Legal brief: EIA and state liability

13th May 2013

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Despite a recent EU court ruling, Stephen Tromans says it may still be possible to establish a causal link between the failure to undertake an EIA and the suffering of financial loss

It is the responsibility of member states to ensure compliance with EU requirements on environmental impact assessment (EIA). Failure to do so may result in development that has unmitigated damaging effects on nearby properties from noise or other matters. But does it follow that those affected in such cases can claim damages against the state?

This was considered by the Court of Justice of the European Union (CJEU) in Jutta Leth v Austria, Land Niederösterreich (C-420/11). Leth made a claim for €120,000 to compensate for the alleged decrease in the value of her home as a result of the failure to carry out an EIA when Vienna airport had been developed and extended.

Leth also demanded that the local government for the province of Lower Austria be liable for any future damage arising from the late and incomplete transposition of relevant Directives, and the failure to carry out an EIA before consenting various developments.

The referring court asked the CJEU for a preliminary ruling on whether the EIA Directive (85/337/EEC as amended) had to be interpreted as meaning that EIA included the assessment of the effects of the project on the value of material assets.

It also asked whether the failure to carry out an EIA in breach of the Directive provided an individual with the right to compensation for pecuniary damage, caused by a decrease in property value resulting from the environmental effects of the project under examination.

In 2004, the CJEU ruled that an individual may, where appropriate, rely on the duty to carry out an EIA under article 2(1) of the Directive – R (Delena Wells) v the Secretary of State for Transport, Local Government and the Regions (C-201/02).

Under the Wells ruling, the Directive gives individuals a right to have the environmental effects of the project assessed by the competent authority and to be consulted.

In circumstances where exposure to noise resulting from a project has significant effects on individuals – in that a home is rendered less capable of fulfilling its function and the individual’s environment, quality of life and, potentially, health are affected – a decrease in the pecuniary value of the property might be a direct consequence of such environmental effects.

Such matters are to be examined on a case-by-case basis. The prevention of pecuniary damage, in so far as that damage was the direct consequence of the environmental effects of a project, was ruled to be covered by the objective of protection pursued by the EIA Directive.

European law confers a right to compensation on individuals for damage caused by breaches of EU legislation if three conditions are met: the rule of EU law infringed must be intended to confer rights on them; the breach of that rule must be sufficiently serious; and there must be a direct causal link between that breach and the loss or damage sustained by the individuals.

The existence, therefore, of a direct causal link between the breach in question and the damage sustained by the individuals is an indispensable condition governing the right to compensation. The existence of that direct causal link is a matter for the national courts to ascertain, in accordance with the guidelines laid down by the CJEU, taking into account the nature of the EU rule breached.

Article 3 of the EIA Directive requires an assessment of the environmental impact of a project, but does not lay down the substantive rules in relation to the balancing of the environmental effects with other factors, or prohibit completion of projects that were liable to have negative effects on the environment.

Those characteristics suggested to the CJEU in the Leth case that the breach of article 3 did not by itself constitute the reason for the decrease in the value of a property.

The fact that an EIA was not carried out, in breach of the requirements of the Directive, did not by itself confer on an individual a right to compensation for purely pecuniary damage caused by the decrease in the value of property as a result of environmental effects, it ruled.

However, the CJEU said it is ultimately for national courts to assess the facts of the dispute and to determine whether the requirements of EU law applicable to the right to compensation have been satisfied – in particular the existence of a direct causal link between the alleged breach and the damage sustained.

Authorities may breathe a sigh of relief that failure to comply with the Directive does not automatically entitle an affected individual to damages. But they cannot rest entirely easy, as it may be possible to establish a causal link between the failure to undertake an EIA and an individual suffering pecuniary damage as a result of environmental effects on their property.

R (Delena Wells) v the Secretary of State for Transport, Local Government and the Regions

This case, from January 2004, concerned the granting of consent for mining activities without an environmental impact assessment (EIA) being carried out. Wells requested that planning permission be revoked or modified to remedy the lack of an EIA in the consent procedure, arguing that the domestic legislation infringed the EIA Directive. She took her case to the High Court, which, among other questions, asked the European courts to rule on: whether approval of a new set of conditions on an existing permission is a development consent for the purposes of the EIA Directive; and whether it is open to individual citizens to challenge the state’s failure to carry out an EIA.

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