Implications for bankruptcy creditors
Prepared by Federica De Luca, Maria Progida and Alessandra Ghisio
According to judgment no. 3 of 26 January 2021, the “Adunanza Plenaria” of “Consiglio di Stato” returned to ruling on the extension of environmental liability to additional parties to those who materially caused the damage and, in particular, on the duty of the official receiver (“Curatore Fallimentare”) to restore and dispose of waste pursuant to Article 192, Legislative Decree no. 152 of 3 April 2006, (“D. Lgs. 152/2006“), dealing with an issue that has long been the subject of a long debate in civil and administrative Courts.
Prior to the intervention of the “Adunanza Plenaria”, administrative Courts issued diametrically opposed interpretations.
According to the minority opinion, the official receiver had to provide for the disposal of waste and the decontamination of polluted sites, since “the declaration of bankruptcy deprives the company of the availability of its assets, which pass into the bankruptcy estate to be managed by the official receiver” (Consiglio di Stato no. 3672/2017).
According to the main opinion – also confirmed by important judgments of Consiglio di Stato (see Judgments no. 4328/2003 and no. 3274/2014) – the official receiver was not obliged to clean up or provide for the disposal of waste referring to the activity carried out by the entrepreneur prior to the declaration of bankruptcy, due to the fact that:
- the official receiver cannot be considered a successor of the bankrupt company since the latter retains its legal subjectivity and remains the owner of its assets although it loses the right to dispose of them. Therefore, the official receiver does not succeed in the legal relations of the bankrupt entrepreneur, but has the sole task of liquidating the assets in order to satisfy the creditors;
- the official receiver is extraneous to the previous management and, consequently, is exempt from liability for environmental contamination related to the previous production activity. The only exception is the authorization of provisional business (“esercizio provvisorio”) pursuant to Article 104 of the Bankruptcy Law: in this case, the official receiver should be liable for the pollution and waste produced during its management;
- pursuant to Article 183 letter f) of D. Lgs. 152/2006, “waste producer” shall mean “the person whose activity produces waste and the person to whom such production is legally referable (initial producer) or anyone who carries out pre-processing, mixing or other operations that have changed the nature or composition of such waste (new producer)“: the identification of the person obliged to restore the environment is therefore not objective, but always depends on the subjective element of willful misconduct or negligence. Also, from the point of view of sanctions, the criminal sanction is imposed on the author of the violation.
Civil Courts have also stated that the official receiver is not obliged to arrange for the clean-up and disposal of waste since he is not responsible for any willful or negligent conduct in the abandonment of the waste. Therefore, it would be up to the public authorities to carry out the remediation of the contaminated area: in this case, the public authorities would have the right to file a prereduction claim against the bankruptcy procedure according to Articles 93 and 101 of the Bankruptcy Law (see Court of Milan, decree 8/06/2017).
The Adunanza Plenaria ruled on this long-standing issue but came to different conclusions from the prevailing opinion. In particular, the legal issue concerned a case of abandonment of waste by a company that was subsequently declared insolvent and, consequently, whether the duty to clean up/remove also fell on the official receiver, pursuant to Article 192 of D. Lgs. 152/2006.
The administrative Court gave a positive answer to this question, stating the following statement: “the burden of restoring and disposing of the waste pursuant to Article 192 of D. Lgs. 152/2006 falls on the official receiver and the related costs are borne by the admitted creditors“.
The assumption on which the judgment is based is that, unlike mergers by incorporation (a case analyzed by Adunanza Plenaria in its judgment of 22 October 2019, no. 10), in the case of an official receiver there is no succession of a new legal entity, since the bankrupt company continues to exist, with the result that the official receiver is not liable.
However, since the official receiver becomes the holder of the assets of the bankrupt company, following the inventory of the assets pursuant to Article 87 et seq. of the Bankruptcy Law, he would become the passive claimant for the removal of the waste.
The judgement states that “responsibility for removal is therefore linked to the status of holder acquired by the official receiver not with reference to the waste (which from an economic point of view can sometimes be considered ‘negative assets’), but considering the possession of the polluted real estate (normally a fund already owned by the entrepreneur) on which the waste insists and which, for environmental protection requirements and compliance with national and Community legislation, must be disposed of“.
Only this interpretation – in the opinion of Adunanza Plenaria – allows for a reading of the D. Lgs. 152/2006 in conformity with European law, both based on the principles of prevention and responsibility. In fact, European law provides for the removal of waste, even after the cessation of activity, by “the entrepreneur who is not bankrupt, or, alternatively, by the person who administers the bankruptcy assets after the declaration of bankruptcy”.
For the purposes of European law, what is relevant for the obligation to remove the waste is the material availability of the property regardless of ownership, in accordance with the “polluter pays” principle. According to this principle “only the person who is not the holder of the waste – such as the blameless owner of the land on which the waste is located – can, in the end, invoke the so-called ‘internal exemption’ provided for by Article 192, paragraph 3, of Legislative Decree no. 152 of 2006 (i.e. the Municipality removes the waste and can recover the costs incurred by filing a claim against the bankruptcy procedure)“.
However, in the opinion of the administrative Court, the official receiver “cannot take advantage of the exemption provided for in Article 192, by leaving the waste of the ceased business abandoned“, since in accordance with Community and national principles, the official receiver – being the holder of the waste – is obliged to secure it and remove it, sending it for disposal or recovery.
Moreover, since the abandonment of waste constitutes a diseconomy and mismanagement of the bankrupt company, in the opinion of Consiglio di Stato, it is justified that the costs for the removal of waste fall on ” the creditors of the entrepreneur himself who, on the other hand, benefit from the effects of the receivership in terms of distribution of any profits from the bankruptcy”.
The extension and interpretation in accordance with European law of the “polluter pays” principle entails a further consideration: proof of the subjective element and the succession of the official receiver are not necessary for the purposes of attributing liability. “On the contrary, Directive 2004/35/EC configures environmental liability as an objective liability; this represents an interpretative criterion for all national legislative provisions“.
The decontamination of polluted areas, therefore, represents public instruments aimed at allowing the material recovery of the environment and not at monetizing the decrease in its value. The judgement also states that, “in decontamination, the function of restoration of the injured legal asset typical of civil liability emerges, which evokes the remedy of reinstatement pursuant to Article 2058 of the Civil Code, provided for environmental damage by Article 18, paragraph 8, Law no. 349-1986”.
Therefore, according to the new view of Consiglio di Stato, which, in all likelihood, will not put an end to the debate at hand, “the responsibility of the official receiver in carrying out the decontamination of land held as a result of the inventory of assets in bankruptcy procedure (as has already been highlighted), pursuant to Articles 87 et seq. L.F. – can similarly disregard the assessment of the existence of a causal link between the conduct and the damage“.
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