3.1 Introduction
Principles and rules on liability and compensation need to define the nature and scope of losses that may be recoverable. This chapter examines issues related to the definition and valuation of environmental damage in areas beyond national jurisdiction (ABNJ), that is: what general principles govern reparation for environmental damage; what types of environmental damage should give rise to compensation or other measures of reparation; and how should such compensation or other measures be assessed in monetary terms. This chapter draws out the characteristics of, and considerations relating to, the global commons areas that might affect the approach taken to these questions, and how, if at all, compensation for environmental damage has been addressed in the existing regimes governing ABNJ under consideration in this study. To inform the discussion, the chapter examines other relevant international principles and rules that have been adopted or applied to address compensation for environmental damage at the international level.
As international concern for the environment and recognition of the significance and value of ecosystem services to humans has increased,Footnote 1 there has been some evolution in international legal approaches to compensability of environmental harm, both in international agreements addressing liability for damage arising from hazardous activities and in judicial forums. Approaches to defining compensable environmental damage remain, for the most part, incomplete, to the extent that they fail to adequately address irreparable environmental damage or interim losses pending restoration of the damaged environment. Legal approaches to defining compensable environmental damage, particularly in the more developed context of civil liability regimes, have usually been determined in light of concerns about valuation methodologies, limits on liability and insurability of risks. There remains a lack of clarity about the elements of environmental damage that can be compensated, and the methods by which any monetary compensation should be assessed.Footnote 2 Most debate has concerned whether damage to environmental resources without a recognized commercial or market valueFootnote 3 should be compensable, and, if so, how such losses should be quantified. This concept of pure environmental loss encompasses damage that is irreparable, or that may entail significant interim losses pending reinstatement or natural recovery of the damaged environment. On this point there are differences in the approaches that have been taken in different contexts and forums, but recent developments indicate that as a matter of principle such losses should be compensated notwithstanding difficulties in quantification.Footnote 4 These developments encompass a growing recognition of the importance of framing environmental damage not simply in terms of damage to components of the environment, but rather in the context of the loss of ecosystem services or functions: the provisioning, regulating, cultural and supporting services provided by environmental resources.Footnote 5
As discussed further in Section 3.2.2, environmental damage in ABNJ could thus encompass various heads of damage, such as:
Consequential loss as a result of impairment to the environment (loss of profit). This could include, for example, losses from reduced access to fisheries, mineral resources or marine genetic resources;
The costs of measures to prevent environmental damage;
The costs of measures of reinstatement taken to restore the damaged environment;
Assessment and monitoring costs associated with identifying environmental damage and the effects of preventive or restoration measures; and
Pure environmental damage that is incapable of restoration or that gives rise to interim losses pending restoration. Such losses would incorporate loss of ecosystem services, as well as components of biodiversity, and could incorporate provision of equivalent resources or services.
Environmental damage in ABNJ could occur in a range of different situations that impact on the appropriate approach to reparation and valuation of damage. For example, environmental damage could arise from impacts from approved activities, such as seabed mining in the Area. Such impacts may have been foreseen in the environmental impact assessment (EIA) prior to approval, and addressed in risk management measures, or they may comprise adverse effects unforeseen in nature and/or scale. Damage could also arise due to accidents, such as discharges of oil or chemicals in the high seas or in Antarctica. Environmental damage may arise from specific incidents, such as catastrophic pollution events, or it might arise as a result of the cumulative effects of certain activities, such as overfishing or destructive fishing practices. It may also result from more complex interactions between diffuse or cumulative sources, such as pollution of the marine environment by plastic, marine pollution by land-based sources or from the impacts of climate change including ocean acidification. Diffuse and cumulative damage raises complex questions around causation, remoteness and attribution. Beyond harm to components of the environment and ecosystem services as such, further consideration might also be given to environmental damage in the context of cultural harm, particularly in relation to indigenous peoples.Footnote 6
Determining workable legal approaches to defining and valuing environmental damage also has to account for the significant technical and scientific challenges associated with assessing and monitoring damage to the environment in ABNJ, and with identifying and implementing any appropriate restoration or compensatory measures. Valuation methodologies have been a thorny issue in the international regime on oil pollution damage, and also in the context of national liability regimes.Footnote 7
Section 3.2 of this chapter first outlines existing and emerging approaches to reparation for environmental damage in general international law, with Section 3.2.1 focusing on the rules of state responsibility and claims against states in respect of environmental damage made in international tribunals and the United Nations Compensation Commission (UNCC). These general rules and principles, as the default rules governing state liability, are applicable in ABNJ, and also provide the foundations for understanding how international law approaches the concept of environmental damage. Section 3.2.2 then examines elements of compensable environmental damage in various international instruments addressing civil liability for environmental harm. While not directly applicable to ABNJ,Footnote 8 these regimes provide further examples of the approaches to defining environmental damage in the context of specific hazardous activities that are likely to inform the development of rules in global commons areas. Section 3.3 then turns to the definition of environmental damage in relevant existing and emerging rules in ABNJ: in respect of Antarctica, the deep seabed and the high seas. Finally, Section 3.4 considers challenges associated with assessing or quantifying claims for environmental damage, and the ways in which such challenges might affect liability rules on environmental damage in ABNJ.
3.2 Defining Compensable Environmental Damage under International Law
3.2.1 State Responsibility
Under general international law, principles of state responsibility apply to reparation in respect of transboundary environmental damage arising from an internationally wrongful act of a state. States have the obligation to ensure that activities under their jurisdiction or control do not cause damage to the environment of ABNJ, or of other states.Footnote 9
3.2.1.1 General Principles of Reparation
Violations of international obligations by states constitute an internationally wrongful act, giving rise to an obligation to make reparation for the injury caused by the wrongful act.Footnote 10 While this principle is relatively straightforward, its application in the context of environmental damage raises a number of questions. In its work on state responsibility, the International Law Commission (ILC) touched upon some specific considerations concerning reparation for environmental harm, but, in light of the general scope of the Draft Articles on Responsibility of States for Internationally Wrongful Acts (ASR), left others unaddressed.Footnote 11 As the commission of an internationally wrongful act is the trigger for the application of rules of state responsibility, for these rules to come into play, states must either violate a rule of international environmental law directly or violate their obligations of due diligence in respect of the oversight of relevant activities.
The approach taken under article 31 of the ASR is that the wrongful act gives rise to a secondary obligation on the responsible state to make full reparation for the injury caused by the wrongful act.Footnote 12 The ILC notes that structuring reparation as an obligation of the responsible state, as opposed to being the right of the injured state, avoids difficulties where the obligation is owed simultaneously to several or many states, but only a few are specially affected by the breach. This is likely to be a recurring feature of harm to the global commons, and may facilitate a more inclusive approach to standing by allowing invocation of state responsibility by non-injured states.Footnote 13
3.2.1.2 Causation and Remoteness
Article 31 makes references to the concept of causality, in that reparation must be made for injury ‘caused by’ the internationally wrongful act. This is addressed further in the commentary to article 31, which refers to various formulations concerning directness, proximity and remoteness of damage. While recognizing that no single formula can fully capture the question of remoteness, and that ‘the requirement of a causal link is not necessarily the same in relation to every breach of an international obligation’, article 31 reflects the need for a ‘sufficient causal link which is not too remote’.Footnote 14 This is consistent with the approach to environmental damage in the Trail Smelter case, which noted that recovery may not be available for damage that is ‘too indirect, remote and uncertain to be appraised’.Footnote 15
Restricting recovery based on remoteness addresses two separate issues germane to damage in the commons. First, there is a policy question of the extent to which a responsible actor ought to bear the unforeseeable consequences of its breach. In complex ecosystems, such as oceans, the causal chains linking damage to specific (and attributable) actions are likely to be attenuated and subject to greater scientific uncertainty. A strict approach to remoteness or foreseeability may narrow the scope of recoverable damages, leaving indirect or unforeseeable harms unaddressed.
A second, related issue relates to the evidentiary challenges associated with proving damage. In the Certain Activities case, the International Court of Justice (ICJ) acknowledged that issues may arise as to the existence of damage and causation in cases of alleged environmental damage. It also noted in respect of valuation of such damage, that the absence of adequate evidence as to the extent of material damage would not, in all situations, preclude an award of compensation for that damage.Footnote 16 However, in a subsequent case, the ICJ did reject a claim in respect of damage to biodiversity through deforestation on the basis that the claimant did not provide evidence of the damage.Footnote 17 A liability claim related to environmental damage in an area beyond national jurisdiction would presumably impose an evidentiary burden on the claimant to prove the damage that has occurred as well as the causal link, which could give rise to challenges in terms of evidence-gathering. For example, the nature and accessibility of certain areas beyond national jurisdiction might mean that in practice only states with significant economic, technical and scientific capacity, or perhaps international organizations, could engage in gathering evidence upon which to found a claim for environmental damage, setting up a de facto barrier to access to justice.
Another issue with respect to causation is that while some incidents of environmental damage in ABNJ may be caused by a single identifiable event, conduct or source, there will be other situations in which such damage arises because of diffuse sources or of cumulative impacts over time – for example, impacts of marine pollution from land-based sources or of climate change. These challenge traditional concepts of causation for the purposes of establishing responsibility for harm and may operate to limit the potential for claims for environmental damage. Assessing responsibility in situations where there are multiple and cumulative sources of environmental damage will depend upon available evidence. However, in ABNJ, establishing a sufficient causal link in these circumstances may be complicated by factors such as deficient baseline data, scientific understanding of cause-and-effect relationships in complex ecosystems or the lack of monitoring to provide data on how and when environmental damage has occurred.
The ILC touched upon this scenario in its commentary to article 31 in the ASR noting that injury may be caused by a combination of factors,Footnote 18 but it did not directly consider the situation of environmental damage arising as a result of multiple drivers or impacts, focusing rather on the implications for allocation of responsibility. In its judgment on compensation in the Certain Activities case between Costa Rica and Nicaragua, the ICJ noted the need for a factual assessment of the evidence in addressing causation as follows:
In cases of alleged environmental damage, particular issues may arise with respect to the existence of damage and causation. The damage may be due to several concurrent causes, or the state of science regarding the causal link between the wrongful act and the damage may be uncertain. These are difficulties that must be addressed as and when they arise in light of the facts of the case at hand and the evidence presented to the Court. Ultimately, it is for the Court to decide whether there is a sufficient causal nexus between the wrongful act and the injury suffered.Footnote 19
The UNCC considered issues related to parallel or concurrent causes of harm in relation to environmental and natural resource claims, concluding that
[w]here the evidence shows that damage resulted directly from Iraq’s invasion and occupation of Kuwait but that other factors have contributed to the damage for which compensation is claimed, due account is taken of the contribution from such other factors in order to determine the level of compensation that is appropriate for the portion of the damage which is directly attributable to Iraq’s invasion and occupation of Kuwait.Footnote 20
International law allows for the invocation of state responsibility against a plurality of responsible states, allowing for actions to be brought against a group of states that are jointly responsible for environmental harm.Footnote 21 The suggestion by the UNCC indicates that in relation to the calculation and allocation of damages, this may be done on a proportional basis.
3.2.1.3 Forms of Reparation
Chapter II of the ASR addresses forms of reparation for injury caused by an internationally wrongful act, namely restitution, compensation and satisfaction.
The basic approach in the ILC ASR is that of full reparation, reflecting the well-known dictum in the Factory at Chorzów case with its emphasis on restitution in kind or, if this is not possible, the payment of a sum corresponding to such restitution and the award, if necessary, of damages for loss sustained which would not be covered by restitution in kind or payment of such corresponding sum.Footnote 22 The notion of reparation to ‘wipe out’ the consequences of the illegal act and re-establish the status quo ante is inherently attractive in the environmental context, as it addresses the dual goals of compensation and environmental protection and restoration. There is no reason that the rationale for restitution hinges on individual rather than collective harm, as might be suffered in harm to the global commons. The wording of article 35 of the ASR, which addresses restitution, refers to an obligation ‘to re-establish the situation which existed before the wrongful act was committed’.
One general concern in this regard is the question of proportionality: whether the requirement of full reparation might lead to ‘disproportionate or crippling’ requirements for the responsible state.Footnote 23 Rather than address the issue of proportionality as an aspect of the obligation to make full reparation, the ILC addresses it in respect of different forms of reparation.
In terms of the forms of reparation that may be appropriate, the starting point is restitution. Article 35 of the ASR recognizes that the obligation to make restitution is not unlimited. Restitution may be materially impossible or may impose a disproportionate burden compared to compensation.Footnote 24 Depending upon any preventive and remedial action taken in such scenarios, some costs incurred might be capable of calculation and recovery, but restoration in full may be impossible, or might only occur over long and/or uncertain timescales leaving significant interim losses, for example in terms of the physical environment, components of biodiversity and/or ecosystem functioning. As envisaged in article 35, the expected costs of such efforts might exceed anticipated benefits so that in some situations, the costs of restoration efforts may be deemed disproportionate to any potential benefits of restoration, even if feasible.Footnote 25 Determining when attempts at restoration are appropriate might in itself be a difficult task, and one that can only be resolved on a case-by-case basis. Relevant to proportionality, some civil liability conventions and other instruments discussed in Section 3.2.2 have made reference to recoverability of costs of ‘reasonable measures’ of reinstatement, which then requires that some criteria of reasonableness are established.
Compensation is the form of reparation envisaged where damage cannot be made good by reparation.Footnote 26 In terms of the standard of compensation, the implication in the ASR is that compensation should be full in that it should result in full reparation, including filling any reparation ‘gap’ where damage is not made good by restitution. In this regard it is noteworthy that article 235 of United Nations Convention on the Law of the Sea (UNCLOS) refers to the objective of assuring ‘prompt and adequate’ compensation in respect of all damage caused by pollution to the marine environment, and reference to ‘prompt and adequate’ compensation is also included in the ILC’s Draft Principles on the Allocation of Loss (Draft Principles), principles 3 and 4.Footnote 27 However, the ILC notes that ‘adequacy’ here is not intended to denote ‘sufficiency’ but relates to a number of issues, including due process of law requirements, and that provided compensation given ‘is not arbitrary, and grossly disproportionate to the damage actually suffered, even if it is less than full it can be regarded as adequate’.Footnote 28
Compensation is not a straightforward solution for environmental damage.Footnote 29 Article 36 of the ASR provides that compensation shall cover ‘financially assessable damage’. In accordance with article 31(2), both material and moral damage is covered by the obligation of reparation, but the commentary to article 36 clarifies that the term ‘financially assessable’ is intended to exclude moral damage (e.g. suffered by a state) which is to be reparable by way of satisfaction.Footnote 30 Compensation is not to be punitive, but is intended to ensure full reparation for damage suffered.Footnote 31 What constitutes financially assessable environmental damage, and how is such damage to be assessed? This requires a breakdown of the components of environmental damage that are compensable – the ‘definition’ of environmental damage – and then the assessment or valuation of such components in monetary terms. In light of the general applicability of the ASR, the ILC commentary to article 36 acknowledges that the appropriate heads of compensable damage and the principles of assessment to be applied in quantification will vary.Footnote 32 In relation to environmental damage, the ILC noted state practice in the context of Canada’s Cosmos 954 claim, as well as the environmental claims in the UNCC, and referred to compensation payments relating to expenses reasonably incurred in preventing or remedying pollution, or providing compensation for a reduction in the value of polluted property.Footnote 33 The ILC’s commentary also supports the view that pure environmental damage is compensable, acknowledging that
environmental damage will often extend beyond that which can be readily quantified in terms of clean-up costs or property devaluation. Damage to such environmental values (biodiversity, amenity, etc. – sometimes referred to as ‘non-use values’) is, as a matter of principle, no less real and compensable than damage to property, though it may be difficult to quantify.Footnote 34
While this supports compensation for pure environmental loss, in its work on state responsibility the ILC did not offer further guidance on such elements of environmental damage or on how they might be quantified.
In 2018, the ICJ handed down its judgment on compensation in the Certain Activities case, the first case in which the ICJ has made an order for compensation in respect of environmental damage caused by one state on the territory of another.Footnote 35 The ICJ affirmed that ‘it is consistent with the principles of international law governing the consequences of internationally wrongful acts, including the principle of full reparation, to hold that compensation is due for damage caused to the environment in and of itself, in addition to expenses incurred by an injured state as a consequence of such damage’.Footnote 36 The ICJ took the view that ‘damage to the environment, and the consequent impairment or loss of the ability of the environment to provide goods and services, is compensable under international law’ and that ‘[s]uch compensation may include indemnification for the impairment or loss of environmental goods and services in the period prior to recovery and payment for the restoration of the damaged environment’.Footnote 37 While the judgment reflects challenges associated with the valuation of such claims,Footnote 38 the Court’s approach reflects more contemporary approaches to address environmental damage ‘in and of itself’ not only in terms of damage to specific resources but also by reference to the services that those resources provide.
In establishing the UNCC, the UN Security Council had already determined that Iraq ‘was liable under international law for any direct loss, damage, including environmental damage and the depletion of natural resources … as a result of [its] unlawful invasion and occupation of Kuwait’.Footnote 39 Thus, the purpose of the UNCC was essentially to administer verifiable claims. Nonetheless, it was recognized that addressing claims for environmental damage and depletion of natural resources would pose special challenges. In this context, the UNCC had to develop criteria and methods to address such claims, and it received numerous claims under this head of damage.Footnote 40 As a first step, the UNCC Governing Council decided that compensation in respect of environmental damage or depletion of natural resources would include losses and expenses arising from:
(a) Abatement and prevention of environmental damage;
(b) Reasonable measures already taken to clean and restore the environment or future measures which can be documented as reasonably necessary to clean and restore the environment;
(c) Reasonable monitoring and assessment of the environmental damage for the purpose of evaluating and abating the harm and restoring the environment;
(d) Reasonable monitoring of public health and performing medical screening for the purposes of investigating and combating increased health risks as a result of the environmental damage; and
(e) Depletion of or damage to natural resources.Footnote 41
The panel dealing with environmental damage and depletion of natural resources claim found that the criteria established by the Governing Council were not exhaustive,Footnote 42 and that the term ‘environmental damage’ was not limited to damage to natural resources with a commercial value.Footnote 43 It also took the view that where loss or damage to the environment was temporary, this did not affect the question of compensability, although it might affect the nature and quantum of compensation deemed appropriate.Footnote 44 The panel found that there was ‘no justification for the contention that general international law precludes compensation for pure environmental damage’.Footnote 45
The UNCC also addressed claims in respect of monitoring and assessing environmental damage for the purpose of evaluating and abating the harm and restoring the environment.Footnote 46 Here, the UNCC found that environmental monitoring and assessment were justified even where it was not yet firmly established that environmental damage had occurred. Conclusive proof of environmental damage was not a prerequisite for a monitoring and assessment activity to be compensable.Footnote 47 However, the panel did not award compensation for monitoring and assessment activities that were ‘purely theoretical and speculative’.Footnote 48
The principles of state responsibility offer some valuable starting points in relation to defining and valuing compensable environmental damage, but they do not address all aspects. The approaches adopted in civil liability regimes provide a further indication of the international community’s understanding of the scope of compensable damage. While liability under civil liability regimes is channelled to operators, often on a strict liability standard, the underlying theory of damage in civil liability regimes remains rooted in restitution and, as such, provides a fuller picture of how damage should be approached in specific commons regimes.
3.2.2 Civil Liability
The ILC has specifically addressed compensation for environmental damage in its Draft Principles on the Allocation of Loss. Principle 3 of the Draft Principles provides that ‘[t]he purpose of the present draft principles are: … (b) to preserve and protect the environment in the event of transboundary damage, especially with respect to mitigation of damage to the environment and its restoration or reinstatement’. In relation to the purposes of the Draft Principles, the ILC notes that Draft Principle 3(b) gives
a prominent place to the protection and preservation of the environment and to the associated obligations to mitigate the damage and to restore or reinstate the same to its original condition to the extent possible. Thus it emphasizes the more recent concern of the international community to recognize protection of the environment per se as a value by itself without having to be seen only in the context of damage to persons and property. It reflects the policy to preserve the environment as a valuable resource not only for the benefit of the present generation but also for future generations. In view of its novelty and the common interest in its protection, it is important to emphasize that damage to the environment per se could constitute damage subject to prompt and adequate compensation, which includes reimbursement of reasonable costs of response and restoration and remediation measures undertaken.Footnote 49
Principle 2 defines ‘damage’ as significant damage caused to persons, property or the environment, and including
i. loss of life or personal injury;
ii. loss of, or damage to, property, including property which forms part of the cultural heritage;
iii. loss or damage by impairment of the environment;
iv. the costs of reasonable measures of reinstatement of the property, or environment, including natural resources;
v. the costs of reasonable response measures.
‘Environment’ for the purpose of the Draft Principles includes natural resources, both abiotic and biotic, such as air, water, soil, fauna and flora and the interaction between the same factors, and the characteristic aspects of the landscape.Footnote 50
The ILC’s work on allocation of loss draws upon the approach taken in several of the civil liability instruments.Footnote 51 Each of these international agreements set out a scope and approaches tailored to the particular activity and/or environment that they address. They reflect the types of damage that might be caused by the activity or substances in question, and the degree of consensus amongst states about the nature and scope of risks posed and potential harm. The definition of compensable damage to the environment varies under the agreements,Footnote 52 and is generally incorporated into a wider definition of the ‘damage’ that is recoverable under the agreement. They typically define environmental damage in terms of reasonable preventive, response or reinstatement measures actually undertaken or to be undertaken, rather than by reference to impacts on the environment – that is, they are concerned with what type of costs might be recoverable under the arrangements established by the agreement. The approach to defining compensable damage in these regimes is influenced by considerations related to limits on liability and insurability of relevant activities.Footnote 53 Heads of environmental damage covered by some or all of the civil liability agreements are described below.
3.2.2.1 Loss of Profit Arising from Impairment to the Environment
This head of recoverable damage is included in most international civil liability regimes.Footnote 54 It does not compensate damage to the environment as such, but rather loss of income suffered by natural or legal persons derived from an economic interest in a use of the environment as a result of environmental impairment. Numerous claims for such loss have been addressed within the civil liability regime on oil pollution damage. The International Oil Pollution Compensation Funds’ (IOPC Funds) 2016 Annual Report notes that, in addition to property damage, admissible claims include economic losses by fishers or those engaged in mariculture and economic losses in the tourism sector.Footnote 55
It is conceivable that such losses from impairment to the environment might arise because of environmental damage in ABNJ. Such losses might be suffered by, for example, high seas fishing entities, tourism enterprises operating in Antarctica or operators with seabed mining licences impacted in some detrimental way by environmental harm. Claiming compensation for such losses in respect of environmental damage in ABNJ is more complicated in the context of non-exclusive rights based on high seas freedoms, but many of these high seas activities are subject to licensing regimes which arguably provide a legal basis for a claim and for quantifying losses.
3.2.2.2 Reasonable Preventive Measures
Reasonable costs relating to prevention of further environmental harm are also covered in most liability regimes. These are defined in the 1992 Oil Pollution Liability Convention as ‘any reasonable measures taken by any person after an incident has occurred to prevent or minimize pollution damage’.Footnote 56 The 1999 Basel Liability Protocol refers to measures to ‘prevent, minimize, or mitigate loss or damage, or to effect environmental clean-up’.Footnote 57 Costs of preventive measures taken outside national jurisdiction may be recoverable where they are taken to avoid or minimize other environmental damage – within national jurisdiction – covered by the agreement in question.
As regards preventive measures to avoid or minimize environmental damage to ABNJ, a key issue, as described in relation to reinstatement costs below, would be who would have the requisite interest or entitlement to take such measures in ABNJ (discussed in Chapter 6). There is also a more general question of how the reasonableness of such preventive measures is to be determined as a matter of proportionality.Footnote 58
3.2.2.3 Reasonable Measures of Reinstatement Actually Undertaken or to Be Undertaken
Reasonable measures of reinstatement reflect the approach to reparation in the work of the ILC on both state responsibility and allocation of loss. Such measures are incorporated into the definition of damage in most international civil liability regimes.Footnote 59 Some guidance as to what would constitute reasonable measures of reinstatement has also been provided, either within the treaties themselves or in subsequent guidance. The IOPC Funds Guidelines for presenting claims for environmental damage, published in 2018, address claims for costs of post-incident studies and reinstatement measures.Footnote 60 The Guidelines discuss, inter alia, specific criteria for reinstatement measures, which focus on accelerating and enhancing the recovery of the damaged components of the environment, and establish that the costs of reinstatement must be proportionate to the extent and duration of the damage and the benefits likely to be achieved.Footnote 61 Measures taken at some distance from the damaged area, but still within the general vicinity, may be acceptable as long as it can be demonstrated that they would actually enhance the recovery of the damaged components of the environment and the services those components provide.Footnote 62 However, the replacement of a damaged site by ‘creating’ an equivalent resource elsewhere may not satisfy the IOPC Funds’ criteria.Footnote 63 The Guidelines acknowledge that there is little experience of admissible claims for reinstatement measures.Footnote 64
It is evident that restoration measures will not always be feasible or effective. The determination of what constitutes reasonable measures of restoration might be challenging where there is no market value for the environmental resource, and the issue of proportionality of restoration measures is likely to arise given that quantifying both the damage and the benefits from reinstatement may be more challenging in ABNJ. The prospects for success of restoration measures in certain environments might also be open to question, and other potential environmental impacts of restoration measures need to be considered. In such situations, alternative methods for making good the environmental loss or loss of ecosystem services may be required.
In areas within national jurisdiction, coastal states have a right to undertake reinstatement actions, or to require or authorize others to do so. In ABNJ, it is less clear who might be entitled to recover as a result of taking such action. In the absence of clear authority to undertake reinstatement measures, a state or private entity may be viewed as acting voluntarily, and as such could be viewed as an ‘officious intermeddler’ since the claimant confers a benefit on the international community that was not necessarily asked for, and as such, the claimant may not be entitled to restitution.Footnote 65 The alternative view would be that states and their agents do have an interest in protecting the environment of the commons and should be able to recover their reasonable costs of reinstatement. This latter position is supported by the general approach in international law that the obligation to make reparation flows from the wrongful act and not from the right of an injured state.Footnote 66 There are also doctrines in both civil and common law jurisdictions that support the idea of necessitous intervention (negotiorum gestio) that permits recovery for interventions in support of community or public interests.Footnote 67 The point of law is far from clear, and the absence of a clear right of recovery acts as a disincentive for states to undertake reinstatement actions, notwithstanding the public benefit in such actions.
A final point in relation to reinstatement is that recovery is limited to the costs of measures ‘actually undertaken or to be undertaken’.Footnote 68 Thus, reinstatement costs cannot be used as a proxy for calculating general damages.
3.2.2.4 Monitoring and Assessment of Environmental Damage
Measures to prevent environmental damage and to reinstate damaged environments presuppose the assessment of damage, in order to understand the scope and nature of appropriate response measures. Monitoring the status and recovery of damaged environments, and impact of any reinstatement measures, will also be an important element of minimizing adverse effects on components of the environment and on ecosystem services. International liability instruments do not always make express reference to such costs, but as noted above, the IOPC Funds’ 2018 Guidance makes reference to post-incident studies. The 1999 Basel Liability Protocol includes in the definition of ‘measures of reinstatement’, reasonable measures to ‘assess’ damaged or destroyed components of the environment.Footnote 69 Guidelines on liability adopted under the Barcelona ConventionFootnote 70 also incorporate activities and studies to assess damage.Footnote 71
In areas beyond national jurisdiction, questions as to who should be responsible for conducting assessment and monitoring of environmental damage arise. Depending upon the way in which any relevant rules are framed, responsibility might fall upon the entity responsible for causing the damage, upon a state or states or upon an international organization. In addition to identifying the most appropriate way to allocate such responsibility, capacity to conduct such activities in areas beyond national jurisdiction may limit the availability of assessment and monitoring.
3.2.2.5 ‘Pure Environmental Damage’ and Ecosystem Services Loss
While the elements of environmental damage above relate to reasonable costs incurred in taking measures to prevent environmental damage or to reinstate damaged environments, it is evident that in some instances irreparable harm may occur, or that the affected environment or ecosystem services can only be restored over the long-term. While the concept of pure environmental damage can relate to notions of the intrinsic value of environmental resources, increasingly environmental loss is framed within the context of the ecosystem services provided by those resources. This type of damage is difficult to quantify in economic terms as the environmental resources and systems affected may well not have a commercial value. The compensation of pure environmental damage, or environmental damage per se, has been a matter of debate both in the context of international liability conventions and in other international forums.Footnote 72 In its commentary to principle 2, the ILC observed that
[r]ecent trends are … encouraging in allowing compensation for loss of ‘non-use value’ of the environment. There is some support for this claim from the [International Law] Commission itself when it adopted its draft articles on State responsibility, even though it is admitted that such damage is difficult to quantify. The recent decisions of the United Nations Compensation Commission (UNCC) in opting for a broad interpretation of the term ‘environmental damage’ is a pointer of developments to come. In the case of F-4 category of environmental and public health claims, the F-4 Panel of the UNCC allowed claims for compensation for damage to natural resources without commercial value (so-called ‘pure’ environmental damage) and also claims where there was only a temporary loss of resource use during the period prior to full restoration.Footnote 73
As yet, pure environmental damage is not generally incorporated into international civil liability regimes. Handl observes that
[t]oday, both national legal systems and international law reflect a broad consensus that the compensation of environmental damage would cover the costs of any reasonable measures – already taken or to be taken – that aim to assess, reinstate or restore damaged or destroyed components of the environment, the principal goal of such measures being to return the affected environment to its pre-existing or baseline condition. However, as soon as in-kind, in-place restoration (‘primary restoration’, or ‘primary remediation’) is not possible and alternative measures might have to be contemplated, this consensus breaks down.Footnote 74
Some commentators have observed that the unfortunate consequence of such an approach might be that minor, reparable damage might be subject to compensation through restoration costs, while more severe irreparable or long-term harm would not.Footnote 75 As is well known, the IOPC Funds have maintained that compensation for impairment to the environment is limited to financially assessable loss: loss of profit arising from impairment to the environment, and the costs of reasonable preventive measures and reasonable measures of reinstatement of the environment actually undertaken or to be undertaken. In the oil pollution regime, there has been a resistance to the idea of compensating non-economic loss associated with environmental damage. As discussed further below, such damage would require different means of assessment and valuation. In 1980, Resolution No. 3 of the 1971 IOPC Fund stated that assessment of compensation to be paid by the Fund would not be made on the basis of an abstract quantification of damage calculated in accordance with theoretical models.Footnote 76 This position has been maintained, most recently in Guidelines for presenting claims for environmental damage published by the IOPC Funds in 2018.Footnote 77 Nonetheless, it has been the subject of growing critique and seems anachronistic in the face of evolving international environmental principles.Footnote 78
Some liability instruments do incorporate ecosystem services within the definition of environmental damage. The 2010 Nagoya-Kuala Lumpur Supplementary Protocol on liability in the context of transboundary movement of genetically modified organisms refers to ‘[t]he reduction of the ability of components of biological diversity to provide goods and services’ as a factor relevant to establishing a significant adverse effect for the purpose of establishing damage.Footnote 79 Other factors in determining a significant adverse effect under that Protocol include ‘long-term or permanent change, to be understood as change that will not be redressed through natural recovery within a reasonable period of time’ and ‘the extent of the qualitative or quantitative changes that adversely affect the components of biological diversity’.Footnote 80
Some international liability instruments include within the definition of covered damage the introduction of equivalent components of the environment, in the context of reinstatement measures, where reinstatement or restoration is not possible. The 2010 Nagoya-Kuala Lumpur Supplementary Protocol gives preference to restoration of biodiversity to the condition that existed before the damage occurred, or its nearest equivalent, but also provides for ‘replacing the loss of biological diversity with other components of biological diversity for the same, or another type of use either at the same or, as appropriate at an alternative location’.Footnote 81 The 1993 Lugano Convention takes this approach, and leaves it to domestic law to determine who may take such measures.Footnote 82 The 2004 Protocol amending the 1960 Paris Convention on liability in the field of nuclear energy also provides for the introduction of equivalent components of the environment.Footnote 83
Guidelines on liability adopted under the Barcelona Convention for the Protection of the Marine Environment and the Coastal Region of the MediterraneanFootnote 84 include within the scope of compensation for environmental damage ‘diminution in value of natural or biological resources pending restoration’ and ‘compensation by equivalent if the impaired environment cannot return to its previous condition’.Footnote 85 The Guidelines note that where compensation is granted for these types of damage, it should be earmarked for intervention in the environmental field in the Mediterranean Sea Area.Footnote 86 The Guidelines are also to apply to damage caused by pollution of a diffuse character provided it is possible to establish a causal link between the damage and activities of individual operators.Footnote 87
Given the challenges that reinstatement may pose in ABNJ, calculating losses with reference to the provision of offsets may be an attractive, even necessary, alternative.Footnote 88 The difficulty would be in determining suitable equivalents for losses to deep ocean ecosystems.
3.2.3 Threshold of Harm
A general issue that arises in terms of defining compensable environmental damage is the question whether there is a threshold of harm which must be met before any liability arises.Footnote 89
The rationale for a threshold of severity to trigger both the obligation of prevention and corresponding liability is based on a recognition that lawful activities conducted within the jurisdiction of one state may well have impacts on other states in light of the ecological unity of the planet. Such mutual impacts are to be considered tolerable as long as they do not reach the ‘significant’ threshold.Footnote 90 Most notably the obligation of due diligence requires states to take reasonable steps to prevent significant environmental harm.Footnote 91 Such a threshold does not however seem to be of general application, but the degree of harm seems nonetheless to be relevant to the assessment of reparation. For example, in examining environmental claims, the UNCC rejected an argument by Iraq that only significant damage was compensable, finding that any direct loss or damage was covered. However, it did note that ‘[i]n considering the reasonableness of remediation measures, it is appropriate to have regard to the extent of the damage involved’.Footnote 92
The question of whether environmental harm must exceed some minimum threshold is a function of the primary rule that defines the internationally wrongful act. In the UNCC claims, the wrongful act, the invasion of Kuwait by Iraq, is not connected to a threshold of harm. In the case of due diligence, where the wrongful conduct incorporates a threshold of significant harm, environmental harm below the threshold would not appear to result in a wrongful act. This situation may again be complicated by cumulative impacts, where the synergistic effects of multiple actions result in a harm that exceeds the significance threshold, but no one state’s actions may amount to significant harm on their own.
In the Draft Principles, the ILC defined ‘damage’ as meaning ‘significant damage’, so that to be eligible for compensation, damage should meet a certain threshold.Footnote 93 To support this approach it cited existing case law, the Trail Smelter arbitration and the Lake Lanoux case, both of which referred to ‘serious’ injury, as well as international conventions imposing thresholds such as ‘significant’, ‘serious’ or ‘substantial’ harm.Footnote 94 The threshold of ‘significant’ damage in relation to allocation of loss reflected the scope of the ILC’s related work on Prevention of Transboundary Harm which applies to ‘activities not prohibited by international law which involve a risk of causing significant transboundary harm through their physical consequences’.Footnote 95 In its commentary to draft article 2 on Prevention of Transboundary Harm, the ILC explained that ‘significant’ ‘is something more than “detectable” but need not be at the level of “serious” or “substantial”. The harm must lead to a real detrimental effect on matters such as … environment’ and ‘such detrimental effects must be susceptible of being measured by factual and objective standards’.Footnote 96 In the 2010 Nagoya-Kuala Lumpur Supplementary Protocol, damage must be ‘significant’. A significant adverse effect for the purpose of the Protocol is to be determined based on factors such as:
(a) The long-term or permanent change, to be understood as change that will not be redressed through natural recovery within a reasonable period of time;
(b) The extent of the qualitative or quantitative changes that adversely affect the components of biological diversity;
(c) The reduction of the ability of components of biological diversity to provide goods and services;
(d) The extent of any adverse effects on human health in the context of the Protocol.Footnote 97
The term ‘significant’ is one that requires determination on a case-by-case basis, and involves more factual considerations than legal determinations.Footnote 98 According to the ILC, it also incorporates value determinations depending upon the circumstances of the case and the period in which the determination is made, that might reflect available scientific knowledge and/or the value ascribed to particular resources.Footnote 99 Assessing whether a threshold of significant damage is met therefore is not an exact science, and might well give rise to different determinations in different international and domestic courts.Footnote 100
To what extent is the threshold of ‘significant’ harm appropriate in the context of liability for environmental damage to the global commons, and, if so, how it is to be measured? In principle, the rationale put forward by the ILC for the threshold in relation to its Draft Principles on Allocation of Loss appears to apply equally in the context of areas beyond national jurisdiction: the recognition that lawful activities conducted within the jurisdiction of one state may have some impacts on areas beyond national jurisdiction as well as on other states. At the same time, the need for factual and case-by-case assessment of significance of harm raises specific questions in the global commons context. As noted elsewhere, the factual assessment of damage and its significance may be challenging, in the light of current scientific knowledge including the availability of baseline data and sufficient understanding of ecosystem functioning. Moreover, any assessment of the significance of harm may depend upon the contemporary state of scientific knowledge, and complex equations relating to the value and need for particular resources of economic value as well as economic and non-economic values ascribed to ecosystem services and components of the environment. Such an assessment should also appropriately take account of the precautionary approach given gaps and uncertainties in relevant scientific knowledge.
3.3 Defining Compensable Environmental Damage in ABNJ
The existing agreements on Antarctica, the deep seabed and the high seas begin to address the question of damage within their liability rules. However, the development of relevant rules in respect of environmental damage in the global commons has been slow and patchy. This makes it difficult to ascertain any common approach to defining compensable environmental damage because, for the most part, liability regimes establishing such definitions are not in place. Still the limited, and as yet untested, rules that have been adopted, and the difficulties in establishing such rules and securing their entry into force, offer some insights in relation to gaps and approaches for consideration in the future.
3.3.1 Antarctic
Article 3 of the 1991 Antarctic Protocol, which provides that activities in the Antarctic Treaty area are to be planned and conducted so as to limit adverse impacts on the Antarctic environment and dependent and associated ecosystems, identifies specific impacts to be avoided, including significant adverse effects on air and water quality, significant changes in the atmospheric, terrestrial, glacial or marine environments and detrimental changes in the distribution, abundance or productivity of fauna and flora.Footnote 101 It also reflects particular characteristics of the unique environment of Antarctica, including some features that may be relevant in other ABNJ, requiring that assessment of planned activities in the area, should take into account, inter alia: cumulative impacts of the activity, both by itself and in combination with other activities in the Antarctic Treaty area; capacity to monitor key environmental parameters and ecosystem components so as to identify and provide early warning of any adverse effects; and whether there exists the capacity to respond promptly and effectively to accidents, particularly those with potential environmental effects.Footnote 102
Activities taking place in the Antarctic comprise primarily scientific research and tourism, with ancillary activities including supply vessels, but exploitation activities, with the exception of fisheries, are limited.Footnote 103 Despite these limitations, the allowable activities entail environmental risks relating, for example, to waste and wastewater, and pollution from aircraft or ships, including fuel oil spills.Footnote 104 To address these risks, the parties adopted Annex VI to the Protocol (Liability Annex),Footnote 105 which establishes a liability regime applicable to environmental emergencies.Footnote 106 The Liability Annex is more limited in scope than the rules and procedures on liability envisaged in article 16 of the Antarctic Protocol in that it addresses only environmental emergencies and response measures thereto addressed in article 15 of the Protocol.Footnote 107
The regime established in the Liability Annex is administrative in nature. Under the Liability Annex, each party must require its operators to undertake reasonable preventive measures that are designed to reduce the risk of environmental emergencies and their potential adverse impact,Footnote 108 and to take prompt and effective response action to environmental emergencies arising from the activities of that operator.Footnote 109 ‘Response action’ means ‘reasonable measures taken after an environmental emergency has occurred to avoid, minimize or contain the impact of that environmental emergency, which to that end may include clean-up in appropriate circumstances, and includes determining the extent of that emergency and its impact’.Footnote 110 There is no reference to restoration measures. ‘Reasonable’, in relation to preventive measures and response action, means ‘measures or actions which are appropriate, practicable, proportionate and based on the availability of objective criteria and information, including: (i) risks to the Antarctic environment, and the rate of its natural recovery; (ii) risks to human life and safety; and (iii) technological and economic feasibility’.Footnote 111 Beyond the definition of ‘reasonable’ noted above, no guidance is provided as to how costs of reasonable response measures should be assessed.
Article 9 does establish limits on liability of an operator in respect of an environmental emergency. Where an operator does not take prompt and effective response action, then the state party of that operator and other parties are encouraged to take such action,Footnote 112 and in such circumstances, the operator shall be liable to pay the costs of such response action. Where prompt and effective response action is not taken, and no response action is taken by any party, article 6 makes provisions for payments to a Fund established under article 12 of the Liability Annex of ‘an amount of money that reflects as much as possible the costs of response action that should have been taken’.Footnote 113 Decisions on requests for reimbursement from the Fund of ‘reasonable and justified costs’ incurred by a party that has taken response action are to be decided by the Antarctic Treaty Consultative Meeting (ATCM), which may seek advice from the Committee for Environmental Protection. As the Liability Annex has not yet entered into force, further guidance remains unavailable.
The approach clarifies two key issues that arise in the commons. The first issue relates to who is entitled to effect response measures to environmental harm. By specifying that any party may take action and then seek their costs from the operator, the 1991 Antarctic Protocol addresses the uncertainty surrounding whether third party responders would be considered ‘officious intermeddlers’.Footnote 114 The approach in the Antarctic is to recognize the collective right to address environmental harms and seek compensation from responsible parties. The second issue that is addressed is that the costs of a response action not undertaken may be used as a proxy for damages. This is in contrast to the approach under civil liability regimes, which only allow for compensation related to reinstatement measures actually taken or to be taken. Insofar as the rule under civil liability regimes is motivated by concerns over windfall awards, the presence of a Fund under the Antarctic Liability Annex ensures that damages collected are directed towards collective environmental interests.
Prior to the adoption of the 1991 Antarctic Protocol, the 1988 Convention on the Regulation of Antarctic Mineral Resources Activities (CRAMRA) would have put in place more extensive liability rules.Footnote 115 While not in force, nonetheless it is worth examining the relevant provisions of CRAMRA as it could provide a possible model for developing new liability rules in areas beyond national jurisdiction under the 1991 Antarctic Protocol, in relation to deep seabed mining, or perhaps more widely. At the same time, caution is needed as CRAMRA addressed a specific economic activity involving a limited range of actors. Article 1(15) CRAMRA provides
Damage to the Antarctic environment or dependent or associated ecosystems means any impact on the living or non-living components of that environment or those ecosystems, including harm to atmospheric, marine or terrestrial life, beyond that which is negligible, or which has been assessed and judged to be acceptable pursuant to this Convention.
This definition addresses both living and non-living components of the environment or ecosystems. The reference to damage ‘which has been assessed and judged to be acceptable pursuant to this Convention’ appears to relate to the regulatory objective to protect and preserve the Antarctic environment and to allow mineral resource activities only where it is judged, based upon assessment of possible impacts on the Antarctic environment and on dependent and associated ecosystems, that the activity in question would not cause significant adverse effects.Footnote 116 It is not linked to specific criteria or indicators that might define and revise acceptable levels of damage, and as the CRAMRA did not enter into force, no further elaboration of this definition was forthcoming. The definition suggests that damage arising out of authorized activities which have been subject to prior EIA would be non-compensable. This, in turn, raises the question whether and in what circumstances damage that is unforeseen in nature or scale prior to authorization might be compensable.
Article 8 of CRAMRA establishes certain rules and procedures for response action and liability. Under this provision, operators undertaking any Antarctic mineral resource activity would have to take necessary and timely response action, including prevention, containment, cleanup and removal measures, if that activity results in or threatens to result in damage to the Antarctic environment or dependent or associated ecosystems. Under article 8(2) an operator would be strictly liable for, inter alia, ‘damage to the Antarctic environment or dependent or associated ecosystems arising from Antarctic mineral resource activities, including payment in the event that there has been no restoration to the status quo ante’.Footnote 117 This appears to provide for a compensatory payment where irreparable damage has occurred, rather than tying the obligation to compensate to reasonable response or restoration actions actually undertaken. The operator would also be liable for ‘reimbursement of reasonable costs by whomsoever incurred relating to necessary response action, including prevention, containment, clean-up and removal measures, and action taken to restore the status quo ante where Antarctic mineral resource activities undertaken by that Operator result in or threaten to resulting damage to the Antarctic environment or dependent or associated ecosystems’.Footnote 118 Had CRAMRA entered into force, further liability rules and procedures were to be adopted through a separate protocol to enhance the protection of the Antarctic environment and dependent and associated ecosystems.Footnote 119
3.3.2 Deep Seabed
The prospect of deep seabed mining in the Area gives rise to a range of potential environmental impacts.Footnote 120 While these activities and impacts relate to a distinct economic activity, they involve a range of actors, various mining techniques and diverse deep seabed ecosystems. In accordance with the relevant regulatory provisions, these activities will be subject to prior EIAs that should enable risks and risk mitigation measures to be identified before any approved exploitation activities commence. Nonetheless, it is possible that unforeseen impacts might arise, or that risks identified during the EIA have impacts of a scale beyond those envisaged. The possibility of cumulative impacts of deep seabed mining and other processes and activities on deep seabed ecosystems cannot be ruled out. Gaps and uncertainties in scientific knowledge about ecosystem functioning and services in the deep seabed must also be taken into account and, the precautionary approach constitutes an important element of the relevant regulatory framework.Footnote 121 Rates of recovery of deep seabed ecosystems raise potential issues of irreparable environmental damage or significant interim losses between damage and recovery.Footnote 122 In this context, defining environmental damage for the purpose of rules on liability and compensation poses particular challenges.
UNCLOS contains general obligations relating to protection of the marine environment, as well as more specific obligations in Part XI addressing protection of the marine environment from harmful effects which may arise from activities in the Area.Footnote 123 Article 1(4) defines pollution of the marine environment as the
introduction by man, directly or indirectly, of substances or energy into the marine environment, including estuaries, which results or is likely to result in such deleterious effects as harm to living resources and marine life, hazards to human health, hindrance to marine activities, including fishing and other legitimate uses of the sea, impairment of quality for use of sea water and reduction of amenities.
In relation to the activities in the Area, article 145 provides for the ISA to adopt rules for the prevention, reduction and control of pollution and other hazards to the marine environment, and to protect and conserve the natural resources of the Area and prevent damage to marine flora and fauna.
Part XI and Annex III of UNCLOS address responsibility and liability specifically in relation to damage arising from activities in the Area. Article 139(2) provides that damage caused by the failure of a state party or international organization to carry out its responsibilities under Part XI shall entail liability. Article 22 of Annex III provides that
the contractor shall have responsibility or liability for any damage arising out of wrongful acts in the conduct of its operations, account being taken of contributory acts or omissions of the Authority. Similarly, the Authority shall have responsibility or liability for any damage arising out of wrongful acts in the exercise of its powers and functions … account being taken of contributory acts or omissions by the contractor. Liability in every case shall be for the actual amount of damage.Footnote 124
In considering article 139 (2), the Seabed Disputes Chamber (SDC) in its 2011 Advisory Opinion noted that
[n]either the Convention nor the relevant Regulations (regulation 30 of the Nodules Regulations and regulation 32 of the Sulphides Regulations) specifies what constitutes compensable damage, or which subjects may be entitled to claim compensation. It may be envisaged that the damage in question would include damage to the Area and its resources constituting the common heritage of mankind, and damage to the marine environment.Footnote 125
The SDC also addressed the amount and form of compensation, by reference to Annex III of UNCLOS, article 22. Here the SDC was of the view that the provisions concerning liability of the contractor for the actual amount of damage under Annex III, article 22, were equally valid with regard to the liability of the sponsoring state.Footnote 126 The SDC suggested ‘the form of reparation will depend on both the actual damage and the technical feasibility of restoring the situation to the status quo ante’.Footnote 127 While the SDC’s Advisory Opinion makes reference on this point to article 31 of the ILC’s ASR on reparation,Footnote 128 and to the material possibility (technical feasibility) of restitution, it does not specifically address considerations of proportionality in respect of restitution. As noted above, the ILC subjects reparation by restitution to a proportionality test so that restitution would not be required where it involves a burden out of all proportion to the benefit deriving from restitution instead of compensation.Footnote 129 The SDC’s Advisory Opinion falls short of defining when compensation might constitute a more appropriate form of reparation. The provisions of Part XI and Annex III of UNCLOS, and the SDC’s Advisory Opinion, also leave open certain questions relating to the definition and valuation of environmental damage arising out of activities in the Area. These include how ‘damage to the Area and its resources’ and ‘damage to the marine environment’ might be defined; and how ‘the actual amount of damage’ might be quantified for the purposes of compensation.
Some of these issues are under discussion in the development of exploitation regulations by the ISA. The current version of the Draft Exploitation Regulations (DER) also envisages the establishment of an Environmental Compensation Fund (ECF) to finance, inter alia, the implementation of any necessary measures designed to prevent, limit or remediate any damage to the Area arising from activities therein, the costs of which cannot be recovered from a contractor or sponsoring state, and the restoration and rehabilitation of the Area when technically and economically feasible and supported by best available scientific evidence.Footnote 130 The DER do not currently contain a detailed definition of what types of costs might be recovered from, or met by, the proposed Fund. An ISA Technical Study on an Environmental Compensation Fund (ISA ECF Study), published in 2021, addressed, inter alia, the topic of compensable damage,Footnote 131 drawing upon a review of existing funds including the IOPC Funds. The study clarifies that only damage resulting from activities in the Area should be compensated from the proposed Fund – damage from other activities impacting the Area would in principle be excluded. It suggests that the Fund cover damage to the marine environment that cannot be recovered from a contractor or sponsoring State. On the basis of the provisions of article 145 of UNCLOS and the definition of pollution in article 1(4), the study suggests that the following elements may be considered as damage to the Area and the marine environment: interference with the ecological balance of the marine environment; damage to the flora and fauna of the marine environment; harm to living resources and marine life; hazards to human health; hindrance to marine activities, including fishing and other legitimate uses of the sea; impairment of quality for the use of sea water; and reduction of amenities.Footnote 132 The study further acknowledges that the DER allow for compensation of preventive measures, that is, measures intended to prevent or limit damage, as well as appropriate activities to study, monitor or assess damage. Under the DER, compensation would also be allowed for remediation measures aimed at cleaning up a contaminated area by removing or isolating contaminants, and for ‘restoration and rehabilitation of the Area when technically and economically feasible and supported by best available scientific evidence’.Footnote 133
The ISA ECF Study, referring to recent developments surveyed in Section 3.2, proposes following the model of the IOPC Funds in excluding pure environmental damage and limiting compensation to recovery for reasonable measures of reinstatement undertaken or to be undertaken and costs of post-incident studies (effectively excluding interim ecosystem services losses). Reasons given for excluding pure environmental damage include the challenges of quantifying such damage and the financial viability of the proposed ECF. The Study notes that the ‘wider the notion of compensable damage, the higher the risk of dispute over the existence of an actual duty to compensate in any given circumstance’, and that ambiguity in the notion of compensable damage should be avoided.Footnote 134 Mirroring the restricted IOPC Funds approach in respect of pure environmental damage seems problematic and out of step with more recent developments, particularly as the Study itself acknowledges that certain damage might not be capable of restoration. Of further note, the Study proposes that recovery of compensation from the Fund should not be subject to establishment of a threshold of harm – such as ‘serious’ or ‘significant’ harm, despite the fact that certain provisions of UNCLOS relating to activities in the Area, and certain provisions of the DER, refer to ‘serious harm’. Instead compensation should be available for ‘any damage’ falling within the definition of compensable environmental damage, consistent with article 22 of Annex III UNCLOS, and the wording of the DER.Footnote 135
The legal status of the Area and its mineral resources as common heritage of humankind generates additional questions concerning the definition and valuation of damage. As noted above, the SDC observed that ‘the damage in question would include damage to the Area and its resources constituting the common heritage of mankind, and damage to the marine environment’.Footnote 136 This suggests that these elements may constitute separate heads of damage in some circumstances. On the one hand, it may be easier to determine when there has been an impact on mineral resources such that the extraction of such resources is affected in terms of volume, quality or cost. Given that the mineral resources of the Area have a commercial value, valuation of damage to such resources may be possible through more traditional commercial valuation methods. On the other hand, the mineral resources of the Area, and the seabed itself, are at the same time important components of the deep seabed ecosystem.Footnote 137
The authorization of mineral exploitation activities presupposes a level of acceptable interference in deep seabed ecosystems, in light of environmental impact assessment and the ISA decision-making process. However authorized activities could give rise to environmental impacts that are unforeseen in nature or extent, and that might be deemed to constitute environmental damage. The principle of common heritage of humankind also incorporates other considerations, such as intergenerational impacts, that might have a bearing on the definition of damage and questions of appropriate compensation.Footnote 138 Issues associated with impacts on marine genetic resources in the Area also require consideration. While such genetic resources fall within the concept of biodiversity, as a component of the environment that may be damaged, the legal status and terms of use of such resources have been addressed in negotiations outside the ISA (see Section 3.3.3). Conceivably, damage to marine genetic resources might be compensable as an aspect of damage to natural resources, where the recovery and exploitation of such resources is impacted by environmental damage arising out of activities in the Area. While loss or damage to such resources subject to existing recovery and use may be capable of economic valuation, any such valuation might pose challenges – for example if the resources are not unique to the damaged area or if they are not currently subject to commercial exploitation. Unlike mineral resources of the Area, marine genetic resources in the Area are not subject to exclusive rights in terms of access, and the legal status of such resources and issues relating to benefit-sharing, could raise questions of standing to claim.Footnote 139
3.3.3 High Seas
As discussed in Chapter 1, there are a wide variety of processes and activities that impact on the environment and biodiversity of the high seas. This variety, and the physical nature of the high seas environment, poses particular challenges when it comes to identifying sources of specific environmental damage, and establishing causation. Where major pollution incidents occur, for example large spills of oil or other hazardous or noxious substances from vessels, it may be possible to establish the source vessel. Yet in other instances this will not be the case. Many of the sources of marine pollution on the high seas are diffuse, and the impacts of certain activities and/or pollutants are cumulative and may become apparent only over the longer-term. Impacts may be direct, for example the impacts of an oil spill on marine mammals, fish or birds that come into contact with the oil. They may be indirect, such as the impact on fish stocks and dependent species of degradation or destruction of spawning grounds or nursery areas. Such factors pose difficulties for defining compensable environmental damage within any liability regime. Moreover, identifying appropriate measures for restoration of damaged and degraded marine ecosystems may pose particular challenges.
The approaches and trends in relation to compensable damage identified in connection with civil liability regimes (discussed above) may provide some guidance for approaches to reparation for environmental damage should the currently scant liability rules for environmental damage in ABNJ be enhanced. In relation to the high seas, however, it is notable that the geographic scope of the civil liability instruments does not generally extend to damage to areas beyond national jurisdiction, although the cost of certain preventive measures taken on the high seas to prevent or minimize pollution damage to areas under national jurisdiction may be recoverable.Footnote 140 On the possible expansion of existing civil liability regimes to the high seas, Gaskell has examined legal options and political will for such a move, and Leigh has noted that during the negotiation of the HNS Convention, Australia proposed that liability for damage caused by contamination of the environment beyond the 200 nautical miles exclusive economic zone be included, but this proposal was not taken up in the Convention.Footnote 141
The 2023 draft agreement on marine biodiversity of ABNJFootnote 142 does not address liability, but its provisions on, inter alia, area-based management tools and environmental impact assessment provide a basis for generating new information and understandings on some issues associated with addressing environmental damage in ABNJ. The draft agreement defines cumulative impacts, for example, and requires that these are considered in the context of environmental impact assessment.Footnote 143 Its requirements concerning proposals for marine protected areas and on environmental impact assessment require the provision of baseline data on the relevant marine environment and biodiversity,Footnote 144 and those on EIA require uncertainties and gaps in knowledge to be identified and considered.Footnote 145 The draft agreement also establishes thresholds for screening and for the conduct of environmental impact assessments in relation to planned activities in areas beyond national jurisdiction. In particular, parties must ensure that an EIA is conducted where a planned activity may cause ‘substantial pollution of or significant and harmful changes to the marine environment’ in ABNJ. The objectives of the provisions of the draft agreement on EIA are, inter alia, to ensure that relevant activities are assessed and conducted to prevent, mitigate and manage ‘significant adverse impacts’.Footnote 146 While this language on threshold has been adopted in the context of prior assessment of activities, not in the context of liability rules, it might be germane to determining what is deemed an ‘acceptable’ impact beyond which liability for environmental damage could arise. The draft agreement further provides for monitoring and reporting of impacts of authorized activities, and where significant adverse impacts that were unforeseen in nature or severity or that arise from a breach of conditions in the authorization are identified, it requires the party with jurisdiction or control over the activity to require that measures are taken to prevent, mitigate and/or manage those impacts or take other necessary action or halt the activity. The Scientific and Technical Body is also given the power to make recommendations to the party concerned with regard to addressing such impacts.Footnote 147 Significantly, the Scientific and Technical Body also has a broader mandate to develop standards and/or guidelines related to the EIA thresholds and processes under the agreement.Footnote 148
Two further aspects of the draft agreement appear pertinent in the context of advancing common understandings of environmental damage and appropriate response measures. First, in the context of area-based management measures, the agreement provides that under certain conditions the Conference of the Parties can adopt decisions on emergency measures in ABNJ where a natural phenomenon or human-caused disaster has caused or is likely to cause serious or irreversible harm to marine biodiversity of ABNJ to ensure that such harm is not exacerbated. Procedures and guidance for the establishment of any such measures are to be elaborated after the agreement enters into force.Footnote 149 Second, the provisions on the financial mechanism refer to the possibility of the Conference of the Parties establishing a fund to finance rehabilitation and ecological restoration of marine biodiversity of ABNJ.Footnote 150 It remains to be seen whether these provisions and others in the BBNJ Agreement, once it enters into force, provide an impetus and legal framework for the further development of liability rules.Footnote 151
3.4 Valuation of Environmental Damage
As suggested above, issues associated with valuing environmental damage have been invoked to limit the elements of environmental damage that are compensable within environmental liability regimes.Footnote 152 In particular, in the IOPC Funds, this consideration has proved a bar to broadening the scope of compensable damage, with the Funds maintaining the position that compensation for environmental damage should not be assessed on the basis of abstract quantification of damage calculated in accordance with theoretical models. By contrast, as discussed further below, the UNCC and the ICJ have demonstrated willingness to look into different valuation methods to compensate damage to components of the environment without a market value, as well as interim environmental losses pending restoration.
Developments in law and practice at the national and regional level have to some extent informed the more innovative, and arguably progressive, approaches to the definition and valuation of environmental damage. In particular, domestic law in the United States, under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Oil Pollution Act 1990 have provided a forum for innovation in the assessment of natural resource damages, as well as for the evolution of an administrative approach to questions of assessing and restoring environmental damage.Footnote 153 The US approach has seen the utilization of a variety of valuation methods, such as contingent valuation methodology, travel cost method, hedonic pricing and habitat equivalency analysis (HEA), some of which were subsequently put forward to support claims in international forums. Contingent valuation is a stated preference model that bases valuation of damage upon a survey of people’s willingness to pay to avoid such damage or maintain a level of environmental quality. The travel cost method assesses economic value of the quality and availability of environmental resources on the basis of willingness to pay to visit and use them; and hedonic pricing, an indirect valuation method, links changes in environmental quality to the market value of associated goods such as housing.Footnote 154 Decisions in other domestic jurisdictions have also supported the use of such methods, or the use of equitable considerations in quantifying environmental damage claims.Footnote 155 Amongst well-known cases in the context of civil liability for oil pollution damage are the PatmosFootnote 156 and HavenFootnote 157 cases in Italian courts, the ErikaFootnote 158 case in France and the approach of the Soviet Union court in the Antonio GramsciFootnote 159 incident (which prompted the IOPC Fund statement concerning abstract quantification methods). However, while these methods have faced an objection of principle in the IOPC Fund context, they also present more fundamental challenges in the context of quantifying environmental damage in areas beyond national jurisdiction. Applying contingent valuation based on willingness to pay seems difficult or impossible in relation to ABNJ; for the purpose of hedonic pricing, it is difficult to identify relevant marketed goods for the purpose of assessing changes in value; and travel cost methods face similar obstacles.
A more promising approach in relation to quantifying environmental damage by reference to ecosystem services loss is HEA, which assesses the nature and extent of the loss of ecological services from the damaged resources, determining the gain in ecological services anticipated from the compensatory projects, and calculating the cost of the compensatory projects. This method, and resource equivalency analysis, takes into account the biological, chemical and physical nature of the damage and remediation options. EU guidance on the Environmental Liability Directive explains that ‘an equivalency analysis identifies which resources and services can be deemed to be “sufficiently similar” to the damaged resources and services and quantifies the amount to be remediated (credit) to be equal to the loss due to damage (debit)’.Footnote 160
While the work of the UNCC and ICJ addresses damage arising out of wrongful acts of states, the approach to the definition and valuation of environmental damage has wider significance. The UNCC decided that where a resource had a commercial value, and was damaged for a period of time, compensation should be awarded on the basis of the market price for the period of time that the damage persisted, adjusted as appropriate to take into account the influence of other sources of damage.Footnote 161 For damage to resources that did not have a market reference price, the UNCC panel indicated that it would be willing to compensate natural resource losses by reference to the costs of other environmental projects that were put in place to compensate for the loss of ecological services that the natural resources would have provided had they not been damaged, so long as there was ‘sufficient evidence that primary restoration will not fully compensate for any identified losses’.Footnote 162 Thus the emphasis was on primary remediation and restoration of services, but there appears to have been recognition that compensation for other restoration activities would be available where primary restoration was not possible or where there were interim losses.Footnote 163 Some claimants used HEA to determine the amount of compensation claimed. In considering approaches to valuation of damage, the panel expressed the view that ‘international law does not prescribe any specific and exclusive methods of measurement for awards of damages for internationally wrongful acts by states. The general rule is to restore what has been damaged to integrity or, if this is not possible, to provide an equivalent for it’.Footnote 164 The panel recognized that
there are inherent difficulties in attempting to place a monetary value on damaged natural resources, particularly resources that are not traded in the market. With specific regard to HEA, the Panel recognizes that it is a relatively novel methodology, and that it has had limited application at the national and international levels. The Panel is also aware that there are uncertainties in HEA calculations, especially for establishing a metric that appropriately accounts for different types of service losses and for determining the nature and scale of compensatory restoration measures that are appropriate for damage to particular resources. For these reasons, the Panel considers that claims presented on the basis of HEA or similar methodologies of resource valuation should be accepted only after the Panel has satisfied itself that the extent of damage and the quantification of compensation claimed are appropriate and reasonable in the circumstances of each claim. However, the Panel does not consider that these potential difficulties are a sufficient reason for a wholesale rejection of these methodologies, or for concluding that their use is contrary to international law principles.Footnote 165
In the Certain Activities case between Costa Rica and Nicaragua, the ICJ made certain general observations about valuation of compensation and also addressed specific valuation methodologies put forward by the parties. As a general matter, in an earlier case, not involving environmental damage, the Court has observed that quantification of compensation for non-material injury rests on equitable considerations and awarded compensation on this basis.Footnote 166 The Court referred to this approach in its Certain Activities case reflecting that in respect of the valuation of damage, ‘the absence of adequate evidence as to the extent of material damage will not, in all situations, preclude an award of compensation for that damage’.Footnote 167 It also cited the Trail Smelter award to the effect that ‘it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate’.Footnote 168 However, the Court also noted that compensation should not be punitive.Footnote 169 In terms of the specific arguments, the Court observed that the valuation methods put forward by the parties were not the only methods available, but that where certain elements of the proposed methods offered a reasonable basis for valuation, the Court would take them into account.Footnote 170 It noted that international law does not prescribe any specific method of valuation for the purposes of compensation for environmental damage, and that it was necessary to take into account the specific circumstances and characteristics of each case.Footnote 171 Costa Rica relied on an ecosystem service approach in evaluating its loss, referring to various categories of impaired goods and services including biodiversity, gas regulation and air quality services such as carbon sequestration, soil formation and erosion control. Nicaragua acknowledged Costa Rica’s right to compensation for the ecosystem service replacement costs but challenged its valuation methodology. In the face of the competing valuation methodologies put forward by the parties, the Court’s approach to the determination of compensation of environmental damage in this case was to assess the value to be assigned to the restoration of the damaged environment as well as to the impairment or loss of environmental goods and services prior to recovery.Footnote 172 Further, in the circumstances of the case, the Court considered it appropriate to approach the valuation of environmental damage from the perspective of the ecosystem as a whole, by adopting an ‘overall assessment’ of the impairment of loss of environmental goods and services prior to recovery, rather than attributing values to specific categories of environmental goods and services and estimating recovery periods for each of them.Footnote 173 While in several respects, the Court’s treatment of quantum remains unclear,Footnote 174 the judgment provides authoritative affirmation of the principle that damage to the environment per se, including interim losses pending full restoration, are compensable under international law.
In the reparations phase of Armed Activities on the Territory of the Congo in the ICJ,Footnote 175 Democratic Republic of the Congo (DRC) sought compensation for damage to natural resources including, in addition to claims for minerals, coffee and timber, damage to flora through deforestation and damage to fauna. In relation to deforestation, the Court noted that DRC had not offered evidence for the extent of environmental damage from deforestation, in particular loss of biodiversity, or a method for its valuation. The DRC did not address its environmental damage claim separately to that for unlawful exploitation of timber resources, and the Court-appointed expert had viewed the deforestation claim as referring to timber production.Footnote 176 The ICJ dismissed the claim for environmental damage resulting from deforestation as it had no basis upon which to assess it.Footnote 177 In relation to loss of fauna, the ICJ did make an award of compensation, but again found that the evidence adduced was not sufficient to determine a precise or approximate number of animal deaths. Finding that Uganda was nonetheless responsible for a significant amount of damage to fauna the Court awarded compensation for this damage as part of a ‘global sum’ for all damage to natural resources.Footnote 178 While the ICJ faced evidentiary obstacles in this case, the ‘global sum’ approach does little to clarify the approach to quantification of environmental damage, or other forms of damage addressed in the case.
A notable aspect of the Certain Activities case is that the ICJ approached the valuation of environmental damage without formally utilizing its power to appoint its own expert(s) to opine on the appropriate valuation methodology and its application. This bears noting as the Court has faced some criticism for aspects of its approach to expert evidence in environmental disputes.Footnote 179 In the Pulp Mills case, the joint dissenting opinion of Judges Al-Khasawneh and Simma highlighted questions and concerns about how the ICJ should approach issues of evidence in disputes that involve complex and voluminous scientific and technical evidence. The dissenting judges were highly critical of how the majority had approached the evaluation of evidence in the case, suggesting that the ICJ had approached the case ‘in a way that will increase doubts in the international legal community whether it, as an institution, is well-placed to tackle complex scientific questions’.Footnote 180 In their view the ICJ was not, on its own, in a position adequately to assess and weigh complex scientific evidence of the types presented by Argentina and Uruguay in that case. By contrast, in the reparations phase of the Armed Activities on the Territory of the Congo case, the Court appointed experts to assist it, including in the assessment of damages related to natural resources.Footnote 181 In cases involving allegations of environmental harm, albeit not addressing compensation as such, other dispute settlement tribunals have also had recourse to tribunal-appointed independent experts to assess the existence and scale of damage.Footnote 182 The UNCC also made use of experts in its work on environmental damage claims.Footnote 183 In relation to ABNJ, such claims seem likely to involve complex issues of scientific evidence relating to baseline data, causation, the reasonableness or feasibility of any proposed restoration measures and consideration of alternative compensatory measures for ecosystem services loss. As such expert scientific input may be of particular importance.
3.5 Conclusions
How compensable damage is defined stands at the centre of liability for environmental harm in the global commons. If understood in narrow, economic terms, the ability of liability rules to protect the environment is severely constrained. On the other hand, if the legal definition of damage more closely reflects the evolving scientific understanding of environmental harm, then there is much greater scope for liability rules to play a more central role in protecting the commons environment. There is growing recognition in international law, including by the ILC and ICJ, of the need to provide for forms of compensation for loss of environmental resources and ecosystem services, including through restoration, and other measures such as the introduction of equivalent resources where primary restoration is not possible or gives rise to interim losses. However, as Handl has noted ‘while there is evident and growing support for the compensability of ecosystem services losses in general, on the international legal plane the situation is fragmented’.Footnote 184 The concept of environmental damage ought to be seen in light of the evolving paradigm of international environmental policy-making in terms of the ecosystem approach and ecosystem services. Defining environmental damage in terms of lost ecosystem services, as well as lost or damaged components of the environment, better reflects contemporary understandings of ecosystem dynamics, even if it further complicates valuation exercises, particularly in ABNJ. This is already reflected in critiques of restricted definitions of environmental damage in civil liability conventions, and in the approach to assessment of environmental damage of the UNCC and the ICJ, albeit that neither body perhaps fully captured lost ecosystem services in their decisions on valuation.
Taking these developments in the compensability of environmental damage into the ABNJ environment poses a range of additional legal and other challenges. Cumulative environmental damage, a significant cause of concern in ABNJ, is difficult to address within existing liability approaches, both in terms of causation and attribution. In addition, potential claims in respect of preventive measures and reasonable measures of reinstatement for environmental damage in ABNJ are closely linked to challenges of establishing standing to bring a claim, and/or of incentives for states to take preventive or remedial action (discussed in Chapter 6). One possible avenue is to clarify the right of states or their agents to undertake response actions with the ability to seek compensation from responsible parties, as contemplated under the Antarctic Liability Annex. This might also imply the need for a role for international institutions in the provision of baseline data, and in assessing and determining appropriate responses to environmental damage in ABNJ – a feature that already appears to be evolving in the context of the role of ISA in a proposed Environmental Compensation Fund, and the role of the ATCM in the fund envisaged under Annex VI of the 1991 Antarctic Protocol.
Questions relating to the feasibility and likely success of restoration measures remain problematic, and, even where feasible, costs might prove disproportionate. The replacement of damaged components of the environment by ‘equivalents’ also poses potentially intractable challenges in the context of the high seas, deep seabed or Antarctica. Furthermore, baseline data on which to assess damage and ground restoration or offset efforts in ABNJ are likely to be incomplete or unreliable.
As to valuation of environmental damage in ABNJ, many of the existing valuation methods are poorly suited to the commons environment and pose significant evidentiary challenges. That said, these remain in a relatively early stage of development and the approach of UNCC and ICJ suggests methods such as HEA provide promising avenues for quantification and will likely evolve in concert with improved scientific understanding of ABNJ environments.
Open access