Comparing U.S. and EU hazardous waste liability frameworks: how the EU liability directive competes with CERCLA.

• Author: Tabatabai, Maryam

1. INTRODUCTION II. AN EXAMINATION OF THE REGULATORY FRAMEWORK FOR HAZARDOUS WASTE LIABILITY IN THE U.S. AND THE EU A. An Overview of CERCLA Liability in the U.S. B. An Overview of the EU Council Directives on Hazardous Waste Liability III. SIMILARITIES AND DISTINCTIONS BETWEEN THE EU AND U.S. REGULATORY FRAMEWORKS A. Damages Covered B. Responsible Parties C. Potential Plaintiffs D. Extent of Liability: Strict Liability, Joint and Several Liability, Retroactivity, and Punitive Damages E. Defenses and Exemptions IV. CASE LAW TRENDS IN THE EU AND THE U.S. A. The U.S. Narrows the Broad Reach of CERCLA Liability B. The EU Struggles with Implementation and Compliance of the Liability Directive V.CONCLUSION I. INTRODUCTION

   On October 4, 2010, 184 million gallons of toxic sludge surged out of a depositing tank belonging to MAL Zrt., an aluminum production and trade company in Ajka, Hungary. (1) The spill killed eight people, injured 150, destroyed crops, and displaced hundreds of residents. (2) However, under the EU Council Directives, Ajka red sludge is not actually classified as a hazardous waste. Accordingly, Hungary's permitting process did not require MAL to guarantee sufficient financial funds for cleanup of a potential waste site. (3) In light of the magnitude of damage and the government's regulatory shortcomings, members of the EU Parliament are reevaluating the EU's current hazardous waste liability framework. (4) In the meantime, the U.S. Supreme Court and the Fifth Circuit have issued decisions that limit Superfund liability in the U.S. (5)

   This Paper compares and contrasts U.S. hazardous waste liability laws under CERCLA with those provided in the EU Council Directive on Environmental Liability and will examine the movement of case law by U.S. Federal Courts and the EU Court of Justice. Following a close analysis of both frameworks, this paper illustrates how CERCLA's broad definitions, retroactive application, detailed enumeration of responsible parties, citizen's suit provision, and additional exemptions make it superior to the EU system. With the exception of the EU's biodiversity and natural resource protection clauses, the U.S. liability structure consistently provides more expansive coverage and better statutory explanations. Unfortunately, rather than moving forward and continuing to establish a strict model of liability, the United States is taking a step back and potentially mitigating environmental liability through Supreme Court decisions. This paper discusses the implications of recent decisions, encourage the United States not to scale back its rigorous policies, and support adoption of biodiversity and natural resources provisions analogous to those of the EU Liability Directive. (6)

   Part II provides a general overview of the regulatory framework in the U.S. and EU. The paper does not delve into individual states' or countries' hazardous waste regulations, which may be more stringent than the bar set by the U.S. or EU. (7) Part III addresses specific notable aspects of each framework and significant distinctions between the two. Part IV examines case law trends, including recent noteworthy decisions. This paper highlights the areas where the European Union and United States have eased their environmental liability regulations and suggests recommendations for strengthening the policies currently in place.

2. AN EXAMINATION OF THE REGULATORY FRAMEWORK FOR HAZARDOUS WASTE LIABILITY IN THE U.S. AND THE EU

   1. An Overview of CERCLA Liability in the U.S.

      Congress enacted the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) in 1980 in response to health and environmental concerns stemming from hazardous industrial pollution. (8) The Act authorizes a federal response to a hazardous substance release and imposes liability for the clean-up of hazardous waste sites on parties responsible for the contamination. (9) Under the Act, the following four classes of persons are considered potentially responsible parties (PRPs): (1) present owners and operators of a facility; (2) past owners or operators of the facility; (3) generators of hazardous waste that arrange for disposal or treatment, and; (4) transporters of hazardous waste. (10) Because the Act imposes strict liability on all persons classified as PRPs, a determination of causation, negligence, or intent by the plaintiffs is unnecessary. (11)

      Furthermore, if the harm is indivisible, the liability is joint and several under CERCLA. (12) This liability framework is based on the "polluter pays" principle, where the producers of the hazardous substance are ultimately held accountable for the harm caused by the disposal. (13)

      The rigid liability standards designed to avert use of taxpayer funds implicate concerns of fairness, such as disproportionate liability or the unjust punishment of parties that were in full compliance of the law at the time the events transpired. (14) These controversial provisions may be one reason why no other nation has adopted the exact approach espoused by CERCLA, while various countries have shaped their environmental regulations after other U.S. environmental laws, like the Clean Air Act and the National Environmental Policy Act. (15)

      Despite heavy criticism of the costs associated with the Superfund, a 1995 study by the Brookings Institution indicates Superfund costs comprise less than 5% of the total expenses associated with satisfying all federal environmental regulations. (16) Nevertheless, the burden of these expenses on certain responsible parties can be devastating, resulting in bankruptcy or closure of business.

   2. An Overview of the EU Council Directives on Hazardous Waste Liability

      Similar to the United States, European environmental action on hazardous waste legislation was catalyzed by a series of large-scale disasters. (17) Four historical incidents led to the development of European legislation on industrial regulation for responding to hazardous threats. (18) In 1976, a chemical plant explosion near Milan, Italy, resulted in the highest known dioxin release in the world. (19)

      The toxic release killed much of the wildlife in the affected Seveso region and caused serious long-term health effects on humans. (20) In the wake of the Seveso incident, the chemical company reassured the community that disposal of the contaminated waste was under way. However, several weeks later, 41 barrels of dioxin-contaminated soil from the spill site were uncovered in a barn in France, all secretly transported during the "clean up" process. (21) Shortly thereafter, another disturbing discovery revealed that the soil underneath a Dutch city was heavily contaminated with chemical pollutants. (22)

      The adverse effects of the hazardous wastes shed light on the need for preventative measures and triggered serious reforms of industrial management in Europe. (23) The European Community worked to issue the Seveso Directive, which established a regulatory framework for managing industries that handle hazardous materials. (24)

      In 1996, the EU adopted the Seveso II Directive on the control of major-accident hazards, expanding the purview of Seveso I. (25) One of the Directive's progressive policies imposed a responsibility to provide information on potential safety hazards to authorities and parties at risk of being harmed by an industrial disaster. (26) Because the Seveso Directives are limited to prevention of major hazardous accidents, liability and instruction following a hazardous release will likely be within the ambit of the EU's directives. (27) The European Union's legal authority to develop binding Directives is derived from Article 288 on the Treaty of the Functioning of the European Union. (28)

      The EU Environmental Liability Directive defines relevant terms and outlines the regulatory framework for hazardous releases occurring in Member States. (29) The Directive was codified on April 30, 2004, and Member States were given a three year period to transpose the legislation into their domestic laws. (30) By July 2010, the transposition of the Directive was successfully completed in every Member State. Because of the slow transposition process, there are few practical applications of the Directive. (31) Accordingly, the EU Court of Justice's decisions will play a pivotal role in determining the implementation and reach of the Directive. (32)

      The Directive incorporates objectives of prevention and resolution of "environmental damage." (33) Similar to the U.S. scheme, the foundation for liability is rooted in the "polluter pays" principle. (34) Therefore, operators carrying out inherently dangerous occupational activities are strictly liable for ensuing environmental damage. (35) The Directive focuses on restoring purely ecological damage, which encompasses damage to natural resources, protected species, habitats, water, and soil. (36) The Directive establishes legal grounds for environmental enforcement claims separate from traditional damages to property, economic loss, or personal injury. (37) Member States' civil liability systems are the primary compensatory tool for traditional damages, just as state tort law guides these damages in the United States.

3. SIMILARITIES AND DISTINCTIONS BETWEEN THE EU AND U.S. REGULATORY FRAMEWORKS

   Developed nations spend roughly 1.5 to 2% of their GDPs satisfying environmental regulations. (38) Although environmental compliance expenditures comprise a small percentage of the total GDP, they still cost countries billions of dollars annually. (39) Examining the environmental liability structure of two influential nations will highlight the differentiating characteristics and will help identify the more stringent policies within each regime. In comparing the two liability structures, we are assuming that the U.S. and EU authorities engage in a relatively similar remediation process when removing contamination and restoring the environment. (40) We are also...