Impact of Environmental Law on Corporate Governance

Environment

 

Why Do We Need Environmental Laws?

The Environment that surrounds us is the only source of our sustenance. We survive if the environment around us survives. The natural tendency of man in his relationship with nature is to take without giving and destroy without replenishing. This is leading to many problems not only for other flora and fauna, but for our own well-being and that of our descendants. It is only upon our initiative and insistence that the rampant degradation of the environment can be slowed down. This is why we have laws that aim at environment protection.

 

Where Are These Laws In Our Legal System?

Our Constitution, the paramount parchment, contains sufficient mention of the need to protect and preserve the environment. In the Constitution of India, it is clearly stated that it is the duty of the state to ‘protect and improve the environment and to safeguard the forests and wildlife of the country’. It imposes a duty on every citizen ‘to protect and improve the natural environment including forests, lakes, rivers, and wildlife’.

 

Point to be noted, milord!

In Maneka Gandhi v. Union of India, the Supreme Court said in its obiter dicta that the right to a clean environment was part of the right to life and liberty under Art. 21 of the Constitution.

 

References to the environment have also been made in the Directive Principles of State Policy as well as in judicial interpretations to the Fundamental Rights guaranteed by our Constitution.

While Article 48-A says: “The State shall endeavour to protect & improve the environment and to safeguard the forests and wildlife of the country.” Article 51-A deals with the fundamental duties of the citizen. Article 51-A (g) states: “It shall be duty of every citizen of India to protect & improve the natural environment including forests, lakes, rivers and wildlife and to have compassion for living creatures.”

 

It is not just the Constitution of India which makes references to the need to protect and preserve the environment. There are specific laws and rules laid down that address important issues that raise public concern. We shall discuss a few of those laws below.

Although some Acts that regulate forest usage and air and water pollution were existent, the framework of current Indian environmental laws was created as a response to the Bhopal Gas Tragedy in 1984.

The Environment (Protection) Act, passed in 1986, was supposed to set up a legislative, regulatory, and administrative mechanism in India to ensure that environmental violations were redressed, and the principle of polluter’s pays and administrative oversight conducted to ensure that industrial accidents such as the Bhopal Gas Tragedy did not occur again.

 

The Bhopal Gas Tragedy

The Bhopal Gas Tragedy is the world’s worst industrial catastrophe. It occurred on the night of December 2-3, 1984 at the Union Carbide India Limited (UCIL) pesticide plant in Bhopal, Madhya Pradesh there was a leak of methyl isocyanate (MIC) gas and other substances from the plant, resulting in the exposure of several thousands of people.

The government of Madhya Pradesh has confirmed a total of 3,787 deaths related to the gas leak. But other reports rack up an even greater number of unofficial deaths. The effects of the gas can be seen in the families even now, generations after the incident, in the form of genetic mutations and physical and mental disabilities.

Due to the poor environmental laws and the sad state of enforcement of the laws that existed, the victims of Bhopal are still seeking justice and the perpetrators of the crime have been let off with nominal punishment and in some cases, none at all.

 

Point of Interest!

In 2009, on the 25th Anniversary of the Bhopal Gas Tragedy, the question of trying Warren Anderson, the CEO of Union Carbide came up again. The media also shed light on the politicians who played a part in handling the situation at the time.

India has made a fresh request to the United States of America to extradite and try Warren Anderson who is living in hiding away from the clutches of the law.

 

Environment Protection Act

So, in a belated response to the disaster, the Environment (Protection) Act, passed in 1986, and the subsequent subsidiary acts and legislations were supposed to set up a legislative, regulatory, and administrative mechanism in India to ensure that environmental violations were redressed.

The Act ensures that its provisions and rules override any other law and it also gives the Central Government vast power to make rules under this Act. The Act endeavours to regulate pollution of the environment. To that end, it censures the emission or discharge of environmental pollutants in excess of the prescribed standards.

The Hazardous Waste Management Rules were notified under the Environment Protection Act, and they seek to regulate the manner of waste disposal and management to prevent pollution and contamination of the environment and of vital resources.

The Rules regulate a wide range of activities, by providing a list of hazardous items that are banned from import and export, and by also providing for registration of recycling equipment for environmentally hazardous material.

 

India is a Party to the Basel Convention on Hazardous Wastes. The basic objectives of the Basel Convention are for the control and reduction of transboundary movements of hazardous and other wastes subject to the Convention, prevention and minimization of their generation, and for active promotion of the transfer and use of cleaner technologies.

 

The objective of Environmental protection is not merely to preserve the attributes of the environment for future use. There is a distinct necessity to preserve and protect the environment for its own sake. We seek to protect it through a few other laws.

 

environment1

  1. Importance of Forest and Wildlife

Conservation of Forests

  • The Forest Conservation Act 1980 was enacted to help conserve the country’s forests. It strictly restricts and regulates the de-reservation of forests or use of forest land for non-forest purposes without the prior approval of Central Government.

In this Act, non-forest purposes includes tea or coffee plantations, forest clearing and excludes those such as that of reforestation or conservation.

  • The Indian Forest Act, 1927 consolidates the law relating to forests, the transit of forest-produce and the duty that may be levied on timber and other forest-produce.

 

  1. Biodiversity

The Wildlife Protection Act provides for the protection of wild animals, birds and plants, but gives varying degrees of protection to different categories listed under 6 schedules. The protection is given from destructive and exploitative activities such as hunting, taxidermy and collecting parts of the animal or bird as a token or ‘trophy’.

Schedule I and part II of Schedule II provide absolute protection -offences under these are prescribed the highest penalties. Species listed in Schedule IV are also protected, but the penalties are much lower.

 

III. Air and Water Pollution

For reasons of preventing air and water pollution, there exist the Air Act and the Water Act respectively, which contain similar provisions for rights and remedies.

The Acts prescribe the different regulatory authorisations required for different industries, and also seek to levy a cess. A cess is a kind of tax that is levied for a particular purpose.

 

Energy

Energy and the resources it is derived from have become a matter of serious concern with the growing awareness of climate change.

The primary goal is to replace non-renewable sources of energy with renewable sources and reduce our consumption to an extent where the reserves may be sustained for future generations. The nature of this aim for sustainable development is that it is less a goal to be reached, than one to be sustained.

 

The current Minister for Environment and Forests (MoEF), Mr. Jairam Ramesh has announced that India will source 20% of its energy consumption from renewable resources.

 

Mining

The problems that many have faced with the existent mining laws and regulations is that companies that obtain the right to mine do not fulfil the duties that come along with the right, such as the duty to rehabilitate those displaced due to the mining activities.

The draft Mines and Minerals (Development and Regulation) Bill, 2010, which proposes to replace the law that has existed since 1957, has many welcome and much-needed features to check the scourge of illegal mining, ensure that the industry is less destructive of the environment, and it includes all stakeholders in the profits produced.

It also proposes that a quarter of the net profits of the company go to those displaced by the mining, the land losers. The draft Act also lays emphasis on sustainable development. Among various provisions to enforce the principles of sustainable development and conservation of minerals, it provides for restoration of mining land to cultivability on closure of a mine.

Chapter Two: Environmental Rights

Remedies from the Courts

Even if there are no laws that provide for a particular grievance or do not address a particular concern, there are many ways to get a remedy from the Courts provided the cause of action is genuine and legitimate.

Now we shall discuss these various remedies and some of the cases that have incepted or implemented these instruments of justice.

 

Civil, Criminal and Constitutional Remedies

The polluter pays principle is based on equity, and it basically amounts to stating that whoever pollutes, or does any activity that would result in the pollution of the environment, must bear the costs of preventing or remedying that pollution.

 

This measure is actually based on a principle in economics known as the Coase theorem (after Ronald Coase) which discusses the importance of calculating the environmental costs of a venture and factoring it into the total expenditure, a method known as internalizing costs. Some enterprises seek to externalize costs and put the burden on society as a whole, thereby increasing social costs.

 

The polluter pays principle as interpreted by the court means that the absolute liability for harm to the environment extends not only to compensate the victims of pollution but also the cost of restoring the environmental degradation. Thus, the polluter is liable to pay the cost to the individual sufferers as well as the cost of reversing the damaged ecology.

–> Example: Hazar Dus is a company manufacturing toxic chemicals, and the factories release a lot of waste into the air and soil. Due to this, many health problems arise in the nearby village and the soil is rendered unfit for cultivation. Hazar Dus is liable to compensate the villagers for their health problems and for undertaking to make the soil fit for cultivation again.

Precautionary Principle

The precautionary principle states that: If an action or policy is suspected to cause harm to the public or to the environment, in the absence of scientific consensus that the action or policy is harmful, the burden of proof that it is not harmful falls on those taking the action.

This means that the person who wants to undertake the action has the responsibility to take all the precautions and verify whether the action will damage the environment.

–> Example: In a situation where an industrial company wants to undertake some infrastructural work by clearing forest land, we do not know what the impact of the move would be on the ecology and environment of the region. At those times, the burden is on the company to find out whether their actions cause harm and if not, to prove that they do not.

 

One of the important steps undertaken in order to comply with the requirements of the precautionary principle, is to get an environmental impact assessment done and obtain a no-objection certificate.

 

Environmental Impact Assessment: An EIA may be defined as a formal process to predict the environmental consequences of human development activities and to plan appropriate measures to eliminate or reduce adverse effects and to augment positive effects.

 

The EIA law was passed in 1994, which required that any project which may result in damage to the environment or pollution must seek for an impact assessment to be conducted by the Agency. This assessment is to be made in consultation with experts and the report is to be made publicly available before the Public Hearing.

 

Point of Interest!

National Green Tribunal Act, 2010

 

A new Act was passed by the Parliament which provides for the setting up of a Green Tribunal which will act as a fast track court for all environment related civil cases. But the Act has not been notified as yet.

 

 

The Writ Jurisdiction:
The Constitution of India has empowered the Supreme Court and the High Courts to issue orders as writs, like those of mandamus, habeas corpus, certiorari, prohibition and quo warranto. The writs of mandamus, certiorari and prohibition are generally used in environment matters as it is a quicker, and therefore, more effective remedy.

Another advantage of writs is that one can approach the highest Court directly and avoid an elaborate appeal process. Writs are filed against the State and elicit only a particular kind of remedy. As you must have studied, the writ of mandamus is a command to do, so the Supreme Court may command the concerned body to do a particular act – there is a positive duty to act.

 

–> Example: The petitioner filed a petition for issuance of a writ of prohibition, prohibiting the respondent from cutting bamboo in the Attappady area in Kerala. The Court looked into the evidence and determined that a writ of prohibition would be appropriate in that situation.

 

–> Example: The petitioner filed a petition for issuance of a writ of mandamus, directing the Administration to enforce the emission levels for motor vehicles. The Court determined on the basis of the representation made and the reports presented that a writ of mandamus would serve to resolve the issue.

 

Public Interest Litigation

 

Public Interest Litigation envisages legal proceedings for vindication or enforcement of fundamental rights of a group of persons or community, which are not able to enforce their fundamental rights on account of their capacity, poverty or ignorance of law. However public interest litigation cannot be resorted to satisfy personal grudge or enmity. Personal interest cannot be enforced through the process of court under Art. 32 in the garb of public interest litigation.

 

–> Example: In Subhash Kumar v. State of Bihar, the Court observed that Art. 32 is designed for the enforcement of fundamental rights. The right to life enshrined in Art. 21 includes the right to enjoyment of pollution free water and air for the full enjoyment of life. If anything endangers or impairs the quality of life, an affected person or a person genuinely interested in the protection of society would have recourse to Art. 32.

 

–> Example: In the case of M.C Mehta V. Union of India, a Public Interest Litigation was brought against Ganga water pollution so as to prevent any further pollution of the Ganga. Supreme Court held that petitioner although not a riparian owner is entitled to move the court for the enforcement of statutory provisions, as he is the person interested in protecting the lives of the people who make use of Ganga water.

Chapter Two: Remedies in Torts

Tort Law Applicable in Environmental Law
Nuisance, Negligence, Strict Liability and Absolute Liability
There are two kinds of nuisance, public and private. A public nuisance injures, annoys or interferes with the quality of life of a class of persons who come within its neighbourhood. A private nuisance is a substantial and unreasonable interference with the use and enjoyment of land.

A common law action for negligence may be brought to prevent environmental pollution. In an action for negligence, the plaintiff must show that (1) the defendant was under a duty to take reasonable care to avoid the damage complained of (2) there was a breach of this duty (3) the breach of duty caused the damage.

 

–> Example: In Ratlam Municipality v. Vardichand, The residents of a locality within the limits of Ratlam Municipality, tormented by stench and stink by open drains and public excretions by nearby slum dwellers moved the Sub-Divisional Magistrate under Sec. 133 CrPC to require the Municipality to construct drain pipes with the flow of water to wash the filth and stop the stench towards the members of the Public. The Municipality pleaded paucity of funds as the chief cause of disability to carry out its duties.

The Court also accepted the use of sec. 133 CrPC for removal of public nuisance.

 
Strict Liability
This rule was developed in an English case, called Rylands v. Fletcher, which holds a person strictly liable when he

  1. Brings or accumulates on his land something
  2. Likely to cause harm if it escapes, and
  3. Damage arises as a natural consequence of its escape.

 

–> Example: Roy brings a ferocious bear onto his farm, it escapes and causes damage to his neighbour’s property. Roy is strictly liable for the damage caused to his neighbour’s property.

 

–> Example: Hemant has a reservoir of water on his property. One day it overflows beyond capacity and goes on to the neighbour’s property. It does not cause any damage to his neighbour’s person or property. However, his neighbour Puja still tries to recover damages for the overrun. Hemant is not strictly liable to compensate Puja for any damages.

 

But ‘strict’ liability is subject to a few exceptions (1) an act of God (2) the act of a 3rd party (3) the plaintiff’s own fault (4) the plaintiff’s consent (5) the natural use of land by the defendant (6) statutory authority.

 

–> Example: Pritam owns an apartment building which he rents out to tenants. The tenants agree to the installation of central air conditioning in the building. The air conditioner malfunctions one day and begins to emanate toxic fumes. Pritam is not strictly liable for the damage caused to the tenants because they consented to the installation of the air conditioners.

 

–> Example: Mr. Mookerji has a reservoir in his house to collect rainwater. It is situated on the terrace, where the tenants of the house tend a small garden of valuable plants. A thunderstorm causes the cover of the reservoir to crack and the water overflows and destroys the garden. This is deemed to be excused from strict liability because the thunderstorm was an act of god, or vis major.

 

Absolute Liability
An increasing number of hazardous industries have come up all over India and although they have great social utility, the potential cost of environmental damage is an intimidating thought too. The doctrine of Absolute Liability was born in the Shriram gas leak case decided by Justice Bhagwati of the Indian Supreme Court.

 

While this case was being heard, the Bhopal Gas Leak case was pending in the Madhya Pradesh High Court. He propounded this model of liability so that he could influence the Bhopal Gas Leak case that was being decided around the same time.
It was held there that “an enterprise which is engaged in a hazardous or inherently dangerous industry, which poses a potential threat to the health and safety of the persons working in the factory and in the surrounding areas, owes an absolute duty to ensure that no harm results to anyone on account of hazardous or inherently dangerous nature of the activity which it has undertaken…”

 

The remedies available in case of such findings as those listed above, are damages and injunction.

 

–> Example: In a case which requires extensive investigation and collection of evidence, the Court may pass an injunction to decide on the rights and duties of the parties during this period.

 

The difference between Strict Liability and Absolute Liability is that while some defences may be used to escape liability under Strict Liability, there are no defences applicable to a charge of Absolute Liability, once the defendant is found guilty.

 

Therefore, while Absolute Liability is applicable only to hazardous or inherently dangerous industries, it has a very wide liability clause and imposes huge liability

 

Damages and Injunction
Damages are the pecuniary compensation payable for the commission of a tort. Damages may either be ‘substantial’ or ‘exemplary’. In the Shriram gas leak case, Oleum gas escaped from a unit of the building and injured a few Delhi citizens. The court observed that in such cases, compensation must be correlated to the magnitude and capacity of the enterprise because such compensation must have a deterrent effect.

 

Point to be noted, milord!

In practice, injunctive reliefs are more successful at reducing pollution and a temporary injunction may be followed by a permanent injunction.

 

 

Chapter Three: International Environmental Law

International Environmental Law

 

International Developments in Environment Protection

India has obligations under numerous international treaties and agreements that relate to environmental issues. As a contracting party, India must have ratified a treaty, that is, by adopting it as national law before it came into force, or by acceding to it after it has come into force. For a treaty to enter into force, the requisite number of countries must ratify the treaty, which then has the force of international law.

International institutions are generally not responsible for directly implementing and enforcing international environmental law, but they often play important monitoring, informational and diplomatic roles.

For example, the 1992 Convention on the Conservation of Biological Diversity (Biodiversity Convention) created a new international body, the Committee on Sustainable Development (CSD). The CSD lacks the power to bring enforcement actions against either governments or private parties, but it plays a role in implementing the Biodiversity Convention.

India is a member of several international conventions and treaties dedicated towards the protection and preservation of our natural world. The notable ones include, Convention on International Trade in Endangered Species (CITES), United Nations Framework Convention on Climate Change (UNFCCC), the Convention on Biodiversity, the Montreal Protocol etc.

 

Principle of sustainable development

The concept of sustainable development evolved through some world summits that were convened for the purpose of discussing the state of environmental degradation the world over.

The concept was floated to incorporate elements of ecology, economics and policy into the law and was first published in the Brundtland report. The definition of sustainable development was: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts:

  • the concept of ‘needs’, in particular the essential needs of the world’s poor, to which first priority should be given; and
  • The idea of limitations imposed by the current state of technology and social organization on the environment’s ability to meet present and future needs.”

 

Intergenerational Equity: Intergenerational equity is among the newest norms of international environmental law. It can best be understood not as a principle, but rather as an argument in favour of sustainable economic development and natural resource use.

If present generations continue to consume and deplete resources at unsustainable rates, future generations will suffer the environmental (and economic) consequences. Therefore, we must all undertake to pass on to future generations an environment as intact as the one we inherited from the previous generation.

 

Common Heritage of Mankind: It is a principle of international law which holds that defined territorial areas and elements of humanity’s common heritage (cultural and natural) should be held of trust for future generations and be protected from exploitation by individual nation states or corporations.

At the UN Convention on the law of the sea, India was among the countries that ratified that there are some parts of nature that cannot have the nature of property, and belong equally to everyone. These aspects of nature, such as the sea bed, the moon, and the high seas are a common heritage of all mankind and everyone has an equitable responsibility towards its preservation.

Exercises

  1. Principle: In an action for negligence, the plaintiff must show that (1) the defendant was under a duty to take reasonable care to avoid the damage complained of (2) there was a breach of this duty (3) the breach of duty caused the damage.

Ans – All of the above

 

  1. A paper factory was using a set of materials which were reusable, but were not being reused and were instead being disposed of as waste. A former employee of the company sued the company on grounds of negligence and pollution to the environment. Is the company guilty of negligence?

(a) No, the company did not have a duty to recycle the material and was thus not negligent in its actions.

(b) The environment will be polluted due to accumulation of reusable waste.

(c) The former employee had a political motive behind suing the company. So the company cannot be held liable.

(d) The disposal of waste materials did not amount to pollution of the environment.

Ans: (a)

The logic of the precautionary principle would be defeated if businesses began to exploit the general lack of awareness amongst the public, and started to circumvent environment protection measures.

 

  1. Principle: The international covenants to which India is a signatory must be incorporated into our domestic laws, and this may be done under Art. 265 of the Constitution. Only then will they be binding upon the citizens.

If a Public Sector Undertaking does not follow the guidelines laid down by the United Nations Framework Convention on Climate Change, can a responsible citizen file a suit against the State for not following the UN Framework?

(a) Yes, because a Public Sector Undertaking is a component of the State.

(b) No, because the Framework Convention does not prescribe any punitive action, and only acts as a guideline.

(c) No, because the PSU is not flouting any domestic law, and is only running contrary to an international framework, which is not binding.

(d) Yes, because once we have signed an international convention it is binding upon us.

Ans – (b)

 

  1. Principle: The rule of absolute liability states that “an enterprise which is engaged in an inherently hazardous industry, which poses a potential threat to the health and safety of the persons working in the factory and in the surrounding areas, owes an absolute duty to ensure that no harm results to anyone on account of inherently hazardous nature of the activity which it has undertaken”

A paper factory that was situated in a relatively woody area suddenly caught fire due to faulty circuitry. It happened when there was nobody in the factory, so the damage was the loss of a section of the woods that the factory was situated in, and all the animals and birds in the trees. Is the paper company absolutely liable for the loss?

(a) The paper factory is not an inherently hazardous industry, thus the duty of care burden is eased on the factory.

(b) The loss is not quantifiable and so the paper company cannot pay the costs.

(c) The loss occurred to the State and the company is thus liable to pay the state government for the losses.

(d) The building was wrongly situated in a woody area.

Ans: (a)

The reason for the fire was the faulty circuitry, which was not a result of the nature of the industry. Thus, the burden of duty is less for the paper company. It will hence not be absolutely liable.

 

  1. Principle: The Precautionary Principle states: ‘the burden of proving that a venture is environmentally safe is on the person taking up the venture.’

Research has shown that companies pay more in damages, than they would have to if they took precautions to prevent the accident, as costs are now so high.  Therefore, since businesses value their profits, hazardous industries that might have such accidents will now install preventive environmental safeguards. Which one of the following, if true, most seriously weakens the argument?
(a) Businesses generally greatly underestimate the risk of future accidents.
(b) Businesses generally try to leave the burden of cleaning up after an accident to the public.
(c) Businesses treat fines that are levied against them as an ordinary business expense.
(d) Businesses are learning to exploit the public’s lack of awareness into protecting themselves.

Ans: (c)

In the following 2 questions, there will be an assertion and a reason provided. You have to decide whether the assertion is right, and then decide whether the reason provided for it is valid.

 

  1. Assertion: Slum dwellers moving to already congested areas may be ousted by the existing residents for public nuisance.

Reasoning: The Right to a Clean & Free Environment is a fundamental right under the Constitution of India.

(a) The assertion is right but is not a natural consequence of the reason.

(b) The assertion is not right, but the reason provided is a valid statement.

(c) The assertion and reason are both false and invalid.

(d) The assertion and reason are both right, but they are not linked to each other.

Ans: (b)

 

  1. Assertion: I can file a PIL for improving the roads in my brother’s village because people in his village are affected.

Reasoning: Public Interest Litigations are representative suits that must reflect the desires and interests of a section of the public, and must not be for personal gain.

(a) Both assertion and reason are right, but the assertion is not an effect of the reason.

(b) The assertion is not valid, but the reason provided is a valid statement.

(c) The assertion and reason are both false and invalid.

(d) The assertion and reason are both right, and the assertion is a natural consequence of the reason.

Ans: (d)

A Public Interest Litigation, as held in Subhash Kumar v. State of Bihar, must not be instituted for personal gain. Any suit against the State, which is in the interest of the public, whom the claimant represents, is a valid litigation.

 

  1. The Constitution protects our fundamental right to a clean and safe environment, except according to procedure established by law. In which of the following situations would this legal standard apply?
  • When your local municipality orders the clearing of trees for widening the road.
  • When the Parliament passes a law for building 7 new dams bypassing the need to get an environmental assessment of the projects.

(iii) When a judge orders that the regulations setting up an industry        must be eased, and development must be accelerated.

Ans: (ii) & (iii)

Although judicial pronouncements are not law per se, they are binding and may be enforced. The law of the Parliament, of course, falls under the standard. But it is doubtful if these laws must be passed.

 

  1. Solve the following:

If,

All cases of strict liability include an element of breach of duty of care, and

Some of cases of breach of duty of care may result in a finding of absolute liability.

Then, do some cases of absolute liability have elements of strict liability?

Ans: All cases of absolute liability have all the elements of strict liability, except that the exceptions do not apply to industries that may be absolutely liable.

 

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