On Directions of Ecologization of Economic Legislation in Ukraine

Gulnara D. Dzhumageldiyeva, Doctor of Law, Senior Researcher, Head of Sector of Legal Environment Problems in the Use of Natural Resources, Institute for Economic and Legal Studies, National Academy of Sciences of Ukraine, Donetsk, Ukraine

The article is devoted to prospects of ecologization of economic legislation in Ukraine by separately codifying ecological legislation of Ukraine and by adding ecology-oriented norms to the Commercial Code. After analyzing laws of foreign countries and practices of enforcing ecology-oriented laws, the author proves the assertion that creating ecological legislation on the basis of the Commercial Code of Ukraine is a matter of priority.

Key words: ecologization; economic legislation; Environmental/Ecological Code; Commercial Code; natural resources.

Public production can hardly exist without involving various natural factors, first and foremost natural resources. On the functional level, these factors act as natural productive forces and, together with production facilities and the total workforce constitute primary factors of production. Since 1950s, the idea of interdependence between efficient use of natural resources and sustainable economic development has become axiomatic in economic literature.

As V.N.Geyets states, domestic statistical data about high rates of economic growth are not indicative  of  sustainability of growth and do  not guarantee adequate standards of living. Sustainable economic growth is a sequence of transitions that an economic system makes going from one balanced condition to another  quality level, to new characteristic features, among which environmentally balanced parameters of social development are given special attention. What matters is the quality of economic growth and approach that lies in its foundation - exploiting natural resources or investing in human capital^[1].

Some positive changes on the way to developing ecology-oriented economy, especially in the energy industry, have been observed in the Ukraine lately. For example, in Ternopil and Vinnitsa regions, small hydropower plants have been reconstructed, which allows to significantly decrease consumption of coal for power generation and, therefore, reduce CO2 dumping into the atmosphere. The technologies introduced at the State Enterprise Research Industrial Complex  “Pavlograd Chemical Plant” enable using solar energy to provide power for production process. Since 2010, in Saki Area of the Autonomous Republic of Crimea, geothermal heat pumps have been used. In Dzankoy Area, thermal boiler stations provide their share of heat supply.  In 2011, in Donetsk region, the “Novoazovsky” wind farm was put into operation. Similar facilities are being built in Nikolayev, Odessa regions and in the Autonomous Republic of Crimea.In the transport sphere, there is also a tendency to replace the use of products of oil refineries with electric power.

For example, during the preparation for the 2012 UEFA European Championship, in Donetsk the busiest public transport routes were served mostly by trams and trolleybuses. As smaller public transport vehicles (minibuses) were taken away from streets, the ecological situation in Donetsk improved considerably. Based on the results of 2012, Donetsk ranked 9th among the most polluted cities in Ukraine, which is significant progress in comparison with its position in 2007 when it ranked 4^th.

Of course, this atmospheric “purification” was not the result of the public transport structure diversification alone. But the comparative analysis of the statistics in Donetsk according to which the amount of air emissions by mobile sources  was 189,700 tonsin 2010and 177,600 tonsin 2012, is symptomatic.

In contrast with the situation in Donetsk, in the Autonomous Republic of Crimea, where the priority is given to the development of micro-bus segment of passenger transport, the amount of air emissions increased from 130,000 tons in 2010 to 137,800 tons in 2012^[2].

Unfortunately, these positive examples of taking environmental  aspects into account in economic activity are the exception rather than the rule, because the current  model of economic development prevailing in the Ukraine is mostly based on inefficient use of natural resources. As practice shows, unscrupulousness in issues of expediency and efficiency of the current model of resource use results in the irretrievable loss of resources (destructive logging in Western Ukraine; depletion of natural gas reserves at the very promising Prykerchenska Block of Ukraine's Black Sea; “trawling” fishing, which caused the fish to migrate in the Azov Sea away from the shores of Ukraine) and ruins the environment in general (causing submergence of populated areas, soil water-logging, changes in the ecosystem of seas, etc.).

According to some estimates, the current general level of technogenic burdenon the environment in  Ukraine exceeds 5 times that of industrialized countries^[3]. At the same time, GDP energy intensity in Ukraine is 3.6 times higher than that of Great Britain, 3.1 times higher than that of Germany and Japan, 2.4 times higher than that of Poland; water use intensity is 2.83 times higher than the worldwide average, and the amount of CO2 emitted per unit of production is 15.25 times higher^[4].

Environmental degradation, exhaustibility of natural resources have determined increased attention to the issue of rational environmental  resources management which has transformed from a regional problem into a national issue within a very short period of time.

The solution of this problem has various aspects – economic, technological, social, with legal regulation in one of the key roles.

National laws on environmental resources management in different countries have their specific features stipulated by geo-climatic conditions, by the level of productive forces development, peculiarities of legal systems, etc. These peculiarities do not allow to automatically borrow “alien”, though efficient, models of legal regulation   of other countries, preserving a similar positive effect.

A borrowed technology is never an exact copy of the original, states V.Polterovich. In order to borrow on a national scale, a country needs special nontrivial institutions. If this were easy, all developing countries would have already become developed ones. But in most cases, most borrowings are not successful^[5]. But still, in the conditions of reforming the system of government in Ukraine, including the sphere of environmental resources management, studying foreign experience can be very useful. Such studies help to borrow - from leading countries -  the experience that is most  needed at the moment or refrain from taking certain steps that proved to be inefficient in foreign legal systems^[6].

To some extent, the current unfavourable situation with using natural resources in economic turnover is the result of an autonomous position of natural resources law, which is developing in parallel with commercial law. The absence of “meeting points” in regulation by means of economic law and environmental law leads to discretion in making decisions and taking measures and, as a result, produces a negative influence on the effectiveness of legislation.

Ecologization of legal regulation of economic activity requires that the optimum ratio of ecological and economic criteria be found. As current practices show, giving priority to the economic criterion is ineffective. However, if ecology is given priority, then a lot of measures and initiatives  that a society needs will be impossible to implement because any economic activity can cause certain damage to the environment. Thus, legal regulation ofenvironmental resources management for economic purposes should be based on a differentiated approach to establishing the ratio of ecology and economy, “weighing” the expected profit and loss, taking into account  all inevitable damage to environment^[7].

The adoption of the Commercial Code of Ukraine as a core legal act regulating economic activity created prerequisites for bringing the legal regulation of natural resources management to a totally new level. For example, Chapter 15 of the Commercial Code of Ukraine proclaims the principle of rational and responsible management of natural resources and defines, in general terms, rights and responsibilities of economic entities – users of natural resources. But there is no legal mechanism to ensure the exercise of  rights and responsibilities inherent to legal personality in the sphere of natural resources management, which makes the abovementioned  “natural-resources provisions” declarative to some extent. To fill in the gap with provisions of special legislation, such as Land Code, Forest Code, Water Code, Natural Resources  Code, Mining Law, etc., is difficult because these normative acts are special-purpose acts and, therefore, highly uncoordinated with one another.

One of the most efficient ways to overcome legal uncertainty and strengthen the ecological component of legal regulation of economic activity is to codify the relevant normative legal base, and the necessity to codify the natural resources acts is no longer discussed by domestic legal experts. At the same time, a question about a method of codification arises: whether the codification is going to result in a special codified legal act – the Ecological Code of Ukraine – or relative legal acts should be included in the Commercial Code of Ukraine (for relationships concerning natural resources management in  economic activity) and in the Civil Code of Ukraine (for   similar relationships in civil transactions).

It should be noted that legal scholars in both commercial law and environmental law areas generally support the idea of possibility  and effectiveness of ecologization on the basis of commercial law approach. For instance, A.V.Rogovenko, while researching the legal nature of coastal zone, concluded that it is an integrated object of legal regulation, namely:

(1) an object of landscape law;

(2) a natural resource;

(3) a health and recreation zone;

(4) an area for economic activity.

In addition, the researcher states that the dialectical combination of these

features with reproduction of major principles of legal regulation will help clearly define the legal regime of the coastal zone through the prism of regulatory control of economic activity^[8].

V.V.Kononov, researching the legal regime of lands in coastal zones, proceeds from viewing them as  protected areas with a specific regime of economic activity. The author stresses that  this characteristic takes priority over the one used in legislation for differentiation of lands according to the intended purpose in order to determine a legal regime; the author also proves that the ultimate goal of land management should be establishment of compulsory measures that land managers and land owners must take in order to bring relevant land plots into compliance with a special regime of economic activity prescribed by the state, rather that determination of borders of coastal protection zones^[9].

At the same time, though the methodological approach used in the Commercial Code of Ukraine has been recognized as efficient, in order to implement this approach de jure in environmental law research – for the purpose of ecologization of legal regulation of economic activity – the Ecological Code as an integrated legal act regulating economic and civil relationships in the area of interaction of the society with environment should be adopted.

The conception of the Ecological Code of Ukraine provides for systemization of major environmental requirements reflected in numerous laws that regulate the use of a particular natural resource. At the same time, the current autonomous system of natural resources legislation – natural resources codes and laws – is preserved.

Obviously, the suggested method of codification will create prerequisites for eliminating apparent contradictions among particular provisions of natural resources legislation. However, the adoption of the Ecological Code of Ukraine is likely to be viewed as a partial solution that cannot provide for an integrated approach to regulating relationships in natural resources management in commerce.

First, even if environmental legislation is coUdified in a cohesive way, as stipulated by the Conception, the Ecological Code will embrace only “vertical” relationships of “authority-compliance” in the sphere of natural resources management; “horizontal” relationships involved in direct use of natural resources (land, water, forest, mineral resources, etc.) are beyond its scope and will be regulated by relevant natural resources codes – special legislation. As a  result, given the general principle of correlation between general and special legislation - lexspecialisderogatgenerali (special legislation repeals (replaces) general legislation), inefficient provisions of natural resources codes can offset positive effects of general provisions of the Ecological Code.

The second aspect that has to be taken into account is that the codification of natural resources legislation should not be a goal in itself. Its task is to raise the efficiency of legal regulation of natural resources management in commerce.

The codification should not result in uncontrollable multiplication of codes, which can cause fragmentation of legislation and weakening of core principles of legal regulations laid down in law codes. V.K.Mamutov states that relationships constituting the object of regulation of a new code must be so specific   that   the

current  normative legal acts, including codified ones, do not ensure their adequate regulation. In other words, in the areas where legislation has been codified, new norms should get integrated into the existing codes. They should not  be passed separately from those codes^[10]. In such a case, the new provisions are compatible with the existing norms so that the general model of legal regulation will not “get hung”, expecting “directives”, but will continue working by the new rules.

Third, the adoption of the Ecological Code will contribute to greater alienation of environmental and commercial legislation, which will  make it harder to accomplish the goal of ecologization of the latter, and will also “delete” the economic criterion from ecological norms.

Ineffectiveness of separate codification of environmental legislation is well illustrated by the experience of Great Britain, where in 1990, the Pensions Investment Research Consultants Ltd. (PIRC) were involved in  developing the UK Environmental Investment Code for pension funds. As of 1991, the code was ratified by most trust funds. According to the Code’s principles, the funds were supposed to make only environmentally-oriented investments, and  the issue of  profitability was of secondary importance. The major principle of the business conduct was the following: a company that neglects environmental problems neglects its investors’ interests as well. But by 1998, the funds-ratifiers had become less stable financially and, therefore, started to lose their investors. As a result, most funds had to change the focuses of their economic policy: the company’s financial health is the major criterion in decision-making. Under no conditions  can a beneficiary’s cheque be put at risk^[11].

The variety of means to implement ecologization of commercial legislation on the basis of Commercial Code of Ukraine that are found in legislation or proposed in legal literature (the contractual nature of environmental resources management, planning, standardization  and assignment of quotas for dumping waste, provision of tax and loan incentives to persons involved in environmental activity, government support of  economic activities that bring minimal harm to environment and are close to natural processes (“ecocycles”), etc) also speak for the idea of such ecologization. These means of regulation have been used in economic activity for a long time; they have standard mechanisms of implementation based on a uniform balanced approach to legal interposition of parties, correlation of their competence, etc. In such conditions, introduction of methods of influencing ecological parameters of economic activity implies only “incorporating” an additional element in a relatively stable structure of law, which will help economic entities to adapt their activity to  new conditions.

Adoption of a separate codified act, on the contrary, can bring much more mismatches, especially on the “border” between its provisions and provisions of the Commercial Code of Ukraine, which will not contribute to  the stability of business climate. Separating objects of regulation of these codes by removing the economic component from the Ecological Code with make the situation worse because in this case, the Code will have distinct technological or technical and ecological orientation: it will include only provisions on work safety and environmental protection. Meanwhile, natural resources get commonly involved in economic activity, therefore, experts state that the economic activity should be regulated so that it will be safe and will not harm the environment. When economic activity and environmental protection  are regulated separately, the effectiveness of legal regulation decreases^[12].

The provision about responsibility for damage to environment confirms this statement. According to the Directive of the Ministry of Environmental Protection of Ukraine No.639 “On Approving the Procedure for Calculating Damages Incurred by the State as a Result of Excess Air Emission” (December 10, 2008), the damages are generally calculated by multiplying the amount of excess emission (in tons) by the minimum wage (for the period of emission) adjusted with the quotient 1.1 and by other regulating quotients differentiated by the type of a settlement and its population.

The effectiveness of a sanction chosen and reasonableness of the procedure of determining damages and their structure seem dubious from both legal and economic points of view.

Losses are always of material nature and involve the reduction of property volume that injured persons had before the violation (direct loss) and non-receipt, as a result of the violation, of property that the injured party had every right to count on (lost profit)^[13].

Excess air emission is a violation of rules of economic activity established by legislation. Such a violation should be ground for liability. However, as a result of such actions, the government as a subject entitled to damages does not incur direct  losses in the meaning above. Also, the correlation between air pollution and the decrease in planned budget revenue is not obvious. Thus, there are no grounds to compensate damages to the state. Here it would be appropriate to speak about imposing - on the guilty party - administrative or economic sanctions, as measures of organizational and  legal or material nature aimed to make the business entity stop breaking law and eliminate consequences of the violation, rather than  about damages.

Neverthelescs, losses caused by environmental pollution exist. Taking into account that key elements in determining the amount of damages are  population and the minimum wage, one can assume that the party injured because of the excess air emission is an individual, and the state (for procedural reasons) is an authorized agent in the relationship concerning compensation of damages. But in such a case, the compensation must be paid to residents of a particular settlement – by way of direct payments or indirectly through the purchase  (by local healthcare institutions) of necessary medications and their distribution among the population on the territory. But, according to the Law of Ukraine “On Environmental Protection”, the compensation recovered  goes to the corresponding budget without being distributed among the population. Thus, the assumption that an individual  is the party entitled to damages is not confirmed.

The next “candidate” entitled to recovery of damages caused by excess air emissions is an economic entity whose activity and results depend on air quality – agricultural producers, apiaries, gamekeepers, etc. As a result of excess air emissions they suffer direct loss – reduction in  property value (crops drying out;  mortality of cattle, birds,  bees; mass deaths of fish or worsening quality of agricultural products) – and lost profit because of decrease in  proceeds from contracts for the sale of their products. But, the loss calculation methodology - because of its components – is least of all adapted to the requirements of this particular category of injured persons. First, the minimum wage used in relevant calculations does not reflect the amount and composition of direct loss suffered by the entity. Second, setting the low quotient of 1.0 for populated areas with prevailing agricultural production  nullifies the compensatory function of liability for damage and contradicts the principle of proportionality (adequacy) of consequences and penalty. As a result, although air pollution in rural areas causes significant negative economic consequences (lost harvest, etc.), it will “cost” the polluter less than the same violation in a megalopolis (without the abovementioned economic consequences).

Separate codification of environmental legislation will only deepen the irrelevance of its provisions to the real economic situation.

When choosing ways of ecologization, one should take into account that forming a system of legislation means  integration of  rules of law rather than their differentiation.  By all means, the problem of drawing distinction among legal rules is extremely important from the theoretical point of view  because it helps bring to light current trends of development for some  directions of legal regulation. However, from the viewpoint of increasing the effectiveness of legal environment of economy, it is most important to find the ways for interaction of provisions of various legal acts regulating economic activity. Problems of causing damage to environment are rooted not so much in the quantity of legal rules that require compliance with quality standards and other environmental norms but in the absence of philosophy of commonality of norms providing sustainable development in various branches, with these norms subordinate to a legal regime of creating a property basis for economic activity and concluding agreements on environmental resources management in economic activity.

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