In Depth: Nature and the Law

Governments are trying to improve environmental legislation. In the US at one time there were discussions about the necessity of introducing a direct federal tax on emissions of carbon gas. In Germany, they are bringing in an energy-climate package stage by stage, the overall objective of which is to reduce greenhouse gases by 36% by 2020. Civilized Europe uses environmentally friendly products with enthusiasm. And the Mayor of London, for example, tries to force people in the city centre to travel by bicycles by enforcing an unreasonably high price to enter Westminster by car. Developers are trying to build eco houses – made from wood, which has grown in safe areas, and without the use of artificial materials.

Saving the drowning

In Russia, caring for the environment has not reached such scales and citizens should start to worry about it and organize public actions with the hope that it draws attention to environmental problems. In fact, it is not comfortable to live where there is a chimney releasing columns of smoke containing the maximum permissible concentration or more of harmful substances (conceived specifications of admissible physical influences are also exceeded: heat, noise levels, vibrations, radiation, and intensity of electromagnetic fields). Or when new cities pop up and all the trees have suddenly disappeared; and nobody takes responsibility for it.

Of course, in Russia attention is paid to environmental matters. There is ongoing development of nature protection and environmental legislation for the establishment of a complete regulatory system on the permissible influence on the environment. The Ministry for the Protection of the Environment and Natural Resources in autumn this year intends to develop and discuss the Environmental Code in the State Duma, which will establish uniform regulations for the authorities and businessmen allowing for the provision of the protection of natural resources, and to follow business interests.

Action is more than due – there have been many statements recently in Russia about environmental problems. The industrial fund of the Russian Federation was constructed during the Soviet epoch, and the share of this that has deteriorated is 70 per cent, which, of course, would negatively influence environmental conditions. The number of applications at law firms specializing in environmental law has also increased.

The reasons are obvious. Environmental law traditionally concerns to complex industries. Besides federal legislation there is a huge number of sub-legal statutory acts that operate, and even then many issues remain behind the regulatory framework, which allows for the law to be interpreted in two ways. As a result, nature suffers.

A negative trend was recently outlined: environmental law has turned into an influencing mechanism for business structures. Unfortunately, although the purpose of various “protests" is proclaimed to be to look after nature, it is often about environmental raidering, as a result of which redistribution of the market is even possible. Enhanced attention on the environmental aspects of business activity reduces the risks of possible claims from competitors, who are prepared to go to various lengths, including ordering checks.

Who’s in the risk zone?

Small and medium sized businesses, thanks to an integrated approach and the complexities of nature protection requirements are not forced independently to know all the particulars of all the regulations. They do not consult experts. Therefore such businesses become a feeding trough for checks even when no offences occur. Large businesses that quite often permit ecological offences ignore the potential danger of unsolved environmental problems. As practice shows, it is easy to become a target of nature protection departments and the public. But to defend your innocence and reputation even in court is always easy.

And the fines for environmental offences are impressive. Of course, in Russia, unlike Europe and the US, penalties are rare. For example, in 2004 company Mobil paid $5.2 billion in fines and compensation for environmental damage. This sum consisted of payment of the penalty, charges on carrying out regenerative works and guaranteeing drinking water for the inhabitants of the settlements in a zone, which has had constant flooding of the San Juan River with oil for nine years.

In Russia the figures are also serious and are estimated to be six figure amounts. Besides liability to property, disciplinary, administrative and criminal liability are also stipulated. In a number of cases, it is necessary not only to pay money, but also suspend the activity of the enterprise within 90 days. The losses in these cases can simply be catastrophic.

Currently there is a case in the Arbitration Court of the Irkutsk region that has been brought against the Baikalsky pulp and paper factory by the Russian Environmental Agency, which is demanding the activity of the factory is suspended in connection with dumping polluting substances into Lake Baikal.

Such large enterprises take measures to make sure that manufacturing does not stop. But smaller enterprises cannot always eliminate the foundations of suspension. In 2007 in the Tomsk region, work at a gas station was suspended before the results of a state environmental inspection had been issued. The losses of the company were more than 25 million rubles.

The basis for criminal liability is also quite wide. For example, it also concerns illegal felling (i.e. felling without permission), and a certain degree of damage in terms of terminating the growth of large trees.

As practice shows, it is much more favourable to create a system within the enterprise (both technological and legal), not allowing for negative financial and repuation consequences. Even if there are not enough resources to create environmentally safe production methods, by means of competent legal protection it is possible to considerably lower risks and negative consequences for the enterprise.

For example, if has an ecological offence takes place (oil spill for example), often an enterprise will take measures to liquidate the consequences, not caring at all about the documentary confirmation of expenditures. But in such cases it is necessary to prove all actions by financial and legal documents. Then it is possible to count on supervising bodies subsequently reducing the size of penalties. Disputes concerning the definition of the size of a fine for a negative influence on the environment is the most frequent category of dispute, and by competent preparation the position of the enterprise almost always manages to be defended, reducing the sums for compensation of damage by up to tens times.

But even in the event that the activity of an enterprise does not lead to an accident, it is necessary to pay attention to environmental legislation. Every enterprise is obliged to have the corresponding regulatory and permissory documentation on nature protection, for example, sanctions on emissions of harmful substances, including in amounts exceeding limits established by legislation, specifications on the formation of waste and limits on their accommodation (the list depends on the specificity of the enterprise). In fact practically all operating enterprises are exposed to checks - and everyone harms the environment not only within the limits of admissible norms, but also above them.

This concerns not only metallurgical and chemical manufacturers, and companies engaged in the transportation of oil and fuel. But it also includes construction companies, enterprises engaged in the transportation and manufacturing (not only ecologically harmful manufacturers), and shops. During the realization of any kind of enterprise activity waste is formed: office paper is used, stationary, cartridges, dust, light bulbs. All this waste is subject to recycling. It would seem harmless light bulbs are waste of the 1st (highest) class of danger.

And as the list of objects which are subject to state environmental control is rather wide, practically all enterprises, no matter what the industry, can be checked. And even in the event that the type of activity is not directly named in the federal law "On the preservation of the environment" (or in corresponding methodical recommendations), it does not mean that the enterprise is released from paying for its negative influence on the environment (which is supported by the High Arbitration Court of the Russian Federation). It is necessary to pay it even when the enterprise does not make a profit or if its activity is unprofitable.

In other words, no matter what the economic activity of the enterprise, fines for negative influence on the environment, actions in relation to the preservation of the environment and compensation for harm to the environment must be answered in full.

Environmental audit

In recent time, the environment has become part of the decision to purchase shares. An environmental audit (alongside legal and financial audits) is an obligatory part of checking a transaction (due diligence). It is checked whether or not the enterprise has had to pay a fine for negative influence on the environment, whether or not it observed all the instructions of the supervising bodies, what condition the nature protection and process equipment is in, etc.

Now even banks estimate the ecological condition of the enterprise to lower the risk of the non-return of credit, getting a more authentic picture about the financial condition of the borrower. Enterprises that don’t observe nature protection rules and regulations, risk not being able to get credit from international banks. There will also be problems in this case in placing securities on international stock exchanges or realizing delivery of production on foreign and international markets owing to a discrepancy of the enterprise or product in international environmental standards.