Recovering the costs of environmental damage

An advisory letter on financial indemnity requirements for high-risk companies

An advisory letter concerning financial indemnity requirements for high-risk companies when recovering the costs of environmental damage.
Hansenn / Nationale Beeldbank

Introduction

In the Netherlands, the risk of serious environmental damage is relatively small. However, the environmental impact of a disaster or a soil decontamination project can be significant. If a serious incident occurs, it is not always possible to recover the costs of remediation from the party responsible. The government and Parliament are therefore considering the introduction of mandatory indemnity requirements for companies whose activities pose a high risk of serious environmental damage.

At the request of the State Secretary for Infrastructure and the Environment, Ms Wilma Mansveld, the Council produced an advisory letter examining the possibility of requiring high-risk companies to provide financial indemnity against the costs of remedying environmental damage which is caused by, or comes to light upon, the termination of their operations. The Council also examined the possibility of liability insurance. The Council’s assessment is based on two key considerations:

  1. The recovery of costs which would otherwise fall to public sector authorities
  2. The degree to which financial indemnity requirements would encourage companies to take preventive measures

It is also necessary to take the potential effect on companies’ competitive position into account. In essence, the question is one of equity and justice. Is it reasonable to expect society to pay the costs of remedying environmental damage which has been caused by a private sector organisation? In the Council’s opinion, whether this is an issue which calls for a legislative solution is a matter of political and societal debate.

Publication date

The advisory letter was submitted to Ms Wilma Mansveld, State Secretary for Infrastructure and the Environment, on 3 June 2014.