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Russia: In Windfall For Polluters, Supreme Court Orders Refund Of Environmental Fines

Russia's Supreme Court ruled last week that environmental fines imposed by the government on industry since 1999 are illegal and must be paid back. The decision means the government will have to refund Russia's most notorious polluters the equivalent of $861 million. This promises not only to dent the federal budget but will also leave Russia without its most effective means to safeguard the environment.

Prague, 11 June 2002 (RFE/RL) -- Last week's ruling by Russia's Supreme Court ordering the government to pay back billions of rubles (hundreds of millions of dollars) to the country's worst industrial polluters ranks as a paradoxical milestone in Russia's journey to a law-based state.

Experts agree that the decision strengthens rule of law in Russia, by upholding the constitution, but its impact on the environment and state coffers is certain to be detrimental.

At issue was a suit brought by the owners of Norilsk Nickel, Russia's and the world's largest producer of nickel, with vast smelters in Siberia and the Arctic Kola Peninsula. Norilsk Nickel sued the government to recover fines Moscow had been imposing on enterprises since 1999 for pollution exceeding set standards.

Norilsk Nickel argued that under the Russian Constitution, taxes and levies can only be imposed by federal law, not an arbitrary government decree. Russia's Supreme Court agreed and ordered the government to stop imposing the penalties and pay back 27 billion rubles ($861 million) in accumulated fines to Norilsk Nickel and hundreds of other polluters across the country.

Valentin Yemelin, an expert on Russia with the United Nations Environment Program (UNEP), told RFE/RL: "The problem is, as usual in Russia, that the intentions are very good but the results are quite negative."

The victorious defendant in the suit, Norilsk Nickel, is widely acknowledged to be one of Russia's most egregious industrial polluters.

Thomas Nilsen tracks ecological issues in Russia for the Norwegian environmental group Bellona. "This enterprise has for decades been polluting, both with heavy metals and, above all, sulfur dioxide, and the results of this enterprise's activities are very visible in the Norilsk area in Siberia but also in the area close to the Norwegian border on the Kola Peninsula, where they operate three smelting plants."

Nilsen's words will resonate with anyone who has visited the company town of Nickel, just a couple of kilometers from the Norwegian border -- winter snow, which carpets the region for more than half the year, is black with soot here. Human life expectancy is 10 years lower than in other parts of Russia. Dead tree stumps are sad reminders that once, before the smelter started belching its lethal cocktail into the surrounding atmosphere, there was a local environment.

Russia has many other such towns. According to a government survey from the year 2000, 120 cities in Russia have air quality that is at least five times more toxic than acceptable levels. Where does the Supreme Court ruling leave them, now that industry has been granted free reign to keep polluting?

Russian legislators are preparing a new law on industry and the environment, which is expected to reach the Duma floor this autumn.

Pollution taxes -- which the government, until last week's Supreme Court decision, was collecting -- are an accepted and widely used method in many countries to encourage industrial enterprises to clean up their act. That is why environmentalists such as Nilsen hope the new law retains the taxation element of the government decree. "It's quite a common mechanism within the European Union and also the Nordic countries, for instance like here in Norway, that polluters have to pay for emissions over the maximum permitted levels and of course, they then can choose whether to reduce their pollution, invest the money in technologies which will reduce the pollution, or just keep on polluting and pay the fine to the government," Nilsen said.

But since President Vladimir Putin abolished the State Committee for Environmental Protection two years ago, the bill will be sponsored by the agency that took over its duties, namely the Ministry for Natural Resources. Nilsen said this does not bode well. "We have not seen the draft of the new law yet, but it is, as far as we understand, written by the Russian Ministry for Natural Resources, which took over the work of the former state committee on the environment. And to us, this sounds like putting the fox to guard the hens, because this is the ministry that earns money by polluting the environment and by exploring the natural resources in the area. So, we are not too optimistic that the new law will in fact be very good," Nilsen said.

Answering industry critics that the government decree did more harm than good, Valentin Yemelin at UNEP acknowledged that fines collected by the government under the old rules were not always well spent. But he said doing away with limits on industrial pollution will have a wide-ranging negative impact. "We cannot say that, for example, funds, payments that were taken into the local budgets or regional budgets from the enterprises as fines for pollution were extremely well used. They were very often misused but still, the system existed. And legally, now it will be very difficult to dispute any environmental damage in court, because basically there is no [longer a] basis for the calculation of this damage," Yemelin said.

Yemelin also noted that the expected delay in passing a new environmental law, even if it defies expectations and ends up being stringent, will make its application a challenge. "What I'm afraid of is that currently, when for a year or more the enterprises will be functioning in an atmosphere of total freedom and will pay for nothing, then it will be all the more difficult to impose anything on them afterward. The system always has inertia and this inertia will carry on," Yemelin said.

Representatives of Russian industry have indicated they will use the next few months to lobby deputies for legislation that is factory-friendly.