Will Your Company Survive When It Strikes? - Part 2
Navigating the Legal Ramifications of Environmental Disasters and Safeguarding Company Rights
18.09.2023
In the first part of this article published earlier, we examined the legal measures necessary to mitigate the risks associated with potential environmental disasters and explored the reasons behind companies' need for proactive preparedness. These measures include crafting emergency response plans, forming dedicated response teams, establishing effective communication protocols, and conducting regular training and drills to ensure a swift and efficient response in the event of an environmental catastrophe. We also emphasized the importance of risk assessments, particularly Environmental Impact Assessments (EIA) and Environmental Risk Assessments (ERA), in identifying and mitigating workplace emergencies. You can access the first portion of this article here.
In this second part, we will explore approaches to mitigating the legal consequences of environmental disasters and examine solutions to protect the interests of companies impacted by or connected to such incidents.
Liability Considerations
Determining liability is often complex and contentious when an environmental disaster occurs. In Türkiye, companies may be held legally responsible for the environmental damage caused by their activities. To minimize potential liability, companies must be proactive and prepared. Here are some key liability considerations:
Compliance with Environmental Regulations: The first line of defense against liability is strict compliance with environmental regulations. Companies must ensure that they adhere to all relevant laws and regulations, including those related to emissions, waste disposal, and hazardous materials management.
Documentation and Record-Keeping: Maintaining accurate and comprehensive records of environmental compliance efforts is essential. These records can serve as evidence of a company's commitment to environmental responsibility.
Insurance Coverage: Companies should consider obtaining environmental liability insurance to protect themselves in case of environmental incidents. This type of insurance can help cover the costs associated with cleanup, restoration, and potential legal liabilities.
Due Diligence in Mergers and Acquisitions: When acquiring or merging with another company, due diligence should include a thorough assessment of the environmental liabilities of the target company. Failing to identify and address these liabilities can result in unexpected legal and financial consequences.
Sanctions Imposed for Causing Environmental Damage
In 2009, a survey was conducted on the environmental responsibility of companies in Türkiye. For the research, 82 companies with high public awareness and brand recognition spanning various business sectors were selected. Out of these, 28 domestic and international companies responded to the questionnaire within the designated timeframe. According to this research, a striking 64% of these companies acknowledged their contribution to environmental pollution, whether directly or indirectly.[1] This underscores companies' awareness of their environmental impact.
Under these circumstances, it becomes inevitable that various (criminal, administrative, and civil) sanctions will be imposed against companies responsible for environmental disasters. These sanctions are framed within the regulatory framework outlined in environmental legislation.
Criminal and Administrative Sanctions
First and foremost, it is essential to mention criminal sanctions, as they constitute the primary punitive measure against companies found guilty of environmental pollution. These sanctions can encompass fines, temporary or permanent suspension of operations, and even complete closure. Their purpose is to hold both companies and responsible individuals accountable.
According to Turkish Constitution Article 56 "Everyone has the right to live in a healthy, balanced environment. It is the duty of the state and citizens to improve the natural environment, and to prevent environmental pollution." Legal liability for polluters is regulated by Environmental Law no. 2872 which establishes the legal responsibility and liability of individuals, companies, and public institutions for environmental pollution and damage. It defines various forms of liability, including criminal, administrative, and civil, for violations of environmental regulations.
Firstly, the polluters are liable to public institutions and organizations for environment pollution, irrespective of whether they are at fault. The polluter is obligated to cover expenses incurred by public entities resulting from their actions. Secondly, the polluters are also liable for damages caused to individuals. This liability is categorized as tort liability, and the fault element is not a prerequisite. Even if a polluter takes all necessary precautions to prevent pollution, they cannot absolve themselves of liability, making it crucial to understand that there is no escape from both forms of liability.[2]
Additionally, administrative sanctions, including fines, suspension of activity permits, and temporary or permanent shutdowns, may be imposed for violations of environmental responsibilities outlined in relevant legislation.
Suspending or Regulating Company Activities: Suspending or regulating company activities after environmental disasters serves as another form of sanction. Relevant authorities can impose measures such as operational closure, permit adjustments, or more stringent inspections to prevent recurrence and ensure compliance with environmental regulations. These measures encourage the fulfillment of environmental obligations and aim to prevent future environmental catastrophes.
The aforementioned sanctions carry substantial consequences, as exemplified by the environmental disaster in Giresun. In this case, the Ministry of Environment and Urbanization imposed the maximum fine of 12 million Turkish Liras and banned the mining company responsible for releasing copper and zinc waste into the environment from further operations. This case underscores the severity of defaulting on environmental responsibilities. Therefore, strict compliance with environmental legislation and diligent monitoring of license and permit requirements are imperative for a company's continued operations.
Risk of Financial and Reputational Loss
Companies can also be held accountable for remediating the effects of environmental disasters and compensating both material and non-material damages incurred by affected individuals or public authorities due to their illegitimate activities.
Beyond financial losses, environmental disasters can significantly damage a company's image and reputation. These events can lead to long-term commercial consequences, including the loss of customers, a decline in stock value, and strained relationships with suppliers and business partners. Hence, it is essential for companies to engage in social responsibility activities related to environmental protection and adhere to environmental legislation to safeguard their image and enhance their reputation.
According to a study, 89% of companies reported benefiting from social responsibility activities in environmental protection through improved environmental image, heightened customer satisfaction, and enhanced product-service quality.[3]
As elaborated in detail above, legal sanctions against companies involved in environmental disasters encompass criminal, administrative, and civil consequences. These sanctions can result in fines, suspension, or even permanent closure for companies responsible for environmental pollution. Taking preventive measures alone does not absolve companies of liability, necessitating the importance of legal counsel. Additionally, companies may be required to compensate affected parties and may suffer reputational damage, customer loss, and disruptions in business relationships. Consequently, it is imperative for companies to engage in social responsibility activities and prioritize environmentally friendly practices to protect their image and reputation. By doing so, companies can mitigate the risks associated with ecological disasters, improve their environmental image, enhance customer satisfaction, and elevate overall product-service quality.
Cooperation with the Authorities
Companies must cooperate fully with authorities when investigations are launched into environmental disasters. Turkish Penal Code Article 253 regulates the investigation and prosecution processes related to environmental crimes. In this context, providing the necessary information and documents to authorities is vital for the proper progression of the investigation. Evidence collection and preservation are equally crucial steps, with authorities usually handling the collection. However, this process may vary based on factors such as the disaster type, local authorities' capabilities, and legal requirements. Therefore, companies affected by environmental disasters should ensure that evidence related to the incident is thoroughly collected and preserved. This evidence can encompass photographs, videos, laboratory analysis results, and witness statements, all of which must be recorded accurately and comprehensively. Furthermore, records documenting the disaster's effects, including information from the date of the incident, monitoring impacts, and interventions, need to be meticulously organized.
In the aftermath of a disaster, assessing and documenting its impacts is a critical step in understanding the extent of environmental damage and taking appropriate action. Environmental experts, consultants, or relevant authorities can provide valuable support in this process. Adherence to relevant legislation and appropriate methodologies is paramount.
Applying for Remedies and Protection of Rights
In the event of an environmental disaster, two primary aspects need to be addressed:
- Actions to protect a company's rights, assuming the company is affected by a third party-caused environmental disaster.
- Legal remedies and protecting a company's rights against penalties for directly or indirectly causing an environmental disaster.
When a company is affected by an environmental disaster, several steps can be taken to seek compensation for damages. The first step often involves insurance claims. Insurance companies typically offer policies covering events such as natural disasters. Companies that have previously purchased these policies can file for compensation directly with their insurers in case of damage. Additionally, government agencies may establish relief and support programs to cover losses resulting from natural disasters. These programs enable disaster victims or affected companies to apply for financial assistance.
Litigation represents another avenue. When a company believes it has suffered damage due to an environmental disaster caused by a third party, initiating legal proceedings may be necessary. The lawsuit process before the court involves preparing and presenting legal arguments, presenting evidence, establishing environmental damage, identifying damage to the aggrieved party, and obtaining a verdict. The court will assess the impact of the disaster and determine the appropriate compensation for the claimant company. Identifying damage, analysing the disaster's effects, and calculating costs are all critical for a strong claim presentation.
For companies that may have directly or indirectly caused an environmental disaster, a different strategy must be established. In such cases, a separate procedure is followed, and the possibility of facing criminal proceedings should be considered. If state authorities or environmental protection agencies find violations of environmental legislation, penalties such as administrative fines, activity suspension, or civil sanctions may be imposed.
Polluters bear responsibility that can stem from multiple sources of liability, with some rooted in strict liability. Hence, it is imperative for companies to establish robust environmental policies and implement a comprehensive array of preventative measures. In the event of potential risks or disasters, it becomes crucial for companies to promptly seek legal counsel to safeguard their rights, tailoring their actions to the unique circumstances of each case.
Alternative dispute resolution, such as arbitration or mediation, is also becoming increasingly favoured. These methods can efficiently, and cost-effectively resolve disputes between parties. It is crucial to note that specialized legal support is essential to initiate, conduct, and conclude procedures for such remedies.
Conclusion
The increasing frequency of environmental disasters necessitates global and national governments to enact specific regulations in line with sustainable development principles. This raises the importance of companies' compliance, as violations can lead to serious legal consequences, including criminal sanctions, liability for damages, and business closure.
To navigate this landscape effectively, companies should seek expert legal support, develop strategies for regulatory compliance and risk mitigation, and explore legal options when facing sanctions. Environmental awareness not only enhances reputation but also provides a competitive edge, with sustainable practices offering economic benefits.
By allocating resources to eco-friendly initiatives, businesses can invest in sustainable technologies and implement comprehensive environmental management protocols while remaining compliant with regulations. Simultaneously, human resources can contribute their expertise to formulate and execute strategies, heighten awareness, and foster a culture of corporate environmental responsibility.
Effectively combatting global-scale environmental disasters stands as an essential endeavour for the well-being and sustainability of businesses, society, and our planet as a whole (Spinaci, 2023). Compliance is no longer optional—it's imperative for survival.
With thanks to Berfu Almina Karagöl for her assistance.
References
Başar, D. (2021, February 24). Legal Quality of the Environmental Pollution and Competition of Responsibility Reasons in Environmental Liability Law (Available only in Turkish). Retrieved from https://dergipark.org.tr/en/download/article-file/1684796
Cavlı, M. (2009). Environmental Responsibilities of Companies in Turkey within the Context of Corporate Environmentalism (Available only in Turkish). Retrieved from https://dspace.ankara.edu.tr/xmlui/bitstream/handle/20.500.12575/29791/6221.pdf?sequence=1&isAllowed=
Güdük, Z. (2017). Legal Liability of Environmental Polluters in Turkish Legislation (Available only in Turkish). Retrieved from TBB Dergisi: http://tbbdergisi.barobirlik.org.tr/m2017-130-1659
NTV Haber. (2021, 12 04). Record Penalty for the Environmental Disaster in Giresun (Available only in Turkish). Retrieved from https://www.ntv.com.tr/galeri/ekonomi/giresundaki-cevre-felaketine-rekor-ceza,ylD4MQzVhkOEUl5szWkBIA/4XnLiBBm6UCse6XXEI_6lQ
Spinaci, S. (2023, May). Corporate sustainability due diligence. Retrieved from www.europarl.europa.eu/RegData/etudes/BRIE/2022/729424/EPRS_BRI(2022)729424_EN.pdf
The Communiqué on Internal Emergency Plans to be Applied in Major Industrial Accidents (Available only in Turkish). (2020, August 15). Retrieved from The Official Gazette: https://www.resmigazete.gov.tr/eskiler/2020/08/20200815-6.htm
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Kemal Altuğ Özgün
Managing Partner
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Işkın İdil Kunt
Associate