Environmental Liability in Brazil

Brazil is home to an incomparable wealth of animal and plant species. To protect the environment, which has time and again receded before Man’s predatory encroachment, dozens of rules and regulations have been drafted over the past few decades.

Environmental Liability in Brazil
The first national law to address the matter came in 1981, the Law on a National Environmental Policy ("Lei da Política Nacional do Meio Ambiente”). It defined a strict liability on the part of the offender, that is, penalties are enforced regardless of blame, so long as there is evidence of the offender’s activity and a causal nexus with the damage verified. An exception is the minimum-value administrative fine, which demands tort liability. The same law enshrined the principle of joint liability, in light of which all those involved in causing damage must answer for it.

However, individual liability may be ascertained under regular recourse. The Brazilian Federal Constitution of 1988 included the right to the environment in the roster of fundamental rights outlined in article 5. The topic was addressed throughout the text, and further deepened in article 225, which determines that "every person has the right to an ecologically sound environment, which is the common inheritance of every person and essential to a healthful life; it falls to government and state authorities, as well as communities, to defend it and preserve it for the sake of present and future generations.”

Another law deserving of mention in this context is the Law on Environmental Crime, of 1998. This law establishes that both natural and legal persons undertaking potentially polluting activities in defiance of legal directives may be subject to administrative, civil and criminal prosecution.

Fines may reach up to R$ 50 million. However, the law has brought in more than severe punishment; it has also incorporated methods and possibilities for redress and reparation. Offenders must, to that end, prove that environmental damage has been remedied, or provide society with restitution. One can say that Brazilian legal frameworks regarding environmental law are fairly comprehensive; rules and regulations are wide in scope and adhere to international standards, such as the "polluter pays” principle, the matter of strict liability and the joint liability of legal and natural persons vis-à-vis harmful action. For this reason, it is possible to state that Brazil is not in sore need of legislation, rather of effective enforcement.

Given most cases, where actions, processes and behaviours are envisioned by law, where due process is observed and matters are tried impartially, mere observance does not guarantee that damages to the environment will be remedied or that the people harmed will be compensated. In the modern world, where relationships become increasingly complex and risks take on a social dimension, it is difficult to conceive of a reparation — especially where the environment is concerned — resorting to nothing but the assets held by those responsible. The theory of strict liability was itself a breakthrough.

It permits assignment of responsibility regardless of blame, based on objective criteria connected with certain activities. Another step in the right direction was the creation of liability insurance, a tool that truly comes into its own when it compensates a victim for damages, yet does not necessitate that those responsible relinquish their assets in order to satisfy the victim.

To find a culprit, to deprive him or her of rights and maybe even their freedom, is not enough to remedy environmental destruction. Thus comes into play the need for insurance. As an instrument to socialize risk, it guarantees indemnification for losses suffered, even when these take on large proportions. Environmental insurance is gaining more and more acceptance throughout the world.

Only recently, the EU published Directive 2004/35/CE, defining, for a number of companies, their obligation to arrange for financial collateral in connection with environmental liability regarding their activities, starting 2010. One of these arrangements may be environmental insurance. Brazil, given its cornucopia of natural resources, is fertile soil for the development of environmental insurance.

However, our insurance market has not really grown in that direction, and environmental insurance is often presented as accessory coverage rather than a mature, full-fledged policy. As a rule, liability insurance excludes environmental pollution specific coverage (except for Product Liability, which offers automatic coverage). Such coverage is, at the end of the day, offered under special conditions and is restricted to sudden pollution, i.e., pollution caused by sudden, unexpected events.

It would not be easy to bring in mandatory insurance under such terms in Brazil the way it happened in the European Union. Not because there is no social need, but because it would prove incompatible with current legislation, the current state of policy development regarding this matter in our country and also due to insurance culture in Brazil, which is rather unique.

One way or another, optional or mandatory, there is no doubt that environmental insurance must undergo serious development in the coming years, not only in Brazil but abroad. This is a highly significant segment which has yet to be fully exploited.

The right to an ecologically sound environment must find expression outside law books; society must strive for it at all times. Environmental insurance is a much-needed contribution to the struggle.

By Ivy Cassa, lawyer and a consultant on insurance and private welfare services in Brazil
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