Romania: Historic Contamination In Romania Under Sale–Purchase Agreements

Last Updated: 22 June 2016
Article by Diana Poputoaia

General Context

Historic contamination receives a lot of attention in Romania, particularly in the process of privatizing formerly state owned enterprises. Some of these enterprises are taken over as ongoing businesses, while others are taken over for assets such as land.

In this context, dealing with historic contamination in Romania means inter alia handling with utmost care the provisions on historic contamination under sale–purchase agreements such as:

  • Romanian legislation does not provide a definition of "historic contamination."
  • The liability for historic contamination follows the general rules which means that authorities can go first against the current owner of the enterprise/ asset and ask it to cover the decontamination costs, irrespective whether the current owner caused the pollution or not.
  • The National Inventory of Contaminated and Potentially Contaminated Sites is still a work in progress and therefore, the purchaser has to rely on the seller to disclose any information on a potential historic contamination.

For example, in the OMV – Petrom privatization case, the Romanian State and OMV Austria agreed on the following definition of historic contamination: "'historic contamination' represents the damage caused by substances or products resulted from activities in the oil & gas sector to soil, underground water or surface water, considering also these substances' or products' migration, as well as people's exposure to these substances and products."

So Who Should Pay For Historic Contamination?

The "polluter pays" principle applies in Romania, without any distinction for historic contamination. However, contractual provisions on historic contamination are extremely important in Romania as the environmental liability is objective. This means that environmental authorities can ask the current holders of land, irrespective of title to land, and any legal or natural person undertaking an activity on a land, without a legal title to it, to cover the costs for repairing the damages caused to the environment, and returning the environment to its initial condition, irrespective of whether such persons caused/contributed or not to the environmental damage. If the holders or occupiers can show that another person caused the contamination, then holders/occupiers may bring an action against the polluter to recover the remediation costs. Therefore, where possible, contractual provisions on liability for historic contamination included in sale–purchase agreements can reduce the purchaser's exposure for historic contamination.

For example, (i) in the Ford – Daewoo Craiova privatization case, the Romanian State, as majority shareholder, is liable for €15 million decontamination costs due to historic contamination, while (ii) in the OMV – Petrom privatization case, the Romanian State, as majority shareholder, is liable for 15 years as of completion of privatization to cover in full any costs related to historic contamination.

The environmental liability is joint and several. This means that even the purchaser under a sale–purchase agreement can be held liable to cover remediation costs (pro rata with its contribution) if the purchaser had any contribution to the land contamination.

In Romania, the Environmental Liability Directive (as transposed in the national legislation) does not apply to contamination having occurred before 30 April 2007. This is important as Government Ordinance no. 68/2007 includes provisions on "piercing the corporate veil" in case of multinational companies.

Obligations

Economic operators or holders of land are compelled to investigate and assess soil and underground contamination, e.g., in case of a pollution incident; periodically, for observing the evolution of contaminated sites subject to remediation actions; and in case of noticing pollution potentially harmful for people's health or the environment. Associated costs are covered by the economic operators or holders of land. These costs are covered by the state budget in case of orphan or abandoned sites.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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