Scope of Contractual Laws in creating Environmental Liabilities


This article has been written by Ritu Janjani, a student of Dharmashastra National Law University, Jabalpur.

According to I.A Shearer as laid down in his book Starke‟s International Law “Any multilateral agency responsible for the promotion of development projects in the developing countries, must concern itself with the ecological effects of the projects in the developing countries, otherwise ecological detriments would have to be set off against the benefits to accrue to the developing country. So far as development is concerned, as a branch of Economics, the criterias of quality of Environment has also become one of the standards of development. The sates may also exercise soverignity over the natural resources for sustainable development. It is a commonplace now that a crises of global proportions is and has been affecting the human environment, through pollution of the atmosphere and of maritime, coastal and inland waters, through destruction of plant life and uncontrolled depletion of natural resources partly by the reason of over population and partly by the demands of industrial technology”[1]

The 2 major cases in this regard are The Blue Lady Itinerary[2], A public interest litigation challenging the import of hazardous wastes into the country was filed in 1995 in the Supreme Court of India by the Research Foundation for Science, Technology and Natural Resource Policy. The Supreme court saw the dismantling would bring a lot of revenue to the country. However, In The Clemenceau Case The Conseil d‟Etat the Apex court considered that the fact that the French State decided to auction the Clemenceau in the public market and concluded a contract for the dismantling of the ship, illustrates the will of the French State to discard the hull of the Clemenceau. Eventually, due to the burden of various International organisations, France had to call the ship back. If there had been no such organisations, to which a nation would have been a signatory, it would have exercised it’s arbitrariness and further cause harm to the environment.

 The Article aims at bringing up a new concept which would provide concrete boundaries, enforceable obligations and appropriate penalties to those, who form a part of this concrete structure. Such a setup would result in a legally binding Contract among the parties to it. However, being a party to such a contract might not require a wilful submission.

The idea is to construe such contracts as the contract of Indemnity as defined under section 126 of the Indian Contract Act 1872. This article aims to identify that whether the International treaties and conventions are deemed to be Contracts, if yes then how are they Enforced and if No, then how beneficial their Enforcement be.

There is also insufficient coordination between the CPCB(Central pollution control boards) and SPCBs(State Pollution Control Boards), InSignificant human and technical capacity constraints are an obvious factor that impacts effective execution of all compliance and enforcement functions at the central, state and local levels. Funding limitations  remain a significant challenge facing all environmental institutions. The variations in the financial status and sources of funding of the PCBs lead to horizontally inequitable treatment of  the regulated community.


The idea of such a contract of indemnity is not new. Increasing risk of environmental liability has led to the explicit incorporation of indemnification contracts for covering the claims and liabilities in a form of a contractual arrangement. In fact many real estate transactions, such as lease agreements and asset purchases now contain both general indemnity and specific environmental indemnity provisions. A large number of companies have also argued that a general or broad form indemnity provision providing indemnification for “claims, losses, damages, and liabilities” includes an intended indemnification for all environmental claims and liabilities. indemnification agreements will be enforceable, and more specifically enforceable for environmental claims and liabilities.[3]

The most common of the Indemnity disputes would be to find out whether certain situations would be covered under this contract of Indemnity or not? It would also be disputable whether such right would be against the whole world (right in rem) or against the person with whom the contract has been explicitly entered into (right in personam). Such contracts of Indemnity would aim to be broader contracts as to hold the indemnifier for all the losses resulting from the harm caused instead of raising specific claims and liabilities.

Such rights although a contractual arrangement might create a Right in Rem as, each and every individual will explicitly or implicitly become a part of it, otherwise an individual or an entity might have a good defence of not being registered and therefore not liable to any environmental contracts. Also, such contracts might not only impose compensation to restore the parties affected but may also impose penalties as it deems appropriate.It is also observed that unlike common law indemnification, such contracts must require full reimbursement of the loss without demonstration of actual fault.


Now and Again there have been many Environmental treaties signed between or among a group of States but have faced the problem of Enforceability due to the overweighing Soverign Immunity. Treaties are enforceable towards countries only when they are parties to it. A state which is not a party to a treaty may not have rights or obligations as per the treaty. For the rights, the assent may be presumed, but for the obligations, such are not binding unless there is written agreement to the contrary. Treaties need to be ratified in order to be enforceable. Treaties once, signed by the parties, are not enforceable unless ratified by a state. Ultimately, it is upon the state to decide how it has to be bound by a Environmental contract.[4]

Likewise, In the case of France vs. Spain (Lake Lanoux Arbitration) France began developing a plan to divert water from lake lanoux over a 789 m drop to generate hydroelectricity. Even though France promised to return the diverted water, Spain pressed France to arbitrate the dispute in the International Tribunal which rejected Spains arguments. Further, the tribunal stated that the treaties did not constitute a reason to subjugate the soverignity of the state where they are located.

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In order to preserve the habitat to a number of species, it’s the human who has to undertake the task of protecting the Environment. Recently, there have been various measures brought by the Government of India to bind all it’s people to enter into a social contract to protect the environment. However, all cannot be brought within it’s ambit unless there are legal provisions operative at the ground levels.

The Supremacy Clause in the U.S. Constitution would seem to solve this puzzle. It says, after all, that “Treaties made, or which shall be made, under the Authority of the United States, shall be supreme Law of the Land. Yet early in the country’s history, the Supreme Court considered treaties “equivalent to an act of the legislature” and therefore enforceable in the courts and those “the legislature should be executed.” As per the Harvard law school review  the state recognizes the principle of sic utere tuo ut alienum non laedas. Under the principle of sic utere, a state has a duty to refrain from acts that would cause injury to persons or property located in the territory of another state.[5]

The issue of international liability for transfrontier pollution, no operational system for adjudicating liability has emerged. The International Court of Justice (ICJ) has heard only some disputes of note, one of them being the Nuclear Tests case, and international arbitration has entertained only a few notable cases, No state even brought suit against the Soviet Union following the I985 Chernobyl accident, although more than twenty states registered significant increases in radioactivity levels. However had the countries surrendered their soverignity in terms of treaties and conventions, such contracts would’ve been easy to enforce.

The first and foremost challenge to such contracts would be regarding the enforceability of such contracts. The parties liable may deny being them in the courts of Jurisdiction.Secondly, the Parent States might not always take the responsibility of the firms/companies registered in their state, having it‟s branches in the other countries, for the Environmental damage caused in the other State.[6]Thirdly, monetary compensation in lieu of restitution is deemed appropriate the amount will include not only the market value of assets, restitution in integrum, or it’s monetary equivalent but also the damages caused due to the loss of life or deprivation of Right to Clean Environment as deemed under Article 21 of the Constitution Of India or any such clause in the treaty. For the material loss, the standard of compensation is easy to state authoritatively, however for the latter, the compensation is less easy to state authoritatively, as it varies in state practice and arbitral opinion, and has also affected in some cases by the desire to achieve a lump sum settlement in respect of a number of claims.[7]

The Parliament has passed various legislations such as The Environment Protection Act, The Atomic Energy Act, 1962 and various other statutes, providing for civil and criminal penalties in lieu of the above mentioned objective. The Government of India on 2nd October 2014 also started with a Swatch Bharat mission (Clean India Initiative) which was brought forth with the idea of binding the individuals through a social contract towards a clean Environment.Further, there have been recent cases of Compensation claims and penalties imposed various government authorities for the environmental degradations caused in the religious holdings, for example the Kumbh Melas and the annual ceremony of Ganesh visarjan.

This concept  aims at applying the anthropocentric approach i.e. by maintaining, preserving and protecting the other aspects of human life aims at enforcing the directive principles i.e. Article 48A and 51A(g) and many other treaties and Conventions to which India is a party. At the international level as well, there has been formulation of a large number of treaties and conventions, whose problem associated to enforceability has been discussed above. However, it is also true that with the consensus of the states, such treaties may go beyond the sovereignty of The States to bind them to such agreements and predetermine their enforceability in the court of Law. Such contracts of indemnity can not only hold the state liable for it’s own acts but also for the acts of it’s subjects abroad.

The main idea of such contracts is to indemnify the host states or the individuals injured for the environmental harm caused to them by leaving the task of determining the apt amount of Compensation or penalties to the competent authorities.

While pollution control boards may close an offending facility or order the withdrawal of its power or water supply, it may only impose penalties by filing cases under the Water and Air Acts and the EPA, which may include fines and/or imprisonment. Pursuing cases through trial and appellate courts, however, has proven to be an ineffective enforcement response, since courts are overburdened, procedures are cumbersome, and resources of state boards are overstretched If such contracts come into existence, the world would become a cleaner place to live in.


[2] THE BLUE LADY CASE AND THE INTERNATIONAL ISSUE OF SHIP DISMANTLING‟,4/2 Law, Environment and Development Journal (2008), p. 135, available at last accessed on 20th June 2020 at 6:00PM 

[3] CRESSINDA “CHRIS” D. SCHLAG, INDEMNITY FOR ENVIRONMENTAL DAMAGE: Methods for Structuring an Enforceable Indemnification Agreement for Environmental Claims and Liabilities last accessed 30th May 2020 at 7:00PM.

[4] MALCOLM N. SHAW, INTERNATIONAL LAW, 171 8th ed. , 2018) 



[7] Supra Note 1 at 271


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