Property owners' liability for contaminated land

Introduction​
Background
Extension of property owner's liability
Owners may incur liability as operator
Comment​


Introduction

A recent ruling from the Environmental Court of Appeal has clarified a property owner's liability for contaminated land. Such liability is subsidiary to the polluter's liability and comes into play when it is impossible to find the liable operator (the polluter), or when the operator is unable to pay for or carry out the necessary remedial measures. The court has now established the scope of the subsidiary liability in relation to the specific time limit rule, which limits an operator's liability to operations that have ended before June 30 1969.

Background

An operator which has caused contamination (the polluter) is primarily liable for remedial measures under the Environmental Code (Chapter 10, Section 2), according to the 'polluter pays' principle. However, the owner of property may incur subsidiary (secondary) liability for such measures if a liable operator cannot be found or is unable to carry out or pay for the necessary remedial measures. This subsidiary liability can apply only if the property owner knew of, or should have discovered, the contamination at the time it acquired the property, and this acquisition took place on or after January 1 1999 (the date on which the Environmental Code entered into force). Further, the liability is limited to the boundaries of the property; the property owner cannot be held liable for contamination in other areas caused by operations or pollution emanating from the property in question. Certain other rules further apply for private residential properties.

If the operator can carry out or pay for only part of the remedial measures, the property owner can be held liable for the remaining part that the operator cannot undertake or pay for. Thus, if a liable operator cannot be found liable or cannot pay for the necessary measures, the environmental authorities can instead turn to the current or previous owner of the contaminated site. The extent of the property owner's liability is thereafter determined after a cost-benefit assessment and joint liability will apply if there are several owners (Chapter 10, Sections 4 and 7 of the Environmental Code).

A special feature of Swedish environmental law on contamination liability is the rule that an operator's liability is limited to contamination caused by operations that were ongoing after June 30 1969 - the date on which the Environmental Protection Act (later replaced by the Environmental Code) first came into force, according to the transitional provisions of the code. Operators which ceased the polluting operations before this date cannot be subject to public law liability for remedial actions.

Extension of property owner's liability

It has previously been discussed whether a property owner's subsidiary liability should cover the situation where an operator cannot be held liable due to the time limit rule (ie, if a property owner could be liable for contaminations derived from operations which ended before June 30 1969). A recent Environmental Court of Appeal judgment (M 11012-13 of May 7 2014, MÖD 2014:14) has now settled this issue. The court clarified that a property owner's liability is de facto subsidiary, in the sense that it cannot be of a greater scope than the liability of an operator for the contamination in question. In this case, a municipal environmental board had imposed remedial measures on the owner of a contaminated property (Jernhusen AB), since it was not possible to find a liable operator. Jernhusen disputed the alleged liability on the grounds that it could not be established whether the activity that had caused the contamination had been ongoing after June 30 1969. It was therefore not possible to impose liability on an operator, and Jernhusen therefore argued that that subsidiary liability likewise could not be imposed on it as the property owner according to Chapter 10 of the Environmental Code. Both the Environmental Court and the Environmental Court of Appeal concurred with Jernhusen's argument, and stated that a property owner's liability for remedial actions cannot extend beyond the liability that an operator carries under Chapter 10 of the Environmental Code. In other words, if an operator cannot be held liable for polluting activities that ended before June 30 1969, a property owner's subsidiary liability will not extend to circumstances before this date.

Owners may incur liability as operator

A property owner's liability is subsidiary to the operator's liability, according to Chapter 10 of the Environmental Code. However, Swedish environmental law encompasses a broad definition of environmentally hazardous activities and thus in certain situations property owners can thus, be considered as operators (polluters) with primarily liability for remedial measures. In such cases property owners will be subject to the polluter pays principle. Such a situation is at hand where property owners become responsible for storage on the property which could be environmentally hazardous, such as landfills and slag heaps, or storage of chemicals in tanks and cisterns. Such storage is classified as an environmentally hazardous activity, for which the property owner could be defined as an operator. Thus, the authorities may impose requirements on a property owner to undertake preventive measures if there is a risk of leakage or similar, or to carry out remedial actions for contamination caused by the stored waste or chemicals – even if the owner has not itself placed or caused the storage at the property.

A property owner can also be primarily liable for contamination if it has in some way contributed to the contamination in question. This could be the case, for instance, when a property owner (or another person, such as a land developer) excavates, builds or undertakes any other measure within a polluted area, and such activities increase the risk of spreading the pollutants. The property owner will in such case be deemed the operator of environmentally hazardous activities under the Environmental Code – even if the activities are intended to decrease or remedy the contamination.

Comment

An acquirer of property in Sweden should thoroughly examine not only whether the property is contaminated, but also whether there is any risk that it might incur subsidiary liability for any contamination, and whether planned or passive (eg, storage) activities on the property could be defined as environmentally hazardous activities, with the attendant risk of remedial liability (and thus considerable costs).

For further information on this topic please contact Mikael Wärnsby or Madeleine Edqvist at Advokatfirman Lindahl KB by telephone (+46 40 664 66 50), fax (+46 40 664 66 55) or email (mikael.warnsby@lindahl.se or madeleine.edqvist@lindahl.se). The Advokatfirman Lindahl KB website can be accessed at www.lindahl.se.