1995 SC 992 53
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In the above cases, the SC has also recognized and implemented the Pollu ter Pays Pri nciple in 57 environmental cases and allowed for no fault liability. In the Bi chchri vill age case , the SC held
that the question of damages must be determined by the now universally accepted Polluter Pays Principle. “The Polluters Pays Principle demands that the financial costs of remedying damage caused by pollution should lie with the undertakings which cause the pollution, or produce the 58
goods which cause the pollution”
In many cases in the 1990s, the SC has categorically blessed the marriage of absolute liability and the Polluter Pays Principle; this is now followed as established environmental jurisprudence. “The polluter pays principle as interpreted by this court means that the absolute liability for harm to the environment extends not only to compensate the victims of pollution but also the cost 59
of restoring the environmental degradation”.
Under this principle, it is not the role of the
government to meet the costs involved in either the prevention of such damage, or in carrying out remedial action, because of effect of this would be to shift the financial burden of pollution incidence to the taxpayer.” 60
61
In the following years, in the southern Indian states of Tamil Nadu and Andhra Pradesh , many villagers were victims of pollution by tanneries and other industries producing toxins such as sulphur dioxide. A PIL was filed in both situations and the SC held that principles that were part of international environmental law were now part of the domestic law through treaties and the interpretation of the SC. It upheld the Polluter Pays Pri nciple and the precauti onary principle as important features of sustainable development in India and also held the polluting
firms absolutely liable for their actions. Another important principle evolved by the SC of India in this regard is the Deep Pocket 62
Theory . Justice Bhagwati , one of the pioneers or judicial activism in India and the author of
the principle of absolute liability, felt that the amount of damages payable an enterprise should be “correlated to the magnitude and capacity of the enterprise because such compensation must have deterrent effect. The larger and more prosperous the enterprise greater must be the amount 57
Indian Council for Enviro-Legal Action v Union of India AIR 1996 SC 1446 Ibid . 59 MC Mehta v Union of India AIR 1997 SC 761 60 Vellore Citizens Welfare Forum v. Union of India (1996) 5 SCC 647 61 Andhra Pradesh Pollution Control Board v Prof MV Nayadu (1999) 2 SCC 718 62 MC Mehta v Union of India AIR 1987 SC 1086 58
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of compensation payable by it for the harm caused on account of an accident in the carrying on of the hazardous or inherently dangerous activity by the enterprise”. However the Deep Pocket Theory was rejected in the Union Carbide Settlement and has since then not been used very
often. However, even though the Deep Pocket Theory has not been used, it has become a common practice to award exemplary damages in case of rogue industries or in cases, where there is extreme violation of law. There have also been cases, where imprisonment was ordered under the penalty provisions of the Environment Protection Act, 1986. While discussing the cases where the SC shaped the environment law for the country, it is pertinent to mention some very important substantive and procedural issues. The above mentioned procedure has been followed in many cases involving the environment. The first reasons is that under the Indian Constitution, a writ petition can only be filed for infringement of fundamental rights under Article 32 and such Fundamental Rights are enforceable only against the
“State”
63
. Therefore if these environmental cases had to be filed
without a class action suit, they had to fulfil the basic grounds for a PIL, which meant that the petition must be filed against the State. However, most of the polluting industries were private enterprises and therefore no writ petition could lie against them. In this regard, the SC has included the appropriate government authority in the matter and a writ petition may be filed against it. The SC has held that if it finds that the government or the authorities concerned have not taken the action required of them, and their inaction has affected the right to life of citizens, it is the duty of the Court to intervene and the Court can issue the necessary directions. For instance, in the case of Bichchri village , the pollution was caused by private industries. However, the PIL was not filed against these units but against the Union of India, the State Government of Rajasthan and the State Pollution Control Board of Rajasthan. This was on the ground that they failed to carry on their duties as the pollution control authority to keep private
63
Under Article 12 of the Indian Constitution as "the State" includes the Governmental and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.
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industries in check and therefore violated the right to life of citizens under Article 21. This is an excellent example of judicial activism and creativity employed by the SC to ensure that a forum under PIL is available even against private industries. The Environmental Protection Act, 1986 gives the government plenary powers to take all steps necessary for protecting and improving the environment. It also allows for the appointment of several general and expert authorities for implementing the environmental policy of the 64
government . The Act also gives the government or governmental authority the power to issue directions to any person with regard to complianc e with the Act. Therefore, the various Pollution Control Boards and environmental authorities are free to take 65
action including closure of industries and criminal action against persons violating any provision of environment laws. The judiciary in India recognizes the Polluter Pays Pri nciple as is seen from the judgment 66
delivered by the Supreme Court of India in writ petition no 657 of 1995. In its order dated Feb.4, 2005, The Supreme Court held that " The Polluter Pays Principle means that absolute liability of harm to the environment extends not only to compensate the victims of pollution, but also to the cost of restoring environmental degradation. Remediation of damaged environment is part of the process of sustainabl e development.” In order to link law and sustainable development I have divided sustainable development into two components:1. Environmental Justice
Social Justice
2. The two principles of justice are
Polluter Pays Principle (PPP)
Precautionary Principle (PP)
During the two decades from Stockholm to Rio " Sustain able Development" has come to be accepted as a viable concept to eradicate poverty and improve the quality of human life while 64
5 Section 3, 4 and 5 of the Environment Protection Act, 1986 Suo Moto v Vatva Industries AIR 2000 Guj 33 66 AIR 1996 SC 1446, Indian Council f or Enviro-Legal Action v. UOI & Ors. 65
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living within the carrying capacity of the supporting eco-systems. " Sustainable D evelopment" as defined by the Brundtland Report means "development that meets the needs of the present without compromising the ability of the future generations to meet their own needs" . We have no hesitation in holding that " Sustainable Development' as a balancing concept between ecology and development has been accepted as a part of the Customary International Law though its salient features have yet to be finalised by the International Law jurists. Some of the salient principles of " Sustainable D evelopment" , as culled-out from Brundtland Report and other international documents, are Inter-Generational Equity, Use and Conservation
of Natural Resources, Environmental Protection, the Precautionary Principle, Polluter Pays principle, Obligation to assist and cooperate, Eradication of Poverty and Financial Assistance to the developing countries. I am, however, of the view that " The Precautionary Principl e" and " The Poll uter Pays" principle are essential features of " Sustainable Development" . " The Poll uter Pays" principle has been held to be a sound principle by this Court in Indian 67
Council for Envir o - Legal Action v. Union of I ndia , The Court observed, "We are of the opinion that any principle evolved in this behalf should be simple, practical and suited to the conditions obtaining in this country" . In this case the number of private companies operated as chemical companies were creating hazardous wastes in the soil, henceforth, polluting the village area situated nearby, and they were also running without licenses, so an environmental NGO, filed writ petition under article 32 of the COI, which sought from the court to compel SPCB and CPCB to recover costs of the remedial measures from the companies. The Court ruled that "Once the activity carried on is hazardous or inherently dangerous, the person carrying on such activity is liable to make good the loss caused to any other person by his activity irrespective of the fact whether he took reasonable care while carrying on his activity. The rule is premised upon the very nature of the activity carried on". Consequently the polluting industries are "absolutely liable to compensate for the harm caused by them to villagers in the affected area, to the soil and to the underground water and hence, they are bound to take all necessary measures to remove sludge and other pollutants lying in the affected areas". 67
J.T. (1996) 2 196
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The " Polluter Pays" principle as interpreted by the Court means that the absolute liability for harm to the environment extends not only to compensate the victims of pollution but also the cost of restoring the environmental degradation. Remediation of the damaged environment is part of the process of " Sustainable Development" and as such polluter is liable to pay the cost to the individual sufferers as well as the cost of reversing the d amaged ecology. The court further stated that: "According to this principle, the responsibility for repairing the damage is that of the offending industry. Sections 3 and 5 empower the Central Government to give directions and take measures for giving effect to this principle. In all the circumstances of the case, we think it appropriate that the task of determining the amount required for carrying out the remedial measures, its recovery/realisation and the task of undertaking the remedial measures is placed upon the Central Government in the light of the provisions of the Envir onment [ Protection] A ct , . It is of course, open to the Central Government to take the help and assistance of State 1986 Government, R.P.C.B. or such other agency or authority, as they think fit." 68
In M.C.Mehta v. Union of I ndia , SC referred the case of En viro-L egal Action and Vellore and ordered the Calcutta tanneries to relocate and pay compensation for the loss of Ci ti zens case ecology/environment of the affected areas and the suffering of the residents. 69
In Vell ore Citi zen' s case , court held that: The precautionary principle and the polluter pays principle have been accepted as part of the law of the land. Article 21 of the Constitution of India guarantees protection of life and personal liberty. Article 47, 48A and 51 A (g) of the Constitutional are as under:
Article 47: Duty of the State to raise the level of nutrition and the standard of living and to improve public health. - The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and in particular, the State shall endeavour to bring about prohibition of
68
WP 3727/1985 (19 December, 1996) AIR 1996 SC 2715
69
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the consumption except from medicinal purposes of intoxicating drinks and of drugs which are injurious to health.
Article 48 A: Protection and improvement of environment and safeguarding of forests and wild life. The State shall endeavour to protect and improve the environment and to safeguard the forests and wild life of the country.
Article 51 A (g): To protect and improve the natural environment including forests, lakes, rivers and wild life, and to have compassion for living creatures.
In this case only, the court considered a public interest litigation highlighting discharge of toxic waste and polluted water from the large number of tanneries in the State of Tamil Nadu. A three judges‟ bench led by Ju sti ce Ku ldi p Sin gh adopted a very strict stand against the polluting tanneries. In this case the court reviewed the history of the concept of sustainable development under international law. In this connection the court briefly referred important legal developments such as the Stockholm Conference 1972, Burndtland Commission Report, 1987, Caring of the Earth Report, 1991, Rio Conference, 1992, Convention on Climate Change, 1992, Convention on Biological Diversity, 1992 and Agenda -21 (A programme of Action for Twentyfirst Century) etc. The important legal findings of the Vellore case, relevant for this article, are summarized below.
The court held that " Sustainable Development " as a balancing concept between ecology and development has been accepted as a part of customary international law though its 70
salient features are yet to be finalized by the international law jurists.
The court was of the view that " The precauti onary Pri nciple" and " The Poll uter Pays 71
Principle" are essential features of " Sustainable D evelopment."
The Precautionary Principle and the Polluter Pays Principle have been accepted as part of the law of the land.
72
According to the court, “once these principles are accepted as part of the customary International law there would be no difficulty in accepting them as part of the domestic law. It is almost an accepted proposition of law that the rules of Customary International
70
( p. 658, Para 10, supra note 25) ( ibid., p. 658, Para 11). 72 (ibid., pp. 659-660, Paras 13 & 14). 71
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Law which are not contrary to the municipal law shall be deemed to have been 73
incorporated in the domestic law and shall be followed by the courts of law”. 74
In Samath a case , only meaning and importance of the term sustainable development as well as "the polluter pays principle as a facet thereof " have been briefly mentioned and 75
affirmed by the Supreme Court. In Nu yudu case , citing Vellore case the Supreme Court felt 76
it necessary to further elaborate the meaning of precautionary principle in more detail‟.
In
77
referred Sardar Sarovar D am , majority judgment (Ki rpal, J. for hi mself and Anand, CJI .) the Nayudu & Vellore Cases and approved the construction of a mega dam and found it compatible with the concept of sustainable development which requires that mitigative steps should be taken. The court refused to apply the precautionary principle in this matter by distinguishing the dam with the hazardous industries. Apart from the constitutional mandate to protect and improve the environment there are plenty of post-independence legislations on the subject but more relevant enactments for our purpose are:
The Water (Prevention and Control of Pollution) Act, 1974 (the Water Act),
The Air (Prevention and Control of Pollution) Act, 1981 (the Air Act) and
The Environment Protection Act 1986 (the Environment Act).
The Water Act provides for the Constitution of the Central Pollution Control Board by the Central Government and the Constitution of the State Pollution Control Boards by various State Governments in the country. The Boards function under the control of the Governments concerned. The Water Act prohibits the use of streams and wells for disposal of polluting matters. Also provides for restrictions on outlets and discharge of effluents without obtaining consent from the Board. Prosecution and penalties have been provided which include sentence of imprisonment. The Air Act provides that the Central Pollution Control Board and the State Pollution Control Boards constituted under the Water Act shall also perform the powers and
73
(ibid.,p. 660, Para 15). Samatha, v. State of A.P. & others (1997) 8 SCC 191, 274. (Para 123) (Decided on July 1 1, 1997 by three judges’ bench) 75 A.P. Pollution Control Board v. Prof. M.V. Nayudu (1999) 2 SCC 718, 732-34 (Para 30, 31 & 36) 76 (Para 32, p. 733) 77 Narmada Bachao Andolan v. Union of India 2000 (7) SCALE 34, 91-92. (pares 119-121) (AIR 2000 SC 3751) 74
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functions under the Air Act. The main function of the Boards, under the Air Act, is to improve the quality of the air and to prevent, control and abate air pollution in the country. In view of the above mentioned constitutional and statutory provisions i have no hesitation in holding that the precautionary principle and the polluter pays principle are part of the environmental law of the country. Even otherwise once these principles are accepted as part of the Customary International Law there would be no difficulty in accepting them as part of the domestic law. It is almost accepted proposition of law that the rule of Customary International Law which is not contrary to the municipal law shall be deemed to have been incorporated in the domestic law and shall be followed by the Courts of Law. To support i am relying to Justice H.R. Khanna's opinion in 78
79
Addl. Di stt. M agistr ate Jabalpur v. Shi vakant Shukl a , Jol ly George Varghese' s case and 80
Gr amophone Company' s case . 81
In the Kamal nath ' s case , court by considering the PPP as the law of the land, ordered that: " I t i s thu s settl ed by thi s Cour t th at one who poll utes the environ ment must pay to reverse the damage caused by hi s acts." Court disposed this matter by giving a show cause notice to the
span motels, that, why Pollution-fine and damages be not imposed as directed by us. This case 82
subsequently came up in front of the court in the year 2000 and court directed to the span motels that: " The powers of thi s Cour t un der A r ticl e 32 are not restr icted and it can award damages in a PI L or a Wr it Petit ion as has been h eld i n a ser ies of decisions" .
Henceforth, court directed a fresh notice to be issued to M/s. Span Motel to show cause why in addition to damages, exemplary damage is not awarded for having committed the acts set out and 83
detailed in the main judgment. Finally in 2002 , while granting exemplary damages court held that:
78
MANU/SC/0062/1976 MANU/SC/0014/1980 80 MANU/SC/0187/1984 81 (1997) 1 SCC 388 82 2000 AIR SCW 1854 83 AIR 2002 SC 1515 79
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" Liability to pay damages on the principle of ' poll uter pays' in addition to damages, exemplary damages for having committed the acts set out and detailed in the main judgment. Considering the object underlying the award of exemplary damages to be to serve a deterrent for others not to cause pollution in any manner. So the quantum at Rs. 10 lakhs is fixed for the span motels." 84
While applying the principle of Polluter Pays, the Supreme Court later expressed the view that compensation to be awarded must have some correlation not only with the magnitude and capacity of the enterprise but also the harm caused by it. The applicability of the principle of Polluter Pays should be practical, simple and easy in application. In Deepak Ni tri te , while remanding the matter to the High Court for reconsideration, the Supreme Court expressed the view that the possibility of 1% of the turnover o f the enterprise may be adequate compensation. In Research F oundati on f or Science Techn ology Nati onal Resour ce Poli cy v. Union of I ndia 85
& A nr . , while examining the precautionary principle and polluter pays principle, the legal
principles noticed in brief were: - "The legal position regarding applicability of th e precautionary principle and polluter pays principle which are part of the concept of sustainable development in our country is now well settled. 86
In Karn ataka I ndustri al Ar eas v. Sri C. Kenchappa & Ors , it was held by the court that In the Rio Conference of 1992 great concern has been shown about sustainable development. " Sustain able development" means `a development which can be sustained by nature with or
without mitigation'. In other words; it is to maintain delicate balance between industrialization and ecology. While development of industry is essential for the growth of economy, at the same time, the environment and the ecosystem are required to be protected. The pollution created as a consequence of development must not exceed the carrying capacity of ecosystem. The Courts in various judgments have developed the basic and essential features of sustainable development. In order to protect sustainable development, it is necessary to implement and enforce some of its main components and ingredients such as - Precautionary Principle, Polluter Pays and Public Trust Doctrine. We can trace foundation of these ingredients in number of judgments delivered by this Court and the High Courts after the Rio Conference, 1992.
84
8 Deepak Nitrite v. State of Gujarat & ors, (2004) 6 SCC 402 [2003 (9) SCALE 303]; decided on 2005 86 on 12 May, 2006; Appeal (civil) 7405 of 2000 85
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The importance and awareness of environment and ecology is becoming so vital and important that we, in our judgment, want the appellant to insist on the conditions emanating from the principle of `Sustai nabl e Development' . 1. We direct that, in future, before acquisition of lands for development, the consequence and adverse impact of development on environment must be properly comprehended and the lands be acquired for development that they do not gravely impair the ecology and environment. 2. We also direct the appellant to incorporate the condition of allotment to obtain clearance from the Karnataka State Pollution Control Board before the land is allotted for development. The said directory condition of allotment of lands is converted into a mandatory condition for all the projects to be sanctioned in future. 87 In Thilakan v. Cir cle I nspector Of Poli ce An d others , the principle of sustainable
development and the doctrines of 'polluter pays' and 'precautionary principle' is part of our environmental law, which is built around Article 21 of Constitution of India. The conditions impugned in this Writ Petition are necessary to protect the environment. If every land owner, driven by profit motive, is to dig his land to win sand, no land except pits will be left for the future generations. So, the petitioners should stop mining, when it reaches the ground water level and immediately all the pits should be filled up, as provided in condition No. 16, which reads as follows: All excavations have to be immediately filled and reclaimed. 88 In Soman v. Geologist , it was held that all the grantees of mining permits have executed
agreements in stamp-papers worth Rs. 50/-, agreeing to fill the pits, after the mining of sand is over. The learned Government Pleader has pointed out that many of the licensees have abandoned the pits, after the mining is over. Not only, going by the principle "Polluter Pays"; they are bound by the conditions of the permits and also by the agreements executed by them to fill the land. But, if any of the licensees, including the petitioners does not fill the land once the mining is stopped, the Geologist shall prepare estimates or cause to prepare estimates, regarding the amount required for filling the pits. The said amount, including cost escalation, if any, shall
87
on 23 October, 2007; AIR 2008 Ker 48, 2007 (3) KLJ 509 on 24 August, 2004; 2004 (3) KLT 577
88
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be recovered from him, invoking the provisions of the Kerala Revenue Recovery Act and the pits shall be filled, using the said amount. 89
In H in dustan Coco-Cola B everages v. M ember Secretary, West B engal Pcb , it was held that before applying the principle of " polluter should pay" , an authority has to first ascertain and determine the damage caused by the polluter and the amount which is necessary to rectify the damage. Even otherwise the amount so realized is required to be utilized for the purpose of restoring the environment and not otherwise. On the absence of such assessment, it would not be justified to arbitrarily direct a person to deposit a lump sum amount. The aforesaid facts and position of law were not kept in mind while passing the impugned order and as such the same cannot be sustained in the eye of law. Before parting we feel it proper to express our concern with regard to presence of heavy metals such as lead (Pb) and cadmium (Cd.) in the discharged effluent. Presence of said substances in the effluent would finally contaminate the environment, and shall cause hazards to human life. It appears, no steps, howsoever has been taken by the WBPCB or by the Appellant to trace out the source of such heavy metals found in the effluent. It is quite possible that heavy metals / (Pb, Cd etc.) may also be present in the products. We, therefore, direct the WBPCB as well as the Appellant to conduct analysis of the water and raw materials used for the purpose, and not only detect the source but also take appropriate steps for eradicating the same so as to avoid any adverse health impacts. we allow the Appeal and set aside the direction dated 2nd May, 2011 issued by the WBPCB and call upon the said Respondent to proceed in accordance with law. We also direct the Central Pollution Control Board, New Delhi / Zonal office at Kolkata, West Bengal to collect the effluent discharged from the Appellant's plant following the paraphernalia laid down under law, analyze the same in all aspects, particularly with regard to presence of heavy metals (Pb, Cd etc.) and prepare a report. It is needless to be said that the expenses for the said purpose shall be borne by the Appellant Company. The cost shall be assessed by the CPCB within two weeks from the date of service/production of certified copies of this judgment and same shall be deposited by the Appellant with the CPCB within two weeks, therefrom. The renewal of the consent to operate the plant would be dependent on the report of the Central Pollution Control Board.
89
on 19 March, 2012; APPEAL No. 10 of 2011
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90
In Court On I ts Own M otion v. State Of H imachal Pradesh and Or s we were informed by the State Government that it had created 'Green Tax Fund' in order to ensure proper development for protecting the environment in all its spheres. The persons who are travelling by public or private vehicles to the glacier of Rohtang Pass must pay a very reasonable sum of money as contribution on the principle of ' Poll uter Pays' . Thus, we direct that every truck, bus and vehicle of any kind which passes through the route ahead of Vashishta and Rohtang Pass shall be liable to pay a sum of Rs.100/- for heavy vehicles and Rs.50/- for light vehicles. The passengers travelling through the CNG or electric buses to Rohtang Pass as tourists shall be liable to pay a sum of Rs.20/- per head, which shall form part of the ticket for the bus. THE PRINCIPLE AS A FEATURE OF CUSTOMARY INTERNATIONAL LAW
The polluter pays principle was promoted by the Organisation for Economic Cooperation and 91
Development (OECD) during the 1970s when there was a great deal of public interest in environmental issues which resulted in demands on the Governments and other institutions to 92
introduce policies and mechanisms for the protection of the environment . The modern day 93
94
principle of polluter pays was first incorporated in Principles 21 and 22 of the Stockholm 95
96
Declaration, 1973. Thereafter, the European Charter on the Environmental and Health, 1989 97
and the Single European Act, 1986 made provisions for applying the polluter pays principle.
90
on 6 February, 2014; APPLICATION NO. 237 (THC)/2013(CWPIL No.15 of 2010) OECD: Principles On the Environment Ministerial Meeting of the OECD, adopted on May 24-26, 1972. cf II ILM 1172-73 (1972) 92 States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental policies and the responsibility to ensure that the activities within their jurisdiction or control do not cause damage to the environment of other states or to areas beyond the limits o f national jurisdiction. 93 States shall cooperate to develop further the international law regarding liability and compensation for victims of pollution and environmental damage caused by activities within the jurisdiction or control of such stat.es to areas beyond their jurisdiction. 94 The Charter provides that environmental standards should be constantly revised in light of new knowledge and new economic conditions applying the polluter pays principle whereby any public or private entity causing or likely to cause damage to the environment is financially responsible for restorative or preventive measures. cf Alexander Kiss and Dinnah Shelton, International Environmental Law 66 (1991). 95 11 ILM 1416 (1972) 96 The Rio Declaration on Environment and Development cf. 31 ILM 876 (1992) 97 States shall develop national laws regarding liability and compensation for Ihe victims of pollution and other environmental damage. States shall also cooperate in a more determined manner to develop further international law regarding liability and compensation for adverse effects of environmental; damage caused by activities within their jurisdiction or control to areas beyond their jurisdiction. 91
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98
The United Nations Conference on Environment and Development, 1992 in Principle 15 incorporates the polluter pays principle. More recently the member states of the Council of Europe and the European Economic Community adopted the Convention on Civil Liability for 99
Damage Resulting from Activities Dangerous to the Environment, which specifically deals with Tran‟s boundary pollution. It must be remembered that every breach of international law 100
gives rise to an obligation to make reparations.
Although traditional norms of state 101
responsibility concern the treatment of aliens and their property, the Trail Smelter arbitration recognised that the principle of state responsibility is applicable in a field of transfrontier pollution and consequently states may be held liable to private parties or other states for pollution that causes demonstrable damage to persons or property. The question that gains importance is whether the mere presence of a principle in a few instruments can have the effect of giving it the status of customary international law? 102
The International Court of Justice in the Nor th Sea Contin ental Shelf Case , delivered a landmark judgement determining whether a particular provision in a treaty had acquired the status of customary international law, thereby making it binding on those nations who are not signatories to the treaty concerned. According to the decision, state practice and opinio ju ris can enable a treaty to acquire the status of customary international law. The former requires that there be widespread acceptance by nations of the new norm and the latter signifies that the practice must have been rendered 103
obligatory by the existence of the rule of law requiring it.
98
31 ILM (1992) Object statement: "considering that emissions released in one country may cause damage in another country
99
and that therefore the problems of adequate compensation for such damage are also of an international nature ... having regard to the desirability of providing for strict liability in this field and taking into account the polluter pays principle." 100 Chorzow Factory (Indemnity) Case, (1928) pcn Ser. A.No.17, p.29. "Reparation must in so far as possible wipe out all the consequences of the illegal act and re-establish the situation which would in all probability have existed if that act had not been committed. Restitution in kind or if that is not possible, payment of a sum corresponding to the value which a restitution in kind would bear, the award, if need be, of damages for loss sustained which would not be covered by restitution in kind or payment in place of it." 101
1969 ICJ 3 The North Sea Case was followed by subsequent decisions of the World Court: Advisory Opinion on the Legality of the threat of Nuclear Weapons. ICJ Communique No. 96/23 (July 3, 1996) 103 Geoffrey Palmer, New Waysto Make International Environmental Law, Am J Int'l L 259, 265 (1992) 102
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The fact that 153 states were signatories of the Rio Declaration does not make the principle in the declaration one of international customary law. What is required is a demonstrable willingness to adhere to it and the practice of nations must alter according to the prescriptions of the new norm for it to attain the status of international customary law.
104
In the absence of any
clear intent among nations, incorporating the above two requirements of customary international law, one wonders how the principle of polluter pays has been incorporated into municipal law. Therefore the principle of polluter pays stands on a weak legal foundation, mainly because its 105
salient features have yet to be finalised b y international law jurists. THE ROLE OF MARKET BASED INSTRUMENTS
The developments of the polluter pays principle must also include mechanisms to safeguard against its potentially harmful effects while at the same time reduce uncertainties about its economic impact. Economists have expressed reservations about the economic viability of the polluter pays principle. Noted economist Kirit Parikh 106 cites four reasons: 1. The application of the principle in urban areas where the industrial sector is dominated by medium, small and tiny enterprises operating in a highly competitive market is risky as any higher costs from emission or other effluent clean up charge might adversely affect their competitiveness in relation to large firms that are capable of affording the installation of necessary equipment. 2. Even though the polluter pays principle does not prohibit the polluter from passing on the additional costs that he might incur in terms of increased costs, thereby increasing price of his product, the reality in developing nations may not always be this way. These nations which rely heavily on exports of primary commodities for which demand in the international market is elastic may find that the costs are entirely borne by the producers in the form of damage to human health, property and ecosystems. 104
Vellore Citizens Case, (1196) 5 SCC 47 at para 10 Both the relevant judgements fail to lay down a standard by which the damages in the case of environmental restoration are to be estimated 106 Kirit Parikh, The Polluter Pays Principle for Developing Countries: Merits, Drawbacks and Feasibility c.! Villod Rege, GATT Law and Environment Related Issues Aff ecting the Trade of Developing Countries, 26 J World Trade 95 at 150 (1994) 105
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3. Representing a larger objection to the inclusion of Polluter Pays in Indian law is the consequences it will have in the realm of the common property resource. The application of the principle will lead to the appropriation of rights by wealthy landlords to the disadvantage of the small land owners, if curbs are imposed on the manner in which a resource can be used, in this instance land. 4. The Court has not dealt with the fact that the level of charges to be imposed on the polluter are extremely difficult to estimate and therefore will give rise to difficulties. The implementation of the Polluter Pays principle has significant economic consequences, especially in the Third World where trade is carried out in commodities that are the products of 107
pollution intensive industries.
To offset the potential economic harm, the principle must be
implemented via Market Based Instruments.
108
The main aim of this is to induce efficiency in
environmental management through the use of market mechanisms. One of the suggested mechanisms to achieve the above mentioned goal is an environmental 109
assurance bond.
This is a bond that would provide a contractual guarantee that the principal
would perform in an environmentally benign manner, but would be levied for the current best estimate of the largest potential future environmental damages. Funds in the bond would be invested and would produce interest that would be returned to the principal. The bond would be held till the uncertainty or some part of it was removed.
110
This would provide a strong incentive
for the principal to reduce the uncertainty of the environmental impact of their activities as quickly as possible, by changing technology to being more environments friendly. The bonds could be administered by an independent regulatory authority, similar to that of the Pollution Control Board. A potential argument against such bonds is that it would favour relatively large firms that could afford to handle the financial responsibilities of activities potentially hazardous to the 107
Gupta, Opt for Market Based Instruments, The Economic Times 6 (September 8, 1997), Bangalore Hereinafter referred to as MBIs. 109 Attilio Bissio and Sharon Boots (Ed.),The Wiley Encyclopedia of Energy and the E1lvironment, 685 (1997) 110 A similar legislation has been enacted in India, in 1991. The Public Liability Insurance Act, 1991. According to S.4(1) ofthe Act every owner shall take out, before he starts handling any hazardous substance, one or more insurance policies providing for contracts of insurance whereby he is insured against liability to give relief under S.3(1). Where death or injury to any person (other than a workman) or damage to any property has resulted from an accident, the owner shall be liable to give such relief as is specified in the Schedule for such death, injury or damage. 108
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environment. But this will prevent firms that cannot handle the financial imposition from passing 111
on the cost of the environmental damage to the public.
This does not however exclude small
firms from the ambit of this principle. It is desired that these firms bond together to handle financial responsibility for environmental damage. They may also feel it is more profitable to 112
switch to less risky activities or technology that does not require such high assurance bonds.
111
Robert Costaza,General Policies To Achieve Sustainability, http://csf.colorado.edu/authorslhanson/p.8 Environmental costs are referred to as negative externalities because they are external to the decision making process. As per the polluter pays principle a particular standard is issued which must be complied with. The compliance results in costs, which in the case of absolute liability are calculated only when the damage occurs, unlike the polluter pays principle, where the cost is a continuous calculation. 112
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CONCLUSION
Its good that India that imbibed the Polluter Pays Principle (PPP) in their Law of land. And, it also had actually helped in imposing damages on the polluter but still the problem with this principle is that it hasn't been implemented properly. If we look at the exemplary damages granted to span motels doesn't serve the purpose of the exemplary damages. Ten lakhs rupees is nothing for the big corporations like span motels. For them at least Rs. 10 cores exemplary damages should be given. And again if we look at the penalty imposed in the Vellore Citizens case, then it just shocks me that how 10,000 rupees can justify the pollution spreaded by the tanneries in the nearby areas. The Author personally feels that this is not an effective way of fund raising. We should reconsider the criteria's laid to decide the compensation amount. At least it should deter the polluters from spreading pollution. This principle needs a strict interpretation from our judiciary with immediate effect and we just can't afford any sort of delay in its proper implementation in developing country, like India. The judgements of the Supreme Court undoubtedly go a long way in reaffirming the commitment of the judiciary in protecting the environment and remedying the ill-effects of pollution. However, the court has erred in the manner in which it has adopted the polluter pays principle, as one of international customary law without demonstrating how the principle actually fits into the ambit of international law. The drawbacks of the polluter pays principle as laid down by the Supreme Court are that there is no gradation system prescribed so that the Polluter Pays Principle can also have a deterrent effect on the industries. It is important for it to be financially unviable to violate environmental protection laws. Thus in addition to evaluating the cost of reparation of the damage, the size of the industry must also be considered so that the penalty can be graded accordingly. This is the only way to ensure that the polluter pays principle will have a deterrent effect on large industries, as often the damage to the environment is irreparable. Nevertheless, the polluter pays principle has set the stage for efficiency based environmental management, through the use of market mechanisms. The authors have identified three challenges that need to be countered to make the polluter pays principle effective, that the Supreme Court did not address43 | P a g e
1. To develop scientific methods to determine the potential costs of uncertainty vis-a-vis environmental damage. 2. To adjust incentives so that the appropriate parties pay the cost of this uncertainty. 3. To offer appropriate incentives to reduce the detrimental effects of the high risk activity. As strict liability for environmental damages becomes the norm, clairvoyant firms must take measures to protect themselves. The polluter pays principle is an improvement on strict liability because it explicitly moves the costs to the present where they will have a great deal of impact on decision making. In lieu of the logic, fairness and efficiency of the polluter pays principle, it promises to be both practical and feasible in helping us ward off the impending, Environmental crisis.
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