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Progress on a new European Union environmental directive is slow, but corporations would be well advised to keep an eye on it, according to a new study.

A September report by the London-based reinsurance broker Guy Carpenter & Co. LLC states that, as of August, only three of 27 European Union countries, Latvia, Lithuania and Italy, met an April 30, 2007, deadline to incorporate the new EU Environmental Liability Directive into their national laws. The report anticipates that two more countries, Sweden and Germany, are on track to do so by the end of 2007.

The good news is that it applies only to incidents that have occurred since April 30, 2007. More sobering is that, although companies are not currently mandated to prove that they have the insurance coverage to fulfill their obligations under the directive, that could all change. The financial security clause will be reviewed by the EU by April 30, 2010, when proof of insurance could become mandatory.

European countries can also season the directive to taste in such arenas as the state-of-the-art defense. A state-of-the-art defense is when a company claims that it could not have known of the effects of an emission when it occurred. Of the 21 EU countries that have addressed that issue, eight plan to provide the option of such a defense and 13 plan to deny it.

It all makes for a complicated stew, made more so by the pre-existence of each countries' own environmental laws. "There remain large areas of uncertainty and a degree of latitude that is likely to produce substantial cross-border variations in liabilities," the Guy Carpenter authors wrote.

November 1, 2007

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