Slovakia: Mandatory financial coverage of environmental liability in the Slovak Republic from 1 July 2012

02 July 2012 | newsletters

As of 1 July 2012, in Slovakia operators of facilities performing environmentally-hazardous occupational activities will have to provide proof of financial coverage for any liabilities arising from environmental damage caused by their activities.

Article 14 paragraph 2 of Directive 2004/35/CE on environmental liability with regard to the prevention and remedying of environmental damage ("ELD") sets out that Member States shall encourage the development of financial security instruments, including insurance, for enabling operators to cover any responsibilities arising out of their environmental liability obligations under the ELD.

Section 13 of the Slovak Act No 359/2007 Coll on Prevention and Remediation of Environmental Damages ("Act") transposing the ELD provides for the obligation of companies performing certain environmentally-hazardous occupational activities defined in the Act to obtain financial coverage for any environmental damage caused by their activities. While the Act entered into force on 1 September 2007, this particular provision only became effective as of 1 July 2012 in order to enable operators to adapt to this obligation.

Scope of environmental liability

According to section 13 paragraph 1 of the Act, financial coverage has to be provided for environmental liability for any damage caused by the performance of the occupational activities; this coverage must include remediation costs. Environmental liability in this context refers to strict liability for any damage to water, soil and/or protected species of animals, plants and biotopes, irrespective of fault of the operator. However, liability does not apply in case no causal link can be established between the damage and the business activity of the respective operator.

Only damages occurring after the entry into force of the Act are subject to the environmental liability provisions. Environmental liability is restricted to a period of 30 years.

Scope of financial coverage

As provided by section 13 paragraph 2 of the Act, financial coverage of liability for environmental damages shall include coverage for both estimated remediation costs and the costs of the risk analysis that must be performed after damage has occurred. Such financial coverage has to be valid throughout the entire period of operation.

Generally, the most suitable financial coverage available in the Slovak Republic for environmental liability is environmental insurance, which has already been marketed by a number of insurance companies. The Act would also consider a bank guarantee as being a sufficient financial coverage; however, the general practice of banks to issue such bank guarantees only for a limited period of time may contradict the requirement to provide financial coverage for the entire time of operation.

The Act does not set out any further guidelines on how to estimate potential remediation costs. In practice, environmental insurers provide tailored products for individual operators, depending on the coverage that is being sought. Coverage for clean-up and damages to natural resources is the minimum required in order to comply with the Act’s requirements.

Any cover instrument issued in another Member State of the European Union is also considered a valid financial coverage in accordance with the Act.

Operator requirements

The operator subject to the requirements of the Act has to provide proof of financial coverage to the Regional Environmental Authority (Obvodný úrad životného prostredia) no later than 100 days from the day of issuance of the permit for the respective occupational activity. Furthermore, the authority has to be informed about the estimated costs for corrective actions and corrective measures to remedy any environmental damage. Any changes to these estimates have to be immediately notified to the authority. The Act does not set a transitional period for facilities in operation on 1 July 2012; thus, it must be assumed that such proof has to be provided without undue delay.

Failure to comply with the requirements of the Act may be sanctioned by a fine of up to EUR 33,193.91. Provided that the operator has arranged for financial coverage, but has not provided proof to the authority within 100 days, a fine of up to EUR 6,638.78 may be imposed.