Global Legal Group: The International Comparative Legal Guide to Environment Law 2009

20.02.2009

1. Environmental Policy and its Enforcement

1.1 What is the basis of environmental policy in [country] and which agencies/bodies administer and enforce environmental law?

The Federal Service for Supervision of Natural Resources under the Ministry of Natural Resources and Environment (MNRE) is responsible for overall environmental control, management of specially protected areas, performance of state environmental reviews, etc. Federal Agencies for Subsoil and Water Resources under the MNRE, and Federal Agency for Forestry under the Ministry of Agriculture are responsible for administering environmental law with respect to the relevant natural resources.

The Federal Service for Supervision of the Environment, Technology and Nuclear Management under the MNRE is responsible for control over the industrial and anthropogenic impact on the environment, waste management, industrial safety, control over potentially hazardous industrial projects, and nuclear safety. The Federal Service for Hydrometeorology and Environmental Monitoring is responsible for environmental monitoring and maintaining the database on the state of the environment. Other agencies, including the sanitary control and tax authorities, also play an important role in protection of human health, wildlife and the environment. The environmental public prosecution department is also involved in enforcing environmental law.

1.2 What approach do such agencies/bodies take to the enforcement of environmental law?

The fundamental principles of Russian environmental law are set out in the Law “On Protection of the Environment” and public agencies are expected to apply these when enforcing environmental law. These principles include the polluter pays principle, the principle of potential environmental danger, full compensation for damage caused to the environment, principle of environmental impact assessment, etc.

1.3 To what extent are public authorities required to provide environment-related information to interested persons (including members of the public)?

The individual’s right to obtain environment-related information is declared by the Russian Constitution and supported by the Law “On Protection of the Environment”. Individuals and various entities have a right to obtain information from the database on the state of the environment maintained by the Federal Service for Hydrometeorology and Environmental Monitoring to a certain limited extent. Various public agencies are also responsible for providing environment-related information to interested persons. For example, the Federal Real Estate Cadastre Service provides information on the condition of land. In practice, however, because no specific procedure has yet been developed for providing such information to interested parties, it is not easy to obtain detailed environment-related information.

2. Environmental Permits

2.1 When is an environmental permit required, and may environmental permits be transferred from one person to another?

Industrial facilities in Russia must operate in compliance with their project/design documentation. This project/design documentation must include a section on environmental protection. Project/design documentation is subject to state review approval, which must evaluate, among other issues, the facility’s impact on the environment. Implementation of any industrial projects in Russia is allowed only upon receipt of a state project/design documentation review approval. Upon the facility’s construction and commissioning permits for wastewater/emissions discharge must be obtained. Together the above may be viewed as a facility’s environmental permit.

Project/design documentation is applicable to a specific facility and is transferable to another person that acquires the given facility.
Natural resource use permits (subsoil use licence, water use licence/contract, etc.) are of limited transferability. Their transfer is possible if the transferee complies with specific criteria established by law and normally requires the prior consent of a controlling public agency.

Permits (licences) are also required for performance of specific activities, e.g., for hazardous waste management or for operation of hazardous industrial facilities. These licences are not transferable and should be obtained by each person independently.

2.2 What rights are there to appeal against the decision of an environmental regulator not to grant an environmental permit or in respect of the conditions contained in an environmental permit?

If a requested permit (licence) is not granted, applicants have the right to challenge the public agency’s decision in court within 3 months of the date of said decision. There is a similar procedure for appealing against the conditions contained in the environmental permit.

2.3 Is it necessary to conduct environmental audits or environmental impact assessments for particularly polluting industries or other installations/projects?

Russian law does not explicitly require conducting environmental audits. They are, therefore, usually prepared on a voluntary basis for the internal purposes of current/potential facility operators. However, with respect to facilities constructed before the current environmental legislation entered into force (i.e., during Soviet times), conducting an environmental audit may be requested by public agencies as well.

Implementation of new industrial projects in Russia is allowed only upon receipt of an approval of the state project/design documentation review, which must evaluate, among other issues, the possible negative impact of an anticipated project on the environment (see also question 2.1 above).

2.4 What enforcement powers do environmental regulators have in connection with the violation of permits?

If the environmental procedures described in the project/design documentation are not observed or other environmental violations are committed civil, administrative or criminal liability measures may be imposed (see question 4.1 below).

In cases of violation of the conditions stipulated by other types of permits/licences (e.g., subsoil use licence, hazardous waste licence, etc.), there are grounds for withdrawal of said licence, this terminating a person’s right to undertake the activities listed therein. Performance of such activities in the absence of the necessary licence may be treated as an illegal entrepreneurial activity, which might entail compulsory liquidation of a company and/or criminal liability of its general director.

3. Waste

3.1 How is waste defined and do certain categories of waste involve additional duties or controls?

The definition of “waste” that applies in Russia is set out in the Law “On Industrial and Consumer Waste”. Essentially, it covers any substance or object, raw material or product residue, etc. that originated during the production process and is not suitable for consumption. Thus, generally, for the purposes of Russian law, waste is any material, substance or product that the holder discards or intends or is required to discard.

“Hazardous waste” is defined as waste containing hazardous components (toxic, inflammable, explosive, contagious, etc.) that might cause immediate damage either to human health or to the environment independently or in contact with other components. Wastes are classified into five classes of hazard (class 1 being the most hazardous), depending on their impact on the health of individuals and the environment.

Additional, higher-level controls apply to transboundary shipment of waste and radioactive waste management.

3.2 To what extent is a producer of waste allowed to store and/or dispose of it on the site where it was produced?

Operation of any facility generating waste is permissible if waste storage equipment is available on site. When operating an industrial facility, if any waste is generated, waste management and placement projects (Waste Manifests) should be developed by waste producers and approved by supervising state authorities. These Waste Manifests, besides other data, stipulate amounts of waste that can be stored on-site and the requirements on such storage and subsequent waste management.

Approved Waste Manifests are valid for 5 years, provided that, on an annual basis, the waste producer confirms that neither the production process nor the raw materials used in production have changed, so the nature and volume of the waste generated remains the same.
Depending on the class of hazardous waste generated, different requirements apply to the procedure for their management, storage and transportation, as well as requirements on landfills for disposal of such waste.

3.3 Do producers of waste retain any residual liability in respect of the waste where they have transferred it to another person for disposal/treatment off-site (e.g. if the transferee/ultimate disposer goes bankrupt/disappears)?

Producers of waste must have a valid contract for waste placement with a licensed waste disposer. At the time the waste is transferred from the waste producer to the corresponding waste disposer, any further liability regarding waste management and its environmental consequences are transferred to the waste disposer. From that time on, there are no legal grounds for imposing any liability (including residual) on waste producers even if the transferee/ultimate disposer goes bankrupt/disappears.

3.4 To what extent do waste producers have obligations regarding the take-back and recovery of their waste?

No statutory requirements as to take-back or recovery of a certain portion of waste generated by a waste producer currently exist under Russian law. Should project/design documentation or Waste Manifest provide for the facility’s take-back or recovery of waste, such would be obligatory for the individual waste producer.

4. Liabilities

4.1 What types of liabilities can arise where there is a breach of environmental laws and/or permits, and what defences are typically available?

Breach of environmental law or permits can give rise to civil, administrative and criminal liability. Civil liability might result either in full compensation for damage caused to the environment or remediation. Remediation should be chosen over monetary compensation if the responsible party is willing and capable to undertake such remediation (or to finance it), or if remediation is more effective than financial compensation. The amount of financial compensation is estimated using applicable calculation methodologies and, in their absence, on the basis of the actual expenses incurred during/necessary for remediation of the damaged environment, including lost profits (if any).

Administrative liability may result in imposing fines (in comparatively insignificant amounts) or suspension of a facility’s operation for up to 90 days. In certain rare cases, closure of a facility is possible. Imposing a fine or suspension of operations does not remove the obligation to eliminate a violation. If said violation is not eliminated, fines/suspension may be imposed repeatedly. Criminal liability may result in imprisonment of respective officials for up to 5 years (only individuals can face criminal charges under Russian law). The criteria for imposing criminal or administrative liability lie in the significance of the damage caused to the environment, health or lives of individuals, and the volume and nature of the measures necessary in order to restore the environment to its original status.

The available defences depend upon the specific circumstances of the case and the applicable environmental legislation.

4.2 Can an operator be liable for environmental damage notwithstanding that the polluting activity is operated within permit limits?

Operators make payments for exerting a negative impact on the environment under their established permit limits. These payments are designed to compensate for the environmental damage caused by the polluter within these permit limits. The latter may, therefore, be found liable for environmental damage caused by its polluting activities only if said damage exceeds the limits established by the permit.

4.3 Can directors and officers of corporations attract personal liabilities for environmental wrongdoing, and to what extent may they get insurance or rely on other indemnity protection in respect of such liabilities?

Directors and officers of corporations may be found liable for environmental wrongdoing and may be subject to administrative or criminal liability. Russian law does not provide for insurance instruments indemnifying a director or officer in respect of such liabilities.

4.4 What are the different implications from an environmental liability perspective of a share sale on the one hand and an asset purchase on the other?

The buyer of the shares inherits all the environmental liabilities associated with the purchased company.

In the case of an asset purchase, the purchaser does not automatically accept liability for the environmental failures of another entity. When purchasing assets, however it is possible that he/she may be found liable for remediation activities and other means for bringing the property and its operation into compliance with the applicable requirements of the law. In certain circumstances, the purchaser could be found liable simply as a result of being the owner of the purchased asset.

4.5 To what extent may lenders be liable for environmental wrongdoing and/or remediation costs?

Financing of any activity performed in violation of environmental requirements or regulations is prohibited by Russian law. Investors, lenders or other parties financing such activities may be found liable for environmental wrongdoing and measures of administrative liability may be imposed on them. Such administrative liability may result in imposing fines or prohibiting further financing of the project under consideration. In practice, however, these cases are not common.

5. Contaminated Land

5.1 What is the approach to liability for contamination (including historic contamination) of soil or groundwater?

The concept of historic contamination is not familiar to current Russian environmental law. As a general rule, therefore, the title holder of the land will be liable for its contamination. Provided that sufficient proof is available that contamination was caused by the previous owner, it is possible that criminal and maybe even administrative liability will not be imposed, but imposition of civil liability measures on the company is quite likely in such cases. It should be mentioned that no clear judicial practice is yet available on this issue.

Depending on the degree of contamination of soil, regulatory authorities may establish special conditions or limits for further use of specific areas. These special conditions or limits may be established if the detected contamination might constitute a danger to human health or the environment (e.g., contaminated soil leads to contamination of groundwater, etc.). These conditions may incorporate a requirement to undertake urgent remediation and stipulate a clean up standard to be achieved. In respect of residential land, special conditions and limits for land use (as well as remediation requirements and standards) may be introduced at a lower level of contamination compared to industrial lands.

5.2 How is liability allocated where more than one person is responsible for the contamination?

Since, as mentioned above, only title holders are generally responsible for compliance with the environmental requirements during operation of a facility, this situation is rather uncommon in Russia.

This question may generally arise in circumstances when property owned by one entity is leased to another. Under Russian law, two title holders (owner and lessee) appear in this situation. Russian law does not clearly allocate environmental responsibility under these circumstances. Thus, it is possible to assume that liability may be applied to either title holder: the owner or the lessee. Available court decisions, however, evidence that the lessee is usually found liable for contamination caused during the lease.

In practice, in order to avoid the risk of being found liable for environmental breaches committed by the property occupiers, appropriate contractual mechanisms are used to determine the party (e.g. the lessee) responsible for maintaining the facility in compliance with the environmental requirements.

5.3 If a programme of environmental remediation is ‘agreed’ with an environmental regulator can the regulator come back and require additional works or can a third party challenge the agreement?

Since it is not always possible to outline all the consequences of contamination and some of them might appear only in time, additional remediation or compensation may be requested from the party that caused contamination, in the event that further damage to the environment is detected. Sufficient proof that such newly detected damage was, in fact, caused by the previous contamination will have to be presented in this case, of course. The limitation period for such claims is 20 years.

A third party may challenge the agreement or submit additional claims, if his/her rights or interests have been violated either by the contamination itself or by the environmental remediation programme.

5.4 Does a person have a private right of action to seek contribution from a previous owner or occupier of contaminated land when that owner caused, in whole or in part, contamination; and to what extent is it possible for a polluter to transfer the risk of contaminated land liability to a purchaser?

Russian environmental law does not explicitly regulate this issue. General contract law does, however, permit the conclusion that if the new owner did not know that the purchased land had been contaminated, he/she may seek a reduction in its purchase price, performance of remediation by the seller, or compensation by the seller for expenses incurred by the purchaser in performing such remediation.

If the contract stipulates that the land is sold “as is”, the buyer is aware of the status of the sold property, and the land purchase price reflects its contaminated status, it is generally assumed that the risk of contaminated land liability is transferred to the purchaser.

Legal mechanisms for transferring and otherwise allocating environmental liability are currently in the early development stages in Russia. General contractual mechanisms may, however, provide some instruments to protect either the seller or the purchaser from future claims submitted by the other party. Yet it should be noted that judicial practice on this issue is currently extremely poor and unclear.

5.5 Does the government have authority to obtain from a polluter, monetary damages for aesthetic harms to public assets, e.g., rivers?

The concept of monetary damages for aesthetic harms to public assets caused by a polluter is unfamiliar to Russian environmental law. At the same time, where such aesthetic harm leads to lost profits, those may be claimed from the polluter in addition to the general compensation for damages caused by environmental wrongdoing.

6. Powers of Regulators

6.1 What powers do environmental regulators have to require production of documents, take samples, conduct site inspections, interview employees, etc?

Environmental regulators have broad powers to obtain information enabling them to perform their functions, including requiring provision of documents, sampling and conducting site inspections, and interviewing employees. Site inspections may be carried out regularly once every three years, but the frequency of extra-ordinary inspections is not limited. Similar mechanisms apply to other means of obtaining information.

There is also a general requirement for performance of internal environmental monitoring with respect to land and other natural resources impacted by the operation of a facility (e.g., air, groundwater, etc.). Operators are required to submit reports to relevant authorities on a regular (usually annual) basis, providing information on the status of an impacted natural resource.

7. Reporting / Disclosure Obligations

7.1 If pollution is found on a site, or discovered to be migrating off-site, must it be disclosed to an environmental regulator or potentially affected third parties?

There is no general requirement for an owner or occupier to notify the local authority/affected third parties of the existence of contamination. The only exception is a level of contamination that may be classed as an emergency situation, when such reporting is expected immediately and under no circumstances not later than within 24 hours.

7.2 When and under what circumstances does a person have an affirmative obligation to investigate land for contamination?

Investigation of land for contamination, as well as for other information about it, is necessary during the phase of geological and engineering surveying prior to development of a facility’s project/design documentation when a construction project is anticipated.

As mentioned above, there is also a general requirement for performance of internal environmental monitoring with respect to land and other environmental media impacted by the operation of a facility. Provided that the operation of the facility causes or may cause negative impact on the quality of the land, regular monitoring (investigation) of its status will, therefore, be required of the facility’s operator.

Land remediation will also necessitate the performance of corresponding investigations.

7.3 To what extent is it necessary to disclose environmental problems, e.g. by a seller to a prospective purchaser in the context of merger and/or takeover transactions?

It is assumed, unless otherwise stipulated in the contract, that the seller must provide the purchaser with the subject of the sale (e.g., land plot) in an appropriate condition, including its proper compliance with the environmental requirements. Generally, it is the buyer’s responsibility to ensure that the subject of the sale is in an appropriate condition at the time it is accepted. This applies to evident/visible defects only, however, and not to hidden defects (including contamination of land) that cannot be detected by visual inspection.

If certain defects of the land were not discussed by the parties at the time of the transaction, so were not known to the purchaser, the latter may bring an action against the seller, claiming that the quality of the sold land did not correspond to that described in the contract. Such claims may seek a reduction in the purchase price, performance of remediation by the seller or compensation for the purchaser’s expenses incurred in carrying out the necessary remediation.

The general assumption is, therefore, that as long as the purchaser was aware of the condition of the purchased land and that the price of the land reflected its defects (e.g., contamination) no claims may be entered by the purchaser against the seller. Thus, in order to minimise the risks of future claims from the purchaser, it may be advisable to provide him/her with as much true and accurate information as possible on the status of the asset for sale.

8. General

8.1 Is it possible to use an environmental indemnity to limit exposure for actual or potential environment-related liabilities, and does making a payment to another person under an indemnity in respect of a matter (e.g. remediation) discharge the indemnifier’s potential liability for that matter?

Even though general contract law does not prohibit concluding agreements of this kind, environmental indemnities are rather uncommon under Russian law. Consequently, no court decisions are currently available on this issue. Administrative and criminal liability for environment-related wrong-doings may not, however, be indemnified.

8.2 Is it possible to shelter environmental liabilities off balance sheet, and can a company be dissolved in order to escape environmental liabilities?

Russian accounting rules do not require specific outlining of environmental liabilities separately from other liabilities on the company’s balance sheet.

Neither are there any specific prohibitions on dissolving a company bearing environmental liabilities. In these cases, the general rules on dissolving a company will apply, whereby environmental liabilities will be subject to coverage, alongside other creditors’ claims, using either the company’s monetary or other assets. All company creditors must be informed of its dissolution at least 2 months in advance in order to allow them to enter their claims. If the company’s assets are not sufficient to cover all claims (including those based on the company’s environmental liabilities), a bankruptcy procedure may be initiated.

8.3 Can a person who holds shares in a company be held liable for breaches of environmental law and/or pollution caused by the company, and can a parent company be sued in its national court for pollution caused by a foreign subsidiary/affiliate?

Under Russian law, shareholders are not responsible for the acts of a corresponding company. The liability of shareholders in a company is usually limited to the value of their participation/shares in the company’s charter capital.

A parent company may be found liable for pollution caused by any of its subsidiaries/affiliates if such pollution was caused by the subsidiary acting on the parent company’s specific instructions. This, however, will apply if such instructions concerned entering into transactions and the subsidiary’s activities within said transaction and on the parent company’s instructions caused pollution (joint liability), or if these instructions led to the subsidiary’s insolvency (secondary liability). It is, however, unlikely that if liability arises on the grounds of tort law, the parent company may be sued for pollution caused by its subsidiary.

8.4 Are there any laws to protect “whistle-blowers” who report environmental violations/matters?

No specific laws protecting persons reporting environmental violations/matters are available in Russia.

8.5 Are group or “class” actions available for pursuing environmental claims, and are penal or exemplary damages available?

“Class” actions are not available in Russia. Claims may be brought by groups of claimants, but all claimants must be identified at the beginning of the trial. At the discretion of a judge, such independent claims may be united in a single trial.

Penal or exemplary damages are not available under Russian law, as only material damage and lost profit incurred by the injured party are subject to compensation.

9. Emissions Trading and Climate Change

9.1 What emissions trading schemes are in operation in Russia and how is the emissions trading market developing there?
In general, Russia’s emissions trading market is in its very early developing stage. Basically as of today only procedure for initiation and implementation of projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases have been developed in Russia as a follow-up of the Kyoto Protocol ratification. No official data on any such projects implementation is available so far.

10. Asbestos

10.1 Is Russia likely to follow the experience of the US in terms of asbestos litigation?

So far, there have been no court precedents evidencing that Russia is likely to follow the US in terms of asbestos litigation in the near future.

10.2 What are the duties of owners/occupiers of premises in relation to asbestos on site?

Russia has ratified the ILO Convention No. 162 on Labour Safety in Use of Asbestos, so its provisions are obligatory for owners/occupiers of premises with respect to asbestos on site and protection of people working with asbestos. The Russian sanitary legislation also introduces specific regulations for working with asbestos and asbestos-containing materials (ACM). According to these requirements, employers must provide their employees with sufficient personal protection and otherwise ensure that no harm can be inflicted on the health of its employees working with asbestos and ACM. All employees should be informed in advance of the danger involved in working with asbestos and ACM. Facilities operating with asbestos or ACM must have sanitary protection zones that prevent these materials impacting on neighbouring territories, including residential areas (if any).

11. Environmental Insurance Liabilities

11.1 What types of environmental insurance are available in the market, and how big a role does environmental risks insurance play in Russia?

Russian law provides for obligatory and voluntary environmental insurance. For example, environmental insurance is required with respect to hazardous industrial facilities (e.g., oil and gas development and transportation, most industrial manufacturing processes, etc.). In general, however, the environmental insurance market in Russia is in its very early stages of development and does not play a significant role.
11.2 What is the environmental insurance claims experience in Russia?

This information is not open to the public in Russia, so it is very hard to obtain any environmental insurance figures. In any case, there is very little claims experience as of today, as this instrument is only developing in Russia.

12. Updates

12.1 Please provide, in no more than 300 words, a summary of any new cases, trends and developments in Environment Law in your country.

MNRE and the Ministry for Economic Development and Trade have been working on drafts of an Environmental Code designed to replace the Law “On Protection of the Environment” and other fundamental laws regulating environmental protection and natural resource use. It has been announced that the Environmental Code will replace the current system of payments and compensation for environmental damage, the system of liabilities for environmental breaches, and other fundamental regulatory mechanisms. Yet disputes are still ongoing as to whether this document is necessary at present and whether it would improve the current legal framework. Opponents argue that, instead of replacing the current legal framework, the government should focus on improving application and enforcement mechanisms and control. Disputes on this matter have been quite vigorous through last year, so it is unclear when and if the draft Environmental Code will be presented to Parliament.

Amendments to the Forestry Code were developed and submitted to Parliament last year. These amendments are aimed at making the forestry and subsoil legislation mutually consistent: in particular, these amendments allow subsoil users that obtained rights to develop the subsoil before the current Forestry Code entered into force to exercise their rights in forest areas as designated at the time when the subsoil use rights were allocated. Basically, these amendments constitute grandfathering clauses protecting the rights of the companies that obtained rights to develop subsoil deposits located beneath specific categories of forest before the current Forestry Code introduced the new legal regime for these types of forest. These amendments have already passed the second reading, the amendments might be expected to become law soon.

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