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Liability as a complement to environmental regulation: an empirical study of the French legal system

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Abstract

Reasons for the joint use of ex ante regulation and ex pos t liability to cope with environmental accidents have been a longstanding issue in law and economics literature. This article, which includes the first empirical study of the French environmental legal system, analyzes courts’ decisions when injurers complied with regulatory standards. The results provide some evidence that liability may be a complement to regulation by encouraging aspects of care that cannot be regulated at reasonable costs, especially human behaviour and organization within dangerous entities. An unexpected effect of liability is observed: judges are more severe with the most regulated firms and public agents compared to smaller, private actors. This might be interpreted as complementing regulation when enforcement of regulatory standards is thought to be weak.

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Notes

  1. Most empirical and experimental studies focus on the relative efficiency of negligence and strict liability rules and reach very different conclusions. See Sect. 2.

  2. For an overview of environmental law in developed countries, see OCDE (2009). And for a comparative law approach, see Hinteregger (2008).

  3. In other words, we try first to assess whether the “compliance defense” (i.e. compliance with regulatory standards relieves the injurer of liability) applies in the French legal system, and if not, we try to understand the role of liability when injurer complied with regulatory standards. Doing so, we could bring some empirical evidence to the theoretical debate over the efficiency of the “compliance defense”. For a theoretical analysis of the “compliance defense”, see Shavell (1984), Viscusi (1988) and Burrows (1999).

  4. The theoretical limits of regulation are described in Sect. 2, and their impacts on the French regulatory efficiency are described in Sect. 4.

  5. Compulsory insurance with a financial asset requirement might be a solution to judgement-proof problems, so that it is not considered as the most important failure of liability. See Monti (2001).

  6. On the problems related to causal uncertainty, see Shavell (1980, 1985). For an overview of the issues raised by causation see Ben-Shahar (2000).

  7. The term “cooperation” was first used by Richardson et al. (1982).

  8. The risk of regulatory capture has been emphasized as a strong case for judicial intervention. See Boyer and Porrini (2001) and Hylton (2002).

  9. The Lugano Convention was passed in 1993. It is considered as one of the most stringent environmental convention, providing for strict liability for damage caused by dangerous activities including public ones. Though it has not been ratified yet.

  10. EC Directive 2004/35/EC.

  11. Comprehensive Environmental Response, Compensation and Liability Act, 1980, 1985, 1996, applying a strict, joint and several liability for environmentally-unfriendly facilities’ owners and operators. For a comparison of the US CERCLA and the EU Directive, see Boyer and Porrini (2002).

  12. Water Act of January 3, 1992.

  13. Waste Act of July 15, 1975 amended by the July 13, 1992 Law on elimination and treatment of waste.

  14. Law on Classified Installations of July 19, 1976 (Loi relative aux Installations Classées pour la Protection de l’Environnement).

  15. Among ICPE facilities subject to authorization we find the riskiest facilities—quarries, nuclear plants—also classified as Seveso (high risk) facilities and IPPC (most polluting) facilities. See The Inspectorate of Classified Installations. http://www.installationsclassees.developpement-durable.gouv.fr/.

  16. The Ministry of Environment, prefects and mayors are in charge of different environmental polices and another police department is in charge of the control of ICPE on the national territory. See Prieur (1993) for a detailed description of French environmental polices.

  17. Law No. 2003-699 of 30 July 2003 on Environmental and Technical Risk Prevention.

  18. See Arrêté du 29 juin 2004, which compels hazardous facilities to adopt “best available techniques” to reduce environmental risks.

  19. Sub-optimal standards result either from minimum care levels (Hutchinson and van’t Veld 2005) or from average care level given heterogeneous costs of regulated facilities (Shavell 1984; Faure 2007).

  20. This article is used in less than 5 % of the cases of environmental accidents judged by the Court of Cassation, see infra Fig. 1.

  21. According to the Cour des Comptes, this category of capture is one of the most important causes of the proliferation of toxic seaweed in the Côtes d’Armor, where prefects have been reluctant to impose stringent environmental impact assessment and controls because they feared a massive exit of agricultural firms. See Cour des Comptes (February 2002).

  22. 1956 represents the first year where data courts decisions are recorded and available.

  23. We observe trials before the Court of Cassation only, because they are published every year contrary to litigations before lower courts such as Tribunal d’Instance, Tribunal de Grande Instance and Cour d’Appel. Our sample would have been greater taking litigations before every court but would have necessitated visiting physically each court in France to gather relevant information.

  24. Lamyline and Dalloz, http://www.lamyline.fr; http://www.dalloz.fr.

  25. Most of the 3206 cases were not directly related to environmental accidents although they contained one or more keywords. For instance, more than 300 cases were concerned with environmental taxation, more than thousand cases were concerned with “nuisance to neighbours” where pollution was not an issue, and about thousand cases concerned litigations before lower courts.

  26. Using the rate of success of victims as a proxy for the “effectiveness” of a liability regime may be questionable because of the possible existence of frivolous cases, where there are no actual losses but just plaintiffs that go on trial to obtain some benefits. However, it is usually so difficult for victims to win a case in the environmental field that this argument does not apply in the present study.

  27. Because we study dummy variables, a logistic regression is relevant; and with logistic regression, for each category of variables, it is necessary to define a “reference variable” which will be used as the baseline to interpret the results. In other words, the coefficient and probability of one variable represents the impact of this variable as compared to the “reference variable”. See Gujarati and Porter (2009), p. 558–565.

  28. See "Appendix" for an econometric analysis of their partial regression coefficients.

  29. Article L 110-1 Code de L’Environnement defines the precautionary principle as “the principle according to which the absence of certainty, taking account of current scientific and technical knowledge, ought not to delay the adoption of effective and proportionate measures aimed at preventing a risk of serious and irreversible damage to the environment, at economically acceptable cost.”

  30. See “Law Barnier. No 95–101, 2 February 1995.

  31. The vast majority of laws and orders concerning environmental protection has been enacted and enforced at that time. We referenced eight laws and orders on air protection, five on noise pollution (out of five), six on waste use and treatment and eleven on water protection.

  32. Water Act 1992: environmental police classifies as an ICPE facilities any facilities using or polluting rivers or groundwater.

  33. ADEME: Agency for the Environment and the Control of Energies, collects and uses environmental taxes according to Waste Act 1992.

  34. See “Law Barnier” No 95-101, 2 February 1995.

  35. “Arrêté” Seveso II, 10 May 2000.

  36. We cannot determine with certainty why the trend of negligence decreases from 1976 to 1988. This could be due to the fact that from 1976 (beginning of the ICPE regulation) courts heavily relied on regulation to determine liability but they changed their approach to negligence in 1986, when, for the first time, the Conseil d’Etat held liable the compliant owner of a quarry for imposing risks of water pollution. CE, ssr 6/2, 30 mai 1986, n.62277, Inédit au Recueil Lebon.

  37. Cass. Civ. II, 24 February 2000. Recueil jurisprudence Dalloz, http://www.dalloz.fr.

  38. Cass. Civ. II, 22 May 2005. Recueil jurisprudence Dalloz, http://www.dalloz.fr.

  39. Under a logistic regression, the predicted impact of each explanatory variable measures the marginal effect of the explanatory variable as compared to the reference situation. See Gujarati and Porter (2009), p. 529–533.

  40. Interaction terms are dummy variables notes 1 if both interacting terms are 1 and 0 otherwise.

  41. The “Fonds de Garantie Automobile” is used to compensate victims of environmental and technological accidents, see Law n° 85–677, 5 July 1985.

  42. The log odds ratio for “organizational care” is 1.860, which means that using this legal ground instead of the “duty to compensate” increases victims’ success by a probability p such that: ln (p/1 − p) ≈ 1.860. We find 86 %, which means an increase of 36 % when “organizational care” is invoked (statistically, when the value of the dummy variable “organizational care” goes from 0 to 1). Same calculus is done for each predicted probability. See Gujarati and Porter (2009), p. 558–561.

  43. See Chabanne-Pouzynin (2001) for a detailed explanation of the jurisprudence concerning public agents’ duty to sanitary security and the increasing number of cases where mayors, prefects and even the State are held liable for failure to take necessary measures.

  44. Fonbaustier (2010) defines it as a “Télescopage” in French.

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Acknowledgments

We would like to thank Yolande Hiriart for her valuable insights and comments, Theodore Eisenberg for his careful review and Emmanuel Flachaire and Armand Taranco for their helpful remarks on econometric issues. We owe special thanks to two anonymous referees for meticulous remarks that helped improve the paper. All errors remain ours.

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  1. CRED, Université Paris II Panthéon Assas, 26 rue des Fossés Saint-Jacques, 75005, Paris, France

    Pierre Bentata

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Appendix

Appendix

We run the following regression:

$$\begin{aligned} L_{\text{VICT}} &= \ln \left( {\frac{{P_{\text{VICT}} }}{{1 - P_{\text{VICT}} }}} \right) = \beta_{0} + \beta_{1} {\text{NUISANCE}} + \beta_{2} {\text{INFO}} + \beta_{3} {\text{UNCERTAINTY}} + \beta_{4} {\text{ORGANIZATION}} \hfill \\ &\quad + \beta_{5} {\text{ICPE}} + \beta_{6} {\text{PUBLIC}} + \beta_{7} {\text{TRANS}} + \beta_{8} {\text{POST}}\_{\text{TRANS}} + \varepsilon \hfill \\ \end{aligned}$$

We obtain the following results:

 

Coefficients (log odds)

Legal grounds

 

 Duty to compensate  (reference variable)

 

 Nuisance to neighbours

0.917* (0.527)

 Duty to inform

0.373* (0.205)

 Uncertainty about the consequences

−2.229† (0.561)

 Organizational care

1.861† (0.436)

Injurer’s identity

 

 Individual or Small firm  (reference variable)

 

 Large firm or ICPE

1.465† (0.311)

 State-owned firm or officials

2.147† (0.511)

Transition period (1992–2000)

0.818** (0.353)

Post transition period (2001–2010)

0.911*** (0.332)

Constant

−2.068† (0.434)

We know that the partial regression coefficients of nuisance to neighbours and duty to inform are different but we have to test whether this difference is statistically significant, because (from a theoretical point of view) these two variables could have the same influence over victims’ rate of success since they are both linked to the regulator’s ability to provide information to victims and injurers.

Thus, we test the null hypothesis that the partial regression coefficients of these two variables are equal:

$$H_{0} :\quad \beta_{1} = \beta_{2}$$

We obtain: χ 2(1) = 1.12 with p > χ 2 = 0.2901.

So we cannot reject the null hypothesis that coefficients are equal to one another. Then these dummy variables can be combined into one single dummy variable (Allen 1997, p. 136–137) as follows:

$$\beta_{1} {\text{NUISANCE}} + \beta_{2} {\text{INFO}} = \beta_{(1 + 2)} ({\text{NUISANCE}} + {\text{INFO}}).$$

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Bentata, P. Liability as a complement to environmental regulation: an empirical study of the French legal system. Environ Econ Policy Stud 16, 201–228 (2014). https://doi.org/10.1007/s10018-013-0073-7

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