REPORT FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Under Article 14(2) of Directive 2004/35/CE on the environmental liability with regard to the prevention and remedying of environmental damage
Date: 2010-10-12
Institutions: European Commission
Subjects: anti-discriminatory measure, environmental liability, polluter pays principle, prevention of pollution

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EUROPEAN COMMISSION 

Brussels, 12.10.2010 
COM(2010) 581 final 

REPORT FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN 
PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND 
THE COMMITTEE OF THE REGIONS 

Under Article 14(2) of Directive 2004/35/CE on the environmental liability with regard 
to the prevention and remedying of environmental damage 

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REPORT FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN 
PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND 
THE COMMITTEE OF THE REGIONS 

Under Article 14(2) of Directive 2004/35/CE on the environmental liability with regard 
to the prevention and remedying of environmental damage 

1. 

INTRODUCTION 

This report is based on Article 14(2) of Directive 2004/35/CE on environmental liability with 
regard  to  the  prevention  and  remedying  of  environmental  damage1  (referred  to  below  as 
‘ELD’ or ‘the Directive’). The report assesses the effectiveness of the Directive in terms of 
actual remediation of environmental damage and the availability at reasonable costs of, and 
conditions for, financial security for the activities listed in its Annex III.  

Novel features of the Environmental Liability Directive 

The  main  objective  of  ELD  is  to  prevent  and  remedy  ‘environmental  damage’.  This  is 
defined as damage to protected species and natural habitats (nature), damage to water and 
damage  to  land  (soil).  The  liable  party  is  in  principle  the  ‘operator’  who  carries  out 
occupational  activities.  Operators  who  carry  out  certain  dangerous  activities,  as  listed  in 
Annex III of the ELD, are strictly liable (without fault) for environmental damage. Operators 
carrying out other occupational activities are liable for any fault-based damage they cause to 
nature.  Operators  may  benefit  directly  from  certain  exceptions  and  defences  (for  example 
force  majeure,  armed  conflict,  third  party  intervention)  and  defences  introduced  via 
transposition (for example permit defence, state of the art defence). 

Operators  have  to  take  preventive  action  if  there  is  an  imminent  threat  of  environmental 
damage. They are likewise under an obligation to remedy environmental damage once it has 
occurred and to bear the costs (‘polluter pays’). In specific cases where the operators fail to 
do so, or are not identifiable, or have invoked defences, the competent authority may step in 
and carry out the necessary preventive or remedial measures. 

The  report  does  this,  firstly,  by  looking  at  the  transposition  and  implementation  of  the 
Directive to examine how it has been applied in practice2,3. The Commission worked with the 
government  experts  group  on  the  ELD  on  transposition  and  national  implementation. 
Business  and  financial  security  providers,  i.e.  insurers,  brokers,  banks  and  financial 
institutions, as well as NGOs were also consulted. 

Secondly, it looks at the issue of financial security. To do this, the response of the financial 
sector  was  analysed  and  alternative  options  for  financial  security  were  assessed,  based  on 
information provided by the insurance and re-insurance industry on available ELD insurance 

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OJ L 143, 30.4.2004, p. 56. 
Financial  Security  in  Environmental  Liability  Directive.  Final  Report  August  2008.  Available  at: 
http://ec.europa.eu/environment/legal/liability/pdf/eld_report.pdf. 
Study  on  the  Implementation  and  Effectiveness  of  the  Environmental  Liability  Directive  (ELD)  and 
related 
at: 
http://ec.europa.eu/environment/legal/liability/pdf/ELD%20Study%20November%202009.pdf. 

Final  Report  November 

2009.  Available 

Financial 

Security 

issues. 

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products  and  coverage  in  the  EU  market.  Reports  on  the  ELD  by  the  Confederation  of 
European Insurers (CEA)4 and information on how operators and industry have responded to 
the Directive5 were also taken into account. Three aspects covered in particular are: the use of 
a  gradual  approach  allowing  Member  States  to  gradually  phase  in  mandatory  financial 
security,  starting  with  riskier  activities  and  operators  and  with  damage  to  soil  and  water; 
setting ceilings for financial guarantees; excluding low-risk activities. 

2. 

EFFECTIVENESS OF THE DIRECTIVE IN REMEDYING ENVIRONMENTAL DAMAGE 

To  examine  the  effectiveness  of  the  ELD  in  environmental  damage,  its  transposition  into 
national law and its implementation were assessed. 

2.1 

Transposition process 

The  Directive  entered  into  force  on  30  April  2004.  Only  four  Member  States6  met  the 
transposition deadline of 30 April 2007. The transposition of the Directive remained slow 
thereafter,  so  that  the  Commission  had  to  start  infringement  procedures  against  23  Member 
States.  During  this  procedure,  the  number  of  non-compliant  countries  was  reduced,  but  the 
Commission  still  had  to  refer  a  number  to  the  European  Court  of  Justice,  which  gave 
judgment against seven Member States in 2008 and 20097. 

The main reasons for the transposition delays were: 

(1) 

(2) 

(3) 

Existing legal frameworks — Member States that already had advanced liability rules 
on  environmental  issues  had  to  fit  the  new  legislation  into  these  existing  legal 
frameworks. 

Challenging  technical  requirements  such  as  the  need  for  economic  valuation  of 
environmental  damage,  the  different  types  of  remediation,  and  damage  to  protected 
species and natural habitats, which were novelties to most Member States. 

The framework character of the ELD, which leaves a wide margin of discretion to the 
Member States, with options that can only be decided upon during transposition; this 
led to delays, as the range of options needed to be debated at national level. 

2.2 

Implementation features 

The  framework  character  of  the  Directive  resulted  in  a  broad  divergence  on  several  key 
implementing provisions amongst the Member States: 

•  The  optional  extension  of  the  EU  scope  of  ‘damage  to  protected  species  and  natural 
habitats’  pursuant  to  the  Birds8  and  Habitats9  Directives  (Article  2(3)  ELD).  Fourteen 

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Navigating  the  Environmental  Liability  Directive.  A  practical  guide  for  insurance  underwriters  and 
claims  handlers  (2009);  The  Environmental  Liability  Directive.  Enhancing  Sustainable  Insurance 
Solutions  (2008);  CEA  White  Paper  on  Insurability  of  Environmental  Liability  (2007).  Available  at: 
http://www.cea.eu. 
Business  survey  on  environmental  issues  through  the  European  Business  Test  Panel  (2009)  (see 
footnote  15);  Ad-hoc  Industry  Natural  Resource  Damage  Group,  Report.  Survey  of  industrial 
companies, 2010. Also FERMA, Survey on Environmental Liability Directive Report, 2010. 
Italy, Lithuania, Latvia and Hungary. 
France, Finland, Slovenia, Luxembourg, Greece, Austria and UK. 
Directive  2009/147/EC  of  the  European  Parliament  and  of  the  Council  of  30 November  2009  on  the 
conservation of wild birds, OJ L 20, 26.1.2010, p. 7. 

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Member States decided to do so and included species and habitats protected under national 
or regional protection schemes in all or part of their jurisdiction (Austria, Belgium, Cyprus, 
Czech  Republic,  Estonia,  Greece,  Hungary,  Latvia,  Lithuania,  Poland,  Portugal,  Spain, 
Sweden and UK). 

•  Another  key  definition,  that  of  ‘operator’,  was  extended  by  all  but  one  of  the  Member 
States,  with  some  opting  to  give  this  definition  a  particularly  broad  scope  (Estonia, 
Finland, Hungary, Lithuania, Poland and Sweden). 

•  The  ELD  grants  Member  States  a  choice  as  to  whether  they  want  to  provide  a  ‘permit 
defence’ and/or a ‘state of the art defence’ that may be invoked by operators. Fewer than 
half decided to allow both defences: Belgium (at regional level), Cyprus, Czech Republic, 
Estonia (except GMOs), Greece, Italy, Latvia (except GMOs), Malta, Portugal, Slovakia, 
Spain,  UK  (except  GMOs  in  Scotland,  Wales).  Equally,  fewer  than  half  decided  not  to 
make  use  of  them:  Austria,  Belgium  (at  federal  level),  Bulgaria,  Germany,  Hungary, 
Ireland,  Netherlands  (applicable  only  after  check  of  reason),  Poland,  Romania  and 
Slovenia.  Denmark,  Finland  and  Lithuania  decided  to  allow  the  ‘permit  defence’  but  not 
the ‘state of the art defence’, while France allowed the ‘state of the art defence’ but not the 
‘permit  defence’.  Sweden  took  a  middle  position,  admitting  permit  and  state  of  the  art 
defences as mitigating factors in the decision process. 

•  For the scope of activities covered by strict liability, several Member States exempted the 
spreading of sewage sludge from waste management operations (Bulgaria, France, Latvia, 
Malta,  Portugal,  Romania,  Slovakia,  Slovenia  and  UK).  A  number  of  Member  States 
included  further  activities  not  mentioned  in  Annex  III  in  the  scope  of  strict  liability 
(Belgium,  Denmark,  Finland,  Greece,  Hungary,  Latvia,  Lithuania,  Netherlands  and 
Sweden). 

•  For  rules  on  multi-party  causation,  most  Member  States  opted  for  a  system  of  joint  and 
several liability, whilst a minority chose proportionate liability (Denmark, Finland France, 
Slovakia and Slovenia). 

•  Finally,  the  ELD  leaves  Member  States  to  decide  whether  to  introduce  a  system  of 
mandatory  financial  security  at  national  level.  Eight  Member  States  have  introduced 
mandatory  financial  security  entering  into  force  at  different  dates  up  to  2014:  Bulgaria, 
Portugal, Spain, Greece, Hungary, Slovakia, Czech Republic and Romania. These systems 
are subject to risk assessment of relevant sectors and operators, and dependent on various 
national  implementing  provisions  providing  for  issues  such  as  ceilings,  exemptions,  etc. 
However,  mandatory  financial  security  is  delayed  in  all  three  countries  where  it  was 
supposed  to  come  into  effect  in  2010  (Portugal,  Spain,  Greece)  because  essential 
provisions are not yet in place. The remaining Member States rely on voluntary financial 
security. 

2.3 

Limited implementation of ELD 

The slow transposition of the Directive has resulted in a limited number of cases being treated 
by  the  competent  authorities.  The  Commission  with  the  support  of  the  network  of  ELD 

9 

Council Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora, OJ L 
206, 22.7.1992, p. 7. 

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government experts10 identified 16 cases treated under the ELD at the beginning of 2010, and 
estimates that the total number of ELD cases across the EU may now be around 50. 

The most important obstacle to an examination of the effectiveness of the ELD is the fact that 
not much is known about the characteristics of these cases. Nevertheless: 

•  most  cases  relate  to  damage  to  water  and  land  and  only  a  limited  number  to  protected 

species and natural habitats. This finding does not apply evenly to all Member States 

•  in  most  cases  primary  remediation  measures  were  applied  immediately  (excavation  and 
soil  replacement  as  well  as  clean-up  of  water,  aiming  to  restore  the  site’s  baseline 
condition). However, none of the cases reported included information about the other two 
types of remediation (complementary and compensatory) 

•  the total costs of remedial measures, when known, range between €

 12 000 and €

 250 000 

•  the duration of environmental recovery varies considerably and is within the range of one 

week to three years for the cases reported 

•  the  activities  involved  were  almost  exclusively  listed  in  Annex  III  of  the  ELD,  falling 
mainly  under  the  IPPC  Directive11,  as  well  as  waste  management  operations,  and  the 
manufacture, use and storage of dangerous substances, preparations and related products. 

Remediation of environmental damage under the ELD 
Environmental damage may be remedied in different ways depending on the type of damage: 

- For damage affecting land, the Directive requires that the land concerned be decontaminated 
until there is no longer any serious risk of negative impact on human health; 

- For damage affecting water or protected species and natural habitats, the Directive aims to 
restore  the  environment  to  how  it  was  before  the  damage  had  the  damage  not  occurred. 
Remedying  of  environmental  damage  in  relation  to  water  or  protected  species  or  natural 
habitats  is  achieved  through  the  restoration  of  the  environment  to  its  baseline  condition  by 
way  of  primary,  complementary  and  compensatory  remediation.  The  damaged  natural 
resources or impaired services must be restored or replaced by identical, similar or equivalent 
natural resources or services either at the site of the incident or, if necessary, at an alternative 
site.  Annex  II  of  the  Directive  includes  definitions  of  the  distinct  types  of  remediation 
applicable to water and nature damage, as well as information on the measures that have to be 
taken  into  account  in  order  to  remedy  the  damage.  Remedying  interventions  need  to  take 
place on the damaged site itself or by creating similar resources in nearby areas. 

The  competent  authorities  judged  that  the  most  difficult  issues  were  the  complex  technical 
requirements  linked  to  the  economic  evaluation  of  damaged  resources/services  and 
environmental remediation methods, as well as the lack of binding thresholds for key terms 
such  as  ‘significant  damage’.  However,  Member  States  have  started  to  develop  guidelines 
and are building up their knowledge base on these questions (see Section 3). 

Reasons  for  the  relatively  low  number  of  ELD  cases  could  include  limited  knowledge  by 
operators.  But  it  may  also  reflect  the  preventive  effect  that  the  ELD  is  already  having. 
Another reason for the limited experience may be that some Member States maintained their 

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Member  States  are  not  obliged  to  report  data  to  the  Commission  for  this  report.  Information  was 
provided  on  a  voluntary  basis  by  government  experts  from  about  half  of  the  Member  States  and 
extrapolated to give rough estimates for ELD cases. 
Directive  2008/1/EC  of  the  European  Parliament  and  of  the  Council  concerning  integrated  pollution 
prevention and control, OJ L 24, 29.1.2008, p. 8. 

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existing laws for soil or water remediation which included more stringent measures than the 
ELD.  Finally,  the  exceptions  and  defences  of  the  ELD  including  insolvency  and  non-
identification of the responsible operators may have led to fewer ELD cases. 

Thus  there  is  insufficient  data  to  draw  reliable  conclusions  on  the  effectiveness  of  the 
Directive in terms of actual remediation of environmental damage. However, this report has 
increased awareness among stakeholders and increased information flows between them, and 
will help Member States prepare their own reports to the Commission, due by April 2013. 

3. 

THE FUNCTIONALITY OF NATIONAL ELD SYSTEMS 

The  degree  of  Member  States’  preparedness  to  deal  with  environmental  damage  under  the 
Directive varies. Some Member States are quite advanced in terms of guidelines on technical 
and economic valuation (Belgium, Denmark, France, Hungary, Netherlands, Spain, and UK), 
procedures and manuals for risk assessment (Spain, Portugal, Italy) and legislative guidelines 
(Spain, Hungary, Czech Republic, Latvia and Poland). Specialised financial security systems 
(such  as  insurance  pools  in  France,  Spain  and  Italy)  offer  appropriate  ELD  insurance 
products. 
To help implement Annex II, the Commission sponsored research12 on economic evaluation 
methodologies that can be used. REMEDE developed a tool-kit with methods for estimating 
remediation costs as well as case-studies to be used as examples. 
Despite  awareness-raising  efforts13,  business  and  particularly  those  industry  sectors  more 
susceptible to risks and damage falling under the ELD (Annex III operators) are generally not 
aware  of  the  ELD  provisions.  This  applies  in  particular  to  Small  and  Medium  Sized 
Enterprises  (SMEs).  Interviews  with  operators  in  the  second  half  of  200914  showed  that  the 
majority  had  not  yet  adapted  their  insurance  policies  to  cover  the  ELD  extended  liabilities, 
while  some  were  not  even  aware  of  its  entry  into  force.  This  may  be  due  to  transposition 
delays,  which  caused  legal  uncertainty,  and  limited  awareness-raising  efforts.  These  results 
have  been  complemented  by  a  survey  carried  out  by  the  Commission  in  2009  using  the 
European Business Test Panel15; the majority of operators and business associations reported 
high levels of uncertainty about their liabilities under the ELD and a limited use of financial 
instruments to cover ELD liabilities. 

Operators  aware  of  their  environmental  liabilities  have  tended  to  cover  the  resulting  risks 
through  a  mix  of  environmental  insurances  such  as  General  Third  Party  Liability-GTPL, 
Environmental Impairment Liability-EIL or other  stand-alone insurance products. Operators 
were using to a much lesser extent other financial security, such as captives, bank guarantees, 
guarantees and funds. 
A  report  from  business16  pointed  out  the  need  to  examine  all  options  available  to  provide 
financial  security  and  suggested  that  Member  States  work  on  improving  the  national 
environmental liability  regimes in place. It asked for more clarity and precision in the rules 
regarding the restoration of environmental damage. 

12 
13 

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15 
16 

The REMEDE project case studies and the tool-kit are available at: http://www.envliability.eu. 
For  instance  ‘EU  ELD  White  Paper  Final  Draft:  EU  Environmental  Liability  Directive:  Practical 
Suggestions to Ensure Sound Implementation’ by Ad-Hoc Industry Natural Resource Damage Group. 
More information in the study mentioned in footnote 3. 
The results are available at: http://ec.europa.eu/yourvoice/ebtp/consultations/2009_en.htm. 
Survey of the Ad-Hoc Industry Group (footnote 5), available at: www.NRDonline.com. 

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The insurance industry reacted positively to the introduction of the ELD. Significant work 
on  what  the  ELD  means  for  the  insurance  sector  has  been  carried  out  and  widely 
disseminated17. The industry has gradually developed products for ELD, either specific ‘stand 
alone’  solutions,  or  top-ups  to  existing  liability  products.  Work  is  in  hand  on  practical 
implementation issues such as underwriting and claims management, as are efforts to develop 
a  database  of  case  studies  to  share  experiences.  However,  there  remains  uncertainty  at  this 
early  stage  as  to  the  readiness  of  existing  products  to  deal  with  ELD  cases.  The  insurance 
industry18 also reported that the recent economic crisis had resulted in a temporary drop in the 
industry’s capacity to provide ELD cover. 

It  can  be  concluded  that  the  transposition  of  the  ELD  was  slow  and  that  implementation 
methods  vary  widely  across  the  EU.  This  divergence  delayed  the  development  of  financial 
security  options  at  national  level.  Although  the  wide  variety  of  national  implementation 
methods  may  impair  the  effectiveness  of  the  Directive,  it  is  extremely  difficult  to  verify 
exactly how. 

4. 

FINANCIAL SECURITY FOR ELD 

4.1.  Development of financial security products 

Under  Article  14(1)  of  the  Directive,  Member  States  are  requested  to  encourage  the 
development of financial security instruments and markets. Member States took rather limited 
action, restricted to discussions with insurers and/or their trade associations. In most cases the 
national  ELD  markets  developed  at  the  insurers’  initiative,  even  in  the  cases  where 
mandatory financial security has been established. 

4.1.1  Financial Security products for the ELD 

Insurance  has  proven  to  be  the  most  popular  instrument  to  cover  environmental  liability, 
followed  by  bank  guarantees  (Austria,  Belgium,  Cyprus,  Czech  Republic,  the  Netherlands, 
Poland, Spain, and UK) and other Market Based Instruments (MBIs), such as funds, bonds, 
etc  (Austria,  Belgium,  Bulgaria,  Cyprus,  Poland  and  Spain).  Insurance  pools  are  present  in 
Spain, France and Italy. 

A  significant  part  of  the  ELD-derived  liabilities  can  be  covered  under  traditional  General 
Third  Party  Liability  or  Environmental  Impairment  Liability  policies.  (Re-)insurers  are 
currently  offering  extensions  to  existing  GTPL  or  EIL  policies  and  new,  specialised  stand-
alone  products.  When  the  ELD  was  adopted  in  2004,  reports  indicated  that  there  were 
practically no insurance products covering risks where the economic consequences could not 
be fully predicted. Since then, suitable products have appeared on the EU market. However, 
coverage  of  damage  due  to  GMOs  remains  difficult:  in  Spain  where  mandatory  financial 
security provisions apply without exclusion for GMOs, there is a special provision to address 
any damage and losses under a civil liability regime and not ELD. 

At present it is difficult to assess whether the current capacity of the (re-)insurance industry is 
large  enough  to  cover  ELD  liabilities  efficiently.  The  ELD  capacities  of  the  insurance 

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Relevant  publications  are  at  the  web  pages  of  the  Confederation  of  European  Insurers  (CEA): 
www.cea.eu. 
Workshop  on  ‘Implementation  efficiency  of  the  environmental  liability  directive  (ELD)  and  related 
financial 
at: 
10 
http://www.biohost.org/eld/workshop09/. 

2009.  Workshop 

available 

security 

issues’, 

report 

July 

is 

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industries  are  constantly  evolving,  as  demand  for  products increases. Capacities can also be 
raised through non-insurance financial security instruments. 

4.1.2 

Other types of financial security 

There is a general focus on insurance products as a way to cover ELD liabilities, although a 
range of alternatives exist. In connection with other environmental legislation, such as that on 
waste  management,  significant  experience  has  been  gained  with  non-insurance  instruments 
(bonds, bank guarantees, funds, captives, etc). These instruments require little change to make 
them suitable for ELD-related liabilities. It should be noted that some alternative instruments 
are more appropriate for large operators with numerous operations than for SMEs. 

The  suitability  of  financial  security  instruments  will  depend  on  their  efficiency  in  terms  of 
remediation  costs  covered,  their  availability  to  operators,  and  their  effectiveness  for 
preventing  pollution.  No  available  instrument  appears  to  fulfil  all  three  requirements  for  all 
ELD  liabilities  and  all  the  sectors  concerned,  so  the  choice  of  instrument  will  vary  across 
operators. 

4.1.3 

Limitations and gaps in financial security products 

The  limitations  of  the  insurance  products  currently  available  are  the  exclusion  of  gradual 
environmental damage and exclusions for some types of remediation, such as compensatory 
remediation. These limitations are due to a lack of data about ELD incidents and inability to 
quantify potential losses. As the market gains experience, these limitations will gradually be 
resolved.  

4.2.  The need for harmonised mandatory financial security  

The  Commission  has  to  examine  the  need  for  a  harmonised  mandatory  financial  security 
system  at  the  EU  level.  Given  that  the  transposition  of  the  ELD  resulted  in  divergent 
implementation rules, that the Member States opting for mandatory financial security do not 
yet have their systems in place, so mandatory approaches cannot be evaluated, and that more 
financial  security  products  are  becoming  available,  it  is  premature  for  the  Commission  to 
propose mandatory financial security at EU level. 

4.3.  Addressing financial security issues 

No commonly agreed definitions exist for the three issues the Commission has to consider in 
the  report  (gradual  approach,  ceilings  for  financial  guarantees  and  the  exclusion  of  low-risk 
activities). Possible approaches to these issues were explored with Member State experts and 
stakeholders. An assessment of the systems in place suggests that to facilitate implementation, 
all mandatory financial security schemes should employ a form of gradual approach, provide 
for the exclusion of low-risk activities, and include ceilings for financial guarantees. 

4.3.1  A gradual approach 

A  gradual  approach  means  the  gradual  introduction  of  financial  security  for  different  risk 
types  and  industrial  sectors  or  liabilities  covered.  Member  State  applications  of  the  gradual 
approach  include  the  limitation  of  mandatory  financial  security  to  Annex  III  activities  for 
which  a  permit,  approval,  or  registration  is  required,  while  others  have  imposed  mandatory 
financial security for some Annex III activities, starting with the riskier ones (in Hungary this 
is limited to IPPC installations). 

4.3.2  Ceilings for the financial guarantee 

No  financial  security  system,  be  it  insurance,  bank  guarantee  or  a  trust  fund,  will  provide 
unlimited  liability.  Therefore,  ceilings  apply  both  to  voluntary  and  mandatory  financial 

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security mechanisms. A ceiling for the financial guarantee could be introduced where the risk 
of  damage  occurring  above  that  ceiling  is  considered  as  low,  and  depends  on  the  location, 
type and size of the operation. Spain introduced ceilings to the liability cover their operators 
need  of  up  to  a  maximum  of  €
 5 million.  In  other  countries  ceilings  are  arranged  between 
insurers and operators. Insurance companies can also introduce ceilings to the liabilities they 
wish to cover, subsequently setting limits to the premiums to be paid but also in the coverage 
that  their  guarantee  provides.  The  previous  ceilings  apply  when  determining  the  maximum 
coverage of the policies. In practice, there are also reimbursement ceilings of ELD policies, 
which currently range between €

 1 million and €

 30 million. 

4.3.3  Exclusion of low-risk activities 

Low-risk activities could be excluded from a mandatory financial security scheme based on a 
risk assessment of the potential environmental damage from Annex III activities19. Mandatory 
systems also define low-risk activities as those where the companies have an EMAS or ISO 
environmental  management  system20;  this  might  be  disputable,  as  other  factors  may  play  a 
more  significant  role  in  determining  the  operator’s  actual  environmental  risks,  such  as  the 
nature  of  the  activity  and  its  location.  Stakeholders  said  that  excluding  operators  on  the 
grounds  that  their  activities  are  perceived  as  low-risk  might  be  controversial,  as  these 
activities could still in reality cause significant environmental damage. 

4.3.4. Conclusions on aspects to be considered for financial security 

Research into the feasibility, impact and effectiveness of mandatory financial security would 
illustrate in detail how such schemes could be implemented without significantly reducing the 
effective  coverage  of  ELD  liabilities.  Many  of  the  available  options,  such  as  a  gradual 
approach,  ceilings  for  financial  security  and  the  exclusion  of  low-risk  activities,  are  already 
being implemented by Member States. 

Whereas some form of gradual approach would necessarily be part of any mandatory financial 
security  scheme,  the  other  two  options  might  or  might  not  be  employed  in  a  mandatory 
scheme.  Using  any  of  the  three  options  needs  a  thorough  analysis;  they  can  facilitate 
implementation of mandatory financial security, but may also reduce effectiveness. 

5. 

CONCLUSIONS AND WAY FORWARD 

The ELD transposition was finalised on 1 July 2010. Available information does not yet allow 
for concrete conclusions to be drawn about the effectiveness of the Directive in remedying 
environmental  damage.  The  three-year  delay  in  transposing  the  Directive  means  that  little 
practical  experience  is  available  yet  on  its  implementation.  Authorities  often  did  not  have 
rules compliant with the ELD in place on time. Operators were often unaware of the specific 
legal  obligations.  Insurers  and  other  institutions  offering  financial  security  were  not 
sufficiently familiar with the requirements their products had to meet to be ELD-compliant. 

19 

20 

EN 

The  Spanish  mandatory  financial  security  system  exempts  operators  with  an  estimated  potential 
environmental  damage  below  €
 2  million  when  operators 
implement  EMAS/ISO  14001).  This  would  exempt  a  potentially  large  number  of  operators  from 
compulsory  financial  security,  making  it  easier  to  implement  the  scheme,  but  the  potential 
environmental damage of all Annex III activities would need to be analysed. 
This is true for Spain (see above) and the Czech Republic. 

 300 000  (or  between  €

 300 000  and  €

9 

   EN 

                                                 
The  results  of  the  studies  carried  out  for  this  report  and  the  experience  gained  with  the 
implementation of the ELD indicate that several measures can be undertaken to improve the 
implementation and effectiveness of the Directive: 

(1) 

(2) 

(3) 

Promote  information  exchange  and  communication  between  the  key  stakeholders 
(operators,  competent  authorities,  financial  security  providers,  industry  associations, 
government experts, NGOs and the Commission). 

Industry  associations,  financial  security  associations,  and  the  competent  authorities 
implementing  the  Directive  should  continue  to  promote  awareness  of  individual 
operators and financial security providers through awareness-raising actions. 

Develop further interpretation guidance on the application of the ELD, in particular 
possible guidelines at EU level on its Annex II. Key definitions and concepts, such as 
‘environmental  damage’,  ‘significant  damage’,  ‘baseline  condition’,  where  there  is 
divergence in national implementation, will be discussed in the environmental liability 
group of government experts and should be clarified and evenly applied. 

(4)  Member States are advised to establish records or registers of ELD cases21. This will 
allow  lessons  to  be  learnt  on  how  best  to  apply  the  Directive  and  support  ELD 
stakeholders. It will also help Member States to fulfil their reporting obligations under 
Article 18(1) ELD and allow the effectiveness of the ELD to be judged on the basis of 
actual cases. 

Despite  the  financial  crisis,  evidence  suggests  that  the  ELD  insurance  market  is  growing  in 
the  EU  and  that  an  increasing  variety  of  products  is  available.  Greater  legal  clarity22  is 
expected to lead to a more predictable and legally certain application of the ELD criteria by 
competent authorities and operators when dealing with cases of damage under this Directive. 

Because  of  the  lack  of  practical  experience  in  the  application  of  the  ELD,  the  Commission 
concludes  that  there  is  not  sufficient  justification  at  the  present  time  for  introducing  a 
harmonised system of mandatory financial security. Developments in those Member States 
that have opted for mandatory financial security, including the gradual approach, and in the 
Member States that have not introduced obligatory financial security, will have to be further 
monitored  before  reliable  conclusions  can  be  drawn.  The  Commission  will  also  actively 
monitor recent developments such as the oil spill in the Gulf of Mexico, which may provide 
the justification for an initiative in this area. 

The  Commission  will  re-examine  the  option  of  mandatory  financial  security  possibly  even 
before  the  review  of  the  Directive  planned  for  2014  in  conjunction  with  the  Commission 
report  under  Article  18(2)  ELD.  In  addition,  the  present  report  has  identified  a  number  of 
other issues that call for more immediate attention. With regard to the general review of the 
ELD  foreseen  for  2013/2014,  the  evaluation  on  a  continuous  basis  of  the  possible  earlier 
introduction of the following corresponding measures will be launched without delay: 

•  the scope of the Directive: While the ELD covers specific environmental damage, mainly 
on land territory, the coverage of the marine environment is incomplete. The ELD extends 

21 

22 

The Commission is aware of Member States’ efforts on this; some of them have incorporated provisions 
in their transpositions. 
See  for  example  the  two  preliminary  rulings  by  the  European  Court  of  Justice  in  the  Italian  Rada  de 
Augusta  cases  C-378/08  and  combined  cases  C-379/08  and  C-380/08,  where  the  Court  clarified 
questions  in  relation  to  the  polluter  pays  principle  and  regarding  the  duties  of  competent  authorities, 
such  as  the  establishment  of  the  causal  link,  determination  and  alteration  of  remedial  measures, 
identification of liable parties etc. 

EN 

10 

   EN 

                                                 
to  coastal  waters  and  the  territorial  sea  as  regards  ‘damage  to  water’  (through  the  Water 
Framework  Directive)  and  to  protected  marine  species  and  Natura  2000  sites  within  the 
jurisdiction  of  the  Member  States  (extending  to  the  exclusive  economic  zone  and 
continental shelf where applicable), leaving a gap in the full remediation of damage to the 
marine  environment.  Damage  to  the  marine  environment  due  to  oil  spills  caused  by  oil 
drilling activities is therefore not fully addressed by the present ELD provisions. 

•  the  divergent  national  transposing  rules  potentially  create  difficulties,  for  example,  to 
financial security providers who have to modify generic products to fit the requirements of 
each  Member  State  where  they  are  provided.  A  mandatory  harmonised  EU  system  for 
financial  security  for  the  ELD  would  have  a  greater  chance  of  success  if  there  was  less 
divergence in the different national implementation provisions. 

•  the uneven application of the permit and state of the art defences by Member States. 

•  the  uneven  extension  of  the  scope  to  cover  damage  to  species  and  natural  habitats 

protected under domestic legislation.  

•  the  sufficiency  of  actual  financial  ceilings  set  for  established  financial  security 
instruments with regard to potential large scale accidents. The ability of existing financial 
security  instruments  to  cover  massive  incidents  needs  to  be  assessed  in  connection  with 
applicable  financial  ceilings  and  the  potential  of  different  types  of  instruments,  such  as 
funds,  insurance,  guarantees,  etc.  In  this  context,  the  review  will  aim  at  discovering  the 
most  efficient  ways  of  ensuring  sufficient  financial  resources  in  case  of  large  scale 
incidents that involve responsible parties with mediocre or even low financial capacity. 

EN 

11 

   EN