New Environmental Liabilities Law in the Province of Buenos Aires. Application in the event of termination or transfer of activities

On January 23, 2012, Provincial Law No. 14,343 (the "Law") was published in the Official Gazette of the Province of Buenos Aires, and became effective on January 31, 2012, although its operability depends on the regulatory decree to be issued by the enforcement authority within 180 days.

However, it is an important environmental law due to the principles it sets and its impactand direct application to commercial transactions taking place in the province of BuenosAires, as discussed below.

The Law aims at: 

(i) regulating the identification and registration of environmental liabilities and the existenceof contaminated sites in the area of ??the province of Buenos Aires;

(ii) regulating the duty to repair such environmental liabilities, polluted sites or other areasat risk for the health of the population.

In this context, the Law defines environmental liability as "all environmental damages, in terms of the pollution of water, soil, and air, the deterioration of natural resources and ecosystemsproduced by any public or private activity, during its regular operation orbecause of unanticipated events throughout its history, which constitute a permanent and/or potential risk for the health of the population, the surrounding ecosystem and property, and that has been abandoned by the responsible"; making it clear thatenvironmental liabilities can be found either on the same facility where the activity isdeveloped or on  lands adjacent to it, whether public or private.

As it can be noted, the Law has a broad scope, as it involves (i) environmental damages caused both by the normal development of the activity and by accidental events, as well as (ii) cases of deterioration of natural resources and (iii)  situations that constitute permanent or potential risk for the environment and health.

For detection of environmental liabilities, Section 7 provides that any person having knowledge of the existence of an environmental liability is obliged to report such liability to the enforcement authority.

Moreover, in order to avoid future environmental liabilities, Section 8 provides for a preventive procedure to mitigate the negative impacts on the environment, which consists in the filing of a Closing Audit for evaluation with the Enforcement Authority in cases of termination or transfer of activities. Such filing  shall comply with the following information: (i) a description of the activity and facilities; (ii) sampling and analysis of soil and groundwater; (iii) prevention and control of soil contamination measures; and (iv) hydro geological study. The procedure and further details of the closing audit shall be established by regulation.

In accordance with the provisions of the Law, the closing audit would be required provided that the running of the activity is permanently stopped, but given the ambiguity of the concept used, the scope of said transfer of activities is not clear. On the one hand, it seems to reach operations which constitute transfer of goodwill, that is, any transaction that implies the transfer of assets to a new subject that will develop the same activity. Yet, it is unclear whether the Audit is mandatory in cases of transfer of ownership that do not imply the transfer of activities, as it could be the situation of continuity of the activity and of the subject who develops such activity, no matter if a change of control is instrumented.

Therefore, the new owner could be sole responsible for environmental liabilities that may exist, without a detection mechanism of such contingency having been set up, as it would happen in case of transfer of activities. In our opinion, these points should be clarified by the regulatory decree, since the aim of the law seems to be the detection of any existing liability or contaminated site, for which it seems reasonable to make a broad interpretation, beyond the ambiguity of the expression transfer of activities.

In fact, the Law is directed to prevent environmental liabilities from being left without repair or registration, so Section 5 establishes the obligation to repair both environmental liabilities and contaminated sites. This obligation is in charge -in the first place- of subjects owners of the activity generating the damage and, alternatively, the property owners in the event that the owner of the activity cannot be located. This alterative responsibility of the property owner is new with respect to responsibilities for environmental damage provided by the existing environmental legislation so far.

In this scheme, it is very important to take into account that in accordance with the provisions of Section  9, the responsible of the activity has the obligation to repair when the evaluation of the Closing Audit show results that imply significant damage to the environment. Elaborating this criterion, Section 10 provides that the responsible will only be released from the obligation to repair when the Enforcement Authority unequivocally indicates that the environment affected by an exploitation is in suitable environmental conditions.

In addition, Section 12 establishes the requirement for urgent action when environmental damages could occur or have occurred, incorporating also the obligation to inform the Enforcement Authority when such measures are taken.

The Law also introduces in the area of ??the Province of Buenos Aires the obligation already set forth by Section 22 of National Law No. 25,675 national in terms of hiring an environmental insurance that guarantees the repair of the environment that could be damaged by the development of the activity. In this respect, the rule clarifies that the only permissible policies will be the insurances for collective environmental damage issued by insurance companies approved by the National Insurance Superintendence, and which are also registered with the egistry of the National Secretariat of Environment and Sustainable Development.

Violations to the above mentioned obligations will be punished with the penalties of warning, fine of principal or ancillary application (from one (1) and one thousand (1000) public administration minimum wages of the Province of Buenos Aires), temporary or permanent closure of part or of all the facility and/or the drop of the existing records with the enforcement authority, the latter two being only applicable with respect to contaminated sites.

Finally, the Law creates the registry of environmental liabilities of the province of Buenos Aires, where environmental liabilities that are declared such shall be registered, and establishing the duty of the enforcement authority to inform the real estate registry of the province of Buenos Aires, who shall record such fact by a marginal note to the last registration of domain, which may be dropped after completion of the tasks of repair.

For further information on this topic please contact María Morena Del Río