Polluter Pays Principle: An Economic Or A Legal Principle?

Introduction:

Polluter Pays Principle is a globally well recognized and a much celebrated environmental law principle. The primary function of the Principle is that it helps in allocating the costs and repairing the damage, between different stakeholders, for the harm caused by them to the environment. The principle is also revolutionary in the sense that it places the responsibility of paying the damages to the persons who ought to pay it and also who have the ability to pay it.

Contemporary Relevance:

Nowadays predominant factor which restrains the government is not directing the industries to strictly follow the environmental norms is the economic factor. The main problem lies in the fact that where to allocate the costs of the pollution. If the industries are made liable for the damages, it adversely affects the trade and consequently, the nation’s growth, but if the state takes up the responsibility of remedying the situation, the costs are indirectly served on the ordinary public of the nation. Hence, this principle serves the very important purpose of allocating the costs for environmental degradation subject to the complex economic position.

What Is The Polluter Pays Principle?

The polluter pays principle is essentially based on a common-sense approach for the mitigation of environmental degradation. It simply means that s/he who damages the environment should bear the cost of rectifying that damage. In a broader sense, producers of goods and other items should be responsible for any pollution which the process of production causes and therefore must also pay for prevention or rectification of the damage caused to the environment by such pollution. Underlying the meaning of the polluter pays principle is the belief that when public authorities take measures to prevent potential and actual environmental damage, the expenses incurred should be borne by the person responsible for the pollution.

In the event of environmental pollution, the principle can be applied to require the producer and/or resource user to meet the costs of implementing an environmental standard. Where it is required, the resource user should also meet the necessary expenses for implementation of technical regulations. It is also suggested that introduction of liability regimes be introduced to make resource users liable for causing environmental harm and thus pay for the pollution caused by their authorities.

The Polluter pays principle originates from the economic theory of the “internalization of externalities”, which imposes on the polluters the social costs borne by public authorities responsible for inspecting, monitoring and controlling pollution. By the same token, the PPP encapsulates the setting up of a system of charges by which the polluters (the persons who generated the pollution by their products or services) bear the financial burden of the public policy to protect the environment. However, despite its initial economic background, the PPP started gradually acquiring legal expressions.

Historical Background:

The Polluter pays principle was first referred to at the international level explicitly in 1972 in a Council Recommendation on Guiding Principles Concerning the International Economic Aspects of Environmental Policies of the Organisation for Economic Co-operation and Development (OECD). In the Recommendation of the Council, it was stated that :

“The polluter should bear the expenses of carrying on the …….. measures decided by 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 cause pollution in production and/or consumption. Such measures should not be accompanied by subsidies that would create significant distortions in international trade and investment”.

The 1972 OECD Council Recommendation added the polluter pays principle to allocate costs of pollution prevention and control measures to promote the frugal use of environmental resources and to prevent likely falsehood in figures on international trade and investment. The polluter pays principle was reaffirmed as a fundamental principle for the Member States during the 1974 OECD Council Recommendation on the Implementation of the Polluter-Pays Principle.

The Pollution provides that the principle implies that the operator of a hazardous installation is under an obligation to bear the cost of reasonable measures to prevent and control accidental pollution from that installation in conformity with the domestic law before the occurrence of an accident in order to protect human health or the environment.

The OECD initiative was the result of demands on governments and other institutions to introduce policies and mechanisms for the protection of the environment and the public from the threats posed by pollution in a modern industrialized society. The principle was subsequently endorsed in 1973 when the European Community (EC) adopted a program of action on the environment.

Subsequently, an EC Council Recommendation (1975) provided that Member states should apply the polluter pays principle. It further provided that natural or legal persons must pay the price of such measures that are necessary to reduce or remove the pollution to meet the standards or equivalent measures laid down by public authorities.

Although the EC Recommendation is not legally binding (unlike the OECD Recommendation), it encompasses many more issues with regards to the costs of environmental damage. The EC took another step in 1986 when it adopted the Single European Act regarding the environment, in which it stated that preventive action should be taken as a priority to rectify environmental damage at the source and the polluter shall be liable to bear the cost. This Act is legally enforceable.

The polluter pays principle was also adopted in the ASEAN Agreement on Conservation on Nature and Natural Resources adopted in 1985.

Through the lens of international law, the PPP is enshrined in Principle 16 of the Rio Declaration, which states that ‘the polluter should, in principle, bear the cost of pollution.’

The United Nations Conference on Environment and Development, 1992 in Principle 15 incorporates the polluter pays principle.

The fact that 153 states were signatories of the Rio Declaration does not make the principle in the declaration of 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.

It is not yet unquestionably accepted as a principle of international law. For example, according to Sands, the polluter pays principle is yet to receive broad geographic and subject-matter support over the long term. He has serious doubts whether the principle has achieved the status of the generally applicable rule of customary international law.

Therefore, the principle of polluter pays stands on a weak legal foundation, mainly because its salient features have yet to be finalized by international law jurists.

So, even while being internationally recognized, it is not yet has achieved a recognition which it deserves to get. Its position is currently nominal in international law, and it needs to be transformed into a stronger and stringent one.

Polluter Pays Principle In The Indian Context:

In Indian environmental jurisprudence, the ‘polluter pays’ principle includes environmental costs as well as direct costs to people or property. The Supreme Court of India has fleshed out the ratio by stating that the ‘remediation of the damaged environment is a part of the process of the sustainable development and as such the polluter is liable to pay the cost to the individual sufferers as well as cost of reversing the damaged ecology.’

The Supreme Court of India inexplicitly applied the principle in the case of M.C. Mehta v. Union of India in the year 1986. It was declared by the court that ‘we have to evolve new principles and lay down new norms, which would adequately deal with the new problems which arise in a highly industrialized economy’. The significance of this judgment lies in the court’s formulation of the principle of the measure of liability of industry engaged in ‘hazardous or inherently dangerous activities’. Such measure must be correlated to the magnitude and capacity of the enterprise.

Secondly, the court directed the industry either to shift from the present location or evolve a green belt around it as a condition precedent to restart the industry. Further, the industry was asked to deposit a sum of Rs. 35,00,000/- in a bank and a guarantee of Rs. 15,00,000/- with the court for compensation to be paid to one who can prove before the court of law that he suffered because of the Oleum gas leakage from the Sri Ram Food and Fertiliser Corporation. Thus an innovative remedy was evolved by the Supreme Court of India in this case which was indirect recognition and application of the ‘polluter pays principle’.

It was for the first time in Indian Council for Enviro-Legal Action v. Union of India, that the court explicitly applied this principle. It was declared by the court that redemption of the damaged environment is a part of the process of sustainable development and as such polluter is liable to pay the cost of the individual sufferers as well as the cost of reversing the damaged ecology.

Thus, the ‘polluter pays principle’ means the absolute liability for harm to the environment extends not only to compensate the victims of pollution but also to the cost of restoring the environmental degradation. Remediation of the damaged environment is part of the process of sustainable development.

In this case, five chemical industries were producing H-acid (1-napthol-8-amino, 6- disciphonic acid). An azo dye and untreated toxic sludge were discharged into the open compound which, in due course of time, flowed through a canal across the entire area and the rainwater washed the sludge deep into the bowels of the earth. It caused pollution of river water and underground water upto 70 feet below the ground within a radius of seven miles of the village Bicchari. It further left the fields nearby infertile, as a result of which residents had to migrate out of the village.

The Court while making a landmark judgment on this PIL, also kept in mind that ny principle adopted by it must be simple, practical and suited to the conditions prevailing in the country. Looking at the widespread ramification of the hazardous or inherently dangerous activities, persons or the institutions would be held ‘liable absolutely’, though they have taken all reasonable care while carrying out such activity.

The liability to compensate is two fold; one, to compensate the victims of pollution for inconvenience and health loss; and the other, to restore the environmental degradation viz., of the soil, underground water and the vegetation cover of that area. Such remediation is part of the process of ‘sustainable development’. It is also to be noted that all this does not absolve a person from criminal liability.

It was also ordered by the court that the Central Government must determine the amount required for carrying out remedial measures and the status report submitted by the National Environmental & Engineering Research Institute (NEERI) in the year 1994 be made a basis to compute it. NEERI in its report had stated that rupees 4,00,00,000/- would be needed to reserve the power of soil and water contamination.

The sincerity of the Supreme Court came to the fore when it was pronounced that the Ministry of Environment and Forest must recover the money from the units and the recovered money be used to repair the damage caused to the land and water in the area. As a result of which plant and factories have been sold by the State Government.

The Supreme court in yet another case of Vellore Citizens Welfare Forum v. Union of India reiterated and declared in unequivocal terms that ‘the precautionary principle and the polluter pays principle are part of the environmental jurisprudence of this country. These principles have been accepted as a part of the law of the land as article 21 of the Constitution of India guaranteed the protection of life and personal liberty. There is also a constitutional mandate to protect and improve the environment under articles 48-A and 51-A (g).

The Court also observed that this principle has also been accepted as part of the customary International Law, therefore, it automatically becomes a part of the basic jurisprudence of the land. In the same case, the court also ordered for the creation of ‘Environment Protection Fund’. This fund could be utilized for compensating the affected persons identified by the ‘authority’ and also for ‘restoring the damaged environment’.

In M.C. Mehta v. Union of India, The Supreme Court reiterated the polluter pays principle and re-emphasized the need to apply it. It was a case of ‘yellowing and decaying of the Taj Mahal’. The court ordered the industries to shift away from the Taj Trapezium or to switch over to gas as fuel. The industries which did not switch over to gas were ordered to be closed down unconditionally by December 31, 1997.

Even the workers of the industries were also recognized as the victims of the polluting industries and for the closure of industry, the workers are not to be thrown out of the industry without any economic/job security. They were also held to be entitled to certain rights and benefits from the erring industries.

Therefore, declaration of gratuitiy, compensation, additional compensation or shifting allowance by the Supreme Court, in this case, has given a new dimension to environmental jurisprudence in India.

There are certain statutes too, which directly or indirectly adhered to the polluter pays principle.

The Public Liability Insurance Act of 1991 makes it a mandatory duty of all the industries, which have a capital value of Rs. 2,00,000 to get insured under the Act. The premium of such insurance shall be collected in the ‘Environment Relief Fund’ which shall be available with the collector of the district. The collector in case of industrial accident/ disaster shall pay, by way of relief, immediately to the victims of the accident/disaster. This relief will not be a bar to file a case for compensation separation.

Similarly, The National Environmental Tribunal Act, 1995, also provides that tribunal can award compensation on the ground of any damage to the environment and such an amount shall be remitted to the authority specified under section 7-A (3) of the Public Liability Insurance Act, 1991 for being credited to the Environmental Relief Fund. The Act provides that if the owner of the unit/ industry fails to pay or deposit such an amount of award within the specified period, it shall be recoverable from the owner as arrears of land.

The abovementioned pronouncements clear out the position of the Supreme court, that even without being any statutory binding of the principle, the action of the court has been very effection and innovative. The court has always come to the rescue of those who have suffered due to pollution. Such a firm stand of the court has taken by surprise all those who used to manipulate the apathetic environmental agencies.

Suggestions With Respect To ‘Legality’ Of The Principle:

Though, the Polluters Pay Principle is legally well recognized both internationally and domestically. But, that recognition is still very weak. The international courts are not able to apply it easily as the content of the principle is still not uniform and static, different interpretations make it difficult for the courts to apply it. Within Indian context, though the role of the supreme court has been phenomenal in applying the principle, lack of statutory law makes the situation ambiguous and a very big loophole is created thereby. Both these problems need to be addressed by making legal recognition of the principle more concrete, both internationally and domestically.

Conclusion:

With the rapid development of technology and industries, environmental degradation is inevitable and dealing with it becomes vital for human existence. The problem escalates when economic aspects of dealing with it become dominant, and the polluters pay principle helps in dealing with the later. We have seen the situations, how it has been helpful both in international and national context. What is needed is the strict implementation of the principle, which can change the situation to a very large extent.

– Harshdeep Singh Bedi

(NLIU, Bhopal)

SOURCES:

‘The Polluter Pays Principle and the Supreme Court of India’, published by Indian Law Institute.
The Polluter Pays Principle, by Shyel Trehan and Shuva Mandel.
The Polluter Pays Principle and the EU State Aid Law for Environmental Protection, by Keloniki Pouilki, published in Journal of Law, Policy and Globalization, Vol. 55, 2016.
Interpreting the Polluter Pays Principle in the Trade and Environment Context, by Candince Stevens, published in Cornell International Law Journal, Volume 27, Issue 3 Symposium 1994.
Principles of International Environmental Law: Routledge Handbook of International Environmental Law, by Shawkat Alam, Md. Jahid Hossain Bhuiyan, Tareq M.R. Chowdhury, Erika J. Techera.
MC. Mehta v. Union of India, AIR 1986 SC 1086.
Vellore Citizens Welfare forum v. Union of India, AIR 1996 SC 2715, 2721.
Indian Council for Enviro-legal Action v. Union of India, (1996) 2 JT (SC) 196.

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