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Delay on E.U. environment law increases uncertainty in U.K.

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Delay on E.U. environment law increases uncertainty in U.K.

LONDON—Companies in the United Kingdom will be left unsure of their liabilities at the end of this month as the government has confirmed that it is likely to miss the April 30 deadline to transpose European environmental legislation into domestic law by as much as a year, experts said.

All European member states have until April 30 to have legislation in place under the European Union's Environmental Liability Directive. The directive provides a common framework to prevent and remediate environmental damage. It covers water resources, such as rivers, lakes and coastal waters, as well as land contamination that threatens human health. Significantly, the directive also covers damage to habitats and species protected by E.U. law.

The U.K. Department for Environment, Food and Rural Affairs, the government department responsible for transposing the directive in the United Kingdom, issued its first consultation paper last year and was due to publish a second, more detailed consultation document this spring.

A DEFRA spokeswoman said the second consultation is now not likely to be published before late summer. "Consultation on the draft regulations will be launched in late summer or early autumn of this year," she said. "Action under the directive cannot be taken until the transposing legislation is in force, which is expected to be in late spring 2008."

The United Kingdom already has existing legislation covering most aspects of the directive, although there are some areas where the directive goes further than current U.K. law, according to lawyers.

The delay will, therefore, create uncertainty for companies or operators involved in a pollution incident that occurs after the April deadline but before the directive is transposed into U.K. law, according to experts. It will also limit the ability of public liability insurers to amend their policies to allow for the Environmental Liability Directive, insurers said.

The delay will create problems for risk managers, said Bob Martin, London-based director of environmental consulting and solutions at Aon Ltd., a unit of Chicago-based Aon Corp. "The ELD has a number of aspects that are left for individual member states to decide upon and write into their national laws to make the ELD manageable. So until these laws are written, companies and their risk managers will not fully know what steps they should take to best protect themselves," Mr. Martin said.

Matthew Young, policy adviser on liability and occupational health at the Assn. of British Insurers, said the trade body representing U.K. insurers is "fairly relaxed" about the situation. "It is important to get it (done) right, rather than quickly," said Mr. Young.

But the ABI would like more clarity over what will happen after April 30 and "whether the current regime will continue," he said.

In response to requests for clarification by Business Insurance Europe, the DEFRA spokeswoman said: "In the meantime, existing environmental protection legislation remains in place to deal with incidents of environmental damage, and continues to offer high levels of protection."

But some experts believe companies will also be subject to the additional liabilities under the directive. "Until the national laws are passed, the ELD itself will become the law in the member states as from April 30, 2007. How this can then be enforced when some of the fundamentals have not been decided on is anyone's guess," Aon's Mr. Martin said.

Valerie Fogleman, consultant at London-based law firm Lovells, said environmental damage that occurs after April 30 will be covered by the directive under Article 17. That article states that the legislation will not apply to environmental damage before April 30, so it must apply after that date, Ms. Fogleman said.

Areas where the directive goes significantly beyond existing U.K. legislation include a requirement to inform the regulator that pollution has occurred and tougher rules regarding biodiversity damage--the remediation of habitats and species.

New to the United Kingdom, the directive will require biodiversity and water damage be remediated to a baseline condition. If this is not possible, "complementary" and "compensatory" remediation--in which an operator may be required to fund an alternative temporary or permanent site to replace the damaged habitat or resource--will be required.

DEFRA also faces a House of Commons Select Committee over its handling of the Environmental Liability Directive, another factor that may hamper the second consultation, some experts said.

On March 22, the House of Commons Environment, Food and Rural Affairs Committee announced it would hold a hearing to consider whether the U.K.'s first consultation document is tough enough. It also said it will investigate why DEFRA has taken "so long to consult formally on the ELD."

A committee spokesman said the hearing is expected by the end of May or early June.