Examination of Witness (Questions 140-146)
24 MAY 2004
PROFESSOR MALCOLM
GRANT
Q140 Joan Ruddock: Finally, could we
have your thoughts on environmental liability, because that has
not been discussed much elsewhere, apart from in your own report.
Professor Grant: I have to say
we spent a long time on environmental liability over a period
of two or more years, and at one time we were reviewing the possibility
of having quite a complex scheme, one that, for example, would
allow certain types of plaintiffs, individuals even, to bring
actions for compensation in the form of remediation, and which
struggled with different definitions of environmental damage.
But as we were going along in that direction so the European Union's
draft Directive on Environmental Liability was coming in a different
direction, and at one point we changed horses and decided it would
make much more sense for us to follow that model, given the growing
likelihood that it was going to be adopted, and indeed was formally
adopted last month. It provides a basis of administrative liability
and puts a competent authority in the frame, so it much diminishes
the role of the courts by allowing a competent authority, perhaps
the Environment Agency, to determine what is environmental damage
caused by GMs, what were the priorities and against whom action
should be taken. But there are some major gaps in the Environmental
Liability Directive, as you know. It is focused on protected species
and habitats under other EU legislation, so it is not, as it stands,
wholly appropriate for potential environmental damage to agricultural
areas that are not specially protected. We have, however, in our
report suggested to the Government that they use the directive
as their starting point and that they design liability rules on
those foundations.
Q141 Chairman: Just quickly, have AEBC
discussed at all the setting up of this indemnity fund and whether
you, as a body, would maybe underwrite that and see that as an
on-going role?
Professor Grant: Do you mean an
indemnity fund for environmental liability?
Q142 Chairman: And possibly economic
as well. In other words to kickstart the insurance industry because
at moment, if there is going to be any real way in which GM can
be introduced, there may have to be some form of quasi state involvement
and one presumes a form of indemnification underwritten by a body
like AEBC. Have you discussed that, and is that something you
could see yourselves doing?
Professor Grant: I would distinguish
between the two cases. I think for economic liability it is entirely
a case of setting up a fund into which contributions are made,
whether by the industry or by Government or even by both, and
that is not so much an indemnity fund as a compensation fund.
For environmental liability you have to ask who is the insurer
of the last resort, and ultimately it is the state. If there were
some unforeseen and unforeseeable environmental damage caused
by the growing of GM crops, and nobody has yet suggested to us
what that might be, because we are here trying to look with foresight
at what arrangements could be put into place for something which
we cannot properly foresee, but if that were to occur and if action
were to be brought against a company which was no longer solvent,
it will be the state that ultimately bears the cost. So we did
consider whether this should be an indemnity fund set up with
contributions from the industry or elsewhere, but we were not
able to come out with a unanimous view about that. You suggested,
Chairman, that the AEBC itself might stand behind it. I have to
say that we have robust members but fragile finances.
Q143 Paddy Tipping: I think Professor
Grant has covered most of the principles of the insurance market,
but can I just ask you directly whether you have talked to any
insurance companies? What are they saying to you about the possibility
of providing economic cover?
Professor Grant: We have spoken
quite extensively to insurance companies, including the NFU Mutual
who are probably the most experienced insurers in this area. They
felt that there was an opportunity for a market to develop and
they were interested in seeing how it might develop, but that
it was premature yet to speculate on what might occur. As in all
other markets, and contaminated land is another very good example,
they really need some practical experience before they can start
to quantify their risk and exposure.
Q144 Paddy Tipping: And the length of
time of that practical experience will depend entirely on how
far GM planting goes on, so there is no point in me saying to
you, "How long is the market going to take to develop?"
We have no idea.
Professor Grant: We do not know,
and there is another great uncertainty which is the regulatory
environment. If liability is tied to regulation and regulation
changes over time then it is extremely difficult for a market
to develop. It would have to be on claims made rather than on
an occurrence basis anyway to minimise longer term exposure, but
against that some of the major insurance and reinsurance companies
are relatively optimistic that a market could develop in due course.
This is a very immature industry.
Q145 Paddy Tipping: What about the interim
period? Presumably interim arrangements have to be made. Is that
where Government steps in?
Professor Grant: Yes. In terms
of economic loss our recommendations were that there should be
an interim compensation fund, and that would be, I think, of value
only unless and until an insurance market matured.
Q146 Chairman: Can I thank you? As always,
Malcolm, it has been a treat. I do not know how many more times
you will wish to come back and visit your views upon us, but we
thank you. It has been very concise and clear to understand where
you are coming from. I am afraid even your asides will be printed
so you will have to answer for them some time, but we have enjoyed
the session and you have given us a very good run into the ministry.
Professor Grant: Thank you very
much for the opportunity to appear before you this afternoon.
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