Environmental Damages, Environmental Reparations, and the Right to a Healthy Environment: The ICJ Compensation Judgment in Costa Rica v. Nicaragua and the IACtHR Advisory Opinion on Marine Protection for the Greater Caribbean

On 2 February 2018, the International Court of Justice issued a landmark judgment on compensation for environmental damages in Certain Activities Carried Out By Nicaragua in the Border Area (Costa Rica v. Nicaragua), Compensation Owed by the Republic of Nicaragua to the Republic of Costa Rica. The ICJ’s decision was followed shortly thereafter on 9 February 2018 by a significant Advisory Opinion of the Inter-American Court of Human Rights (IACtHR), declaring the fundamental importance of the right to a healthy environment to human existence and States’ corollary obligations to protect human rights through marine environmental protection in the Greater Caribbean region (summary report of the Advisory Opinion in English found here, while the full text of Colombia’s request for advisory opinion on this question can be found here). The 2 February 2018 ICJ Compensation Judgment follows its 16 December 2015 Judgment declaring Nicaragua liable for activities in Costa Rican territory, such as the excavation of three caños and establishment of military presence in said territory (see my previous comments on evidentiary approaches in this 2015 Merits Judgment here.)

While both the 2 February 2018 ICJ judgment on compensation and the 9 February 2018 IACtHR Advisory Opinion signify the central importance of international environmental norms to international human rights law, the methodological approaches taken by the World Court and the regional human rights court for Latin America reveal some sharp differences between these tribunals.  In adjudging compensation for environmental damages caused by Nicaragua to Costa Rica, the ICJ took a rather ‘incrementalist’ approach to quantification and empirical proof for every head of damage asserted – a methodologically ambiguous and context-sensitive approach which is not easily replicable for future environmental cases, given the complex nature of environmental damages in any given dispute.  The ICJ did not adopt Costa Rica’s theory of an “ecosystem approach” to damage assessment, and neither did it adopt Nicaragua’s position that “replacement costs” be used to estimate environmental damages.  Unlike the IACtHR Advisory Opinion’s broad acceptance of States’ continuing individual obligations towards preventing transboundary harm that could ensue from infrastructure projects in the Greater Caribbean, the ICJ Judgment carefully reduced Costa Rica’s claim of compensation by delineating between Nicaragua’s compensatory duties as part of environmental reparations, and Costa Rica’s own environmental mitigation duties in the presence of foreseeable environmental damage.  These recent developments suggest that, while it is recognized that all States share responsibilities towards environmental protection especially under the precautionary principle, the precise allocation of environmental reparations owed through compensation will not always lie strictly on the side of the State that is the environmental tortfeasor, at least where the ICJ is concerned.

The following subsections summarize the 2 February 2018 ICJ Judgment reasoning on compensation, the 9 February 2018 IACtHR Advisory Opinion, and conclude with some comments on methodologies used for damages assessment and environmental reparations, especially in the thorny form of lump-sum upfront compensation for environmental damage impacting present and future generations.

The ICJ’s Own Methodology on Environmental Damages

The ICJ first noted that the size of the area affected by Nicaragua’s unlawful activities is 6.19 hectares. (Judgment, para. 54).  Using its “ecosystem approach” projecting loss, where it would take a 50 year period for the affected area to recover, Costa Rica claimed around USD$ 6.711 Million in damages, with pre-judgment interest of around USD$ 0.5 Million.  On the basis of its “replacement cost” theory and invoking the amount of USD$309 per hectare (the amount paid by Costa Rica to landowners and communities as incentives to protect habitats under domestic environmental conservation programs) per year for a recovery period of 20 to 30 years, Nicaragua estimated that Costa Rica was not entitled to anything more than US$188,504.00.  (ICJ Judgment, para. 20).  The Court then clarified its position on its judicial discretion over damage and causation, given scientific uncertainty pervading environmental damages allegations:

“34. In cases of alleged environmental damage, particular issues may arise with respect to the existence of damage and causation.  The damage may be due to several concurrent causes, or the state of science regarding the causal link between the wrongful act and the damage may be uncertain.  These are difficulties that must be addressed as and when they arise in light of the facts of the case at hand and the evidence presented to the Court.  Ultimately, it is for the Court to decide whether there is a sufficient causal nexus between the wrongful act and the injury suffered.”(Italics added.)

The Court did not elaborate on its own criteria for the sufficiency of the causal nexus, particularly when environmental damage arises from a State’s illegally wrongful acts.

With respect to valuation of damages, the Court recalled its ruling in Diallo where “equitable considerations” were used to take into account the relative situations of parties to the case (see Dapo Akande’s comments on this case here), as well as the Trail Smelter arbitration’s reference to a 1931 United States Supreme Court decision in Story Parchment Company v. Paterson Parchment Paper Company that held that, in cases of torts that “preclude the ascertainment of the amount of damages with certainty…it will be enough if the evidence show the extent of damages as a matter of just and reasonable inference, although the result be only approximate.” (ICJ Judgment, para. 35).  The Court declared that “damage to the environment, and the consequent impairment or loss of the ability of the environment to provide goods and services, is compensable under international law.” ICJ Judgment, para. 42).

The Court drastically whittled down the amount of compensation owed to Costa Rica, to the amount of USD$120,000 for impairment or loss of environmental goods and services, USD$2,708.39 for restoration costs over the internationally protected wetland, costs and expenses at US$236,032.16, annual interest at 4% for the period from the 2015 Judgment and the 2015 Judgment on Compensation to US$20,150.04, and interest at 6% on these amounts when they fall due on 2 April 2018.  (ICJ Judgment, para. 157.)  The total amount adjudicated to Costa Rica of US$378,890.59 is just about 5% of Costa Rica’s claim.

Considering that this was a case where the Court examined experts back in 2015 to determine environmental damage, it was somewhat surprising that the Court did not also conduct an examination of experts to assess and estimate environmental damages (or at least the 2 February 2018 Judgment on Compensation is silent on this).  Neither is there any reference in the 2 February 2018 Judgment on Compensation to consultations with independent experts (institutions, organizations, or individual scientists) by the Court pursuant to its powers in Article 50 of the Statute of the ICJ, given the kind of scientific uncertainty that was to be expected when estimating damages over a recovery period for the 6.19 hectare affected area (whether it was 50 years as asserted by Costa Rica or 20-30 years as asserted by Nicaragua).  It is not entirely clear from the text of the 2 February 2018 Judgment on Compensation if the Court requested the Ramsar Secretariat (or any other international environmental organization, such as the United Nations Environmental Programme) to assist in this compensation phase of proceedings.  Instead, the ICJ’s 2 February 2018 Judgment on Compensation reads somewhat like an itemized list of what the Court deemed to be reasonably appropriate – given the relative situations of the parties and Costa Rica’s own obligations to mitigate natural hazards, without clearly establishing the scientific or factual basis for each item of damage as attributable to the unlawful activities of Nicaragua.

The Court then pronounced that “it is appropriate to approach the valuation of environmental damage from the perspective of the ecosystem as a whole, by adopting an overall assessment of the impairment or loss of environmental goods and services prior to recovery, rather than attributing values to specific categories of environmental goods and services and estimating recovery periods for each of them” (ICJ Judgment on Compensation, para. 78) – curiously, without clearly elaborating what that “overall assessment” entails, and whether this assessment is itself predicated on reliable science regarding the assessment of short and long-term damages to internationally protected wetlands under the Ramsar Convention.  Instead, the Court simply declared that the approach is “dictated by the specific characteristics of the area affected by the activities of Nicaragua, which is situated in the Northeast Caribbean Wetland, a wetland protected under the Ramsar Convention, where there are various environmental goods and services that are closely interlinked….such an overall valuation will allow the Court to take into account the capacity of the damaged area for natural regeneration.” (ICJ Judgment on Compensation, paras. 80-81).

In finding that Costa Rica was only entitled to US$120,000 for the impairment or loss of environmental goods and services of the impacted area in the period prior to recovery, and USD$2,708.39 for restoration measures, it was puzzling that – contrary to settled environmental compensation practices – the Court’s 2 February 2018 Judgment on Compensation does not indicate a baseline environmental assessment of the affected area ex ante before environmental damage from Nicaragua’s activities, a recovery period estimate (and the extent this is achievable naturally or through deliberate measures of Costa Rica at Nicaragua’s expense), as well as a cost of mitigation or remediation measures estimate for the said recovery period. Neither does it refer to Nicaragua’s duties of mitigation under the precautionary principle. Instead, the Court sparsely observed, among others:

1. “Costa Rica has not demonstrated that the affected area, due to a change in its ecological character, has lost its ability to mitigate natural hazards or that such services have been impaired…evidence before the Court suggests that both caños have subsequently refilled with soil and there has been substantial revegetation.” (ICJ Judgment on Compensation, para. 74.)
2. Because “there is no clear evidence before the Court of the baseline condition of the totality of the environmental goods and services that existed in the area concerned prior to Nicaragua’s activities”, the Court rejected the 50-year recovery period and also deemed it “incorrect to assign a single recovery time to the various categories of goods and services identified by Costa Rica.” (ICJ Judgment on Compensation, para. 76).
3. “…the most significant damage to the area, from which other harms to the environment arise, is the removal of trees by Nicaragua during the excavation of the caños. An overall valuation can account for the correlation between the removal of the trees and the harm caused to other environmental goods and services (such as other raw materials, gas regulation and air quality services, and biodiversity in terms of habitat and nursery).” (ICJ Judgment on Compensation, para. 79).
4. Nicaragua’s ‘corrected analysis’ estimating US$84,296 as damage to four categories of environmental goods and services (trees, other raw materials, gas regulation and air quality services, and biodiversity) is insufficient.  Rather, “…the absence of certainty as to the extent of damage does not necessarily preclude it from awarding an amount that it considers approximately to reflect the value of impairment or loss of environmental goods and services…the Court, while retaining some of the elements of the ‘corrected analysis’, considers it reasonable that, for the purposes of its overall evaluation, an adjustment be made to the total amount in the [Nicaraguan] ‘corrected analysis’ to account for the shortcomings identified…the Court therefore awards to Costa Rica the sum of US$120,000 for the impairment or loss of environmental goods and services of the impacted area in the period prior to recovery.” (ICJ Judgment on Compensation, para. 86.  Emphasis added.).  Clearly, the Court used Nicaragua’s ‘corrected analysis’ as its reference point and then made adjustments from there – a choice of methodology that remains opaque and undiscussed throughout the Judgment on Compensation.  Considering that the four categories of environmental goods and services implicate very different scientific considerations for their damages assessment (especially for biodiversity consequences which often depend on wholistic impacts assessment, or even factoring in climate change impacts on the affected area), it is surprising that the Court did not elaborate further on any evidence of scientific methodologies (whether submitted by the parties or drawn by the Court from independent experts) for damages assessment with respect to each of these categories.

The rest of the ICJ Judgment on Compensation (paras. 107-147)  then proceeds to an itemized discussion of Costa Rica’s costs and expenses incurred in relation to Nicaragua’s unlawful activities and the monitoring costs over the affected area, such as costs of flights, cargo and transport, satellite surveys, among others.  This itemized list – although too extensive to discuss in this post – is quite an interesting study of what the Court deems as “sufficient” documentary evidence in its judicial discretion to prove such costs and expenses (and provides a significant contrast to the high volumes of costs and expenses in investor-State arbitrations).  The itemized discussion slashes Costa Rica’s claim of around USD$3.5 Million in costs and expenses, to less than 10% in the amount of USD$236,032.16.  Notably, the Court does not allocate costs for legal representation fees (again, in stark contrast to investor-State arbitrations where this has become almost standard practice every time State responsibility is adjudicated).

The IACtHR Advisory Opinion on Marine Protection in the Greater Caribbean

The IACtHR Advisory Opinion (original in Spanish) establishes the fundamental nature of environmental rights to human rights, laying out a clear framework for States with respect to their shared responsibilities on marine protection over the Greater Caribbean region.  Significantly, the Opinion refers to the long-term impacts of climate change on populations.  The Advisory Opinion – as reported by an international non-governmental organization in English – establishes the following marine protection duties of the States in the Great Caribbean region”

• Avoid causing “significant” environmental damage in and outside their territory, for which they must regulate, supervise and monitor activities that could cause harm.
• Assure, among other things, the realization of effective and independent environmental impact studies, as well as mitigation and contingency plans for potential damages.
• Cooperate with other States and provide them with information regarding risks to their natural environment.
• Apply the precautionary principle to protect the rights to life and personal integrity due to serious and irrevocable environmental degradation, even when scientific uncertainty exists.
• Guarantee the rights to public participation, access to information related to potential environmental harms, and access to justice in decision-making that could affect the environment.

One can observe, based on the above declaration, that environmental damages assessment with respect to the Greater Caribbean marine environment will be of a much broader, integrated, or wholistic nature, in contrast to the ambiguous “overall assessment” proclaimed by the ICJ in its 2 February 2018 Judgment on Compensation that ultimately ended up being fairly incrementalist and opaque on scientific reasoning.

Conclusion

While there is much to praise about the International Court of Justice’s landmark first Judgment on Compensation for environmental damage, some caution is warranted as to the Court’s methodology for damages assessment in environmental cases.  The Court has been a leading tribunal in the declaration of environmental rights and duties, especially from its judgments on the Pulp Mills, Whaling in the Antarctic, and Gabcikovo-Nagymaros cases.  However, the same objections on scientific evidence and methodology that Judges Simma and Al-Khasawneh raised in their landmark separate opinion in Pulp Mills have to be stressed again today.  The Court’s reasoning in its Judgment on Compensation nowhere surveys the considerably evolved scientific landscape on short-term and long-term environmental damages assessment for complex environmental phenomena such as biodiversity, energy, air quality, and raw materials – as well as the climate change impacts that will also be felt in the affected area.  This would have been a far more visionary Judgment – emulating the scientific bases for interlocking State responsibilities for prevention, remediation, and mitigation that were recognized in the IACtHR’s Advisory Opinion – had the Court at least transparently discussed the evidence before it and any use it made, if any, of the highly developed scientific resources of the international community today.