It is undisputed that evaluation of environmental damage is an
extremely complex area. This is clearly reflected in the varied and
often controversial material available on the matter, from studies
of legal principles to courts precedents on actual pollution cases.
Brazil is no exception to this rule.
Prior to the 1980's, Brazilian legislation on pollution was
neither extensive nor severe. As far as marine pollution caused by
ships was concerned, sanctions against polluters were limited to
administrative fines imposed by the Naval authorities through local
Port Captaincies. Public actions in the civil sphere were extremely
rare. This was due to the lack of specific statutes and of an
administrative structure to deal with the problem.
This picture has changed radically since then. The 1990's and
early 2000's brought abundant and very aggressive rules (in the
ambit of penal, civil and administrative law) in respect of
pollution in general and also pollution caused specifically by
vessels. At the same time, environmental bodies, as well as
Prosecutor Offices in Federal and State spheres, greatly improved
their operational structures. As a result, the value of
administrative fines escalated and civil actions by Public
Prosecutors became the norm.
As a consequence, the problem of quantification of environmental
damages became acute. Against this background, the Environmental
Body for the State of São Paulo, CETESB, came up with a
formula for quantifying environmental damages. Given the good
technical reputation of this body and also the leading role of
São Paulo in the Brazilian economy (it was also home to the
largest Brazilian port, Santos), this formula rapidly spread from
its cradle in the administrative sphere and started being used in
court cases.
However, as is often the case with mathematic al formulae, the
CETESB formula failed to provide a fair assessment of all
circumstances involved in pollution cases, both aggravating and
mitigating. To make matters worse, its conceptual flaws also caused
the resulting values to increase exponentially and absurdly; For
example, even when starting from zero pollution (but with the input
of other variables at low figures) the formula yields a result of a
minimum of over US$ 31,000. If there is no pollution, how can there
be any "damage" to compensate for ?
From the very beginning Brazilian lawyers acting for Owners and
P&I Clubs have waged a fierce court battle against the
application of CETESB's formula, trying to draw the Courts'
attention to its flaws and inconsistencies. But the results during
more than a decade were unquestionably negative. While compensation
figures were in fact eventually reduced in a number of cases on
account of defence arguments against the formula these were small
claims and the reductions in compensation amounts were granted by
the Courts intuitively, because the values initially found seemed
excessive, but without any formal criticism of the formula itself.
These reductions were seen instead as small corrections required by
the particular circumstances of a few cases, leaving intact, or
even confirming the validity of, CETESB's formula as a safe
criterion for assessing the quantum of environmental damage.
However, this position now seems to have been drastically changed
in what has become the most important precedent against
CETESB's formula. In a case handled by our firm, involving an
oil spill during fuel supply operations, the owners calculated the
spill at 30 litres (compared with 273 litres by the Federal
Prosecutor Office's assessments). A civil action for
compensation for environmental damage ensued and was filed before
the 1st Federal Court of Santos. A technical investigation by a
court expert was held with a view to quantifying the damage to the
environment. Application of the CETESB's formula resulted in
the astronomical figure of US$ 912,640,962.56 !
This assessment was strongly opposed and the first instance Court
requested a second survey by a different expert. The aim of this
second investigation was to consider specifically the criticisms
against the CETESB formula.
The results of the second survey were decisively positive. First,
the expert recommended a reduction in quantum of the compensation
to a symbolic amount - US$ 1.00. In reaching this conclusion the
expert took into consideration the small amount of the spill and
other factors such as (i) the Member's immediate and effective
reaction fighting the oil spill and (ii) the hydrodynamic
conditions of the Santos estuary which is capable of supporting
small spills without significant alterations to its natural status.
In figurative but particularly expressive language the court expert
said:
"should it be possible to insert on a ruler 100 centimetres long, in an escalating manner, the maximum amount being the valuation previously proposed (around 1 billion U.S. dollars), it is correct to affirm that the amount to be compensated by the defendant in the particular episode should be far closer to the zero on the ruler than to the end of the scale".1
Additionally, the expert - himself a biologist from CETESB -
admitted that even in the administrative sphere CETESB has now
ceased to use the formula in question, as it is no longer
considered an adequate instrument to evaluate damages arising from
oil spills: "CETESB's technical body is firmly convinced
that the limitations and technical inconsistencies" (says the
report about the formula) "make it difficult to support it and
consequently to continue using it"2 .
It is true that these are considerations set out not in a judgment,
but, so far, only in a survey report which has yet to be examined
by the First Instance Court. However, it will be very difficult for
the second survey report not to exert enormous influence on the
judge's mind when the time comes to render judgment in the
case. And, more than this, it was decidedly good news to have a
public mea culpa from CETESB, after all these years of unfair use
of such a long-criticised formula. It is expected that the effects
of this technical investigation will now slowly spread to other
Courts in and out of Santos until the application of CETESB's
formula is definitively banished from court practice. The negative
experience of this formula will then allow room for other criteria
of assessment of environmental damage that may be more just.
Hopefully, this is what the future holds, sooner rather than
later.
Footnotes
1.Report, court file, folio 454. This conclusion immediately
brings to mind what happened in the well-known precedent of the
"PATMOS" case which was dealt with by the Italian Courts.
In a sense, it must be noted that the Brazilian case went even
farther than the Italian one. In Italy, likewise, there were two
technical reports and the experts stated that where it was not
possible to precisely appraise the damages they would supply the
Court with the information necessary to reach a just evaluation.
Because of that there was a widespread criticism that the
conclusions reached by the said specialists were vague. In Brazil,
on the contrary, the expert not only recognised the existing
difficulties, but was courageous enough to recommend a symbolic
figure, as this was found adequate in the circumstances.
2. Report, court file, folio 454.
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.