Court ruling in oil spill case paves way for extended 'producer pays' principle

The ruling earlier this week that seaside towns affected by the Erika oil spill can claim compensation from the oil company that had chartered the tanker is the latest in a line of judgments placing increasing responsibility on producers as polluters.

In a case brought by Mesquer, one of the small French seaside towns affected by the 1999 spill, the European Court of Justice ruled that the 'polluter pays' principle in the EU's waste framework directive requires that the cost of such pollution must be borne by the 'previous holders' or the 'producer of the product from which the waste came', which in this instance was French oil giant Total (Case C-188/07 Commune de Mesquer v Total France and Total International Ltd).

This, according to Michael Woods, head of the environment group at Stephenson Harwood, reflects a growing trend to make producers responsible further down the supply chain.

'Taken to its logical conclusion, this judgment means that producers are no longer able to 'wash their hands' of the responsibility for the pollution which could be caused by their goods being dumped or lost at sea just by passing on control of these goods to a ship owner or operator,' Woods told Solicitors Journal.

However, the court also held that the producer would only be liable to bear clean up costs if 'he has contributed by his conduct to the risk that the pollution caused by the shipwreck will occur'.

This would include for instance whether the producer failed to take adequate measures to prevent the accident, such as failure to check that the ship was suitable for the cargo.

Whether the failure to take such steps contributed to the accident and should result in the producer being liable will be a matter for the national court to determine, according to the Luxembourg judges.

No further guidance was provided by the ECJ as to how the national courts should go about ascertaining contributory negligence. Although there is a clear suggestion in the present case that Total was reckless, Woods says the standard to be met by producers and previous holders is likely to give rise to contention.

Whether the oil should be regarded as 'waste' was a conditional step in addressing the

liability issue. The court considered that while still out at sea the oil leaked from the Erika was not waste; once it reached the shore however and got mixed with sand and other flotsam, it was.

This finding follows the court's previous ruling in Van de Walle in 2004 (Case C-1/03) where it held that soil contaminated by hydrocarbons released by a petrol station should be regarded as waste under the directive, but the ruling is likely to have repercussions beyond land contamination and oil pollution.

'In a wider context, companies that have been involved in producing substances which later become waste by spillage or leakage cannot assume responsibility for the waste has been passed on when the substance passed into another person's hands,' says Simon Payne, environmental law specialist and head of Plymouth university law school. 'In fact if they have in any way contributed to the risk of later pollution by failing to take steps to prevent this from happening liability can attach.'

The court's approach in Mesquer mirrors that which underpins legislation on chemicals (REACH) and on packaging waste, making producers responsible for their products even after they have moved further down the supply chain.

The ruling was delivered as the EU is finalising a draft directive standardising criminal penalties for breach of environmental law. Initially proposed in 2001 the directive was recast in February 2007 following suggestions that civil, rather than criminal, sanctions would provide a more effective enforcement mechanism.