The Supreme Court Restores the Effects of Environmental Insurance

On December 11, 2014, the Argentine Supreme Court of Justice (the “Court”) repealed a precautionary measure[1] that had suspended the effects of Decree No. 1,638/2012 and of Resolution No. 37,160/2012 issued by the Argentine Superintendence of Insurance (the “SSN”, after its acronym in Spanish). Such regulations had created a new legal regime for environmental insurance (the “New Regime”).

The precautionary measure, originally ordered by the Lower Federal Court No. 9 in Administrative Matters, had suspended the New Regime and at the same time, had ordered the SSN to adopt the necessary proceedings to request -before approving insurance policies- the environmental approval by the Secretariat of Environmental and Sustainable Development (the “Environmental Secretariat”), and to verify the technical ability to remediate the environment,  by means of contracts with authorized operators, in accordance with the regime in force. The Court of Appeals in Administrative Matters (the “Court of Appeals”) confirmed the judgment by stating that the requirement to take out environmental insurance, provided in Section 22 of Law No. 26,675, generates an obligation to recompose on the insurance company, and does not generate a financial guarantee to recompose the collective environmental damage.

The Court, in the first place, made reference to precedents that state that although the resolutions related with precautionary measures are not final judgments, when such resolutions cause a grievance that may not be subject to appropriate remedy, or when they may disrupt the coercive power of the State or when they exceed the individual interest of the parties and affect the community as a whole, such principle backs down. In this case, the Court considered that the ruling of the Court of Appeals seemed to be definitive, because it prevents competent authorities from enforcing a decree of the Argentine Executive Branch, compromising the powers granted by the Argentine Constitution.

Also, the Court understood that the challenged ruling is a case with institutional gravity, since it goes further than the pure interest of the parties, having direct effects on the republican principle of separation of powers.

With respect to the requirements that the precautionary measure must comply with, the Court stated that the legal basis given by the Court of Appeals to prove the existence of legal plausibility was dogmatic and inadequate. In that regard, the Court pointed out that “the dogmatic statement ‘the way the system is designed leads to a regime based on the insurance company, [and] the obligation to adopt the necessary measures to satisfy the need to prevent and remediate by retaining operators’ given by the Court of Appeals is not sufficient to prove legal plausibility”.

Likewise, the Court argued that the conclusion reached by the Court of Appeals, whereby it is for the insurance company to prevent and restructure the collective environmental damage, violates Section 22 of Law No. 25,675 that expressly foresees that the environmental insurance must be taken out to guarantee the financing of the remediation of the environmental damage. It also contravenes Section 28 of the same law that establishes that the obligation to remediate the environment belongs to that who generated the damage.

So, the Court argued that the conclusion reached by the Court of Appeals was to be objected under the “liability principle” contained in Section 4 of Law No. 25,675[2] and the other regulations of the liability regime for environmental damage derived from Sections 28 and 29 of Law 25,675 and Sections 10 and 40 to 43 of Law No. 25,612 of Comprehensive Management of Industrial and Service Activities’ Waste.

Regarding the urgency in obtaining a precautionary measure, the Court considered that the Court of Appeals had failed to make a strict appreciation of the circumstances of the case, requisite specially required when the preliminary measure affects erga omnes the applicability of a Decree enacted by the Argentine Executive Branch. In that sense, the Court said on several occasions that a comprehensive appreciation of the compromised reality was to be made aiming at clearly establishing if the consequences that may derive from the incidents to be avoided could affect the subsequent recognition of the right at stake.

The Court reached the conclusion that the preliminary measure was disproportionate and that the Court of Appeals should have considered that a measure that suspended the applicability of the New Regime and ordered the adoption of a certain technical aptitude verification system, would have a significant effect over the constitutional principle of separation of powers, so its merits should have been evaluated with particularly strict criteria.

Finally, the Court ordered to send the file back to the Court of Appeals for a new ruling with reasoned grounds that sustain it as a constitutionally valid act.

As of this decision of the Court, the New Regime should be applicable again. However, it is important to note that the Environmental Secretariat recently enacted Resolution No. 999/2014[3] that established –following the line adopted by the Court of Appeals in the case that was recently dismissed by the Court- that insurance companies must fulfill certain requirements to sell environmental insurance; among them: a) proof of “technical ability” (through contracts with remediation agents / hazardous waste operators); b) obtaining the prior environmental approval; c) other requisites, as proof of a certain solvency. This Resolution also established a 90-business-day term for companies to fulfill these new requirements. The term, in principle, will be due on 02/20/2015.

[1] Case “Appeal filed by the defendant in re: Fundación Medio Ambiente v Argentine Government – National Executive Branch – Decree No. 1638/12 – SSN – Resolution No. 37160, in re: autonomous precautionary measure” (Supreme Court of Justice 219/2013). The main case is “Fundación Medio Ambiente v Argentine Government – National Executive Branch – Decree No. 1638/12 – SSN – Resolution No. 37160, in re: autonomous precautionary measure” (No. 56432/2012), Lower Federal Court No. 9 in Administrative Matters.

[2] “The generator of degrading effects on the environment, present or future, is liable for the preventive and corrective remediation actions”.

[3] For more information about this Resolution see our issue #144 of Marval News.