Compensation for Environmental Damage: Progressively Casting a Wider Net, but What's the Catch?

• Author: Mohan, M.P. Ram

Table of Contents I. Introduction 613 II. ICJ's Jurisdiction, State Responsibility, International Liability of the State and Civil Liability 615 A. ICJ's Jurisdiction 615 B. State Responsibility for Wrongful Acts 616 C. International Liability of a State in the Absence of Wrongfulness. Subsidiary State Liability More Readily Accepted 619 D. Civil Liability Treaties for Compensation in the Absence of Binding Principles of International State Liability 626 1. Living Modified Organisms 627 2. Oil Pollution 628 3. Nuclear Damage 630 III. ICJ's Costa Rica Case - Taking Stock 633 A. Brief Background 633 B. Damage to the Environment Per Se: An Explicit Recognition by the ICJ 634 C. Compensation for Environmental Harm--an Opaque Calculation? 637 D. The Gravity of a State's Acts: The Fine Line Between Equity and Punitive Damages. 646 1. Punitive Damages--International Law 646 2. Punitive Damages in Environmental Tort Law Cases in the United States 647 3. Exemplary Damages as Addressed by the Judiciary in India 650 4.Punitive Damages in Civil Law Countries & the Understandable Reluctance by the JCJ Given the Different Domestic Approaches 655 E. Use of Experts & Valuation Methods. 656 1. On the Use of Court-Appointed Experts 656 2. On Valuation Methods 659 IV. Domestic Developments - moving Beyond the Constraints and Loopholes of International Regimes as Illustrated bY the deepwater horizon oil spill and the erika tanker Incidents 664 A. Deepwater Horizon Oil Spill Incident 664 B. The Erika Oil Spill Disaster--a Trigger to Strengthen the Domestic Regime 667 C Accidents as Pivotal Moments to 'Upgrade' Domestic and International Environmental Law 671 V. State of Affairs and Conclusion 672 I. INTRODUCTION

The 2018 decision by the International Court of Justice (ICJ) in which it for the first time addressed compensation for environmental damage in the case Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v. Nicaragua)-Compensation Owed by The Republic of Nicaragua to The Republic of Costa Rica (1) (the Costa Rica case) serves as the perfect opportunity to take stock of where international environmental law stands in terms of liability and compensation for environmental damage. One might recall that during the 1972 UN Conference of the Human Environment, states were called upon to cooperate to further develop international law regarding liability and compensation for the victims of pollution and other environmental damage caused by activities within the jurisdiction or control of such states to areas beyond their jurisdiction. (2) This call for action was renewed during the 1992 UN Conference on Environment and Development whereby states were asked to "develop national law regarding liability and compensation for the victims of pollution and other environmental damage" and to "co-operate in an expeditious and more determined manner to develop further international law regarding liability and compensation for adverse effects of environmental damage caused by activities within their jurisdiction or control to areas beyond their jurisdiction." (3)

While keeping in mind the distinct features between state responsibility for wrongful acts, the international liability of states in the absence of wrongfulness, and the civil liability of persons along with the secondary liability of states as addressed in international treaties (in Part II), this Article seeks to focus on the core elements and questions which one could find at the center of a Venn diagram between these various liability regimes (in Part III). To know: How are international bodies as well as domestic courts, international treaties, and national legislations, defining and interpreting environmental damage and applying it in concrete cases where compensation for environmental damage is in order? What is the standard of care applicable to the no harm obligation--is it based on a fault-based regime, strict, or even absolute liability? What are the legal consequences attached to a violation, in terms of reparation and compensation? Which methodology does one apply to calculate environmental harm? One will notice that judges and legislators at the international and domestic level don't necessarily operate in strict isolation, but rather tend to gradually influence each other, much like a natural osmosis process. Despite some of the progress made with regard to the theoretical aspects of compensation for environmental damage, this Article will also review how courts fill in the contours when deciding environmental damage claims, including their reliance on equity as well as punitive damages. This Article will further review whether international and domestic courts sufficiently rely on independent experts and valuation methods to calculate natural resource damages. Part IV more closely analyzes how the weaknesses of the international regime for civil liability for oil pollution has triggered interesting and more robust domestic legislative responses, based on a brief analysis of the Deepwater Horizon oil spill in the United States and the Erika oil spill disaster in France. The red thread running through this Article is that there is a natural and mutual influence between international environmental law developments, be it soft law, treaties or judgments by the ICJ, and domestic legislative or judicial responses and reasonings. This Article reviews these various facets through the prism of the Costa Rica case and contrast some of the ICJ's approaches and conclusions vis-a-vis compensation for environmental damage with responses and methodologies adopted by domestic courts and national legislatures as well as international treaty regimes and adjudicating bodies. In doing so, Part V better places the Costa Rica case in the context of contemporary environmental law developments and identifies areas where the ICJ could have walked a more proactive judicial policy path.

2. ICJ's JURISDICTION, STATE RESPONSIBILITY, INTERNATIONAL LIABILITY OF THE STATE AND CIVIL LIABILITY

   1. ICJ's Jurisdiction

      It is worth recalling that only states may be parties in cases before the court per the Statute of the ICJ. (4) Article 36 of the statute specifies that the jurisdiction of the court comprises all cases which the parties refer to it and all matters specially provided for in the Charter of the United Nations or in treaties and conventions in force. The states party to the statute may also declare that they recognize as compulsory ipso facto and without special agreement, in relation to any other state accepting the same obligation, the jurisdiction of the court in all legal disputes concerning: (a) the interpretation of a treaty; (b) any question of international law; (c) the existence of any fact which, if established, would constitute a breach of an international obligation; and (d) the nature or extent of the reparation to be made for the breach of an international obligation. (5) The primary sources guiding the ICJ in its decisions are international conventions, international customs, and the general principles of law; while the secondary sources include judicial decisions and the teachings of the most highly qualified publicists. (6) Moreover, if the parties agree, the court may decide a case ex aequo et bono (that is, based on fair and equitable treatment). (7)

   2. State Responsibility for Wrongful Acts

      Before delving into a more detailed analysis of the ICJ's Costa Rica case, it is worth disentangling some key distinctions between state responsibility and the international liability of a state. The 2001 Draft Articles on Responsibility of States for Internationally Wrongful Acts, (8) although not codified in a binding treaty, are deemed by many to reflect international custom with regard to state responsibility, (9) which the ICJ has also referred to in several of its judgments, (10) including the Costa Rica case. (11)

      Article 1 of the 2001 Draft Articles contains a well-established principle of international law according to which every internationally wrongful act of a state entails the international responsibility of that state. (12) Article 2 then clarifies that there is an internationally wrongful act of a state when the conduct consisting of an action or omission (a) is attributable to the state under international law and (b) constitutes a breach of an international obligation of the state. Such international obligation can be contained in a treaty or imposed by either customary international law or the general principles of international law. (13) The obligation to prevent harmful effects--or environmental damage--to others would be a primary rule of international liability, a breach of which engages state responsibility. The ICJ has held that customary international law establishes an obligation to respect the environment of other states or areas beyond a state's national jurisdiction. (14) This was initially embedded in Principle 21 of the Stockholm Declaration (according to which "States have... the sovereign right to exploit their own resources pursuant to their own environmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction" (15)) as well as UN General Assembly Resolutions, which lay down the basic rules governing the international responsibility of states with regard to the environment. (16) Likewise, this obligation is found in the UN Convention on the Law of the Sea (UNCLOS) (17) and multilateral environmental agreements, such as the 1992 Convention on Biological Diversity (CBD). (18) As pointed out by Sands, this can be interpreted as an extension of the principle of "good-neighbourliness" contained in Article 74 of the UN Charter. (19) In the context of transboundary environmental damage, reference must be made to the often-quoted 1941 Trail Smelter arbitration case, (20)...