More than six months after the implementation period set
forth under the Environmental Liability Directive, the German
Environmental Damages Act has finally come into effect on 14
The EU Environmental Liability Directive imposes liability
on industrial operators, among others, for the damage they
cause to the environment and Member States were required to
have implemented this Directive in national law by 30 April
2007. In response, the Federal Government of Germany
(Bundesregierung) approved the draft of the German
Environmental Damages Act ("GEDA") implementing the
Directive in September 2006; it was passed by the Bundestag in
March 2007 and finally entered into force on 14 November 2007.
In comparison to the draft approved in September 2006 the final
version contains a significant change in relation to insurance
obligations. However, this does not seem to have prevented the
predicted development of new insurance policies.
Even though the Directive does not impose a duty to take out
insurance with the respect to operators' potential
liability under the Environmental Liability Directive, it
states that Member States "shall take measures to
encourage the development of financial security instruments and
markets by the appropriate economic and financial
While the draft GEDA empowered the Federal Government to
enact provisions in relation to the duty of all responsible
persons or companies to provide for financial security
instruments, the relevant provision has now been deleted in the
final version. Nevertheless, the
Association of the Insurance Industry (Gesamtverband der
Versicherungswirtschaft) has prepared Draft General Insurance
Terms which will be the basis for the insurance policy terms
offered by German insurance companies to cover.
Following the existing scheme which has been developed in
relation to civil law damage claims in Germany under the
Environmental Liability Act (Umwelthaftungsgesetz), Insurance
for GEDA liability is likely to cover only environmental
damages which are caused by disruption of operations. As a
consequence, environmental damage which is caused in the course
of normal (and permitted) operations of the plant are not
covered under the insurance policies offered. Furthermore, the
General Insurance Terms contain a long list of environmental
damages which would not be covered under the standard insurance
policy, including for example:
Damage to groundwater (it is likely that companies will try
to rely on their existing polices which provide cover for
Damage to real property owned by the policy holder (although
insurance companies will most likely offer additional insurance
modules to cover such liability).
According to several press releases, several insurance
companies have already incorporated environmental damage
insurances into their insurance programmes to cover GEDA
liability. It is understood that a number of large companies
which operate in several European countries have begun to take
out environmental damage insurance. However, at this point in
time it is still very hard to predict what impact GEDA will
have on liability consequently how large the environmental
damage insurance market will be.
Furthermore, there is continuing uncertainty as to elements
of the GEDA itself and this is still affecting the development
of the insurance market: for example it is still unclear on
which basis environmental damages under the GEDA will be
quantified, particularly in case of damage to biodiversity.
Further insecurities result from the fact that contrary to the
position taken by other Member States (including France, Spain
and as proposed in the UK), the Environmental Damage Act does
not release operators from their liability if the emission
which caused the environmental damage was permitted. Whether or
not this will be the case is up to the discretion of the
federal states which have not finally decided on how to handle
Copyright Clifford Chance 2008
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