A U.S. law called the Comprehensive Environmental Response, Compensation & Liability Act (CERCLA) lets the federal government hold polluters liable for the cleanup of sites where there has been a release of hazardous substances into the environment. Why do we mention a U.S. law in a Canadian newsletter? Answer: Because the law can be used to hold Canadians responsible for pollution on U.S. soil. The risk of liability under CERCLA extends to Canadian companies that have subsidiaries operating in the U.S.; and it can even apply to companies that do business entirely within Canada. Here’s a case illustrating the two theories that have been used to hold a Canadian company liable under CERCLA for environmental damage in the U.S.
CANADIAN PARENT LIABLE FOR U.S. SUBSIDIARY
FACTS
The U.S. Environmental Protection Agency (EPA) commenced a series of cleanup actions at the site of a waste disposal company in Michigan. Because the disposal company was in bankruptcy, the EPA sued its parent company and CEO under CERCLA to recover its costs. Those defendants were both located in Ontario. The lawsuit was in the U.S. and neither defendant bothered to show up for it. So the EPA won by default. It then asked the Ontario courts to enforce the judgment against the parent company and the CEO. At this point, the defendants started fighting back. Don’t let a foreign state assert its sovereignty in Canada, they enjoined the court.
RESULT
The Ontario Court ruled that Canadian courts should respect and enforce the judgment of the U.S. court.
EXPLANATION
Canada is a sovereign state and its citizens aren’t subject to regulation or taxation by foreign countries. But there are situations when Canadian courts will respect the judgments of a foreign state in the interests of justice and “comity.” This was such a situation, the court said. The EPA wasn’t aggressively asserting U.S. laws against Canadians minding their own business. The pollution occurred in the U.S. and the parent company and CEO owned and operated the company that caused it. “The law would be seriously deficient and at odds with the reality of modern commercial life,” the court explained, “if a resident of this province could actively engage in business in the U.S. for a period of years, but then shelter behind the borders of Ontario” to avoid having to answer for the legal consequences of that business.
United States of America v. Ivey, [1995] O.J. No. 3579
COMPANY WHOLLY WITHIN CANADA IS LIABLE
FACTS
Each year between 1906 and 1995, a lead-zinc smelter located in Trail, BC, deposited about 145,000 tonnes of slag, a by-product rich in heavy metals, into the Columbia River. The slag flowed downstream, across the U.S. border and into the state of Washington, where it contaminated the environment. The EPA ordered the smelter to conduct a cleanup study. The smelter refused. When the EPA balked at enforcing the order, members of confederated tribes across the River brought a citizen suit against the smelter under CERCLA. The smelter claimed that CERCLA can’t be applied “extraterritorially” to Canadian companies.
RESULT
The U.S. Court of Appeals ruled that CERCLA applied and refused to dismiss the case.
EXPLANATION
This wasn’t a case of applying a U.S. law on Canadian territory, the court said; it was about holding a Canadian company responsible for a domestic offence within the U.S. Persons can be liable under CERCLA if they “release” hazardous substances into the environment. A “release” includes not just direct discharges but the natural migration of hazardous materials from discharged substances. Thus, in this case, there were actually three releases: the dumping of slag into the River in Canada; the drifting of the slag downstream into the U.S.; and the leaching of hazardous substances from the slag into the environment. The third release occurred on U.S. soil and triggered CERCLA liability. So the smelter could be liable under the law even though it didn’t conduct any operations in the U.S.
Pakootas v. Teck Cominco Metals, Ltd., 452 F.3d 1066 (U.S.C.A.: 9th Cir., July 3, 2006)
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