There is growing recognition in Russia that the former Soviet drive to industrialize and maximize production as rapidly as possible had a high cost in terms of environmental damage. Repairing such damage requires action of a massive scale. Russia has recognized that legislation has an important role to play in this and has introduced a law and regulations intended to limit further harm.


The preamble to the law "On Environmental Protection," passed in December 1991, states that its purpose is to ensure environmental safety in accordance with basic principles that include the primacy of human life, rational use of resources and the prevention of irreversible environmental damage.


The law provides three main mechanisms for exercising control: permits, emissions standards and payments. It also envisages credits and other privileges for enterprises that introduce conservation technologies.


Every enterprise using the environment for economic purposes must enter into an agreement with the local authority. The agreement, which forms the basis of the permit issued by the Environment Ministry, will set out the authorized uses, the term and method of exploitation of the resources, the payments and compensation for damage. Limits are set on emissions according to the geographic region and the waste-disposal techniques used by the enterprise. The aim is to move towards setting a ceiling on emission levels, but as this cannot always be achieved immediately, temporary limits can be agreed.


The payments include a fee for the right to use the resources, for use above the agreed limits and for reinstatement and protection of the environment. Payments do not exempt enterprises from the responsibility to implement conservation measures nor from liability. Liability takes three forms: administrative, punishable by fines for violations; civil, providing compensation for harm which can include emotional injury, infertility and birth deformities; and criminal, which involves the personal liability of the responsible official, not of the company, and for which the penalties include imprisonment.


Companies which plan large-scale developments that may negatively affect the environment must obtain and comply with an environmental appraisal. The ministry can enforce compliance with the appraisal.


It will be a long time before the legislation has much impact. Nevertheless, the concerns are real and investors should therefore consider whether there is any existing liability for environmental damage and how they can be protected from inheriting responsibility for problems that predate their investment.





Marcia Levy, an attorney with Norton Rose, has been practicing law in Moscow for three years.