Treatment Of Environmental Liabilities In Insolvency Resolution: Clean Slate Or Continuing Burden?

Introduction

Corporate entities dominate the number of debtors admitted into CIRP and numerous of these come with environmental liabilities left outstanding: in the form of pending consents/closures, contaminated soil or pending liabilities payable to the pollution control bodies. The IBC was conceived with the private law logic of value maximisation and providing a “clean slate” to the applicant; while environmental law rests on the public law logic of strict/absolute liability and the “polluter-pays” principles, ensuring liabilities stick to the activity or site. This blog explores how this interaction plays out - are environmental liabilities discharged as ‘claims’ on approval of a resolution plan, is environmental liability attached to the assets of the corporate debtor irrespective of changes in ownership, how it influences the feasibility of the plan and what steps the potential resolution applicant should take when acquiring a contaminated industrial asset.