European Union Environmental Business Law Essay

The Treaty of Rome which established the European Economic Community in 1958, did not originally included any provisions for the safeguard of the environment It was not until 1985 that the Single European Act inserted Title VII containing articles 130r to 130t in the Treaty of Rome that made environmental protection a lawful objective of the Commission and laid down the core principles upon which the environmental policy was based (Poostchi 83). The core principles as stated by Poostchi are â€Å"the principles that preventative action should be taken, that the polluter should pay and that environmental damage should be rectified at source. These legal principles as given by the Single European Act were further refined by The Maastricht Treaty which enhanced the scope of the environmental policy of the European Union. Today the European Union has over 200 directives (legal texts) with environmental policies under the broad classifications of Air, Biotechnology, Chemicals, Civil Protections and Environmental Accidents, Climate Change, Land Use, Noise, Ozone Layer Protection, Soil, Waste and Water as well as issues like public participation in environmental decision making and public access to environmental information. Development and Implementation of Environmental Law The EU has the option of adopting environmental legislation by way of three primary legal instruments: (i) directives, (ii) regulations, and (iii) decisions. Regulations and decisions are binding in their entirety and are directly applicable within Member States; directives, are binding as to the result to be achieved, but leave to the Member States the choice of form and method, which means that member states have the power to enact local legislation based on a directive to further the cause of initiating it in the first place (Goodrich). The branch of law dealing with the environment has the same system of development and enforcement as other laws developed by the commission. The primary responsibility of EU is to develop environmental laws, while the duty of implementation and enforcement rests in the hands of the 25 member states. Herein lays the strength and weakness of the system. The strength lays in the fact that member states have greater power of enforcement than a council of 25 states, but at the same time member states enjoy considerable flexibility in enforcement which often leads to delays or avoidance of implementation, thereby frustrating the purpose of the law itself. The Legislative Process The Commission is responsible for ensuring compliance with environmental laws. By undertaking its own assessments, through complaints by EU parliament and petitions by EU citizens, the commission monitors the degree of compliance. If after review there is evidence of a breach of law, the EU initiates the infringement proceedings against the violating state. There are three categories of breaches 1) Non-communication cases, in which a member state fails to, inform EU about the adoption of national legislation implementing a directive after the deadline for implementation has passed. 2) Non-conformity cases, in which a member state implements a directive incorrectly. 3) Bad-application cases, in which a member state has failing to correctly apply community law in a particular case. The infringement procedure contains several steps which are outlined in Article 226 of the Treaty. The Commission usually upon receiving a case, issues a formal notice to the government, after which it can issue a reasoned opinion. If the member state still refuses to comply the commission refers the case to the European Court of Justice, for a ruling. Non-compliance with a ruling can lead to the imposition of a fine or lump-sump penalty on the member state. In April 2004 environmental liability directive was issued by the EC with the aim of preventing and remedying environmental damage. According to the directive (which is to be adopted by member states over a period of 3 years) Environmental damage can be remedied in several ways depending on the type of damage: For damage affecting the land, the Directive requires that the land concerned be decontaminated until there is no longer any serious risk of negative impact on human health; For damage affecting water or protected species and natural habitats, the Directive is aimed at restoring the environment to how it was before it was damaged. Another development in the environmental law front is the possibility (proposal for a directive) of criminal action against serious negligence and intentional damage. According to a press release by the EC (Brussels, February 2007) the law would apply to both natural and legal persons. The proposal lays down the maximum penalty, and allows member states to impose more stringent measures. The motivation to introduce criminal action is because although EC Environmental law has existed for 30 years, there are still many cases of severe non- observance of Community environmental law. According the Seventh Annual Survey on the implementation and enforcement of Community environmental law 2005 (Commission Staff working paper Brussels, 2006) there has been a significant reduction in the number of open cases at the end of the year 2005 (798 cases) as opposed to 2004 (1220 cases). However the Environment sector, still accounts for one-fourth of all open cases concerning non-compliance with Community Law under investigation by the Commission. EU Environmental Law and International environmental law Over the past 30 years EU had made tremendous impact on environmental law legislation by enforcing very stringent environmental standards across its member nations. Environmental laws are discriminatory by nature, as they favor countries with developed infrastructures, wealthy industries and higher per capita incomes. For EU to expect all its trading partners (irrespective of their national income and stage of development) to comply with its strict Environmental laws, means that it will seek to eliminate any advantage that they might have in terms of lower prices. Environmental laws can serve as a form of non-tariff trade barrier. As in the case if Shrimp-Turtle case (USA banned the import of shrimp from countries which in the process of shrimp trawling accidentally caused the death of sea turtles. These countries were expected to install US made Turtle Excluder Devices (TEDs), so that the shrimp trawling would become environmentally friendly again) (Schaffer et al. 628). The net effect was to increase the sales of a US industry (the industry making TEDs), and possibly raise the price of imported shrimp products. (Schaffer et al. 623) United States ran into trouble with the WTO on the ban on shrimp products, because it was declared uncompetitive and unfair. Subsequently USA had to redefine its guidelines, so that exporting countries which employed a programme similar to that of the USA for turtle protection were given a certification to export again. Impact on FDI and International Businesses EU’s has emerged as the leading incubator for environmental rules and regulations, and this has major implications for all businesses hoping to work with the European market. This includes businesses within and outside the European Union. This is mainly because of two reasons. Businesses must comply with EU regulations if they wish to continue supply and demand to the region. Secondly like all highest forms of legislation (and constructive action in general) the EU legislation set the benchmark for environmental regulation and there may come a time when they will be followed and implemented across the globe. Recently the Commission enacted 3 new laws, which will have a significant effect on businesses trading in EU. The three regulations are REACH (Registration, Evaluation, and Assessment of Chemical Hazards); RoHS (Restriction of Hazardous Substances); and WEEE (the directive on Waste Electronic and Electric Equipment). All three are complex pieces of legislation that will affect a vast range of products, chiefly electronics that are made, sold, used, and disposed of across 25 EU member countries. (Elkington) The first legislation will make mandatory testing of over 30,000 chemical substances for human safety. This will put the fate of several chemical companies in jeopardy. RoHS seeks to ban six substances out of the E. U. economy: lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBBs), and polybrominated diphenyl ethers (PBDEs). This will make it nearly impossible to manufacture semiconductors for electronic items. The third legislation (WEEE) will affect manufacturers of products like TVs, refrigerators, or cars. This take-back legislation will force companies to take the responsibility of recycling packaging material of their product and also ensure recycling of discarded products (end of life accountability). This legislation takes root from the concept of recycling all waste material so that some of it can be re-absorbed (re-claimed) in the productive process, instead of going unutilized into landfills. These legislations will have a number of implications for local and foreign countries in Europe. Firstly they will have to invest in take-back and recycling infrastructure. It is generally observed that big companies adopt the law, in fear of retaliation from NGO’s, and because they refused to be driven out of markets because of these de-facto trade barriers. Korean and Japanese countries demonstrated this when they took a lead in adopting the ISO 14000 standards, so that they cannot be discriminated in the European Market. The rate of adoption of companies from these countries was faster than that of EU companies themselves. The possible impact of stringent environmental laws is felt on domestic companies as well. During a period of economic downturn and business slowdown, most businesses are reluctant to enforce environmental legislation. Also the cost of monitoring the legal environment for businesses increases. EU is actively taking notice of breach in compliance with environmental laws and the process of pursuing legislative action at the European court is a time wasting and expensive affair. According to the OECD report on FDI, the 2003 FDI inflows to European countries were 23 per cent lower than in 2002. But according to data available with UNCTAD, for the period 2004-2006 FDI picked up again and the EU countries recorded a growth of 30% . Thus it cannot be determined to a conclusive level whether the changes in FDI have resulted because of the enactment and enforcement of environmental laws. It may be noted that European Union’s proactive behavior in enacting environmental legislation could be because they had a smaller land mass and learned the importance of conservation before other bigger countries like US. Whatever the case maybe, it remains to be seen whether the extensive array of laws will improve the environment to any noticeable degree. Given the number of years it takes for degradation to become noticeable any fruits of improvement will take time to manifest themselves. Till then both foreign and domestic businesses will find themselves facing a host of challenges, ranging from legislative action, forced compliance, rising environmental compliance cost and the like. However it will also open opportunities for businesses to develop eco-friendly products, and maintain a positive image in the minds of consumers.

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