Master Thesis
LLM European Private Law
T
HE
P
OLLUTER
P
AYS
P
RINCIPLE
E
XAMINED
D
ETERMININGC
ORPORATEE
NVIRONMENTALL
IABILITY IN CASES OFT
RANSNATIONALE
NVIRONMENTALD
AMAGE UNDER THEF
RAMEWORK OFT
HER
OMEII
R
EGULATION8 January 2020
Rebecca Caroline Poort, 13091883 rcpoort@gmail.com
Word Count: 12.289 (excluding bibliography)
Supervisor: Prof. Dr. Aukje van Hoek Co-Reader: Prof. Dr. Klaas Eller
A
BSTRACTThe Rome II Regulation sets out the ‘polluter pays’ objective. This Master Thesis examines whether the framework of the regulations effectively determines corporate liability when environmental damage is caused by corporate conducts. Based on a normative analysis – from an internal perspective – of the applicable law, the relevant judgments and juridical commentary, and academic literature, this thesis concludes that the framework of the Rome II Regulation – despite some limiting factors – is effectively determining corporate liability in cases of transnational environmental damage, therefore safeguarding the polluter pays objective.
T
ABLE OFC
ONTENTSAbstract ... I
1 Introduction ... 1
1.1 Literature: Analysis and Overview ... 3
2 Regulatory Challenges Relating to Corporate Transnational Environmental Cases ... 6
2.1 Definition Corporate Transnational Environmental Cases ... 6
2.2 Material Scope of the Rome II Regulation ... 7
2.3 The Concepts of Corporations and Globalization ... 9
3 Corporate Environmental Liability under the Framework of Rome II ... 12
3.1 Article 7 Rome II ... 12
3.1.1 Aim of Article 7 ... 12
3.1.2 Article 7’s Ability to Determine Corporate Environmental Liability ... 15
3.2 Article 17 Rome II ... 18
3.2.1 Aim of Article 17 ... 19
3.2.2 Article 17’s Ability to Determine Corporate Environmental Liability ... 20
3.3 Relation Between Article 7 and 17 ... 22
4. Possible Limiting Factors of The Rome II Framework ... 24
4.1 The Effect of Licensing on Liability of Corporations ... 24
4.1.1 Two Types of Licenses ... 24
4.2 Multinational Corporations Shifting Liability to Their Subsidiaries ... 26
4.3 Article 14: Party Autonomy ... 27
5. Conclusion ... 29 Bibliography ... 32 Primary Sources ... 32 EU Cases... 32 National Cases ... 33 Secondary Sources ... 33
1 I
NTRODUCTIONThe Rome II Regulation prescribes the EU rules applicable to conflicts of law regarding non-contractual obligations in civil and commercial matters.1 The rules of the Regulation are of
universal application, meaning that; “any law specified by this Regulation shall be applied whether or not it is the law of a Member State”. 2 This establishes the Regulation’s erga omnes
character. The Rome II Regulation was drafted to enhance the functioning of the internal market as it creates legal certainty as to the applicable laws, while ensuring free movement of judgments. In Article 4(1), the Regulation articulates the uniform general rule of "the law of the country in which the damage occurs” 3 the so called ‘lex loci damni’. Subsequent articles
prescribe several special conflict-of-law rules, such as those relating to matters of environmental damage in Article 7. These were established to safeguard the objectives that the Regulation sets out for itself in the preambles. For this thesis, Recital 25 is a particularly important provision of the preambles, as this Recital articulates:
“Regarding environmental damage, Article 174 of the Treaty, which provides that there should be a high level of protection based on the precautionary principle and the principle that preventive action should be taken, the principle of priority for corrective action at source and the principle that the polluter pays, fully justifies the use of the principle of discriminating in favour of the person sustaining the damage.”4
This Recital effectively sets the ‘polluter pays principle’ as an objective of the Rome II Regulation. This principle is the foundation of this thesis, which aims to answer the research question: Can corporate liability in cases of transnational environmental damages effectively
be determined under the framework set by the Rome II Regulation?
This thesis examines under which circumstances and how corporations are determined as the polluter under the aforementioned legal framework. This is crucial since corporations are the biggest economic actors in modern-day society. These economic actors carry out transnational conducts which may result in environmental degrading activities, resulting in
1 Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations [2007] Official Journal of
the European Union L199/40 (Rome II Regulation): Article 1(1).
2 Rome II Regulation: Article 3. 3 Rome II Regulation: Article 4(1). 4 Rome II Regulation: Recital 25.
excessive environmental damage.5 When determining environmental liability, there is a legal
gap in ascertaining corporate accountability. This is due to the legal possibilities to limit accountability for corporation. Given this gap, corporations have the opportunity to enjoy the profits of their potential environmental degrading actions while not being charged with the consequences. If the framework provided by the Rome II Regulation is effective, it must ensure that the polluter pays. Hence it must be possible to effectively determine corporate liability in cases of transnational environmental damages.
To determine a general understanding of the concept that lies at the forefront of this thesis, it is important to first set out the concept ‘corporate environmental liability.’ To assess corporate environmental liability, two elements are individually defined and later combined to create one general definition. The first element examined is corporate liability. This thesis asserts that corporate liability results from practices of a corporation, which the corporation can be held accountable for. 6 The second element that is defined is environmental liability.
This is understood as the liability arising out of delicts causing environmental damage. Per Recital 24 of the Rome II Regulation, environmental damage is defined as:
“adverse change in a natural resource, such as water, land or air, impairment of a function performed by that resource for the benefit of another natural resource or the public, or impairment of the variability among living organisms.”7
Ergo, for the purpose of this thesis, corporate environmental liability is understood as the liability that can be attached to corporations arising out of corporate conducts causing environmental damage.
In this thesis, a normative analysis – from an internal perspective – of the applicable law, the relevant judgments and juridical commentary, and academic literature, is conducted to constitute an answer to the research question. The research scope excludes environmental cases without either a European and a transboundary element, as these are not within the formal scope of the Rome II Regulation.8 Furthermore, the question of causation between conduct and
transnational environmental damage is excluded. Although the relationship between the
5 Michael Anderson, “Transnational Corporations and Environmental Damage: Is Tort Law the Answer?,” Washburn Law J. 41, no. 3 (2002): 403.
6 John Armour et al., “What Is Corporate Law?,” in Anat. Corp. Law Comp. Funct. Approach, by Reinier
Kraakman et al., 3rd ed. (Oxford: Oxford University Press, 2017), 8–9.
7 Rome II Regulation: Recital 24. 8 Rome II Regulation: Article 1(2).
conduct of the corporation in a country and the environmental damage inflicted in another country is an interesting issue, the uncertainty of causation occurs in all cases concerning transnational environmental damage. Hence, it is not limited to corporate conduct. Therefore, it is excluded from the scope of this thesis. Moreover, the overarching question regarding the socio-economic role corporations should ideally take, given the fact they are the biggest economic actors in modern day society, is also not addressed. Although this is an interesting question, it is not within the scope of this thesis. The aim is merely to address the question of legal liability and how this can be assessed under the framework of the Rome II Regulation.
To answer the question of how corporate liability in cases of transnational environmental damages can be determined under the framework of the Rome II Regulation, several issues are examined. First, a general definition of corporate transnational environmental cases is examined in Chapter 2. Subsequently, the challenges arising from those cases are explored. Two categories of challenges are distinguished, relating to the Rome II Regulation’s material scope and the concepts of ‘corporations’ and ‘globalization.’ Moreover, Chapter 3
assesses two ways to determine corporate environmental liability under the Rome II framework. The concept is first assessed under the framework provided by Article 7 and subsequently by Article 17. This chapter provides a detailed normative overview of the Articles’ ability to determine corporate environmental liability and lays out the relation between Article 7 and 17. Chapter 4 presents an overview of the Rome II Regulation’s possible shortcomings by examining three possible scenarios where corporations could reject liability. These scenarios relate to the effect of licensing, parent corporations shifting liability to subsidiaries and the notion of party autonomy as provided for by Article 14 of the Rome II Regulation. This thesis concludes that the Rome II Regulation effectively determines corporate liability in cases of transnational environmental damages under Articles 7 and 17.
1.1
LITERATURE: ANALYSIS AND OVERVIEW
Numerous scholars have provided their interpretation of the functioning of the Rome II Regulation. There is not much consensus in the analyses of the Regulation, this can inter alia be seen when looking at the interpretation of the material scope. Scholars such as Kadner Graziano, Mahmoudi, Betlem & Bernasconi, and Plender & Wilderspine have adopted a broad interpretation of this scope.9 Scholars such as Dickinson Dicey, Morris & Collins, and Fuchs
9 Gerrit Betlem and Christophe Bernasconi, “European Private International Law, the Environment and Obstacles
for Public Authorities,” Law Q. Rev. 122, no. 1 (2006): 124–51; Thomas Kadner Graziano, “The Law Applicable to Cross-Border Damage to the Environment: A Commentary on Article 7 of the Rome II Regulation,” Yearb.
have interpreted the Rome II Regulation’s narrow material scope.10 Hence, two groups of
scholars can be distinguished who have analyzed the functioning of the Rome II Regulations. One group interprets a limited functioning and scope of the Regulation, Andrew Dickinson represents this approach throughout this thesis.11 While the other group interprets a broader
scope and enhanced functioning of the Regulation. This approach is articulated in this thesis by the chapters from Ahern and Binchy’s book.12 This thesis’ contribution is a balanced
analysis of the functioning of the Rome II Regulation by addressing both views.
Another contribution is the analytical description of the determination of corporate environmental liability. Scholars such as Anderson, Enneking, Rooney and Symeonides have analyzed the Rome II Regulation and tort law’s impact on corporate liability.13 This thesis
differs as it merely describes the conceptional understanding of corporate environmental liability under the framework provided by the Regulation. Furthermore, Faure & Nollkaemper and Grusic have analyzed the implications of climate change litigation.14 This is a distinctly
different type of litigation as cases concerning climate change claims aim to address the greater picture resulting from continuous environmental degrading activities. Moreover, Wai has described the implications for private law litigation in the era of globalization.15 This paper is
Int. Law Oblig., 3rd ed. (London: Sweet & Maxwell, 2009), 635–48; Said Mahmoudi, “Some Private International
Law Aspects of Transboundary Environmental Disputes,” Nord. J. Int. Law 59 (1990): 128–38.
10 Andrew Dickinson, “Environmental Damage,” in Rome II Regul. Law Appl. Non-Contract. Oblig., 1st ed.
(Oxford: Oxford University Press, 2008), 429–46; Collins of Mapesbury and Jonathan Harris, Dicey, Morris &
Collins on the Conflict of Laws, 15th ed. (London: Sweet & Maxwell, 2018); Angelika Fuchs, “Environmental
Damage,” in Rome II Regul. Pocket Comment., by Peter Huber, 1st ed. (Munich: Selier, 2011), 13–18.
11 Andrew Dickinson, “Environmental Damage,” in Rome II Regul. Law Appl. Non-Contract. Oblig. Updat. Suppl. I, vol. 1 (Oxford: Oxford University Press, 2010), 69–74; Andrew Dickinson, “Public Policy, Mandatory Rules,
and Rules of Conduct and Safety,” in Rome II Regul. Law Appl. Non-Contract. Oblig., 1st ed. (Oxford: Oxford University Press, 2008), 625–42; Dickinson, “Environmental Damage,” 2010.
12 John Ahern and William Binchy, The Rome II Regulation on the Law Applicable to Non-Contractual Obligations: A New International Litigation Regime (Leiden: Martinus Nijhoff Publishers, 2009).
13 Anderson, “Transnational Corporations and Environmental Damage: Is Tort Law the Answer?”; Liesbeth
Enneking, “The Common Denominator of the Trafigure Case, Foreign Direct Liability Cases and the Rome II Regulation,” Eur. Rev. Priv. Law 16, no. 2 (2008): 283–312; Jane Rooney, “Extraterritorial Corporate Liability for Environmental Harm: <i> Okpabi v Royal Dutch Shell <i>,” North. Irel. Leg. Q. 70, no. 1 (2019): 157–62; Symeon Symeonides, “Tort Conflicts and Rome II: A View from Across,” in Festschr. Für Erik Jayme, by Mansel Heinz-Peter, Erik Jayme, and Thomas Pfeiffer (Sellier European Law Publishers, 2004), 935–54; Symeon Symeonides, “Rome II and Tort Conflicts: A Missed Opportunity,” Am. J. Comp. Law 56, no. 1 (2008): 1–44.
14 Michael Faure and Andre Nollkaemper, “International Liability as an Instrument to Prevent and Compensate
for Climate Change,” Stanf. Environ. Law J. 26 (2007): 123–80; Uglješa Grušić, “International Environmental Litigation in EU Courts: A Regulatory Perspective,” Year Eur. Law 35, no. 1 (2016): 180–228.
15 Robert Wai, “Transnational Liftoff and Juridicial Touchdown: The Regulatory Function of Private International
Law in the Era of Globalization,” Columbia J. Transnatl. Law 40, no. 2 (2002): 209–74; Robert Wai, “Private v. Private: Transnational Private Law and Contestation in Global Economic Governance,” in Priv. Int. Law Glob.
different as it addresses the greater picture of private law litigation, while this thesis limits itself to litigation of corporate transnational environmental cases. Thus, the main contribution of this thesis is the normative and balanced analysis of the Rome II Regulation regarding the determination of corporate liability in cases concerned with transnational environmental damage resulting from torts committed by corporations.
2
R
EGULATORYC
HALLENGESR
ELATING TOC
ORPORATET
RANSNATIONALE
NVIRONMENTALC
ASESIn this chapter, the regulatory challenges posed by corporate transnational environmental cases are described. Firstly, regard is given to a general definition of these cases and the distinct regulatory challenges that the different types of cases bring. Secondly, the regulatory challenge relating to the material scope of Rome II is discussed. Thirdly, the regulatory challenges arising from the concepts of ‘corporations’ and ‘globalization’ are examined.
2.1
DEFINITION CORPORATE TRANSNATIONAL ENVIRONMENTAL CASES
Corporate transnational environmental cases are those where practices of (multinational) corporations cause environmental damage in a transboundary situation. Two categories of corporate transnational environmental cases can be identified, following Grušić’s reasoning.16
The first category concerns a corporation established and operating in country X and directly causing environmental damage in country Y. An exemplary case is the Bier case, concerning pollution of surface water of the Rhine in the Netherlands, resulting from the chemical discharge of a French company operating upstream.17 The most significant regulatory
challenge in this type of cases is that country X, when called to regulate or litigate the activity, may not sufficiently give regard to all the negative externalities suffered in country Y. This is caused, as Grusic determined, by national differences in environmental standards: “the operator will be subject to the exclusive application of the laxer standards of country [X], even if the negative externalities of its activities are suffered in country [Y].”18
The second category of cases concerns multinational corporations established in country X with an incorporated subsidiary in country Y, where the subsidiary’s operations cause direct environmental damage in country Y. Considering the subsidiary falls under the multinational corporation, the case’s transboundary characteristic is confirmed. An example of this type of cases is the Akpan v Shell case, concerned with environmental harm suffered by a Nigerian farmer, Akpan, allegedly from business operations of Shell Petroleum Development Company of Nigeria Ltd (incorporated in Nigeria), a wholly-owned subsidiary of Royal Dutch
16 Grušić, “International Environmental Litigation in EU Courts: A Regulatory Perspective,” 9.
17 Case 21/76 Handelskwekerij G. J. Bier BV v Mines de potasse d'Alsace SA [1976] EU:C:1976:166 (Bier). 18 Grušić, “International Environmental Litigation in EU Courts: A Regulatory Perspective,” 10–11.
Shell (established and incorporated in the Netherlands).19 Grušić examined that the biggest
regulatory challenge in this type of cases results from the subsidiary’s separate legal personality. The subsidiary is a constituent part of the multinational corporation and therefore not regulated by the jurisdiction of the parent corporation. Under those circumstances, the multinational corporation can take advantage of the subsidiary’s separate legal personality. They are able to reap the profits and shift liability over the negative externalities of the practices carried out by their constituent parts.20
2.2
MATERIAL SCOPE OF THE ROME II REGULATION
The material scope of the Rome II Regulation is limited to “civil and commercial matters”.21
The same terminology is used in the Brussels Convention22 and Rome I Regulation,23 to
safeguard a consistent interpretation, an autonomous meaning – in accordance with the case-law of the Court – must be given to this concept.24 For a case to fall within the material scope
of the Regulation, the case needs to involve a relationship governed by private law.25 Therefore,
a case needs to be brought by a private party specifically impacted or has a specific interest.26
Hence, the court has to identify two elements: (1) the legal relationship between the parties; and (2) the factual and legal basis of the action as brought by the claimant.27
Corporate transnational environmental cases might fall outside of this material scope, as the inherent nature of these cases concerns environmental damage, which is generally not
19 Cedric Ryngaert, “Tort Litigation in Respect of Overseas Violations of Environmental Law Committed by
Corporations: Lessons from the Akpan v Shel Litigation in the Netherlands,” McGill Int. J. Sustain. Dev. Law
Policy 8, no. 2 (2013): 250.; Case C/09/337050 Akpan and others v Royal Dutch Shell and Shell Petroleum Development Company of Nigeria,Ltd. [2013] NL:GHDHA:2015:3587 (Akpan v Shell).
20 Grušić, “International Environmental Litigation in EU Courts: A Regulatory Perspective,” 11. 21 Rome II Regulation: Article 1(1).
22 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters [1968]
Official Journal of the European Union L299/32 (Brussels Convention): Article 1.
23 Regulation (EC) No 593/2008 on the law applicable to contractual obligations [2008] Official Journal of the
European Union L177/6 (Rome I Regulation): Article 1.
24 Case 29-76 LTU Lufttransportunternehmen GmbH & Co. KG v Eurocontrol [1976] EU:C:1976:137 (LTU v Eurocontrol), paras 35. Case C-271/00 Gemeente Steenbergen v Luc Baten [2002] EU:C:2002:656, para. 28. Case
C-115/08 Land Oberösterreich v ČEZ as [2009] EU:C:2009:660, para. 22.
25 Case 29-76 LTU v Eurocontrol, para 4.; Case C-271/00 Gemeente Steenbergen v Luc Baten, para. 29. 26Case 29-76 LTU v Eurocontrol, para 4.
inflicted on one individual but on society at large. 28 The interests of society are not covered by
the Regulation, which is why a regulatory challenge regarding corporate transnational environmental cases materializes.
Notwithstanding, the ECJ in Gemeente Steenbergen v Baten clarified that a case could also be brought by a public authority acting in its private capacity. 29 By doing so, the ECJ
expanded their understanding of a private party, hence broadening the Rome II Regulation’s material scope. In the Gemeente Steenbergen v Baten case, concerning social assistance to a divorced spouse, the question was raised with regard to the corresponding provision – Article 1(1) Brussels Convention30 – the conclusions of which can be extended to the interpretation of
Rome II. The ECJ articulated that: “public authority and an individual may come within the scope of the Brussels Convention provided that the public authority has not acted in the exercise of its public powers.”31 The ECJ confirmed this interpretation in Land Oberöstereich v CEZ.
In this case, an Austrian public body brought an action in its private capacity as the landowner to the Czech nuclear power station, which allegedly polluted the land with nuclear radiation.32
The Court did not even question the applicability of the Brussels Convention and thus accepted that the matter fell within the material scope of civil and commercial matters.
Additionally, the ECJ further expanded their understanding of a private party in VKI v
Henkel by including a state-authorized body in the definition.33 The ECJ found that: “Not only
is a consumer protection organization such as the VKI a private body, but in addition […] the subject-matter of the main proceedings is not an exercise of public powers. […] On the contrary, the action pending before the national court […] seeks to make relationships governed by private law subject to review by the courts. Hence, an action of that kind is a civil matter within the meaning of the first paragraph of Article 1 of the Brussels Convention.”34 With this
ruling, the ECJ further expanded the material scope of Rome II. Thus, the ECJ has significantly
28 Michael Bodgan, “The Treatment of Environmental Damage in Regulation Rome II,” in Rome II Regul. Law Appl. Non-Contract. Oblig. New Int. Litig. Regime, by William Binchy and John Ahern, 1st ed. (Leiden: Martinus
Nijhoff Publishers, 2009), 224–25.
29 Case C-271/00 Gemeente Steenbergen v Luc Baten, para. 22. 30 Brussels Convention: Article 1.
31 Case C-271/00 Gemeente Steenbergen v Luc Baten, para. 22. 32 Case C-115/08 Land Oberösterreich v ČEZ as.
33 Case C-167/00 Verein für Konsumenteninformation v Karl Heinz Henkel [2002] EU:C:2002:555 (VKI v Henkel).
extended the material scope of the Rome II Regulation by broadening their understanding of a private party. Therefore, more parties are enabled to claim damages in corporate transnational environmental cases, as long as they have a particular interest.
However, in LTU v Eurocontrol the ECJ created legal precedence to limit the material scope. As they found that “the recovery of charges payable by a person governed by private law to a national or international body governed by public law”35 amounts to the exercise of a
public authority in the exercise of its public powers, rather than in its capacity of a private person. Hence, the LTU v Eurocontrol case does not amount to a civil and commercial matter, excluding it from the material scope. This finding has inter alia been confirmed by cases such as Lechouritou v Dimosiotis.36
The material scope is limited to cases that are governed by private law. Since this thesis limits the concept of corporate transnational environmental cases to the two types defined in Section 2.1, they fall within the material scope of the Rome II Regulation. The assumption is made that when a claim for damages is made in either of the two types of cases, the criteria articulated in Article 1 are fulfilled.
2.3
THE CONCEPTS OF CORPORATIONS AND GLOBALIZATION
Further regulatory challenges can be identified with regard to the concepts of corporations and globalization. Corporations, in itself, bring about additional regulatory challenges. As Anderson describes, “[corporations] pose singular problems of regulation and accountability that will not be solved without close attention to the actual circumstances in which [corporations] operate.”37 The problems he describes arise from the fact that 21st-century
corporations rival nation-states as units of economic organization. The two concepts of ‘corporations’ and ‘globalization’ come together in corporate transnational environmental cases and bring about two specific regulatory problems.
The first relates to the fact that multinational corporations have incorporated subsidiaries that are not subject to the principle of shared liability. The principle of shared liability articulates the obligation of two or more partners to be responsible for satisfying a liability.38
35 Case 29-76 LTU v Eurocontrol, para 4.
36 Case C-292/05 Eirini Lechouritou and Others v Dimosiotis Omospondiakis Dimokratias tis Germanias [2007]
EU:C:2007:102 (Lechouritou v Dimosiotis), para. 39.
37 Anderson, “Transnational Corporations and Environmental Damage: Is Tort Law the Answer?,” 401. 38 Ibid.
Corporations often deny liability under this principle, as in most instances, the parent company is not liable for the activities of the subsidiary. This reasoning follows the principle that was first articulated by the House of Lords in Salomon v Salomon and later affirmed in Adams v
Cape Industries plc: “the court is not free to disregard the principle of Salomon v A Salomon
[…] our law, for better or worse, recognises the creation of subsidiary companies, which though in one sense the creatures of their parent companies, will nevertheless under the general law fall to be treated as separate legal entities with all the rights and liabilities which would normally attach to separate legal entities”.39 This regulatory challenge was already described
in relation to the Akpan v Shell case (Section 2.1) but is strengthened by the fact that in theory, there is no judicial body that is enabled to exercise its jurisdiction over every component of a multinational corporation when it operates in various continents.40
Following, this ties into a second challenge, which describes the problematic feature of a multinational corporation calling into question a fundamental axiom of the global legal order, namely that each actor is subject to the jurisdiction of at least one influential court at any time. Connecting this axiom to the principle of territorial sovereignty postulates that each nation-state enjoys a ‘reserved domain’ of domestic jurisdiction in which other nation-states may not intervene –also articulated in Article 2(7) of the UN Charter.41 The fact that this principle is
reproduced in the UN Charter confirms its international importance. Consequently, as Anderson describes, an anomaly can be detected in the international system: The courts of the home country of the parent corporation lack the territorial jurisdiction to regulate the subsidiaries’ activities abroad, while at the same time the courts of the host country, in which the subsidiaries are located, lack jurisdiction over the parent company.42 This anomaly,
combined with the perspective set-out by Enneking that the home country's regulatory involvement might even be perceived as “neo-imperialistic interference”43, signifies the
importance of this regulatory challenge.
39 Case Adams v Cape Industries Plc [1990] Ch. 433 (Adams v Cape Industries Plc); Case Aron Salomon v A. Salomon and Company Ltd. [1897] A.C. 22 (Salomon v Salomon).
40 Anderson, “Transnational Corporations and Environmental Damage: Is Tort Law the Answer?,” 401. 41 Ibid. at 402.; United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI, Article 2(7). 42 Ibid.
43 Enneking, “The Common Denominator of the Trafigure Case, Foreign Direct Liability Cases and the Rome II
Several challenges can be identified in relation to the determination of corporate liability in transnational environmental damage cases. The challenges regarding the Rome II Regulation’s material scope are mitigated in this thesis as there are two distinct types of cases of transnational environmental damage identified that are considered to fall within the material scope. The regulatory challenges relating to the concepts of ‘corporations’ and ‘globalization’ could lead to possible shortcomings in the Rome II framework, this is further examined in Chapter 4.
3 C
ORPORATEE
NVIRONMENTALL
IABILITY UNDER THEF
RAMEWORK OFR
OMEII
This chapter assesses how corporate environmental liability can be determined under the Rome II framework. This can be done under two provisions: Article 7 and Article 17. The aim and the ability to determine corporate environmental liability of both Articles are discussed. Subsequently, the relation between the Articles is examined. This provides an overview of how corporate liability in transnational environmental damage cases can be determined per the framework of the Rome II Regulation.
3.1
ARTICLE 7 ROME II
Article 7 deals with the special choice-of-law rules regarding environmental damage. It states:
“The law applicable to a non-contractual obligation arising out of environmental damage or damage sustained by persons or property as a result of such damage shall be the law determined pursuant to Article 4(1), unless the person seeking compensation for damage chooses to base his or her claim on the law of the country in which the event giving rise to the damage occurred.”44
Hence, Article 7 operates in conjunction with the general conflict-of-law rule of Article 4(1). Considering the subject-matter of Article 7, this Article seems to be the apparent choice when assessing how to determine corporate environmental liability under the framework of the Rome II Regulation.
3.1.1 AIM OF ARTICLE 7
The Article's aim is deducted from an analysis of Recitals 24 and 25, legal scholarship, and the Proposal the Commission submitted to adopt the Rome II Regulation. Recital 24 articulates the Regulation’s definition of environmental damage.45 This definition does not require the
adverse impact of the environmental damage to be either ‘measurable’ or ‘significant.’ Rather, the Recital seems to contain an implied understanding of environmental damage, which determines that the adverse impact has to be of a ‘certain significance.’ This significance can either be in terms of intensity – i.e. the seriousness of the (potential) problems caused – or in terms of quantity – i.e. the number of persons or square kilometers of land affected, as also
44 Rome II Regulation: Article 7. 45 Ibid.: Recital 24.
argued by Bodgan.46 This reasoning has been confirmed by scholars such as Kadner Graziano,
who state that: “the Rome II Regulation defines ‘environmental damage’ independently of any damage to rights of the individual such as life, health or, in particular, of property.”47 The ample
room for interpretation that is left to the courts by the Recital’s implied understanding of environmental damage extends the aim of Article 7, as the Article becomes more broadly applicable.
Moreover, the reference to Article 174 EC Treaty in Recital 25 is deemed important for the aim of Article 7. This provides a high-level of environmental protection based on: “the precautionary principle and the principles that preventive action should be taken, that environmental damage should, as a priority, be rectified at source and that the polluter should pay.” 48 The reference in Recital 25 justifies the claimant’s unilateral choice of law articulated
in Article 7 by giving the claimant the choice to base their claim on the law determined by the general rule of Article 4(1) or the “the law of the country in which the event giving rise to the damage occurred.”49 The aim of the incorporation of this alternative conflict rule is, as
articulated by Bodgan: “[to make] it difficult for the juridical or natural person claimed to be liable to avoid or limit his liability by either directing the harmful effects of his activities to, or carrying out such activities in, a country with non-existing or polluter-friendly civil liability rules on environmental damage.”50 Thus, Recital 25 articulates the polluter pays principle and
subsequently broadens the aim of Article 7. It not only forces (corporate) operators who are carrying out ecologically dangerous activities – established in countries with a low level of environmental protection – to abide by the higher-standard prevailing in neighboring countries. It also discourages (corporate) operators established in countries with high environmental protection to operate near the border to shift the negative externalities from their practices to the neighboring countries with laxer rules.
Notwithstanding, under Article 7 of the Explanatory Memorandum, included in the Commission Proposal submitted to adopt the Rome II Regulation, the Commission appears to 46 Bodgan, “The Treatment of Environmental Damage in Regulation Rome II,” 224.
47 Kadner Graziano, “The Law Applicable to Cross-Border Damage to the Environment: A Commentary on
Article 7 of the Rome II Regulation,” 85.
48 Consolidated version of The Treaty Establishing the European Community [2006] Official Journal of the
European Union C 321 E/37 (EC Treaty): Article 174(2). Amended by the Treaty of Lisbon (2007) as: Consolidated version of the Treaty on the Functioning of the European Union [2012] Official Journal of the European Union C326/ 47 (TFEU): Article 191(2).
49 Rome II Regulation: Article 7.
require that the environmental damage should be the result of ‘human activity.’ The Commission puts forward that: “the rule [of Article 7] covers both damage to property and persons and damage to the ecology itself, provided it is the result of human activity.”51 This
interpretation is not translated in either the final form of Article 7 or the Recitals. Hence, very little significance is given to this statement by the Commission. Regardless, the Commission Proposal limits the aim as it suggests that the “event giving rise to the damage”52 usually will
be the result of a human activity.
Legal scholarship is conflicted whether the aim of Article 7 is further extended by the intention of the Article. According to Kadner Graziano, the inherent aim of the Article is to apply public authority claims. He argues that: “as the Rome II Regulation will also cover pure environmental harm, the intention of the legislator of the Rome II Regulation must clearly have been that [claims for pure environmental harm exclusively to public authorities] shall be regarded as ‘civil matters’ that fall within the scope of application.”53 Nevertheless, Dickinson
– relying on the VKI v Henkel case54 – argues that: “the Member State’s competent authority
to recover the costs of taking preventative and remedial measures under the [Environmental Liability Directive] should be seen as being based on the exercise of powers of a public nature conferred exclusively on it, and as falling outside the […] Rome II Regulation.”55 Additionally,
Bogdan – drawing inspiration from the Bier case56 – suggests that: “the situation may be
different if the State has authorized a private person, such as a non-governmental environmentalist organization, to take legal, action, in its own name, against the person responsible for the ecological damage.”57 Hence, there is no consensus in legal scholarship.
This thesis submits that Article 7 expresses the intention to cover pure environmental harm, however, for a case to fall within the Rome II Regulation material scope, the relationship between the parties has to be governed by private law – as articulated in VKI v Henkel.58
51 Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual
obligations ("ROME II") [2003] COM/2003/0427final (Commission Proposal for the Rome II Regulation), 19.
52 Rome II Regulation: Article 7.
53Kadner Graziano, “The Law Applicable to Cross-Border Damage to the Environment: A Commentary on
Article 7 of the Rome II Regulation,” 86.
54 Case C-167/00 VKI v Henkel.
55 Dickinson, “Environmental Damage,” 2008, 433–34. 56 Case 21/76 Bier.
57 Bodgan, “The Treatment of Environmental Damage in Regulation Rome II,” 225. 58 Case C-167/00 VKI v Henkel.
Thus, Recitals 24 and 25 showcase that it was within the legislator’s intention to make the Article broadly applicable. Bogdan and Kadner Graziano confirm this, though Dickinson is sceptical. Dickinson’s scepticism is in line with the limited aim found in the Commission Proposal. Notwithstanding that view, a reading of the Regulation’s rules infers a broad aim of Article 7, where a wide scope of interpretation is left to the judiciary.
3.1.2 ARTICLE 7’S ABILITY TO DETERMINE CORPORATE ENVIRONMENTAL LIABILITY Article 7 provides the claimant with the unilateral choice of law. Hence, if the claimant has the necessary resources, the Article creates a favor laesi approach in favor of the claimant.59 The
only restriction is that the claimant cannot ‘cherry-pick’ some substantive rules of the law applicable under Article 7 and the rules from the applicable law per Article 4(1). The claimant can merely rely on one of the two legal systems. Regardless, the favor laesi approach created by Article 7 enhances the Article’s ability to determine corporate environmental liability. Considering the possibility that the defendant – the corporation in these cases – is able to escape liability is significantly decreased.
In addition, Bodgan submits that Article 7 allows for a situation of dépeçage, meaning that the claimant can choose different laws for different ‘parts’ of the damage. To exemplify, the law designated by Article 7 for property damage and the law pursuant from Article 4(1) for personal damage. Thus, following Bogdan’s reasoning: “well-informed claimants in cross-border cases will generally be in a better position and obtain better protection than claimants in purely domestic cases, who have no similar right to choose between legal systems.”60
Bodgan’s view is not supported by other scholars, among others Dickinson and Symeonides submit that there is no room for dépeçage.61 They recall that the European Parliament opted
for the issue-by-issue approach in Article 4(4) in their First Reading.62 This might explain
Bodgan’s view. However, the notion of dépeçage was never accepted, as it was heavily criticized, by scholars such as Kreuzer: “[as] extremely dangerous for a consistent and
59 Mahmoudi, “Some Private International Law Aspects of Transboundary Environmental Disputes,” 134;
Bodgan, “The Treatment of Environmental Damage in Regulation Rome II,” 222.
60 Bodgan, “The Treatment of Environmental Damage in Regulation Rome II,” 222.
61 Dickinson, “Environmental Damage,” 2008, 440; Symeonides, “Rome II and Tort Conflicts: A Missed
Opportunity,” 184–86.
62 Article 4(4): “In resolving the question of the applicable law, the court seised shall, where necessary, subject
each specific issue of the dispute to separate analysis.”
Position of the European Parliament adopted at first reading on 6 July 2005 with a view to the adoption of Regulation (EC) No .../2005 of the European Parliament and of the Council on the law applicable to non-contractual obligations ("ROME II") [2005] COD/2003/0168 (European Parliament Position First Reading)
homogenous appreciation of a case.”63 Therefore, per Article 15 of the Rome II Regulation,
the law applicable to non-contractual obligations under the rules of the Regulation shall apply to all of the matters set out and a situation of dépeçage is precluded.64 This leads to a more
limited ability of the Article to determine corporate environmental liability then Bodgan has tried to put forward.
Moreover, the Article’s ability to determine corporate liability is further enhanced by the absence of the requirement of foreseeability.65 Therefore, whether the person claimed to be
liable knew or should have to be liable under the law articulated by Article 7 or under the lex
loci damni is not relevant when determining liability. Hence, as Kadner Graziano determined:
“the application of the law of the country in which the damage occurred does not depend on whether the damaging effect in this country was foreseeable for the defendant, and rightly so.”66 The absence of the requirement of foreseeability in environmental damage claims
enhances the Article’s ability to determine liability of corporations, as it is no longer of importance whether the corporation knew or should have known about the local environmental rules.
Furthermore, Article 7 differentiates between ‘environmental damage’ (i.e. ecological damage) and ‘resultant damage’ (i.e. “damage sustained by person or property as a result of [ecological] damage”67). However, the same conflict rules are applied to both types of
damages. Per Article 7, the claimant may choose to bring his entire claim either under the law applicable per Article 4(1) – lex loci damni – or under the lex loci actus. Thus, as the ECJ clarified in the Bier case: “the plaintiff has an option to commence proceedings either at the place where the damage occurred or the place of the event giving rise to it.”68 Suppose the
claimant chooses to pursue their claim under Article 4(1). In that case, this means the lex loci
damni governs the environmental damage and the resultant damage. Under those
63 Karl Kreuzer, “Tort Liability in General,” in Unification Choice Law Rules Torts Non-Contract. Oblig. Eur.,
by Alberto Malatesta, viii ed. (Padova: Cedam, 2006), 68.
64 Rome II Regulation: Article 15.
65 Kadner Graziano, “The Law Applicable to Cross-Border Damage to the Environment: A Commentary on
Article 7 of the Rome II Regulation,” 73; Bodgan, “The Treatment of Environmental Damage in Regulation Rome II,” 222.
66 Kadner Graziano, “The Law Applicable to Cross-Border Damage to the Environment: A Commentary on
Article 7 of the Rome II Regulation,” 73.
67 Rome II Regulation: Article 7.
68 Case 21/76 Handelskwekerij G. J. Bier BV v Mines de potasse d'Alsace SA [1976] EU:C:1976:166 (Bier): para.
circumstances, there is a de facto irrelevance of the localization of the resultant damage, as also put forward by Bodgan and Mahmoudi. 69 There is no de facto irrelevance of the localization
of the resultant damage when the claimant chooses to bring his claim under the lex loci actus. The issue of localization is, however, of great importance when assessing whether corporate liability for torts committed by subsidiaries of multinational corporations is also covered by Article 7. This is an important question because the multinational corporation’s home country’s jurisdiction often safeguards higher environmental standards than the host jurisdiction.70 Hence, if the claimant would be enabled to bring their claim under the
multinational corporation’s home jurisdiction, this would most probably increase the likelihood of their claim to succeed. This would be consistent with the ‘polluter-pays’ objective set out by the Regulation.71 However, the question remains whether and under which circumstances
the action or omission (i.e. inaction) of the parent corporation of a multinational corporation that directly or indirectly resulted in environmental harm in the host country can be qualified as a tort under Article 7. This is a classification issue and as van Hoek determined: “classification issues be solved by using an autonomous interpretation method. Whether a dispute concerns contract or tort is decided autonomously for the European instrument involved, based on the rationale of that instrument.”72 The Court has, up till January 2020, not
given its interpretation on this matter yet. Based on the Regulation’s objectives and rationale, the scope of Article 7 demands a broad interpretation. That would imply that the claimant should be able to bring a claim under the lex loci actus. The localization of the lex loci actus might be based upon the following considerations. One suggestion to solve this issue is given by Enneking: “in such a case the locus delicti is the place where the activity that failed to take place should have taken place.”73 Therefore, indicating the need for supervisory accountability
of the mother corporation of the multinational corporation. Another possibility might be the financial benefits for the mother corporation in relation to the accountability for damages.
69Bodgan, “The Treatment of Environmental Damage in Regulation Rome II,” 223; Mahmoudi, “Some Private
International Law Aspects of Transboundary Environmental Disputes,” 131.
70 Liesbeth Enneking, “Foreign Direct Liability and Beyond: Exploring the Role of Tort Law in Promoting
International Corporate Social Responsibility and Accountability” (Utrecht University, 2012), 216.
71 Rome II Regulation: Recital 25.
72 Aukje van Hoek, “Transnational Corporate Social Responsibility: Some Issues with Regard to the Liability of
European Corporations for Labour Law Infringements in the Countries of Establishment of Their Suppliers,”
Univ. Amst. Inst. Priv. Law 1, no. 1 (2008): 4.
73 Enneking, “Foreign Direct Liability and Beyond: Exploring the Role of Tort Law in Promoting International
Thus, in Article 7 lies the foundation to effectively determine corporate liability in cases of transnational environmental damages. Both the broad aim and the wide scope of the Article, as follows from the preambles of the Regulation, contribute to the effective determination of the concept. This is enhanced by the favor laesi approach, the absence of the requirement of foreseeability and the broad scope that should be interpreted as to the localization of the lex
loci actus of the action and omission of the parent corporation of a multination corporation
regarding the torts committed by their subsidiaries.
3.2
ARTICLE 17 ROME II
Article 17 of the Rome II Regulation relates to the ‘rules of safety and conduct.’ It is aimed to strike a ‘balance’ between the parties. Corporate environmental liability can be determined under this Article, even though the Article does not specifically refer to ‘environmental damage’ as such, it reads:
“In assessing the conduct of the person claimed to be liable, account shall be taken, as a matter of fact and in so far as is appropriate, of the rules of safety and conduct which were in force at the place and time of the event giving rise to the liability”74
Article 17 is – unlike Article 7 – not a choice of law rule. It refers to the lex loci actus merely as a fact in determining liability. It is in place, as the rules of safety and conduct of the place where the defendant acted should affect the resolution of the proceedings even where the tort is governed by the law of another country. The Article only engages in so far as the law applicable under the relevant provisions dictates.75 Article 17 affirms the ‘datum’ of foreign
law, meaning that it determines the particular role foreign law plays as part of the background factual matrix to a dispute.76 Hence, Article 17 helps to mitigate the issue that liability may be
based on a law the application of which the person claimed to be liable could not foresee.77
Bearing in mind the concept of ‘state sovereignty’, it is considered inappropriate for one country’s courts to order the defendant to behave in a manner incompatible with the mandatory rules of conduct and safety, which are in force in another country where the potential wrongful 74 Rome II Regulation: Article 17.
75 Richard Fentiman, “The Significance of Close Connection,” in Rome II Regul. Law Appl. Non-Contract. Oblig. New Int. Litig. Regime, by William Binchy and John Ahern, 1st ed. (Leiden: Martinus Nijhoff Publishers, 2009),
91.
76 Alex Mills, “The Application of Multiple Laws Under the Rome II Regulation,” in Rome II Regul. Law Appl. Non-Contract. Oblig. New Int. Litig. Regime, by William Binchy and John Ahern, 1st ed. (Leiden: Martinus
Nijhoff Publishers, 2009), 150.
77 Jan von Hein, “Article 4 and Traffic Accidents,” in Rome II Regul. Law Appl. Non-Contract. Oblig. New Int. Litig. Regime, by William Binchy and John Ahern, 1st ed. (Leiden: Martinus Nijhoff Publishers, 2009), 172.
act took place.78 Thus, this Article is important as it determines the role the lex loci damni plays
even if the corporation is held responsible under the jurisdiction of their home country where the multinational corporation's headquarters are situated, lex loci actus.
3.2.1 AIM OF ARTICLE 17
The aim of the Article is deducted from an analysis of Recital 34, legal scholarship and the Proposal the Commission submitted to adopt the Rome II Regulation. Recital 34 of the Rome II Regulation dictates:
“In order to strike a reasonable balance between the parties, account must be taken, in so far as appropriate, of the rules of safety and conduct in operation in the country in which the harmful act was committed, even where the non-contractual obligation is governed by the law of another country. The term ‘rules of safety and conduct’ should be interpreted as referring to all regulations having any relation to safety and conduct, including, for example, road safety rules in the case of an accident.”79
Recital 34 can be considered as laying the groundwork for Article 17. The two underlined elements in this Recital are further examined to understand the aim of Article 17 better. Recital 34 is inter alia inspired by Article 9 of the Hague Product Liability Convention,80 regarding
this corresponding provisions Reese suggested: “The word ‘rule’ should be interpreted in a broad sense to include not only statutes and decisional rules but also municipal ordinances.”81
Extending this reasoning to Article 17 broadens the aim, as the Article can incorporate more national considerations as long as they can be regarded a ‘rule’. The Article’s aim is further broadened when looking at the meaning of ‘regulations’ referred to by Recital 34. The concept of regulations should go beyond codified rules and include those based on case law, following Dickison’s reasoning.82 An example of those case-based rules within the scope of Article 17
are the Verkehrspflichten under German law.83 Thus, by broadening the meaning of the
concepts ‘rules’ and ‘regulations’ articulated in Recital 34, the aim of Article 17 is extended.
78 Bodgan, “The Treatment of Environmental Damage in Regulation Rome II,” 227. 79 Rome II Regulation: Recital 34.
80 Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual
obligations ("ROME II") [2003] COM/2003/0427final (Commission Proposal for the Rome II Regulation), 25.
81 Willis Reese, Explanatory Report on the 1973 HCCH Products Liability Convention, tome III, Acts and
Documents of the Twelfth Session, (1972), 269.
82 Dickinson, “Public Policy, Mandatory Rules, and Rules of Conduct and Safety,” 640.
83 Cees van Dam, “Liability for Immovable Objects,” in Eur. Tort Law, 2nd ed. (Oxford: Oxford University Press,
Furthermore, as articulated in the Commission Proposal, the intention behind Article 17 – originally Article 13 of the Commission Proposal – reads: “The rule in Article 13 is based on the fact that the perpetrator must abide by the rules of safety and conduct in force in the country in which he operates, irrespective of the law applicable to the civil consequences of his action, and that these rules must also be taken into consideration when ascertaining liability”84 Hence,
the aim of the Article is to force the competent judicial authority to take account of the foreign law as a point of fact in the case. This ensures that regard is given to the ‘context’ of the tort. In what way, and to what extent, the judiciary applies the ‘rules of safety and conduct’ is up to their discretion. This can also be understood from the words “in so far as is appropriate”85
articulated in Article 17. The legislator adopted this wide margin of appreciation due to the varying degrees and non-exclusive nature of local rules.86 The consequences of this margin of
appreciation and the Article’s broad aim are examined in the next section.
3.2.2 ARTICLE 17’S ABILITY TO DETERMINE CORPORATE ENVIRONMENTAL LIABILITY The wide margin of appreciation that the judiciary enjoys in deciding whether and, if so, for what purpose and to what extent to take account of the rules identified by Article 17 affects the Article’s ability to determine corporate environmental liability. Considering that Article 17 was inspired by Article 7 of the Hague Convention on the Law Applicable to Traffic Accidents87,
the interpretation adopted by Judge Friendly in Pearson v. Northeast Airlines can be considered as criticism regarding the application of the Article: “it thereby interferes with the proper freedom of action of the legislature of the sister state. The terms and conditions of a claim created by statute inevitably reflect the legislature’s balancing of those considerations that favor and of those that oppose the imposition of liability.”88 Judge Friendly argues that the
margin of appreciation might lead to creating a ‘statutory collage’, which bears little to no resemblance to what was intended by the legislators.89 Hence, the original intention of the
84 Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual
obligations ("ROME II") [2003] COM/2003/0427final (Commission Proposal for the Rome II Regulation), 25.
85 Rome II Regulation: Article 17.
86 Eric Essén, Explanatory Report on the Hague Traffic Accidents Convention, tome III, Acts and Documents of
the Eleventh Session, (1968), 27–28.
87 Dickinson, “Public Policy, Mandatory Rules, and Rules of Conduct and Safety,” 638.
88 Case Pearson v Northeast Airlines, Inc. [1962] 309 F.2d 553 (2d Cir. 1962) (Pearson v Northeast Airlines),
para. 565.
89 Christopher Armstrong, “The Hague Convention on the Law Applicable to Traffic Accidents: Search for
legislature might not be accurately translated by the usage of Article 17. This diminishes the Article’s ability to determine corporate environmental liability.
Additionally, Article 17 provides part of the context wherein the conduct of the defendant must be judged. The judiciary is only obliged to take account of the ‘rules of safety and conduct’. There is a distinct difference between applying a rule of law or taking account of one. As articulated by the Commission: “taking account of foreign law is not the same thing as applying it: the court will apply only the law that is applicable under the conflict rule, but it must take account of another law as a point of fact, for example when assessing the seriousness of the fault or the author' s good or bad faith for the purposes of the measure of damages.”90
Therefore, the significance of the ‘rules of safety and conduct’ varies according to the nature of the conduct and other surrounding circumstances. Hence, as established by the Dutch High Court in the Kalimijnen case, if liability under the applicable law is strict, the defendant’s conduct may not fall to be assessed at all.91 In such cases, Article 17 has little to no effect.
Therefore, Article 17 has a limited ability to determine corporate environmental liability. This is confirmed by Symeonides, who expresses that Article 17 is a “tool for helping the tortfeasor, but not necessarily the victim.”92 He finds that this “concern for the perpetrator is excessive, if
not misplaced.”93 Dickinson, however, disagrees with him and puts forward: “there would be
no reason why a person seeking compensation cannot equally pray in aid breach of rules of safety and conduct.”94 He is more positive regarding the ability of the Article, and stresses that
the completeness of the “framework for the determination of non-contractual obligations” is of great importance.95
The framework that Article 17 provides incorporates a broad scope of ‘rules’ and ‘regulations.’ In Dubai Aluminium v Salaam the High Court of Justice extended the scope of the case-based ‘rules’ by taking account of the business practices and customs in the place in
90 Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual
obligations ("ROME II") [2003] COM/2003/0427final (Commission Proposal for the Rome II Regulation), 25.
91 The national proceedings of the Bier case are referred to as the Kalimijnen cases. Hence, they are concerned
with the environmental degrading activities of a French company (Mines de Potasse d’Alsace) which caused environmental damage in the Netherlands. Case Mines de potasse d'Alsace SA v Handelskwekerij G. J. Bier BV [1988] RvdW NL:PHR:1988:AD5713 (Kalimijnen).
92 Symeonides, “Rome II and Tort Conflicts: A Missed Opportunity,” 41. 93 Ibid.
94 Dickinson, “Public Policy, Mandatory Rules, and Rules of Conduct and Safety,” 641. 95 Ibid.
which the defendant acted.96 Therefore, non-legally binding conventional standards of
behavior are within the scope of Article 17, as also argued by Dickinson.97 This further extends
the scope of Article 17 and enhances the Article’s ability to determine corporate environmental liability, as there is a broader regulatory framework that can be used to impose or deny corporate environmental liability.
3.3
RELATION BETWEEN ARTICLE 7 AND 17The relation between Article 7 and 17 materializes out of the extensive public-law regulations governing environmental standards. These regulations form a part of the 'rules of conduct and safety’ – articulated in Article 17 – corporations have to comply with. Therefore, Article 17 could play an important role in cases of environmental damage claims, falling within the scope of Article 7.98 As the Commission noted: “One of the most frequently asked questions concerns
the consequences of an activity that is authorised and legitimate in State A (where, for example, a certain level of toxic emissions is tolerated) but causes damage to be sustained in State B, where it is not authorised (and where the emissions exceed the tolerated level). Under [Article 17] the court must then be able to have regard to the fact that the perpetrator has complied with the rules in force in the country in which he is in business.”99
If the multinational corporation acts on a prior-obtained license obtained from their home jurisdiction, locus actus, Article 17 plays an important role. Article 17 puts the judiciary under the obligation to look at the environmental standards set by the ‘rules of safety and conduct’ of the locus damni. These rules might still put liability on the corporation. This is an important aspect of the claimant’s claim, as the Dutch Court of First Instance recognized in the Kalimijnen case: the permits’ existence was “not without importance to the question of liability.”100 Thus,
the situation could arise where Article 17 can put liability on corporations in the context of Article 7, even when a license obtained from the locus actus is in place. The effect of licensing is further examined in Section 4.1, as there are several additional factors that come into play.
96 Case Dubai Aluminium Co Ltd v Salaam [1999] 1 Lloyd’s Rep 415 EWHC:1998:1204 (Dubai Aluminium v Salaam), paras. 452-453.
97 Dickinson, “Public Policy, Mandatory Rules, and Rules of Conduct and Safety,” 640. 98 Dickinson, “Environmental Damage,” 2008, 443.
99 Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual
obligations ("ROME II") [2003] COM/2003/0427final (Commission Proposal for the Rome II Regulation), 20.
100 Translation of extract para 6: Case Handelskwekerij G. J. Bier BV v. Mines de potasse d'Alsace SA [1979]
To conclude: Article 7 effectively determines corporate liability in cases of transnational environmental damages. Article 17 provides an alternative way to determine corporate liability in cases where corporations rely on a prior-obtained license of the locus actus. Hence, it is argued that the Rome II Regulation provides an effective framework to determine corporate liability in cases of transnational environmental damage per Article 7, and in some specific cases per Article 17.
4.
P
OSSIBLEL
IMITINGF
ACTORS OFT
HER
OMEII
F
RAMEWORKThis chapter deals with three possible limiting factors: Firstly, the effect of licensing on the liability of corporations is laid-out. Secondly, the possibility of multinational corporations to shift liability to their subsidiaries is explored. Thirdly, Article 14 facilitates the freedom of choice, whether this could provide a possibility for corporations to reject liability is analyzed. These elements provide a possibility for a corporation to reject liability, these elements are further explored in the following sections.
4.1
THE EFFECT OF LICENSING ON LIABILITY OF CORPORATIONS
This section aims to answer the question whether corporations can rely on the legitimacy assessment of the locus actus to reject liability. The situation might occur that a corporation has obtained a license from their home jurisdiction (i.e. locus actus) and carries out practices according to that license. Despite the legitimate license, environmental damage might occur cross-border. When a plaintiff sues the corporation – as enabled under Article 7 –a complicated situation arises. The corporation relies on the legitimacy assessment of the locus actus, while the plaintiff relies on a breach of statutory rules governing his right to a clean environment, either under the law of the locus actus or the locus damni. Article 17 provides a possibility to determine corporate liability when a corporation acts according to a license. Although, the rules of safety and conduct of the locus damni articulated in Article 17 are merely a fact in determining liability and not the only ones the judiciary has to take into account. The rules of safety and conduct are essential to all types of licenses, as explored in the following section. 4.1.1 TWO TYPES OF LICENSES
Two types of licenses can be distinguished: firstly, a license obtained from the locus actus and a licensee obtained from the locus damni. Licenses obtained from the locus damni cannot relieve the corporation from their responsibilities as the potential tort and the license fall under the same jurisdictional rules. This situation occurred in the Akpan v Shell case. Shell Petroleum Development Company of Nigeria Ltd had obtained a legitimate license to carry out their business practice from the Nigerian authorities.101 Article 17 still plays a role in these
circumstances. This provision puts the judiciary under the obligation to look at the environmental standards set by the rules of safety and conduct. It could be that the rules of code
