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INECE SECRETARIAT STAFF 299

1 INTRODUCTION

The article begins by surveyingvariations on the traditional remedy ofmoney damages. It then discusses theappropriateness of alternatives such asrestitution, injunction and declaratory reme-dies. This discussion is followed by anoverview of the penalty options available to

policy makers for harms to the environmentand/or persons and for non-compliancewith environmental laws and regulations.The article provides a background analysisof the critical formulation of civil penalties,with the aim of ensuring that the economicbenefit of non-compliance is outweighed bythe punishment facing regulated entities fornon-compliance. Mitigating and aggravat-ing factors in individual cases are also con-sidered. This analysis is followed by a dis-

cussion of the differences between criminaland civil penalties and the appropriatenessand underlying bases of each form ofpenalty. Finally, the article offers a brief dis-cussion of alternative penalties available topolicy makers, in addition to the traditionalcriminal and civil penalties available, bysurveying environmental enforcementalternatives in use by environmentaladministrators in the United States andCanada.

2 TYPES OF REMEDIES

2.1 Damages

Damages are a financial remedyadministered with the aim of providing theplaintiff with monetary compensation equiv-alent to his or her losses resulting from theactions of the defendant.1 Types of dam-ages include:

—General Damages: The market value

of the damage to the plaintiff caused bythe defendant (e.g., the differencebetween the market value of a propertyimmediately before a harm and itsmarket value after the harm2).

—Consequential Damages: Thosedamages incurred after the initial lossas a direct consequence of the initialharm. These damages are usually usedwhen the full value of the loss cannot becalculated by market mechanisms or

when the full value of the loss is notrepresented in the calculation of marketloss.3

—Substitution Cost: Used when thereis a large difference between thereplacement value and market value ofa property to the plaintiff (e.g., when aparticular piece of property has anunquantifiable sentimental value to itsowner4).

—Punitive or Exemplary Damages:Intended to punish the defendant, in

PENALTIES AND OTHER REMEDIES FOR

ENVIRONMENTAL VIOLATIONS: AN OVERVIEW

INECE SECRETARIAT STAFF

2141 Wisconsin Ave. NW, Suite D2 Washington, DC 20007, [email protected]

SUMMARY

This article provides an overview of the functions and unique features of penaltiesand other remedies available to legislators, administrators and judges who seek to enforceexisting environmental laws and regulations and/or to deter, both generally and specifical-ly, future non-compliance.



addition to compensating the plaintiff,and deter future wrongs by thedefendant and others.

—Standardized Damages: Damages

generally provided under a statutoryframework, but calculated for theparticular plaintiff.5

—Litigation Costs: These damages allowa party to recover reasonable attorney’sfees accrued in the course of litigation.They are frequently provided for undercivil rights, employment discriminationand environmental statutes.

—Adjustments for Time Differentials:When interest and present value

are used to calculate compensationpayments made to the plaintiff forinjuries occurring long after the initialharm has occurred or for future harm.

—Adjustments for Benefits Reaped orHarms Avoided by the Plaintiff: Plaintiffusually has a responsibility to takereasonable measures to avoiddamages.

2.2 Alternative Remedies

2.2.1 Restitutional Remedies

Restitutional remedies are a formof damages used to prevent unjust enrich-ment by making defendants give up whatthey wrongly obtained from plaintiffs.6

Restitution can take on a punitive elementwhen the restitution exceeds both the plain-tiff’s losses and the defendant’s gains.

—Restitution in Specie: Where restitution

is in-kind rather than money damages.—Measurement of Defendant’s Benefits:

Measures the increased assets in thehands of the defendant from the receiptof property.7

—Market Value: Measures the marketvalue of services provided to defendantregardless of their value to thedefendant.

—Use Value: Measures the value of any

benefits received by the defendant asmeasured by market indicators or actual

gains to the defendant.

—Gains Realized: Measures the actualgains realized by the defendant uponthe sale or transfer of an asset received

from the plaintiff.—Savings or Profits: Measures the

value of savings or profits earned bythe defendant in the use of assetsreceived from the plaintiff. This is anextraordinary remedy because of thedifficulty in separating the defendant’sefforts from the plaintiff’s assets.

2.2.2 Coercive Remedies

Typified by an injunction, this type

of remedy coerces the defendant to act ornot act under threat of being found in con-tempt, which subsequently results in finesor imprisonment.8

—Specific Performance: Compelsdefendant to perform or not to performa specific action ordered by the court.

—Structural Injunction: Used to restorepublic institutions such as schools orprisons and to force compliance with

constitutional or statutory requirements.—Provisional Injunctions: Temporary

restraining orders and preliminaryinjunctions issued before a trial beginsto prevent some irreparable harm oralleviate the threat of an imminentemergency.

2.2.3 Declaratory Remedies

An authoritative and reliable state-ment of the parties’ rights with no award of

damages, restitution or injunction. Thisremedy is often useful in contract caseswhen the parties need to know their rightsand duties under the contract or when a cit-izen is confronted with regulation that maybe unconstitutional and seeks to clarify thevalidity of the regulation without firstbreaching that regulation.9

3 PENALTIES

3.1 Civil PenaltiesCivil penalties are fines, payable to

300 SEVENTH INTERNATIONAL CONFERENCE ON ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT




the government, following a breach of therelevant governing statute. The underlyingpolicy consideration when applying civilpenalties requires the administrator to cal-culate the economic benefit of non-compli-

ance and ensure that the penalty burden isat least as great as the benefit of the viola-tion, so that there is a compelling motiva-tion for compliance.10 Considerationsinclude the benefit that the violator receivesfrom delayed compliance and other bene-fits of non-compliance.11 In calculating theappropriate severity of civil penalties,administrators should address circum-stances in which benefits arise in factorsother than cost savings.12 There are very

few circumstances where the economicbenefit of noncompliance will be mitigat-ed.13

3.1.1 The Gravity Component:

While the economic benefit compo-nent ensures that a company cannot profitfrom its violations, the gravity componentreflects the seriousness of the violation.The following components are consideredwhen calculating the gravity factor:

—Actual or Possible Harm: This factorcontains within it a number of sub-factors that attempt to determinethe likelihood that the activity of thedefendant actually resulted or waslikely to result in a violation.

—Toxicity of the Pollutant.

—Sensitivity of the Environment.

—Overall Severity of the EnvironmentalHarm.

—Length of Time of the violation: Apenalty is assessed for each separateviolation as well as the length of timethat the violations occurred.

3.1.2 Adjusting the Gravity Component

Establishing consistency and rea-sonable expectations with respect to thetreatment of the regulated community is apolicy goal of the civil penalty system. But

there must also be flexibility within thepenalty assessment process to account for

particular circumstances of a given situa-tion. The following factors promote flexibili-ty among the regulated community byadjusting the gravity factor for such circum-stances as:

—Degree of willfulness or negligence:This factor can only increase theseverity of the penalty. It considers thefollowing:

• The degree of control the violatorhad over the events constituting theviolation.

• The foreseeability of the eventsconstituting the violation.

• The level of sophistication within theindustry in dealing with complianceissues or the accessibility ofappropriate control technology (ifthis information is readily available).This should be balanced against thetechnology-forcing nature of thestatute, where applicable.

• The extent to which the violator infact knew of the legal requirementthat was violated.

—Degree of Cooperation: This factorcan aggravate or mitigate the penaltyand will be based on the followingsub-factors:

• Prompt reporting of noncompliance.

• Prompt correction of environmentalproblems.

• Cooperation during pre-filinginvestigation.

—History of noncompliance: This factor

may only be used to raise a penalty. Itconsiders the following factors:

• Similarity of the violation in questionto prior violations.

• Time elapsed since the priorviolations.

• The number of prior violations.

• Violators’ response to prior violationswith regard to correcting the previousproblem and attempts to avoid futureviolations.



• The extent to which the gravitycomponent has already beenincreased due to repeat violations.

—Environmental damage: Used where

the environmental damage is so severethat it is not sufficiently covered by thegravity component.

—Ability to Pay: Generally, administratorswill not assess fines that are beyond acompany’s means to pay, and mayadjust penalties accordingly. The burdenof proving the inability to pay is on theviolator.

—Strict Liability: For some regulatedpollutants that pose grave threats to the

environment and human populations(e.g., toxic and hazardous pollutants),administrators enforce penalties undera theory of strict liability. Under thistheory, any party who contributes toa hazardous waste site (generates,transports, stores or disposes), can beheld liable for the entire cost of thecleanup, regardless of the magnitude ofthat party’s contribution. However, in sit-uations where there are multiple poten-

tially responsible parties, the administra-tor will attempt to identifyand resolve the liability of the smallercontributing parties early in the process.The harshness of the enforcementscheme can be mitigated byimplementing a de minimis exemptionto the settlement policy, which exemptsthe smallest contributors from liabilitysubject to certain conditions.14

3.2 Criminal PenaltiesPunitive by nature, criminal reme-

dies tend to utilize fines or imprisonmentrather than damages or restitution. Criminallaws focus on immorality and state of mind,while tort laws focus on compensation. Afurther distinction is that criminal remediestend to be imbued with moral culpability.The justifications for tort and criminal lawdiffer in that tort law focuses on compensat-ing a victim for damages that have

occurred or likely will occur, while criminallaw focuses on protecting the public from

harm by punishing harmful results that willor probably will occur from defendant’sconduct.

3.2.1 Appropriateness of Civil or

Criminal Penalties

Criminal law punishes a broadrange of activities. A threshold question indetermining whether criminal or civil penal-ties are appropriate focuses on which formof punishment provides the most practicaland effective means of coercing thedesired behavior.

Function of Criminal Penalties:Criminal penalties can seek retribution,social condemnation, specific deterrence,general deterrence, protection of third par-ties, and payment of compensation or repa-ration. Thus it serves a much broaderrange of functions than civil damages.15

Standard of Proof: Generally atcommon law, the burden of proof in civilcases need only balance the probabilitiesin favor of the defendant’s guilt. Criminalcases however, usually require prosecutorsto prove the defendant’s guilt beyond a rea-sonable doubt.

3.2.2 Underlying Bases ofCriminal Punishment

There are two possible routes to acriminal sanction for environmental viola-tions. One is through the conventional crim-inal codes. Another consists of acts that arespecifically made punishable through thevarious environmental statutes.16

—Severity of Punishment: The severity

of criminal offenses are not solelydefined by the resulting punishment,but are frequently classified asfelonies or misdemeanors prior tothe administering of punishment.

—Felonies: Felony offenses usuallyrequire the defendant to “purposely,”“knowingly,” or “recklessly” violate thelaw and generally carry more severesentences and fines.

—Misdemeanors: Misdemeanor offenses

often require less culpability on the partof the defendant and can be prosecuted





when the defendant “negligently”commits an act or omission.Alternatively, misdemeanors canalso be prosecuted where a defendant“purposefully,” “knowingly,” or

“recklessly” commits an act or omissionwhich has less deleterious effectsthan a felony offense.

3.3 Alternatives to Civil & CriminalPenalties – U.S. &Canadian Models

3.3.1 Supplemental EnvironmentalProjects in the United States

The purpose of SupplementalEnvironmental Projects is to encourageand obtain environmental and public healthprotection and improvements that may nototherwise have occurred without the settle-ment incentives provided by the policy.17

In evaluating a proposed Supple-mental Environmental Project, administra-tors may follow an evaluation process sim-ilar to that of the U.S. Environmental Pro-tection Agency (EPA), which follows the fol-lowing four-step process:18

—Ensure the Project Meets the BasicDefinition of a SupplementalEnvironmental Project. This means itmust improve, protect or reduce risks topublic health, or the environment atlarge. The primary benefit of the projectmust be to the public health or theenvironment, rather than benefitsaccrued by the regulated violator.Further, Supplemental EnvironmentalProjects cannot include actions that

the defendant is likely to be required toperform as injunctive relief in the instantcase, as injunctive relief in another legalaction that EPA or another regulatoryagency could bring, as part of anexisting settlement or order in anotherlegal action, or by a state or localrequirement.

—Ensure that All Legal Guidelines areSatisfied:19 The project cannot beinconsistent with any provision of theunderlying statutes and must either:advance an objective of the environ-

mental statutes that form the basisof the action; by design, reduce thelikelihood of similar violations; reduce

the adverse impact that the violationcontributes to; or reduce overall risk

potentially affected by the violation.

—Other Requirements: A project cannotuse funds to satisfy obligations of afederal agency, nor spend moneyon projects that might circumventlimitations on federal funding.

—Commitment to perform a SupplementalEnvironmental Project may mitigatethe penalty assessed.20 However,the final penalty should meet some

minimum amount established by theadministrator. In calculating the finalsettlement penalty, the administrator,within its discretion, may mitigatethe penalty in response to theviolator undertaking a SupplementalEnvironmental Project. The U.S. EPAutilizes the following formula:

Final Settlement = Settlement amount –(Supplemental Environmental ProjectCost x Mitigation Percentage)

The following broad project cate-gories illustrate some of the aims of a Sup-plemental Environmental Project:

—Public Health: Providing diagnostic,preventative or remedial health care(e.g., community medical treatment,therapy or studies).

—Pollution Prevention: Reduce theamount or toxicity of the pollutionproduced (e.g., improvements inrecycling, treatment and disposaltechniques).

—Environmental restoration andprotection: Improve the land, airor water at natural or man-madeenvironments affected by the violation(e.g., conservation or remediation ofresources not otherwise mandatedby law).

—Assessments and audits: Examine

internal operations to determine if otherpollution problems exist or if operations



could be improved to avoid futureviolations (e.g., pollution preventionassessments, environmental qualityassessments, or environmentalcompliance audits with requirements

to correct any discovered violations).

—Environmental compliance promotion:Help other companies achievecompliance and reduce pollution(e.g., seminars, publications, trainingor technical support).

—Emergency Planning and Preparedness:Assist state or local emergencyresponse or planning agencies tofulfill their duties under the Emergency

Planning and Community Right to KnowAct (e.g., non-cash assistance such astraining or equipment).

3.3.2 Environmental ProtectionAlternative Measures in Canada

Environmental Protection Alterna-tive Measures, as provided by the Canadi-an Environmental Protection Act of 1999,are an alternative to court prosecution.Environmental Protection Alternative Mea-

sures under the Act divert the accused –whether a company, individual or govern-ment agency – away from the courtprocess after the entity is charged, and intonegotiations between the accused and theAttorney General of Canada, in consulta-tion with the Minister of the Environment.The Environmental Protection AlternativeMeasure will contain measures that theaccused must take in order to restore com-pliance.

Examples of those measuresinclude:

—Development of pollution preventionmeasures to reduce releases of a toxicsubstance down to regulated limits;

—Installation of better pollution controltechnology or monitoring systems;

—Changes to production to ensurecompliance with regulatoryrequirements; and

—Clean-up of environmental damage.Not every alleged offender is eligi-

ble for an Environmental Protection Alter-native Measure.

4 REFERENCES

1 Dobbs, Dan B., Dobbs Law of Remedies3 (1993).

2 Id. at 288.

3 Id. at 289.

4 Id.

5 Id.

6 Id. at 5.

7 Id. at 566.

8

Id. at 6.9 Id. at 10.

10 Riesel, Daniel. Environmental Enforce-ment: Civil and Criminal § 4.05 (5th ed.1999).

11 Memorandum from the Kathie A. Stein,EPA Office of Enforcement and Compli-ance Assurance, to Regional DivisionDirectors 5 (July 23, 2002) available ath t tp : / /www.epa .gov /comp l iance / resources/policies/civil/caa/stationary/ penpol.pdf.

12 Id.

13 Id.

14 Memorandum form Barry Green, Officerof Site Remediation enforcement, U.S.EPA and Bruce Gelber, EnvironmentalEnforcement Section, U.S. Dept. of Jus-tice, to Regional Directors, Revised Set-tlement Policy and Contribution WaiverLanguage Regarding Exempt DeMicromis and Non-exempt De Micromisparties (Nov. 6, 2002) available athttp://www.epa.gov/Compliance/resources/policies/cleanup/superfund/wv-exmpt-dmicro-mem.pdf.

15 Woods, Michael and Richard Macrory,Environmental Civil Penalties: a MoreProportional Response to RegulatoryBreach, Faculty of Laws, University Col-lege of London, 11 (Nov. 2003) available

at http://www.ucl.ac.uk/laws/environ-ment/civil-penalty/index.html.





16 Riesel, Daniel. Environmental Enforce-ment: Civil and Criminal § 6.02 (5th ed.1999).

17 Memorandum from the Steven A. Her-

man, EPA Office of Enforcement and

Compliance Assurance, to RegionalAdministrators 1 (May 1, 1998) availableat http://www.epa.gov/Compliance/ resources/policies/civil/seps/fnlsup-hermn-mem.pdf

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