Is compensation a good outcome in cases of environment damage?

Are monetary compensations for pollution impacts, loss of livelihoods or for other damages good enough an outcome of environmental justice? Or should it include better regulation or a substantive improvement in environmental conditions at various scales, local, national and planetary.

While fighting environmental cases, should we accept that compensations are a ‘necessary but not sufficient’ outcome of such cases?

What else could we suggest as additions to the justice ‘package’…commitments to clean up by the polluter, promise to not damage again, a deposit that gets forfeited in case of violations/damages in the future ? Any others that you know of or have pushed for in environmental cases?

Look forward to your views.

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Perhaps along the lines of ‘commitments to clean up by the polluter,’ if there are cases of irreversible damages (where clean-up or rehabilitation are not an option because of development or the extent of damage) there could be commitments to establish other protected areas or livelihood supports in another, nearby area in an attempt to ‘replace’ what was lost? Compensation in the form of land/environmental services etc., instead of money. Do you think that would ever be possible?

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If the state regulators (as is usually the case) are under-resourced, easily manipulated, and don’t have powers to monitor regulations, govern licensing and impose sanctions, then maybe this could be a focus of court orders - could we advocate that fines and operational license fees go towards these bodies directly? Give them some teeth. Perhaps there will be opportunities for paralegals to build more formal partnerships with regulators: pooling resources, evidence and intel?

Also, as the Indian government is mildly obsessed with FDI, could courts invoke any international industrial guidelines which might effect a company’s ability to export? And might spur some extra state funding for prevention.

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An interesting article related to this thread. It highlights that the compensation of the Deep Horizon oil spill in the Gulf of Mexico has only been calculated for only the US side of damages . BP has been sued by Mexican fishing businesses to say that the damages have not been compensated for also. The news report also indicates that those affected in the US are also yet to receive the compensation.

Will be great to hear from everyone about their thoughts, insights or additional information.

BP Sued By Mexican Fishing Businesses for Deepwater Horizon Spill

by Richard Smallteacher, CorpWatch Blog May 5th, 2015 http://www.corpwatch.org/article.php?id=16024&printsafe=1

British Petroleum (BP) has been sued by some 25,000 Mexican fishing businesses over the 2010 Deepwater Horizon disaster in the Gulf of Mexico. The company says it has paid $1.8 billion in compensation to U.S. businesses but has yet to offer money to those affected south of the border.

Deepwater Horizon was a floating rig built by Hyundai Heavy Industries of South Korea and leased by Transocean of Louisiana to BP to explore for oil 4,000 feet below the surface in the Macondo Prospect some 41 miles off the coast. On April 20, 2010, methane gas from the well forced its way to the surface and caused the well to blow out. The resulting fire killed eleven workers and burned for three months before it was capped, but not before an estimated 4.9 million barrels of oil were spilled.

“To say that damages only occurred in the United States is a lie and shows a lack of respect for Mexico,” Horacio Polanco, the lawyer for the plaintiffs in three Mexican coastal states of Tamaulipas, Veracruz and Quintana Roo, told El Pais newspaper. “There are at least 30 types of migratory species that we share with the United States, and the damage has been enormous.”

Polanco’s lawsuit was filed just days before U.S. courts threw out a lawsuit against BP filed by Mexican state governments, stating that the individual states did not have standing in court.

“The Mexican constitution vests ownership of ‘lands and waters within the boundaries of national land territory’ in the ‘nation,’” wrote Chief Judge Carl Stewart of the U.S. Court of Appeals in a judgment handed down May 1. “The state constitutions … bespeak a role for the states in managing some of the country’s property. But they do not provide the Mexican states with the crucial proprietary interest.”

The courts will now have to decide if individual Mexican businesses can sue BP. And the courts are also expected to hear a lawsuit filed in April 2013 by the Mexican federal government for compensation from BP.

To date, BP has set aside $43 billion to cover costs related to the spill – which include direct clean up costs, compensation to private businesses and fines to government authorities.

Earlier this year Judge Carl Barbier ruled that the company should also pay the U.S. government a fine of $13.7 billion for violations of the U.S. Clean Water Act.

Previously, the company had agreed to pay out $7.8 billion to compensate most private sector claimants in the U.S. under a settlement agreement signed in March 2012. That figure has risen steadily and the company says it now expects to pay out as much as $9.7 billion.

In addition, if Polanco wins, he says that his Mexican clients should be paid as much as $50,000 each or another $1.25 billion.

Meanwhile, the U.S. business owners are complaining that they have yet to be paid over three years after they settled with BP. Brent Coon, a Texas lawyer whose firm represents 10,000 spill clients, told the Nation magazine that he expects that some 75 percent of small-business owners—“the Gulf Coast blue-collar, hand-to-mouth, paycheck-to-paycheck guys”—may never be paid.

BP is hardly short of money to make payments to either the U.S. or Mexican fishing businesses. The company reported $12.1 billion in profits in 2014 and $13.4 billion in 2013. BP owned approximately $315 billion in assets around the world in 2014, up from $236 billion in 2009, the year before the spill, according to estimates provided in court.

Separately, in January 2013 Transocean agreed to pay out $1.4 billion to settle all U.S. government claims against it. And last September, Halliburton, which was also a defendant in the lawsuits, settled all claims with the U.S. government for a payment of $1.1 billion.

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A very interesting case - especially with the question of transboundary environmental cases and compensation. And a good reminder that in many cases it is questionable whether the promised compensation is even paid out and whether compensation actually reaches all those affected. So in terms of @manjumenon’s original question

should we accept that compensations are a ‘necessary but not sufficient’ outcome of such cases

I’d say that this case highlights that it’s often still a challenging fight just to ensure compensation is actually and fairly delivered to all those negatively affected. Maybe it would be strategic to advocate not only for compensation to be awarded, but also very clear mechanisms and timelines to enforce the payment? (I’m not sure if that was done in the BP case - does anyone know?)

This example also suggests, to me, that it would be strategic to advocate for deposits or funds set aside proactively in case of violations or damages, from which compensation and remedy efforts could be paid. (Though with the BP case, probably a fund like that would not have been enough to cover the scope of the damage.)

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In my view, monetary compensation is not good enough. In the case of Motu Koitabuans living in Port Moresby, most of the land has been compulsorily acquired for the purposes of development. The people are paid money to marginalise themselves to the outskirts of the harbor around Port Moresby, living over the sea with water and sewerage problems. They are not involved in any of the development. Roads are built by expatriate contractors with hugh profits. Construction also involves expatriate companies. There is no spin-offs, no small business promotion. Instead of monetary compensation, customary landowners should be involved in the development through business opportunities. Environmental impact and ways of minimising environmental damages should be decisions the landowners should be involved in too. So compensation is necessary but not sufficient. My view!

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In cases of pollution impacts, loss of livelihoods or other damages, monetary compensation can hardly be said to be a sufficient outcome, though it is a necessary one.

In a case in Mundra, Gujarat, where there was incontrovertible evidence of non-compliance of various environmental conditions, found by a Committee constituted by the Ministry of Environment and Forests. The Committee made a recommendation to set up an Environment Restoration Fund (ERF). The ERF was to be 1 percent of the project cost or 200 crores (whichever is higher). The fund was to be used for remediation of environmental damage in Mundra and for strengthening regulatory and monitoring systems .It even recommended the fund be used to provide social infrastructure and livelihood support for the affected fisheries community there.

This is the link to report http://www.indiaenvironmentportal.org.in/files/file/adani_final_report.pdf

This case highlights the need for measures to be taken beyond mere monetary compensation. In most environment justice cases the negative externalities (the cost suffered by third parties due to an economic transaction) cannot be measured. For example if there is a cluster of industries causing pollution, it is difficult to attribute the amount of damage caused by each as is difficult to measure the extent of damage. There can be various impacts- on health, livelihood, environment degradation which is difficult to measure.

Therefore I think measures are to taken over and above monetary compensation! A ‘justice package’ should definitely include measures like restoration & rehabilitation.

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Some state pollution control boards and area-specific bodies such as Dahanu Ecologically Sensitive Area Authority in India have been asking the project owners to submit a bank guarantee. This is a guarantee for the owners’ promise to install pollution control equipments in its units. A time period is granted for this installation. If the equipment is not in place by then, the bank guarantee gets forfeited. I think this system should be extended to second/third time (future) violations/damages by a project. Or when a project seeks renewal of its environmental clearance/expansions, while deciding on the proposal, a report card on the performance of the existing unit including record of past violations/damages should also be looked into. Mere one time monetary compensation is not a sufficient deterrent to future violations.

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This article- http://www.natlawreview.com/article/environmental-sentencing-update-very-large-fines-very-large-companies highlights a recent case ‘R v Thomas Water Utilities’ of water pollution (untreated sewage entered a natural reserve due to total pump failure) and the use of the ‘Environmental Offences – Definitive Guidelines’ in the case. These guidelines were issued in July 2014 by the Sentencing Council of England and Wales.

This is the first judgment of the Court of Appeal that uses the 2014 Sentencing Council Guideline. The guideline suggests that the amount of fines be fixed looking at the level of culpability and harm and the size of the organisation.

Though the guidelines do not define ‘a very large organisation’, it suggests where the turnover greatly exceeds the large company threshold ‘it may be necessary to move outside the suggested range to achieve a proportionate sentence. The judgment says that the amount of fine should have some reflection on the size of the organization.

Do you think that such a proportionate calculation of the amount of fine is an effective method of deterrence in cases of violation of environment law?

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A fascinating blog post by Rajiv Shah, ex political editor of the Times of India titled Displacement Induced Development. The blog amongst other things raises some important questions around compensation:

“A “reasonable” physical compensation cannot hide the fact that there is a tendency to overlook the psychological scar the communities suffer from after they are displaced from own land. Who is going to compensate for that? And how? One is left wondering…”

The full article can be found at:

Look forward to thoughts and responses Kanchi

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But in my knowledge presently this amount of Rs. 200 crores is also set aside by the Court.

@Shodhika see here a detailed briefing note on the issue along with all the documents procured by RTI. No court has set aside the requirement of Rs.200 crores. The discussions of the minsitry’s file notings are also discussed here and here.

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