Protocol on Liability and Compensation for Damage Resulting from Transboundary Movements of Hazardous Wastes and Their Disposal

Abstract

The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (hereafter: Basel Convention) was adopted in 1989. It was a reaction to heightened international awareness of the exponential growth of hazardous waste being produced and the risks it presented to human health, property and the environment while being transported around the globe. The Basel Convention primarily aims to minimise the generation and transboundary movements of hazardous wastes and to keep risks at a tolerable level. It was also a response to the practice of exporting increasing amounts of hazardous waste from the Global North to the Global South. Hence, the Convention is supposed to address concerns regarding environmental justice which arise when industrialised countries profit by exploiting the precarious economic positions of nations in the Global South. Economically challenged countries may accordingly be under pressure to prioritise economic development over environmental concerns when they are offered foreign payments in exchange for accepting toxic waste shipments. By dealing with the disproportionately large share of the burden regarding hazardous waste developing nations face, the Basel Convention has been touted as one of the international agreements at the forefront of integrating environmental justice principles into global trade.

1 Introduction and Regulatory Context

1.1 The Basel Convention

The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (hereafter: Basel Convention) was adopted in 1989. It was a reaction to heightened international awareness of the exponential growth of hazardous waste being produced and the risks it presented to human health, property and the environment while being transported around the globe. The Basel Convention primarily aims to minimise the generation and transboundary movements of hazardous wastes¹ and to keep risks at a tolerable level.² It was also a response to the practice of exporting increasing amounts of hazardous waste from the Global North to the Global South. Hence, the Convention is supposed to address concerns regarding environmental justice which arise when industrialised countries profit by exploiting the precarious economic positions nation in the Global South. Economically challenged countries may accordingly be under pressure to prioritise economic development over environmental concerns when they are offered foreign payments in exchange for accepting toxic waste shipments.³ By dealing with the disproportionately large share of the burden regarding hazardous waste developing nations face, the Basel Convention has been touted as one of the international agreements at the forefront of integrating environmental justice principles⁴ into global trade.⁵

The primary regulatory mechanism and ‘keystone’ to achieve its objectives is the Convention’s system of prior informed consent (PIC).⁶ Under this system, exporting Parties have to notify or shall require the generator or exporter to do so, in writing, via the competent authority of the State of export to the competent authority of the States concerned of any proposed transboundary movement of hazardous wastes or other wastes, Article 6. Until these countries provide their written consent and confirm the existence of a contract between the exporter and the disposer specifying environmentally sound management, the Convention prohibits the waste from being exported. If it turns out after export that the importing country cannot manage the hazardous wastes in an environmentally sound manner, the Convention requires the exporting nation to re-import the wastes, Article 8. The Basel Convention also prescribes that hazardous wastes or other wastes shall not be exported to a non-Party or imported from a non-Party. By prohibiting Parties to trade wastes with non-Parties, the Convention is supposed to encourage membership.⁷ The Convention also entails various relevant definitions and provisions, e.g. regarding international cooperation to improve and achieve environmentally sound management of hazardous wastes and other wastes. Furthermore, it has established a Secretariat which, for example, shall coordinate cooperation to provide information regarding the implementation of the Convention’s provisions and assist Parties upon request with the identification of illegal waste trafficking, Article 16.

The Convention contains an important exemption from its scope of application in Article 11: Accordingly, parties may enter into bilateral, multilateral and regional agreements or arrangements regarding transboundary movements of hazardous wastes or other wastes with Parties and non-Parties. Such agreements or arrangements are required to not derogate from the environmentally sound management of hazardous wastes and other wastes as required by the Convention in particular with respect to taking into account the interests of developing countries. Critics have argued that this clause enables industrialised countries to circumvent and weaken the Convention by cutting deals and preying on the economic needs of developing nations.⁸ Another criticism concerns the absence of effective enforcement mechanisms, as the Secretariat does not have any relevant competencies regarding the enforcement of the provisions of the Convention.⁹ As such, compliance, monitoring and enforcement primarily is left in the hands of the State Parties.

1.2 The Ban Amendment

To increase protection for developing nations and solidify the regulation of hazardous wastes, the parties proposed an amendment to the Basel Convention in 1994 that would ban all exports of hazardous wastes from OECD Member States, the European Community (EC) and Lichtenstein to non- OECD (or developing) nations by December 31, 1997 (“Basel Ban”), see Annex VII to the Basel Convention.¹⁰ The prohibition of these specific transboundary movements was considered, by some, as a way to address the challenges faced by developing countries and countries with economies in transition in controlling imports of hazardous and other wastes they were unable to manage in an environmentally sound manner but continued to receive.¹¹

The Amendment, however, has still not been ratified by the three-quarters majority of Member States present at its adoption which is required for it to enter into force.¹² Many of the States that have failed to join or ratify the Basel Ban are OECD nations, but there is also a large number of non-OECD, developing nations that have failed to ratify the amendment. The reason for this, according to Widawsky, lies in a lack of understanding “that the unique pressures of developing nations require the harmonization of a precautionary attitude with tools for economic growth”. In essence many developing nations are averse to a system in which they are universally deemed ineligible to import certain wastes, especially wastes from which valuable scrap metals can often be recovered.¹³

1.3 Protocol on Liability and Compensation

Article 12 of the Convention required the Parties to co-operate to adopt, as soon as practicable, a Protocol that sets out appropriate rules and procedures in the field of liability and compensation for damage resulting from the transboundary movement and disposal of hazardous wastes and other wastes. In what was considered another effort to strengthen the Convention, the Protocol on Liability and Compensation (hereafter Protocol) was finalised on 10 December 1999 at the Fifth Conference of Parties (COP-5) to the Basel Convention, after 6 years of negotiations. The Protocol functions as a supplement to the Basel Convention treaty and must be ratified separately before it enters into force,¹⁴ however, and as is the case with the Ban Amendment, the Protocol has so far failed to obtain the required number of ratifications.¹⁵

Article 1 of the Protocol states that its objective is to provide a comprehensive regime for liability as well as adequate and prompt compensation for damage resulting from the transboundary movement of hazardous wastes and other wastes, including incidents occurring because of illegal traffic in those wastes. It was seen as the first international environmental law mechanism to assign comprehensive liability and provide adequate and prompt compensation to those injured by both the legal and illegal international transportation of hazardous wastes. For this reason, UNEP considered the Protocol to constitute “a major breakthrough” in international environmental law.¹⁶

2 Liability Model

2.1 Scope of the Liability Regime

Article 3 of the Protocol contains differentiated and rather complex provisions regarding the scope of application of the liability regime. It applies only during certain stages of the transboundary movement of hazardous wastes, imposes liability either on the Party of export or the party of import, determines the geographical scope of its provisions based on the location of the damage and, finally, delimits its scope with respect to the Protocol’s application to transboundary movements covered by Article 11 of the Convention agreements and the relationship between the protocol and other liability instruments.¹⁷

Regarding relevant stages of the transboundary movement, Article 3.1 provides that the protocol applies only to damage due to activities that occur during a transboundary movement of hazardous wastes and other wastes and their disposal, including illegal traffic, from the point where the wastes are loaded on the means of transport in an area under the national jurisdiction of a State of export. This narrow targeting, according to critics, can leave wide gaps in coverage for many types of environmental damage: Injuries from the transport of hazardous waste in international commerce are addressed by the Basel Liability Protocol, whereas an accident arising from the improper management of hazardous waste near a border may not be covered by the treaty.¹⁸

With respect to its geographical scope, the Protocol shall apply only to damage suffered in an area under the national jurisdiction of a Contracting Party, as such, if neither the exporting nor State of import is a Contracting Party, the Protocol does not apply. Notably, Article 2(2)(c)(i), (ii) and (v) of the Protocol specify that the Protocol does apply to damage occurring in areas beyond any national jurisdiction. This mainly concerns “traditional” damage to life, personal injury, property as well as costs of preventive measures; costs of taken measures of reinstatement of the impaired environment in such areas (Article 2(c)(iv), on the contrary, are not included.¹⁹

The protocol restricts its scope to damage occurring during stages in which the Party to the Protocol has possession of the waste: i.e., if only the State of import is a Contracting party, the Protocol only applies to damage which takes place after the disposer has taken possession of the hazardous wastes and other wastes. When only the State of export is a Contracting Party, the Protocol only applies to damage that arises prior to the moment the disposer takes possession of the hazardous wastes and other wastes. Finally, Article 3(3)(d) of the Protocol stipulates that the Protocol also applies to damage suffered in an area under the national jurisdiction of a State of transit which is not a Contracting Party provided that this State is listed in Annex A and has acceded to a multilateral or regional agreement concerning transboundary movements of hazardous waste which is in force.

The contracting party can also exclude the application of the protocol by way of notification to the depository with respect to all transboundary movements for which the notifying State is the State of export, for such incidents which occur in an area under its national jurisdiction, as regards damage in its area of national jurisdiction.

Article 3(7)(a) of the Protocol exempts Parties from liability and compensation when they have made a bilateral, multilateral or regional agreement or arrangement that provide liability regimes that “fully meet or exceed” the Protocol’s provisions and the damage occurred in an area under the national jurisdiction of any of the Parties to the agreement or arrangement. This provision is quite controversial as many critics argue that it provides a vague exemption that allows the majority of hazardous waste transportation to go unregulated.²⁰

2.2 Standard of Liability

Articles 4 and 5 of the Protocol contain, as noted above, provisions regarding strict and fault-based liability. The Protocol stipulates strict liability in Article 4 which, given the scope of application outlined above, broadly applies to two constellations: First, when both the importing and the State of exports are Parties to the Basel Convention, the Protocol imposes strict liability on the person that notifies in accordance to the Convention until the disposer takes control of the wastes.²¹ Second, when only one of the contractors is a Party to the Convention, the Protocol applies strict liability for damages that occur while the Party has control of the wastes. The Protocol thus allocates full liability for any damage resulting from the movement of hazardous wastes on the entity in operational control.²² If two or more persons are liable, liability is joint and several according to Article 4(6).²³

In addition to strict liability, the Protocol imposes fault-based liability for failure to comply with the provisions of the Basel Convention or, as Article 5 states, due to “wrongful intentional, reckless or negligent acts or omissions”. This thereby extends the reach of the provisions of the Protocol as any person can be subject to fault-based liability under the general principles of tort law, and compliance with the provisions of the Basel Convention can be considered a foundational duty of persons transporting hazardous waste between countries.²⁴ Notably in this respect, Article 6 of the Protocol provides a general rule requiring every person in operational control or possession of waste to take reasonable measures to mitigate damage arising from an incident.²⁵

With respect to State responsibility, Article 16 stipulates that the Protocol shall not affect the rights and obligations of the contracting Parties under the rules of general international law.

2.3 Actors Addressed by the Liability Regime

As outlined above, the Protocol differentiates between the addressees of its provisions regarding those subject to strict liability and those subject to fault-based liability. Strict liability only applies to persons which are subject to the jurisdiction of either the State of export or the State of import and who act as the notifier, the exporter, the importer or the disposer of the wastes.²⁶ The carrier, i.e. any person who simply undertakes the actual transport of hazardous wastes or other wastes, is not subjected to strict liability. In contrast, fault-based liability has no such restrictions and may, in principle, apply to any person involved.

States can also be exposed to civil liability if they are to be considered a person within the meaning of Articles 4 or 5 of the Protocol and act in a private capacity rather than in the exercise of their sovereign rights.²⁷ However, Albers points out that the Protocol contains several provisions that attempt to avoid the imposition of civil liability on States. In particular, Articles 4(1) and 4(2) of the Protocol provide that it is not the States but only the exporter or importer of the waste can be held liable if the State has notified the transport. Additionally, the Protocol does not establish any explicit rule imposing subsidiary liability on States which would apply in cases where sufficient compensation cannot be attained from the liable person.²⁸

2.4 Definitions of Damage and Limits of Liability

Unlike, for example, the Nagoya Kuala Lumpur-Supplementary Protocol, the Basel Protocol primarily addresses ‘traditional’ damage to private parties occurring during a transboundary movement of hazardous wastes.²⁹ Article 2(c) defines damage broadly to include loss of life, personal injury, damage or loss of property; loss of income deriving from an economic interest in the use of the environment incurred as a result of impairment of the environment; the costs of measures of reinstatement of the impaired environment, limited to the costs of measures actually taken or to be undertaken; and the costs of preventive measures, including any loss or damage caused by such measures, to the extent that the damage arises out of or results from hazardous properties of the wastes involved. Damage as a loss of income or the costs of measures of reinstatement is, as previously outlined, explicitly excluded when the damage occurred in areas beyond national jurisdiction.³⁰

With respect to the limitations placed on liability, several points are noteworthy: Parties found liable under the negligence standard can have an unlimited amount of damages imposed on them, whereas parties found liable under strict liability are liable only up to a certain amount.³¹ Article 4 of the Protocol requires Parties to establish individual national limits on liability, the details of which can be found in Annex B to the Protocol. This same annex also provides financial minimums regarding the limitations on the amount that claimants must be awarded when the damaging party is strictly liable. These minimum limits are proportional to the amount of waste involved in the harmful trade.³²

Notably, according to Article 13 of the Protocol, both strict and fault-based liability also have temporal limits as claims are deemed inadmissible unless they are brought within 10 years from the date of the incident. Furthermore, these claims must be filed within 5 years from the date the claimant first knew, or should have known, of the damage.

2.5 Causation

The Basel Protocol does not provide for specific rules of causation that would determine how courts could eliminate causes for environmental damage which may be considered too indirect or too remote to give rise to liability.³³ Albers, however, points out that the combination in the Protocol of strict liability and fault-based liability regimes implicates different ways to determine causation related to these types of liability. He argues that the absence of the requirement to prove fault on the part of the respondent in cases regarding strict liability places special emphasis on the determination of the causal link. With regard to strict liability, a person is deemed liable solely on the grounds that an incident has occurred which can be linked back to a certain risk for which that person is deemed responsible but regardless of the particulars of the person’s conduct in terms of subjective fault or negligence. In contrast, to claim compensation based on fault it is necessary to establish a causal link, not between the risk and the damage, but between the particular conduct of the liable person on the one hand, and the actual damage on the other.³⁴

2.6 Exemptions from Liability

Article 4 of the Protocol contains a list of exonerations from strict liability, including where it results from armed conflict, hostilities, civil war or insurrection; a natural phenomenon of exceptional, inevitable, unforeseeable and irresistible character; or where it wholly is the result of compliance with a compulsory measure of a public authority of the State where the damage occurred, or of the wrongful intentional conduct of a third party, including the person who suffered the damage.³⁵

According to Article 6(2), any person in possession and/or control of wastes for the sole purpose of taking preventive measures provided that this person acted reasonably and in accordance with any domestic law regarding preventive measures, is not subject to liability.

2.7 Insurance and Possible Funds

Strict liability must be covered by compulsory insurance to minimise the risk of insufficient compensation being available should an involved person become liable.³⁶ As such, Article 14 of the Protocol requires notifiers, exporters and importers to carry insurance, bonds or other financial guarantees to cover their liability for amounts not less than the minimum limits specified in Annex B. Insurance premiums may depend on the type of operation, such as whether it is a one-time or routine operation, and the degree of specialisation of the operator and so forth.³⁷ Notably, according to Sachs, States frequently refer to high limits of liability and the alleged non-availability of domestic insurance products that could cover these limits as reasons for not ratifying civil liability regimes such as the Basel Liability Protocol.³⁸

The Protocol does not establish a fund to cover damages arising from any incidents that occur. In 1999, the Conference of Parties decided, on an interim basis, to enlarge the scope of the Technical Cooperation Trust Fund of the Basel Convention to assist developing and transitioning countries that are Parties in cases of emergency and compensation for damage, thereby establishing an emergency mechanism.³⁹ This mechanism shall, until the Protocol enters into force, coordinate cooperation and mutual assistance and help parties estimate the magnitude of damage that has occurred or damage that may occur along with the measures needed to prevent damage and to take appropriate emergency measures to prevent or mitigate any the damage.⁴⁰ A draft report of the Secretariat containing recommendations regarding, inter alia, the adequacy of resources available for use under the mechanism and cooperation with other international organisations and agencies in responding to emergencies, however concluded that the level of funding does not seem sufficient if a more comprehensive and responsive assistance to be conducted to prevent and mitigate the short-term effects of an incident.⁴¹

2.8 Enforcement and Jurisdiction

Claims for compensation may be brought in the courts of the party either where the damage was suffered, where the incident occurred or where the defendant has its residence or a principal place of business, Article 17. According to Article 18 any court other than the court first seized can stay its proceedings in cases of related actions brought in the courts of different Parties, while the actions are pending at first instance. A court may also decline jurisdiction if the law of that court permits the consolidation of related actions and another court has jurisdiction over both actions.

Regarding the applicable law, Article 19 of the Protocol stipulates that all matters which are not specifically regulated in the Protocol shall be governed by the law of the competent court, including any rules of such law relating to conflict of laws. The Protocol also provides stipulations regarding the mutual recognition and enforcement of judgements.

3 Rationale Behind the Chosen Liability Model

The differentiated combination of strict liability and fault-based liability is supposed to enable the optimal allocation of liability with respect to the specific advantages and shortcomings of each of the models.⁴² Albers cites a range of the advantages of the specific legal configuration of the Protocol: Strict liability allows avoiding cumbersome procedures to determine the adequate standard of care or questions of fault or negligence and, thus, is supposed to ensure an effective reaction to damage as well as a prompt and more effective compensation of the victims of pollution. It does so, as prove of fault, which might require information and data about complex or technical processes or installations, is not necessary. In addition, strict liability provides an increased incentive to amicably settle disputes. Potentially liable persons are incentivised to invest in the prevention of damage rather than in endeavours to dispute the existence of fault. A strictly-liable person can take recourse against any other person who is strictly liable or subject to liability based on fault. Hence, on this secondary level, an allocation of the financial burden among all the liable persons can be sought based on the responsibility of the contributors regarding fault and negligence, irrespective of any predominant concerns of promptness and efficiency. In contrast, fault-based liability considerably broadens the range of actors addressed: Every person that comes in contact with the hazardous wastes is potentially liable for damage caused by negligent actions in breach of the rules of the Convention or as a result of their intentional or negligent breaches of standards of due care. Therefore, fault-based liability can be seen as providing an incentive to adhere to the rules and standards surrounding the transboundary movement of hazardous wastes and is consistent with the polluter-pays principle.⁴³

The lack of subsidiary liability for an involved State should, according to Albers, not be considered a weakness of the Protocol’s approach. On the one hand, the risk of insolvency of the liable person may be minimised given the mandatory insurance requirement and the establishment of a trust fund. On the other hand, the availability of information about risks and adequate means of prevention is not a factor that supports there being any subsidiary liability for States: With regard to damage caused by the activity of private persons, a State usually lacks sufficient information about the conduct of such activities and, consequently, cannot sufficiently supervise and control these activities.⁴⁴ The non-inclusion of subsidiary State liability thus also corresponds to the regulatory ratio of allocating liability according to the availability of information about the hazards and modes of prevention pertaining to a given activity.⁴⁵

4 Special Features of the Liability Regime

The Protocol combines relatively broad provisions regarding the definition of damage covered and the potential actors addressed with finely tuned stipulations regarding the multiple stages of the transportation chain and the territorial scope of the regime: The Protocol, as outlined above, sequentially shifts liability from generators to exporters to importers to disposers, depending on which entity has operational control of the waste at each a given stage of transport.⁴⁶ This limited window for assessing liability, as Kohn points out, keeps causation problems at a minimum. Either damage is caused when an exporter has control and is thus the exporter's responsibility, or when an importer has control, making the importer liable.⁴⁷

One particularly limited aspect of the Protocol’s scope, critics focus on, is its failure to assign liability for the ‘aftercare’ of disposed wastes. Accordingly, waste generators who benefit from the activities that created the hazardous wastes should retain some responsibility for any long-term damage that results, such as groundwater pollution.⁴⁸ The Protocol, however, fails to hold either generators or exporters liable for any future damage to the environment and public health.⁴⁹

In addition, critics highlight that the ‘mitigated’ strict liability⁵⁰ employed by the Protocol establishes incentives for generators to circumvent their (strict) liability by simply hiring exporters to act as notifying and controlling entities,⁵¹ furthermore, the Protocol fails to establish any general secondary liability for generators of hazardous waste.⁵² The person acting as notifier and exporter, and to which strict liability solely would be imposed, would most likely be a waste broker, letter-box trading company or another shelf company established to incur liabilities and may, should damage arise, lack sufficient funds for compensation, become insolvent or be dissolved.⁵³

The question of whether the fault-based liability provision of the Protocol may close the loopholes that circumvent strict liability remains unanswered. In principle, it seems plausible that courts may determine liability for damage due to intentional or negligent violations of a standard of care regarding the diligent selection of exporters or disposers of hazardous wastes.⁵⁴ A rule which stipulates fault-based liability of actors who are not (anymore) in control of the hazardous waste in question may be able to contribute to the evolution of such standards of care regarding the diligent selection of third parties. In this context, it is noteworthy that the Basel Convention has led to an elaboration of a significant number of policy instruments with a non-binding character: “Within the framework of the Convention, a large body of technical guidelines on the management of specific waste streams has been developed by technical government expert groups and approved by the COP. These non-binding instruments have been designed for the use of Governments at all levels, as well as other stakeholders, to provide practical guidance and thus facilitate the management of the relevant waste streams.”⁵⁵ Given the potential significance of non-binding standards regarding a due level of care, these instruments also may contribute to the evolution of an adequate standard to determine fault-based liability.

5 Practical Relevance

As noted above, the Basel Protocol has not yet entered into force; its stipulations therefore cannot be judged based on practical experiences with its implementation and enforcement by parties and competent courts. The reasons brought forward to explain its lack of practical relevance, however, are instructive as they are mentioned to explain the lacking success. Daniel elucidates a number of criticisms regarding disincentives to join the Protocol: First of all, he identifies the complexity of the implementation of the protocol as an obstacle to higher acceptance. For example, uniform maximum limits of liability should have been established instead of these being subject to national laws. Other criticisms concern the lack of a permanent and adequate compensation fund, the complexity of the application section as it relates to Article 11 agreements and the channelling of liability to persons other than those with operational control, which presumably does not take into account the polluter-pays principle.⁵⁶

Choksi identifies a lack of incentives with regard to the non-ratification of the US, as most of the waste trade engaged in by potential Parties is covered under the Article 11 exemption for bilateral and multilateral agreements. In addition, the overall failure of the Basel Convention to provide for an effective regime of waste control is considered a reason for non-ratification: “Since the United States already uses a prior informed consent mechanism to regulate hazardous wastes under RCRA and imposes its own joint and several liability regime, it has no reason to ratify a weaker and more narrow international law requiring domestic legislation on identical environmental issues.”⁵⁷ Finally, economic disincentives to ratify have been identified, in particular, there is concern that the Protocol lacks specific liability limits and that its stipulations and vague provisions may be interpreted and implemented differently by exporting States, leading to protracted disputes, increased liability and uncertain outcomes.⁵⁸