All posts by Eva Maschietto

About Eva Maschietto

Email: [email protected]
Tel: +39 02 87239400
A founding partner in the firm, Eva has assisted national and international clients for more than twenty years in corporate, real estate and extraordinary financial transactions. She has acquired distinguished expertise in civil, commercial, administrative and environmental law.
Eva’s experience includes a partnership in a primary international law firm, as well as, Environmental Risk Manager for General Electric Financial Division in London (GE Commercial Finance). Such experience allowed Eva to acquire a sharp business sense and sensitivity for managing entrepreneurial risk.

Contaminated Lands in Italy

Albeit the “polluter pays” principle regime, the innocent owner is still in an uncomfortable position in our Country.  A way to the future.

Most of the queries posed principally by international investors to corporate and environmental lawyers when analysing the risks of a transaction involving contaminated lands in Italy, relates to the concrete application of the “polluter pays” principle.

Clients are interested in understanding to what extent an “innocent owner” may be involved in the costly and lengthy remediation proceedings related to a contaminated land, knowing that the Italian bureaucratic apparatus is mammoth and, therefore, not being inclined to take on the burdens of such a proceedings.

What Italian lawyers tend to affirm, to this end, is that while in general terms in Italy the “polluter pays” principle applies fully in Italy, the Italian environmental legal system provides for some notable exceptions and corrections to such principle, involving the “innocent owner” of a contaminated land in the expenses for the cleanup and remediation procedures.

Such exceptions are grounded on the fact that there is a number of cases where the “polluter” cannot practically be identified, is unable (for example due to its insolvency status) or simply omits to carry out the remediation actions provided for by the Italian legal system: in all these cases, the Italian regulator had different possibilities to face the situation and retrieve the resources to tackle the activities that are needed.

Obviously the first possibility was to put the remediation burden of the “orphan” contaminated sites on the public agencies, which – in essence – means that the burden would be distributed among the people living within the territorial ambit where the contaminated site is located and correspondent to the local agency jurisdiction.  However, clearly, this solution had the upside of finding always an entity “responsible” (in a general way, but not in connection to a liability) which would have taken care of the remediation costs, but it looked objectively unjust, considering that the population of a determined area, already possibly affected directly by the consequences of contamination, would have been subject to an economic burden to eliminate the source of its own damage.

With a view to facing this inconsistency and to mitigating the relevant economic impact, the Italian legal system has searched and found a different corrective measure, by attaching at least a part of the cost to the subject which – to a certain extent – somehow enjoys the site and, therefore, is (or should be) interested in its remediation and reinstatement into environmentally sound conditions: the owner, on the assumption it be completely innocent with respect to the contamination and regardless of the fact that it was aware of the existence of the contamination itself at the date of the acquisition of the title or thereafter.  The rationale to such measure is to trigger the owner (innocent) to carry out voluntarily the remediation measures necessary to reinstate the property to its original state, or at least to an acceptable state under a risk assessment approach connected to the target use of the property itself, putting a threaten of enforcement of the corrective measure invented by the law.

The contents of this corrective measure – which was introduced for the first time in the first regulations on waste in 1997 – has progressively changed and is now crystallised in the Environmental Consolidated Act as a “real lien” (onere reale) which consist of an encumbrance on the property to which a “special privilege of the credit” (privilegio speciale immobiliare) is attached.

In practice what happens is that the local authority (typically the Municipality) is entitled to register in the Land Registry (where all Italian properties are listed) and in the city planning destination certificate (where also all Italian real estate are registered) the existence and the contents of such encumbrances, evidencing the kind of contamination, the existence of a cleanup obligation (such lien being registered after the approval of the cleanup design) with a view to both rending the lien public and compel the innocent owner to act.

In the unfortunate event that the innocent owner does not take any action, the Municipality can enforce the privilege of the credit and can claim for the reimbursement of the expenses of the remediation activities – which, in this case, would be completed by the Municipality itself – as a consequence of a specific administrative proceeding which has to explain – providing sufficient grounds – the fact that the real polluter (liable for the contamination of the site in the first instance) was not traced or could not be forced to pay for the cleanup expenses.

The innocent owner’s “liability” (under a legal standpoint it is questionable whether this be a real liability, in consideration of its objective character completely disconnected from fault) cannot exceed the fair market value of the site, which needs to be calculated after the remediation proceedings is completed.

As a meagre consolation for the “innocent owner” itself in case it refuses to pays the relevant costs and suffers the expropriation of the land is represented by the recourse to the polluter for the correspondent refund (which in theory, should the agency have carried out the proceeding properly be at this stage really far from reality).

What is interesting is that the national jurisprudence on the “innocent owner” duties tended to expand its liability in the recent years in Italy considering the innocent owner a sort of deep pocket’s player and tending to impose effective active obligations on the same.  Some decisions of the Italian administrative Courts – under the pressure of the agencies which lacked the money to face the remediation costs – had imposed to the innocent owners obligations to perform the remediation activities rather than to reimburse the costs sustained by the agencies themselves.

Luckily a wise stop to this enlarging interpretation was firmly put by the European Court of Justice (referred to by the Council of State in its Plenary Assembly) which confirmed the strict interpretation of the corrective measures of the Italian legal system, limiting it to the consequences of the existence of the “real lien” on the land (onere reale) and the legal privilege of the credit (privilegio speciale immobiliare) to the payment of costs or to the consequent enforcement in case of default.

Specifically on the 4th of March 2015 the third Chamber of the European Court of Justice issued the decision in the case no. C-534/13 related to a preliminary ruling on the interpretation of the “polluter pays” principle stating that in cases where it is impossible to identify the polluter of a plot of land or to cause that person to adopt remedial measures, the competent authority cannot require the owner of the land (who is not responsible for the pollution) to adopt preventive and remedial measures, that person being required merely to reimburse the costs relating to the measures undertaken by the competent authority within the limit of the market value of the site, determined after those measures have been carried out.

Too little time has passed to see whether the agencies and the national courts have completely abided by the educations of the European Court of Justice which – this time – has ruled favouring a more certain scenario for innocent owners of contaminated sites, enhancing the chances of the international investors to rely on their lawyers advice which, more and more, should be addressed to comfort and reassurance.

We are certainly on this side and believe that the enterprises have a proper full right to invest where the environmental law is interpreted according to its rationale, providing the elements to assess all the risks in carrying out extraordinary real estate or M&A  transactions in Italy and taking the appropriate measures to face them.