“‘Environment & Climate Change Law 2016:ENV16_Chapter 10 – Costa Rica” , is an article by Partner Roberto Cordero C., and Senior Associate Lindsay Ryan V. PhD., recently published at: The International Comparative Legal Guide.
1 Environmental Policy and its Enforcement
1.1 What is the basis of environmental policy in your jurisdiction and which agencies/bodies administer and enforce environmental law?
Article 50 of the Costa Rican Constitution points out that every person is entitled to a healthy and ecologically balanced environment. Therefore, it is legitimate to denounce acts that violate that right and to demand reparation of the damage caused. This is to say that the State should guarantee, defend and preserve that right.
Our environmental policies are based on the 1995 Organic Environmental Act No. 7554. This Law aims to ensure conservation, continued sustainable use of natural resources, to promote inclusive economic development, expand social participation for the conservation and management of biodiversity, as well as the fair and equitable sharing of the benefits derived. Furthermore, it states that whoever pollutes the environment or inflicts damage to it is liable and subject to penalty, under the established law of the Republic and international agreements.
According to Act No. 7554, the governing body concerning environmental policy, in charge of protecting and managing the natural resources, is the Ministry of Environment and Energy (MINAE).
Furthermore, this law creates the National Environmental Council as a deliberative body with advisory functions on environmental policy to the President of the Republic, and two decentralised bodies of MINAE: first, the National Environmental Technical Secretariat (SETENA), the fundamental purpose of which is to harmonise environmental impact with production processes; and second, the Environmental Administrative Court, with exclusive jurisdiction and functional independence, whose main objective is to ensure compliance with the laws protecting the environment and our natural resources.
Our legal system also includes other sectorial authorities with environmental jurisdiction, such as the Costa Rican Institute of Aqueducts and Sewers, the Ministry of Health, the Environmental Prosecutor and the Ministry of Agriculture and Livestock.
1.2 What approach do such agencies/bodies take to the enforcement of environmental law?
The SETENA, through the Department of Environmental Assessment (DEA), implements the process of Environmental Impact Assessment (EIA). This is a technically scientific and administrative procedure to identify and predict what effects a particular activity, work or project will have on the environment, to establish whether it should be approved or rejected by the EIA.
The resolutions of the SETENA are mandatory for individuals, entities and for public organisations. In addition, the SETENA provides the tools and resources to monitor compliance with the resolutions of the EIA, and if its contents are violated, it can order the suspension of works and can even execute the guarantee of compliance, issued in the EIA, which represents 1% of the total investment.
On the other hand, the Environmental Administrative Court, through environmental resolutions and reconciliations, exhausts administrative procedures, and their resolutions are of strict and mandatory compliance and cannot be appealed.
1.3 To what extent are public authorities required to provide environment-related information to interested persons (including members of the public)?
Costa Rica’s legal system has incorporated, as the basic pillars for administrative procedure, the principle of transparency and the right of access to information. This principle is the cornerstone of the interpretation and protection of the fundamental rights of citizens, provided in article 30 of the Constitution.
Thus, under the social and democratic rule of law, each and every one of the public institutions and bodies must conform to the respective administration. The provisions of Law No. 6227 General Act of Public Administration, should ensure the protection of the right to information.
Contained within innovative bodies such as SETENA is the implementation of the virtual file, which can be an efficient tool to provide such a guarantee.
2 Environmental Permits
2.1 When is an environmental permit required, and may environmental permits be transferred from one person to another?
All human activities that impact the environment require an environmental licence, which can be obtained from the SETENA, according to article 17 of the Environmental Law. Requirements specify the area (500 square metres or more) and detailed activities (hotels, houses, industry, agriculture, etc.) according to Decree 31849 SETENA-Environmental Impact Study procedures and requirements. Other related legislation is 833 Construction Law; 7794 Municipality Code and Decree 65, Construction Regulation.
2.2 What rights are there to appeal against the decision of an environmental regulator not to grant an environmental permit or in respect of the conditions contained in an environmental permit?
All environmental impacts can be appealed. This process includes a public hearing, which can be requested to have studies explained or reviewed. The Environmental Management Plan, Impact Assessment Study, and environmental measures to prevent and control impacts are all conditions contained in an environmental permit that can be reviewed and appealed. Also the amount of an Environmental Warranty or “project environmental insurance”, can be appealed on the grounds of its total value or for a complete extension.
2.3 Is it necessary to conduct environmental audits or environmental impact assessments for particularly polluting industries or other installations/projects?
Yes, environmental impact assessments are conducted for all industries. Also, an Environmental Regent or Auditor has to be appointed to each project, and has to report monthly findings to the SETENA.
2.4 What enforcement powers do environmental regulators have in connection with the violation of permits?
The National Technical Environmental Secretary (SETENA) can revoke the permit, execute the environmental warranty and close the complete project or an area thereof. Moreover, SETENA can send the file to the Environmental Administrative Court for damage evaluations and corresponding fines and criminal charges (if damage to water sources is found, or any situation where human health is threatened).
3.1 How is waste defined and do certain categories of waste involve additional duties or controls?
The Waste Management Act No. 8839, 2010, defines waste as a solid, semisolid, liquid or gaseous material, whose generator or holder must dispose of, and which may be recovered or treated responsibly by an appropriate disposal system. This Act classifies waste into two categories: ordinary waste and hazardous waste.
As regards hazardous waste, there is a specific law that regulates its pertinent accumulation, storage and disposal, in response to the need to minimise the possibilities of fire, explosion or release of hazardous waste that can affect human health or the environment. Based on the above, certain security controls must be followed in relation to the containers of hazardous waste, labeling and location of accumulation points.
However, waste declared in need of special handling is excluded from the regulation for hazardous waste during its delivery, receipt, storage, transportation, segregation and storage, as long as shape, protective layer or airtightness is maintained; that is to say, while not disassembled, treated or altered for treatment or disposal. Special wastes are listed in the Executive Order No. 38272-S, 2014.
3.2 To what extent is a producer of waste allowed to store and/or dispose of it on the site where it was produced?
A waste producer is permitted to store and/or dispose waste on site, provided it complies with the necessary legal requirements. Regarding said requirements, two different statutes apply according to the type of waste that is to be disposed of, specifically: ordinary and hazardous waste
Regarding ordinary waste, the municipality will establish the system of collective storage of waste, according to the characteristics of the collection and transport equipment they use. Final disposal must be performed in landfills or any other technology that complies with the relevant regulations.
In the case of hazardous waste, during storage the waste must be packed, taking into account the following conditions: incompatibility of waste to be stored; contingency planning; and waterproof flooring and adequate ventilation, depending on the type of waste stored. The storage on site of the generator must be for a maximum period of one calendar year from the moment it began to accumulate hazardous waste, and it must never exceed storage of 3,785 litres (1,000 gallons) of the same type of hazardous waste.
After reaching the allowed period of storage, the waste producer should proceed to carry the waste to an authorised collection centre, for treatment and disposal or to be exported for proper disposal.
3.3 Do producers of waste retain any residual liability in respect of the waste where they have transferred it to another person for disposal/treatment off-site (e.g. if the transferee/ultimate disposer goes bankrupt/disappears)?
In Costa Rica, based on the principle of shared responsibility, there is a joint, coordinated and differentiated participation of all producers, importers, distributors, consumers, waste managers, both public and private.
In that sense, although generators transfers their waste to an agent authorised by the Ministry of Health, all waste management must be secured by contracts and manifests of delivery–transport-reception to avoid causing damage to health and the environment.
The generator must first ensure that the site has all legal and environmental requirements, and permits for final disposition.
A breach of this obligation may be regarded as jointly and severally liable for damages to the environment and health, which may cause the company to accrue charges for improper handling of these and applicable penalties
3.4 To what extent do waste producers have obligations regarding the take-back and recovery of their waste?
According to Law No. 8839 and its regulations, producers are obligated to take the necessary measures to avoid the generation of waste at source, reuse waste and recover waste through recycling, co-processing or other technical procedure for the recovery of materials and energy use. Priority should be given to material recovery over energy use, according to technical criteria.
The recovery of waste should be covered by the waste management plan of each waste producer, established in the General Rules for Health Operating License, Ministry of Health
4.1 What types of liabilities can arise where there is a breach of environmental laws and/or permits, and what defences are typically available?
If there is a violation of environmental laws or permits, there will be claims in several administrative offices: Sanitary measures will be applied by the Ministry of Health, including an option of specific improvements with a compliance timeline, or closing orders from this health officer. Environmental controller offices at the Local Government and National Environmental Ministry can also review permit violations and can even review environmental authority resolutions. Environmental claims at the National Technical Environmental Secretary (SETENA), with the option of remediation plans, site inspections, warranty execution and evidence of improvement or sanctions at the Environmental Administrative Court. All defence procedures must include environmental damage assessments, remediation plans, and compliance from the legal representative involved.
4.2 Can an operator be liable for environmental damage notwithstanding that the polluting activity is operated within permit limits?
No, if the operator, company or industry is within permit limits, there is no liability; although investigations will be performed and polluting activities will be reviewed, to confirm compliance (for example: air emission, waste water discharge parameters).
4.3 Can directors and officers of corporations attract personal liabilities for environmental wrongdoing, and to what extent may they get insurance or rely on other indemnity protection in respect of such liabilities?
Yes, if there are criminal charges (water contamination and health impact); otherwise, for breach of environmental laws or permits, they will be co-responsible but only within their corporate limits and with the company directly responsible for the violation. The project will have an environmental warranty or insurance issued by SETENA; personal insurance will not be necessary since the company will be held responsible for damages. There is no indemnity protection, but rather a direct responsibility for the director or officer with specific capacities and knowledge.
4.4 What are the different implications from an environmental liability perspective of a share sale on the one hand and an asset purchase on the other?
Environmental liabilities will remain within the company’s activities and national registration and representation; no share sale will be directly affected (indirect impact will be related to media coverage or news), the asset purchase can maintain environmental liability if the violation is directly related to a site, project, industrial plant, etc.
4.5 To what extent may lenders be liable for environmental wrongdoing and/or remediation costs?
Since environmental permits/laws and compliance are attached to a local or national representation, the company subject to liability will be the operating company; so any violation or remediation costs will be directed to the company in charge of permits and national registration.
5 Contaminated Land
5.1 What is the approach to liability for contamination (including historic contamination) of soil or groundwater?
No historic files are related to new operations. There is a new Decree 37757 (Guide for Land/Soil Contamination, published in 2014), that includes contaminated sites, but since there is no background concerning any Environmental Authority, there is no pertinent approach or information. Groundwater or soil studies are recommended by SENARA, which is the authority in charge of groundwater protection. However, such studies are only required in specific areas and related to water aquifer protection standards.
5.2 How is liability allocated where more than one person is responsible for the contamination?
All parties involved will acknowledge the violation, and if there is more than one person or company involved, there can be co-responsibility and direct violation proportionate to each party.
5.3 If a programme of environmental remediation is ‘agreed’ with an environmental regulator can the regulator come back and require additional works or can a third party challenge the agreement?
Since there is more than one jurisdiction or administrative environmental authority involved, all remediation plans or environmental agreements must include related public institutions or regulators. If all of them are involved, then third party challenges cannot be successful, although Environmental Prosecutors and Comptrollers will always be open to reviews or appeals. The Constitutional Court is often a source of new reviews, but if all regulators are involved, these challenges will be discharged.
5.4 Does a person have a private right of action to seek contribution from a previous owner or occupier of contaminated land when that owner caused, in whole or in part, contamination; and to what extent is it possible for a polluter to transfer the risk of contaminated land liability to a purchaser?
Since there are no previous records and/or historic files, there have been no cases related to a regulator or environmental authority. Previous owners could be held responsible if groundwater or soil contamination were found, but studies must be performed and are recommended in an Environmental Due Diligence.
5.5 Does the government have authority to obtain from a polluter, monetary damages for aesthetic harms to public assets, e.g. rivers?
Yes, criminal charges, administrative cases and health-related issues can be claimed. There are several offices and authorities capable of this actions: The Environmental State Attorney, The Criminal Prosecutor’s Office, The Environmental Comptroller Officer, The Environmental Administrative Court, the Local Government office, and the Ministry of Health and Environmental Conservation’s area offices.
6 Powers of Regulators
6.1 What powers do environmental regulators have to require production of documents, take samples, conduct site inspections, interview employees, etc.?
Any natural or legal persons subject to enforcement proceedings (project approval, permits, complaints, etc.) under the Ministry of Health, SETENA, MINAE, or Environmental Administrative Court, must provide the documents required by the public administration in order to verify compliance with the laws and regulations on the subject.
Likewise, during the SETENA inspections the interested party must provide the necessary facilities at the site where the activity, work or project is executed, to verify the information submitted and the environmental compliance.
Regarding the Ministry of Health (General Health Act No.5395), during the inspections, the authorities can practice health operations, collect samples, or collect background checks or tests where they suspect there might be any violation of the Act.
Refusal to comply with the authority’s requirements during the enforcement proceedings could be deemed as a severe infraction
7 Reporting / Disclosure Obligations
7.1 If pollution is found on a site, or discovered to be migrating off-site, must it be disclosed to an environmental regulator or potentially affected third parties?
As a general obligation, indicated in Act No. 7554 article 102, any environmental pollution or contingencies must be denounced by the Environmental Comptroller to the Environmental Prosecutor or the Attorney General’s Office.
On the other hand, according the article 8.5 of the Executive Order No. 37757-S, “Regulations on Securities Guide to Soil decontamination of sites affected by environmental emergencies and spills”, chemical product spills must be reported by the owner of the company to the Ministry of Health no later than 48 hours after being detected, with a description of the immediate mitigation measures taken, including date and time of notification to the System Emergency 9-1-1. Similarly, the owner or the generator of the spill must submit to the Ministry of Health, within a maximum of 10 days post-spill detection, a Monitoring Plan for the next six months.
7.2 When and under what circumstances does a person have an affirmative obligation to investigate land for contamination?
When an obligation exists to protect the environment and report pollution incidents, there is also an obligation to look into the matter by means of studies and monitoring.
In that sense, governmental authorities will demand a report on the outcome of any such research work or risk assessment, as well as a remediation proposal (previously approved by the Ministry of Health).
7.3 To what extent is it necessary to disclose environmental problems, e.g. by a seller to a prospective purchaser in the context of merger and/or takeover transactions?
Whilst there is no specific obligation on a seller to disclose to a buyer unknown environmental problems of the company or the property being sold, failure to do so will expose the seller to the risk that the buyer may terminate the sale agreement and seek damages in accordance with the Civil Code.
Said code provides that parties must enter into negotiations in good faith and provide appropriate information; thus, disclosure would be required.
8.1 Is it possible to use an environmental indemnity to limit exposure for actual or potential environment-related liabilities, and does making a payment to another person under an indemnity in respect of a matter (e.g. remediation) discharge the indemnifier’s potential liability for that matter?
The Liability for environmental damage in Costa Rica is always objective and recognised by the Constitution as a general principle of law.
In this way, the mere existence of damage bears responsibility for the agent (public, private, physical or juridical), considered the originator of that damage, who must therefore indemnify for damages caused by his action or omission, even if his conduct was lawful.
So the inclusion of indemnity clauses in a contract would not release those who commit damage, from their liability towards third parties and authorities. Accordingly, an agreement would not limit the exposure versus third parties and authorities.
8.2 Is it possible to shelter environmental liabilities off balance sheet, and can a company be dissolved in order to escape environmental liabilities?
In Costa Rica, a company’s accounting records must reflect all of its assets and liabilities; but there is no express rule requiring a company to have its accounting books and records reflect liabilities or obligations of a possible environmental nature.
However, in the case of the warranty of compliance established by SETENA, the company must keep a record of this deposit which must be renewed annually for a specified period of time. In case of non-compliance with environmental commitments established by SETENA, the Administration may execute an environmental compliance warranty.
In the event of a finable infraction caused by a corporation, the individuals that legally represent said corporation or act on its behalf shall be liable to payment by default (Article 101, Act No. 7554).
Nonetheless, it is possible for a company to evade its environmental liability if said liability is not claimed prior to dissolution.
8.3 Can a person who holds shares in a company be held liable for breaches of environmental law and/or pollution caused by the company, and can a parent company be sued in its national court for pollution caused by a foreign subsidiary/affiliate?
The mere fact that a person holds shares in a company does not make them personally liable for the damage caused by the company, since the latter is a body corporate distinct from the persons who hold an ownership interest in the same. As stated in question 8.2 above, the individuals that legally represent said corporation or act on its behalf shall be liable in default for the payment of infraction.
A parent company cannot be sued in its national courts for pollution caused by a foreign subsidiary/affiliate.
8.4 Are there any laws to protect “whistle-blowers” who report environmental violations/matters?
There are no special regulations to protect “whistle-blowers” who report environmental violations committed. However, according to Constitutional article 50 and Act No. 7554, anyone can denounce the violation of environmental regulations, for such purpose, MINAE and the Environmental Comptroller establish the Integrated Care Processes and Environmental Complaints System (SITADA). Under this system, complaints are registered without revealing the identity of the complainant, and after evaluation, are forwarded to the competent agency to investigate the allegations and take charge of the matter.
8.5 Are group or “class” actions available for pursuing environmental claims, and are penal or exemplary damages available?
Environmental legitimacy has been widely recognised by the Constitutional Court, through the figure of diffused interests, such as the right to a healthy and ecologically balanced environment.
The collective interest is also protected, allowing people with small claims to come together and sue as a group, sharing among all members the cost of establishing the proceedings and strengthening their personal pretensions, now considered collectively.
All public and collective interest becomes a way to legitimise the state action.
The jurisdictional defence of diffused and collective interests is recognised in various rules of our legal system. The last legal body to include its tutelage is the current Code of Administrative Adversarial (Contencioso Administrativo).
8.6 Do individuals or public interest groups benefit from any exemption from liability to pay costs when pursuing environmental litigation?
There are no exemptions from liability to pay costs when pursuing environmental litigation, for either individuals or public interest groups.
9 Emissions Trading and Climate Change
9.1 What emissions trading schemes are in operation in your jurisdiction and how is the emissions trading market developing there?
Two systems are in place in Costa Rica: a voluntary carbon market, with a base value of $20 per carbon/tonne with a baseline of 26 carbon/tonnes per hectare, and the national government system based on the Forest Financial Fund, with a value of $6 per carbon/tonne. The legal base is No. 7575 Forestry Law.
9.2 Aside from the emissions trading schemes mentioned in question 9.1 above, is there any other requirement to monitor and report greenhouse gas emissions?
Yes, the government plan is to have a complete country accountability so there can be a national carbon neutral certification. To this end, the Climate Change Office is creating a national inventory and monitors all greenhouse gas emissions. This plan is in its early stages.
9.3 What is the overall policy approach to climate change regulation in your jurisdiction?
Since the recent Paris agreement and COP compromises, new regulations will be expected for other regulated greenhouse emissions. Currently vehicles, boilers, and air-conditioning systems are regulated, and have compliance parameters.
10.1 Is your jurisdiction likely to follow the experience of the US in terms of asbestos litigation?
No, there is a Decree 25056 – controlled use of asbestos and related products, which prohibits new constructions with asbestos components. However, no litigation will follow.
10.2 What are the duties of owners/occupiers of premises in relation to asbestos on site?
The duties of owners or occupiers is to remove all asbestos findings at a site. In Costa Rica the only “solution” for asbestos is to send this material to a confined space at landfills or waste management sites.
11 Environmental Insurance Liabilities
11.1 What types of environmental insurance are available in the market, and how big a role does environmental risks insurance play in your jurisdiction?
The only environmental “insurance” is the warranty required by SETENA (National Technical Environmental Secretary), for new projects or projects regulated from 2004 to this date. All other risks or accidents are regulated on a case by case situation.
11.2 What is the environmental insurance claims experience in your jurisdiction?
Experience in environmental insurance claims consist solely of the execution of SETENA’s warranties, and there have been very few such cases, since the majority end up in remediation plans and damage payments.
12.1 Please provide, in no more than 300 words, a summary of any new cases, trends and developments in Environment Law in your jurisdiction.
Since July 2010, our jurisdiction has promoted a change and trend in waste management, not only stimulating recycling practices but going beyond, to the source and initial guidelines for product life cycles. This will not only include reuse and reduction practices, but also direct and indirect responsibilities throughout the entire chain of custody. Moreover, this has evolved to new regulations regarding hazardous waste management, and a more complex Decree 37757-Guide for Land/Soil Contamination that includes remediation procedures and introduces the need for soil-sample-protocols. Certainly, this will produce groundwater evaluations and more damage control plans which may include, in the near future, aquifer evaluations and contamination management plans. The other new trend is energy generation from ordinary waste, plans for which a new decree is under study.
Roberto Cordero C.
Partner Environmental Law Division
Lindsay Ryan V. PhD.
Senior Associate Environmental Law Division