Difficulties in Determining the Subjects of Emissions into the Environment

Difficulties in Determining the Subjects of Emissions into the Environment

Everybody knows clearly that emissions into the environment  are a  substantial world ecology problem. The problem is especially serious in the Republic of Kazakhstan due to the fact that most of Kazakhstan‘s economy sector is based on industry which is known to be a source of environment pollution. Because of this the legal regulations take a significant place in the Environmental legislation of the Republic of Kazakhstan. However, the legislation does not always give an exact answer to some questions emerging in practice relating to emissions into the environment. This issue will be mainly discussed in the article.

According to paragraph 2 of article 95 of the RK Environment Code one of the economical regulation mechanisms of Environment is payments for expending emissions into the environment. From a legal point of view,  environment emissions  generally means waste products,  harmful physical affection.

The obligation of paying for environmental emissions is provided in the RK Tax Code and payments should be made in compliance with special ecology nature using Permit given by the authorized body in  the Environment Protection Sphere.

Nature users that make pollution and sewage usually obtain an Environment Permit and make payments to the budget for emissions into the environment.  However, even though most Nature users currently try to tackle the problems concerning payments for emissions into the environment by reaching agreements, where one side is responsible for the payments, there is no exact answer to such questions such as : Who is the emissions subject? Who must pay?

As an example, let us show one typical situation. Let us suppose a subsoil user is to sign a contract with a construction organization for building a road. According to the contract the contractor was bound to obtain all necessary Environment Permits and make payments for emissions during the construction works. Before drafting the contract the subsoil user obtained confirmation of State Environment expertise for building the road line, where it had been stated that there would be possible emissions as a consequence of the construction works. In compliance with the agreement, the contractor was bound to provide construction equipment.

The contractor did not fulfill all the duties in terms of special nature use and as a result the Territory Environment Protection Department sued the contractor for indemnification caused by the emissions.

While considering such issues, one question will always arise here: Who is supposed to obtain the Permit for the emissions and make payments into the budget- the subsoil user or the contractor?

In accordance with paragraph 1 of article 69 of the RK Environment Code nature users expending emissions into the environment have to obtain the Permit for the emissions. At first, it seems to be clear and obvious. However, when it comes to decide which side is producing the emissions- the subsoil user or the contractor, judicial proceeding normally finds the subsoil user as a side responsible for the emissions. Moreover, contractual conditions  which say the contractor has to obtain the Permit for the emissions into the environment and make payments, are recognized as invalid by law courts, because of the following:

1.     In accordance with chapter 83 of the RK Tax Code the payments for emissions into the environment are reported as compulsory payments into the budget. According to article 461 of the RK Tax Code the payments mostly depend on the capacity of real emissions into the environment. Article 25 of the Code says that a property and actions that carry tax obligations are supposed to be tax objects. Consequently, a certain emissions capacity into the environment will involve tax obligations of an individual and legal entity which have to be registered with the Tax State body, determine taxation objects (notably, the emissions capacity), make compulsory payments into the budget and compile tax accounting.
In compliance with paragraph 1 of article 29 of the RK Tax Code all tax duties are made by the taxpayer by himself, unless another procedure is provided by the Tax Code. Paragraph 4 of the RK Supreme Court ruling from June 22,2006,#5 “The Judicial Applying Tax Legislation” says “in accordance with paragraph 1 of article 29 of the  Tax Code, the  taxpayer has to make payments into the budget by himself, unless another procedure is provided by the Tax Code. Any civil law bargains involving transferring tax indebtedness from one person to another in order to free that person from tax paying are supposed to be invalid in terms of law.

2.     The subsoil user is supposed to be the subject expending emissions into the environment, because their project involves a certain emissions capacity. The state territory Environment Protection body as a plaintiff  in court, interpreted that the subsoil user is a someone who made a decision in their interests to carry on activity involving emissions. And besides the subsoil user knew that their activity would involve not only the planned outcome as the main result, but also emissions as a consequence. The subsoil user determines the capacity and measure of the emissions when organizing their activity. Because of this the subsoil user has to: firstly, do everything to reduce the negative emissions effect on Environment; secondly, compensate for the damage to the Environment regeneration caused by the emissions.

Nevertheless, we do not think that it would be prudent to declare the subsoil user as the only side responsible for emissions payments, even if it is said by the court decision that the subsoil user decided about the capacity and measure of emissions (that is to say the subsoil user made a decision of road construction), but ,on the other hand, the contractor could control the capacity of emissions, because the contractor exploited the construction equipment during the construction works that  caused the  emissions.

Just let us imagine one similar situation. Let us say that a building contract was not signed for construction of real estate, but for personal property. In this case, it is apparent that making the object is the contractor’s task, not the subsoil user’s. The contractor fulfils the duty in the place where the necessary resources for the building are located, incidentally these resources are supposed to belong to the contractor on propriety rights or rights of use. If these resources cause the emissions, the duty of reducing negative emissions effect and remediation lie on the contractor. Furthermore, waste products are supposed to be the results of the contractor’s construction works. When coming to a decision of construction of the object the subsoil user does not have to submit project documentation to the state Environment Expertise  bodies and does not control the  use of the necessary resources for building.

We are inclined to think the same situation arises when entering into a contract of construction. In fact, here is one special point: the construction works are realized by the contractor on a land section that belong to the subsoil user initially, that is to say the right of a land section should be realized only by the subsoil user.

The question as to whether it is possible to make construction on a land section or not depends on measures and methods of emissions into the environment and who has the proprietary rights or rights of use for emissions source.

On the whole, the source of emissions, or rather the construction equipment belongs to the contractor. What we think of as the emissions should be admitted as a result of the contractor’s activity. To prove that, we can refer to paragraph 3 of article 463 of the RK Tax Code where it is  said that tax payments should be made in the place of the state registration.

Consequently, regarding the example mentioned at the beginning of the article, we suppose the contractor to be the subject of tax duties, despite the conditions in the contract between the contractor and the subsoil user, because the contractor equipment that was the main source of the emissions.

Furthermore, from paragraph 1 of article 69 of the RK Environment Code it follows that the nature users expending the emissions into the environment have to obtain a Permit for the emissions .

Having proved the contractor’s duty to obtain a Permit for emissions we can consider the relevancy itself during the construction works. Spreading emissions without obtaining the Permit is supposed to be excessive and in compliance to “The economical rules of the Environment Pollution Damage Assessment” excessive Environment emissions are regarded as Environment damages and  rules of indemnification should be made.

In general, despite the current law applying, there are valid reasons for imposing the responsibility for  Environment damages not on the subsoil user, but or the contractor.

We hope you do find this information interesting and helpful. If you have any questions, please do not hesitate to contact us.

Best regards,

"Environmental Law" Department

Tel.: +7 (727) 2 445-777
Fax: +7 (727) 2 445-776
ecology@gratanet.com