Contamination of the environment by any means has traditionally provoked a violent reaction from the community if such pollution became known to the wide audience. The right to a healthy environment is guaranteed by the Constitution of the Russian Federation¹. Even though in everyday life, most citizens rarely think about the need to sort waste and reduce the amount of non-reusable plastic, news on another technological accident² causes fair anger and demand to find and punish a polluter. The announced amounts of compensation calculated by Rosprirodnadzor seem to be quite adequate payment for trampling over nature.

Nevertheless, the analysis of the procedure and methods of compensation for the environment shows that the conclusion about the legitimacy and, most importantly, the effectiveness of such compensation may be quite ill conceived. First, as such compensation is aimed primarily at enriching the state budget. The funds paid for damage to the environment may not be directed at all for its restoration, with which the Constitutional Court of the Russian Federation agreed³.

Environmental legislation provides for two types of compensation – restoration or monetary compensation. The payment of monetary compensation cancels the responsibility of the polluter to restore the environment, and the state does not have the obligation to send the received amounts of compensation for restoration. That is, the payment of compensation does not lead to the vital results for which it was designated.

In addition, the abstractness of the methods for calculating compensation raises questions from specialists involved in environmental protection, and the regional bodies of Russian environmental authority (Rosprirodnadzor) often try to both collect monetary compensation and oblige the polluter to restore the original state of the environment at their own expense⁴ (which is essentially a double responsibility). The standard and burden of proof in disputes with environmental authorities are also problematic in practice⁵.

The above questions arise in connection with the application of the national legislation by Russian courts, which, despite an attempt to clarify certain aspects by the Supreme Court⁶, remained rather controversial.

For cases related to compensation for damage from the oil spills from ships, in addition to general environmental protection legislation, there are special provisions of the Russian Merchant Shipping Code (chapters XVIII and XIX.I), which literally implemented the 1969 Convention on Civil Liability for Oil Pollution Damage (as amended by the 1992 Protocol; hereinafter CLC) and the 2001 International Convention on Civil Liability for Bunker Oil Pollution Damage (hereinafter the Bunker Convention), to which Russia joined in 2001 and 2008, respectively. The principles on which both conventions are based are identical and boil down to the fact that the shipowner, who is strictly responsible for the oil spill, must be responsible solely in accordance with the provisions determined by the international treaty.

The conventions define the scope of application, the concept of damage to be compensated, as well as the procedure for presenting claims. The 1969 Convention also provides for its own limits on the shipowner’s liability. And, in addition to the limits of liability, the 1971 Convention on the Establishment of the International Fund for Oil Pollution was signed (later amended by the 1992 Protocol). The International Oil Pollution Fund (IOPC Fund) is an intergovernmental organization that pays compensation for oil pollution from tankers if the amounts to be paid by the shipowner (its insurer) do not cover all losses. The Foundation has developed detailed commentaries on the CLC⁷.

So, in relation to the topic of this research, both conventions in Art. 1(6) and Art. 1(9), respectively

(Articles 316 and 336.1 of the Russian Merchant Shipping Code) contain the concept of pollution damage: “loss or damage caused outside the ship by contamination resulting from the escape or discharge of [bunker] oil from the ship, wherever such escape or discharge may occur, provided that compensation for impairment of the environment other than loss of profit from such impairment shall be limited to costs of reasonable measures of reinstatement actually undertaken or to be undertaken…”

This definition clearly states that, as for the damage to the environment, the shipowner should only compensate for the cost of implementing reasonable remediation measures (excluding the loss of profit from pollution).

This contradicts the provisions of the Russian environmental legislation, which provide for alternative methods – restoration or monetary compensation based on so called “method” (mathematic formulas) of calculating harm.

Conventions do not provide for a definition of “impairment of the environment” but in practice of the IOPC Fund, damage is to mean an adverse alteration to the environment leading to a deterioration or weakening of its functioning.

Based on the above definition, it follows that in connection with damage to the environment, three types of claims can be presented:

1) Recovery of lost profits;

2) Collecting costs for research on the need for and ways to restore the environment;

3) Expenses for environmental restoration.

Such a mechanism for determining compensation for damage, which boils down to proactive actions to restore the environment, was established due to the fact that the marine environment is extremely volatile and has a high capacity for self-healing. Not all oil spills can lead to long-term negative consequences, and only urgent measures to eliminate the spill can effectively reduce the damage.

Moreover, from a long-term perspective (for example, a decrease in the fish population) it is almost impossible to calculate such consequences, since the initial state of the environment (before the spill) is often unknown, and the combination of other harmful factors (illegal fishing, discharge of toxic substances from production facilities, etc.), will not allow identifying the share of damage that falls on a particular spill⁸.

Therefore, no abstract methodology is considered effective and reasonable for calculating compensation.

At the same time, the Russian state bodies, having absorbed the experience of the Soviet Union, are still trying to insist on the application of methods for calculating compensation for environmental damage, which was recently accepted by the Thirteenth Commercial (“Arbitrazh”) Court of Appeal.

So, in case No. A56-79392/2019, the courts of first and second instance rejected the arguments of the defendant about the need to apply the provisions of Chapter XIX.I of the Russian Merchant Shipping Code and the Bunker Convention and, therefore, completely refused in rejecting the claim of the regional body of Rosprirodnadzor, based on the “method”⁹ of calculation of environmental damage

The court of first instance confirmed the priority of national environmental protection rules over international provisions, and the legality of filing claims against the shipowner for recovery of compensation calculated based on mathematic formulas. It should be borne in mind that the oil spill was completely liquidated, and Rosprirodnadzor did not undertake (and does not plan to) any actions to eliminate the spill and restore the environment.

Case А56-79392/2019 reflects an extremely negative change in the Russian case law. Previously similar disputes were resolved not in favor of Rosprirodnadzor.

Thus, according to the judgement of the Commercial (“Arbitrazh”) Court of St. Petersburg and the Leningrad Region of 07.09.2010 in case No. А56- 45633/2010, the court refused to Rosprirodnadzor to recover the damage caused to the environment by the oil spill from m/v Volgoneft-139, since (1) the claims of the public authority are not based on reasonable measures to restore the environment, (2) the costs aimed at direct compensation for damage have already been incurred by others.

And in accordance with the judgement of Proletarskiy District Court of Rostov-on-Don of 23.03.2011 in case No. 2-3731 2010 (fuel oil spill in the water area of the Temryuk port), the rules of international law establishing the criteria for compensation for harm caused to the environment (in in particular, a water body), were recognized as having priority over the provisions of the Federal Law “On Environmental Protection” No. 7-FZ 10.01.2002, which establishes other rules in this area. In the court’s opinion, the amount of damage caused should be determined in the amount of actually incurred costs for the restoration of the environment, and not in accordance with abstract calculations according to the “method”.

The recent deviation of Russian courts from global practice is seen even more controversial in the context of Russia’s participation in the Executive Committee of the IOPC Fund, which in June 1996 considered the issue of the inadmissibility of the requirement of the Emirate of Fujairah as a state entity to compensate for environmental damage based on an abstract methodology¹⁰.

Among other things, the Soviet Union was also deprived of the Fund’s compensation calculated on the basis of the methodology in accordance with the Legal Position of the International Fund for Compensation for Oil Pollution Damage, set out in Resolution No. 3 of October 1980 (in connection with the oil spill from the ship “Antonio Gramsci”)¹¹.

Summing up the above, it is worth noting that the world community (with the participation of Russia) has developed an effective mechanism for liquidating and compensating for environmental damage, which has been repeatedly tested in practice around the world. Efficiency is achieved by encouraging shipowners to independently implement measures to eliminate the spill, by compulsory insurance of shipowners’ liability, as well as other mechanisms that make it possible to recover the amount of damage to the environment. The method for determining such damage is also installed. The recovery of compensation on the basis of an abstract mathematic formulas completely contradicts international rules in force for the Russian Federation, and, as practice shows, is in no way aimed at restoring the environment, but is essentially a measure of responsibility, not compensation. ■