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Tricks under Trade: How International Trade Both Facilitates and is Facilitated by Corporate Environmental Crime in the Waste and Hydrocarbon Sectors
Published online by Cambridge University Press: 15 May 2024
Abstract
Legal scholarship in the realm of international economic law has a blind spot: the practice of international trade. Cargo and container shipping is the blood and guts of international trade, and it is fuelled by bunker oil – a hydrocarbon mixture of the dirtiest petroleum-based products. Worryingly, there is empirical evidence of bunkers being intentionally contaminated with waste oils. This fraudulent contamination violates numerous international, national, and EU rules on waste management and poses immense risks to the health of planet and people alike. These same acts of fraud are also extremely profitable, and they facilitate the smooth functioning of our global economy. The fraud is itself not just incentivised in the tight-margins reality of international trade, but it is facilitated by the lack of proper legislation and the vulnerability of the existing means of enforcement in the areas where there is legislation to comply with. Economic operators often use falsified documents to market fuel oil that should be considered as waste. Systematic wrongdoing of this kind is detrimental to the environment and risks eroding the rule of law in both its formal and substantive conceptualisations.
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References
1 IMO, “Fourth IMO GHG Study 2020” (2021); EU Commission, “Fourth Annual Report from the European Commission on CO2 Emissions from Maritime Transport (period 2018-2021)” C(2023)1585 final. European Parliament, “Sustainable maritime fuels” “Fit for 55ʼ package: The FuelEU Maritime proposal” Briefing EU Legisaltion in Progress (2023), available at https://www.europarl.europa.eu/RegData/etudes/BRIE/2021/698808/EPRS_BRI(2021)698808_EN.pdf (last accessed 16 December 2023).
2 N de Sadeleer and I Damjanovic (eds), “The Evolving Nature of the Rule of Law in International Economic Law” (2024) European Journal of Risk Regulation.
3 For details regarding both the mentioned criminal investigations, which were conducted in the Netherlands between 2010 and 2020, please see: G Giardi, Illegal Waste Management Activity in the Process of Bunker Fuel Production: A Criminological Case Study of Corporate Environmental Crime and Its Enforcement (Eleven International Publishing 2023). In the book, the crimes are described in detail as are the industrial contexts in which they materialised. The author used multiple theoretical frameworks applied to different levels of analysis to provide an integrated understanding of how and why the acts of fraud took place.
4 Directive 2008/98/EC of the European Parliament and of the Council of 19 November 2008 on waste and repealing certain Directives, OJ L 312, 22.11.2008, pp 3–30. Furthermore, the activities should be criminalised in accordance with Directive 2008/99 of the European Parliament and of the Council of 19 November 2008 on the protection of the environment through criminal law, OJ L 328, 6.12.2008, pp 28–37. Arts. 3 (b) and (c) oblige MSs to ensure that the following conducts constitute criminal offences, when unlawful and committed intentionally or with at least serious negligence:
“(b) the collection, transport, recovery or disposal of waste, including the supervision of such operations and the after-care of disposal sites, and including action taken as a dealer or a broker (waste management), which causes or is likely to cause death or serious injury to any person or substantial damage to the quality of air, the quality of soil or the quality of water, or to animals or plants;
(c)the shipment of waste, where this activity falls within the scope of Art 2(35) of Regulation (EC) No 1013/2006 of the European Parliament and of the Council of 14 June 2006 on shipments of waste and is undertaken in a non-negligible quantity, whether executed in a single shipment or in several shipments which appear to be linked.”
5 M Lynch, P Stretesky and M Long, “The Treadmill of Production and the Treadmill of Law: Propositions for Analyzing Law, Ecological Disorganization and Crime” (2020) 31(1) Capitalism Nature Socialism 107; C Aller, L Ductor and MJ Herrerias, “The World Trade Network and the Environment” (2015) 52 Energy Economics 55; JA Frankel and AK Rose, “Is Trade Good or Bad for the Environment? Sorting out the Causality” (2005) 87(1) The Review of Economics and Statistics 85.
6 Some insightful perspectives in this regard include: WS van der Loeff, J Godar, V Prakash, “A Spatially Explicit Data-Driven Approach to Calculating Commodity-Specific Shipping Emissions per Vessel” (2018) 205 Journal of Cleaner Production 89 – here we see how estimates can be made regarding the environmental impact of shipping as a crucial element in international trade. Other sources connecting international trade practices and adverse environmental impacts include: M Bruckner et al, “Quantifying the Global Cropland Footprint of the European Union’s Non-Food Bioeconomy” (2019) 14 Environmental Research Letters 045011; S Allain et al, “The ‘bioeconomics vs bioeconomy’ debate: Beyond criticism, advancing research fronts” (2022) 42 Environmental Innovation and Societal Transitions 58. Regulation (EU) 2023/1115 of the European Parliament and of the Council of 31 May 2023 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010, OJ L 150 also explicitly addresses the consequences of globalised trade and the EU’s role in that context (see eg recital 8).
7 Examples include: SB Longo and B Clark, “An Ocean of Troubles: Advancing Marine Sociology” (2016) 63(4) Social Problems 463; T Dietz and A Jorgenson (eds) Structural Human Ecology: New Essays in Risk, Energy, and Sustainability (Washington University Press 2013); and A Schnaiberg and K Gould, Environment and Society: The Enduring Conflict (Blackburn Press 1994).
8 Examples include: U Beck, “The Cosmopolitan Perspective: Sociology of the Second Age of Modernity”(2000) 51(1) The British Journal of Sociology, 79; A Giddens, Politics of Climate Change (Polity 2009). In their contribution Clark and others have provided an overview of this spectrum of perspectives (TP Clark et al., “Capitalism and Sustainability: An Exploratory Content Analysis of Frameworks in Environmental Political Economy” (2022) 9(2) Social Currents 159.
9 As an example, we can peruse the findings of the United Nations Environment Programme, which recently issued the first global assessment of air pollution regulation, which surveys the measures adopted (or not adopted) in 194 States (UNEP, Regulating Air Quality (2021)).
10 H Culot, “The Concept of the Rule of Law and Global Governance: Theoretical Perspectives” (2024) European Journal of Risk Regulation. It should be noted here that Culot’s arguments rest, in part, on perspectives that connect the rule of law to the definition and protection of property rights specifically.
11 de Sadeleer and Damjanovic, n. 1. Page number. It is important to note that the formal/substantive distinction indicated here is different than the that articulated in the discipline of legal philosophy. Indeed, within legal philosophy, a way of systematising the discussion on the rule of law is by distinguishing between the formal, procedural, and substantive aspects of governance through the rule of law (J Waldron, “The Rule of Law and the Importance of Procedure” (2011) 50 Nomos 3.) The boundaries of these categories differ from those outlined by de Sadeleer and Damjanovic. Moreover, the distinction between formal and substantive adopted here does not imply that a clear position exists in legal or legal philosophical scholarship on the precise definition of the rule of law. Such a definitive or uniform perspective is currently absent in the debate (Ibid; J Waldron, “The Rule of Law” in Edward N. Zalta and Uri Nodelman (eds.) The Stanford Encyclopedia of Philosophy (2023) <https://plato.stanford.edu/archives/fall2023/entries/rule-of-law> (last accessed 3 March 2024). Finally, it should be noted that the substantive component identified by de Sadeleer and Damjanovic is more often discussed in terms of the (moral) values that underly the rule of law in legal philosophy scholarship. In this regard, there appears to be a split among those who consider the establishment of expectations and security (intended as liberty from arbitrariness in both vertical and horizontal relationships) to be the paramount function of the rule of law (see, eg, Tom Bingham, The Rule of Law (Allen Lane 2010); Friedrich Hayek, The Constitution of Liberty (University of Chicago Press 1960); Jeremy Bentham, The Theory of Legislation, C.K. Ogden (ed.) (Kegan Paul, Trench, Trubner & Co 1931 [1802, 1864]) and which is also echoed in Culot’s contribution to this special issue (see also n. 10 above). However, like in the article of de Sadeleer and Damjanovic, the position taken here is that, the substantive component of the rule of law is inextricable from the moral requirements of the liberal democratic regime, which in legal philosophy is, in some respects, the perspective taken by Raz and Fuller who connect the rule of law’s guarantees of freedom to the complete exercise of individual autonomy and as functional to ensuring human dignity (J Raz, “The Rule of Law and its Virtue”, in his book, The Authority of Law (Oxford University Press [1977] 1979); Lon Fuller, The Morality of Law (Yale University Press 1964).
12 B Magraw, Daniel “Rule of Law and the Environment,” (2014) 44(1–2) Environmental Policy and Law 201–210.
13 The principle of legality as a component of the rule of law is discussed in Case C496/99 P Commission v CAS Succhi di Frutta [2004] ECR I-03801, para 63; and the principle of legal certainty in Joined cases 212 to 217/80 Amministrazione delle finanze dello Stato and others [1981] ECR I-02735, para10.
14 In her contribution, Alexovicova also looks at the distinction between formal and substantive rule of law and acknowledges the importance of effective enforcement to guarantee what she terms procedural rule of law I Alexovicova, “Enforcement of Multilateral Trade Regulation by Non-State Actors. Desirable and Feasible?” (2024). The emphasis here is, however, on the danger that systematic erosion of formal or procedural manifestations of the rule of law end up impacting its substantive components. As mentioned in n. 11 above, the substantive notion of the rule of law is taken to indicate the moral core connected to liberal democratic ideals, which is different from the substantive aspect as it is understood in legal philosophy.
15 LJ Kotzé and D French, “The Anthropocentric Ontology of International Environmental Law and the Sustainable Development Goals: Towards an Ecocentric Rule of Law in the Anthropocene” (2018) 7(1) Global Journal of Comparative Law 5; R Kim and K Bosselmann, “International Environmental Law in the Anthropocene: Towards a Purposive System of Multilateral Environmental Agreements” (2013) 2(2) Transnational Environmental Law 285; J Ebbesson, “The Rule of Law in Governance of Complex Socio-Ecological Changes” (2010) 20(3) Global Environmental Change 414. It is also important to note that, in legal philosophy, the approximation of the rule of law with justice is not an accepted position (Waldron, n. 11). Yet there are examples of the line between the rule of law and justice being blurred. For example, Dworkin approximates the rule of law to legality and claims that there may be different notions of legality: he cites the example of the Nuremberg trials and assigns equal worth to both the claim that legality was respected because only through the trials could true legality be assured and to the claim that the trials offended legality but were justified in the interest of other values, such as justice (R Dworkin, “Hart’s Postscript and the Character of Political Philosophy” (2004) 24 Oxford Journal of Legal Studies 1, 24).
16 W Kaufmann and A Lafarre, “Does Good Governance Mean Better Corporate Social Performance? A Comparative Study of OECD Countries” (2021) 24(6) International Public Management Journal 762; C Castiglione, D Infante and J Smirnova, “Environment and Economic Growth: Is the Rule of Law the Go-Between? The Case of High-Income Countries” (2015) 5 Energy, Sustainability and Society 26.
17 M Sulaman, L Xingle, “Rule of Law and CO2 Emissions: A Comparative Analysis Across 65 Belt and Road Initiative (BRI) Countries” (2021) 279 Journal of Cleaner Production 123539; NPW Setyari, “Economics and Environmental Development: Testing the Environmental Kuznets Curve Hypothesis.” (2021) 11(4) International Journal of Energy Economics and Policy 51.
18 Setyari, n 15.
19 Ibid 53. The notion of composition effect indicates: “the part of the observed between-group difference in the distribution of some economic outcome that can be explained by differences in the distribution of covariates.” C Rothe, “Decomposing the Composition Effect: The Role of Covariates in Determining Between-Group Differences in Economic Outcomes” (2015) 33(3) Journal of Business & Economic Statistics 323.
20 Setyari, n 15; NW Hlongwane and OD Daw, “Testing environmental Kuznets Curve hold in South Africa: an econometric approach” (2022) 12(3) International Journal of Energy Economics and Policy, 385.
21 G Slapper and S Tombs, Corporate Crime (Longman 1999). A highly publicised example is that of “Dieselgate” whereby several companies in the autmotive sector committed large-scale, systematic fraud to disguise the true emissions their products were releasing in irder to comply with increasing restrictions (for a discussion, see, eg, C Braun and J Van Erp, “International Regime Complexes and Corporate Crime: A Research Agenda Based on the Volkswagen Diesel Fraud Case” (2022) 77 Crime, Law and Social Change 185.
22 RA Cloward, “Illegitimate Means, Anomie, and Deviant Behavior” (1959) 24(2) American Sociological Review 164; R Merton, Social Theory and Social Structure (Simon and Schuster 1968); “Social Structure and Anomie” (2003) Crime 201; N Passas, “Anomie and Corporate Deviance” (1990) 14(2) Contemporary Crises 157; R Agnew, “Building on the Foundation of General Strain Theory: Specifying the Types of Strain Most Likely to Lead to Crime and Delinquency” (2001) 38(4) Journal of Research in Crime and Delinquency 319.
23 Giardi, n 3. J Coleman, “Toward an Integrated Theory of White-Collar Crime” (1987) 93(2) American Journal of Sociology 406; M Needleman and C Needleman, “Organizational Crime: Two Models of Criminogenesis” (1979) 20 American Journal of Sociology 517.
24 N Dorn, S Van Daele and T Vander Beken, “Reducing Vulnerabilities to Crime of the European Waste Management Industry: The Research Base and the Prospects for Policy” (2007) 15 European Journal of Crime, Criminal Law and Criminal Justice 23.
25 Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (adopted 22 March 1989, entered into force 5 May 1992) (1989), 28 ILM 657. Regulation (EC) 1013/2006 of the European Parliament and of the Council of 14 June 2006 on shipments of waste, OJ L 190, p 1, 12.07.2006. Directive 2008/98, see n 4. Directive 2019/883/EU of the European Parliament and of the Council of 17 April 2019 on port reception facilities for the delivery of waste from ships, amending Directive 2010/65/EU and repealing Directive 2000/59/EC, OJ L 151, 7.6.2019, pp 116–142. Wet van 13 juni 1979, houdende regelen met betrekking tot een aantal algemene onderwerpen op het gebied van de milieuhygiëne. Besluit van 19 maart, houdende regels met betrekking tot het inzamelen van bedrijfsafvalstoffen of gevaarlijke afvalstoffen. Besluit van 25 maart 2010, houdende regels ter uitvoering van de Wet algemene bepalingen omgevingsrecht. Please note that, since the time of writing the Dutch legal framework has been substantially amended and consolidated through the entry into force of the new Environmental Law: Omgevingswet 01.01.2024.
26 Art. 3 (1) of Directive 2008/98 reads: “[W}aste” means any substance or object which the holder discards or intends or is required to discard.
27 The definition of waste cited in the footnote immediately above already hints at this by mentioning “required” to discard. Further indications of a legal obligation to apply the waste label may be contingent on more objective assessments of hazardousness and risk. The List of Wastes enumerates a series of codes that are to be applied to substances or objects that are already recognised as wastes. Where the conditions of the list are met in regard to the classification of a substance or object as hazardous, this classification is binding. Fuel oils are classified as hazardous wastes (can fall under code 01.3 Used oils; 01.4; 02; 03.1 Chemical wastes, specifically 03.1.13 07 01* fuel oil and diesel). This list continues to evolve and can also serve as a helpful tool to determine whether substances not included in it, but which resemble items already listed, might be susceptible to be defined as wastes. (Commission Decision of 3 May 2000 replacing Decision 94/3/EC establishing a list of wastes pursuant to Article 1(a) of Council Directive 75/442/EEC on waste and Council Decision 94/904/EC establishing a list of hazardous waste pursuant to Article 1(4) of Council Directive 91/689/EEC on hazardous waste (notified under document number C(2000) 1147) (2000/532/EC). However, the inclusion of a substance in the list is not determining factor in its classification as a waste (see Joined cases C-418/97 and C-419/97 ARCO Chemie [2000] ECR I-4475 para. 49).
28 See Section 1 Chapter 3 of Giardi, n 3; Neil Cockett, Neil Cockett on Bunkers (LLP 1997); M Broekman and J Bakker, “Milieurisico’s Van Specifieke Stoffen in Bunkerolie in Zeeschepen: Onderzoek Van De Literatuur En De Reach-Dossiers” (RIVM Rapport 2016-0067, 2016); A De Buck et al, “Blends in Beeld. Een Analyse Van De Bunkerolieketen”, (CE Delft 2011), C Fisher, R Meech and J Denholm, Bunkers: An Analysis of the Technical and Environmental Issues (Petrospot Ltd., 4th edn. 2013), RP Pskowski, “Bad Bunker: Fuel Contamination Claims, Imo 2020, and the Houston Problem” (2019) 44 Tulane Maritime Law Journal 217.
29 Giardi, n 3.
30 H Appel, A Mason and M Watts (eds), Subterranean Estates: Life Worlds of Oil and Gas (Cornell University Press 2015).
31 De Buck, Smit, Faber, and Van Grinsven, n 28; Giardi, n 3; Fisher, Meech, and Denholm, n 28; Hannah Appel, Arthur Mason, and Michael Watts n 30.
32 The exception here is regarding the amount of SOx and NOx concentration is permissible in bunker fuel, which is regulated under Annex VI of MARPOL (International Convention for the Prevention of Pollution from Ships (MARPOL), November 2, 1973, entry into force 17.02.1978, 17 I.L.M. 546). In the EU, this is implemented through Directive 2005/35/EC on ship-source pollution and on the introduction of penalties for infringements, OJ L280, 27.10.2009, p. 52. There is also no clear definition of what bunker fuel is besides it being a mixture of hydrocarbons (See, eg Art. 1 (5) International Convention on Civil Liability for Bunker Oil Pollution Damage 2001, entry into force 21 November 2008: “Bunker oil” means any hydrocarbon mineral oil, including lubricating oil, used or intended to be used for the operation or propulsion of the ship, and any residues of such oil.)
33 Giardi, n 3; De Buck, Smit, Faber, and Van Grinsven, n 28; A Spapens, “Vuile Olie: Een Onzichtbaar Probleem Met Grote Gevolgen” (2013) 75(8) Het tijdschrift voor de politie 20.
34 Giardi, n 3; De Buck, Smit, Faber, and Van Grinsven, n 28.
35 See Giardi, n 3. The data used in that study derived from the criminal investigation files of police and public prosecution in the Netherlands. The crimes they investigated occurred, at least in part, on Dutch territory. Until now, there has not been any other systematic study of this type of crime in other jurisdictions. Nevertheless, from the evidence gathered by the Dutch authorities in the cases pursued as well as from conversations those same authorities have conducted with partner authorities in other jurisdictions, these same criminal activities and flows of substances can be observed beyond the Netherlands and beyond Europe.
36 Ibid., SC Monahan and BA Quinn, “Beyond ‘Bad Apples’ and ‘Weak Leaders’: Toward a Neo-Institutional Explanation of Organizational Deviance” (2006) 10(3) Theoretical Criminology 361.
37 James Coleman, n 23.
38 This is set out clearly in the case-law of the CJEU: Joined Cases C-241/12 and C-242/12 Shell Nederland [2013] ECR I-821, para. 39; Case C-188/07 Commune de Mesquer [2008] ECR I-4501, para. 53; Case C-263/05 Commission v Italy [2007] ECR I-11745, para. 32 and recently confirmed in Case C-624/17 Tronex BV [2019] ECR I-564, para. 19.
39 See, for example, the waste oils under codes A3020, A3190 and A4060 Annex VIII of Basel Convention, n 25.
40 It is also important to acknowledge that EU rules are often considered more stringent in the realm of environmental protection and of waste management compared to those developed and applied in other jurisdictions. The point of view being taken in this contribution is that this more stringent approach is, in fact, correct. In fact, this point of view mirrors the growing practice of seeing the EU as a (legitimate) exporter of green norms, which, in turn, are founded on highly specialised and science-based policymaking in this portion of the globe. However, it is also important to advance these arguments knowing that this assumption lies at their heart and is liable to debate. The EU Green Deal is a clear example of this trend.
41 David Matza, Delinquency and Drift (Routledge, 1964).
42 These two types of pollutants are sulfur oxides (SOx) and nitrogen oxides (NOx). They are explicitly mentioned in Annex VI to MARPOL as well as the Directive on ship-source pollution cited at n 31. They are also reported in the most recent versions of ISO 8217.
43 Needleman and Needleman, n 23.
44 Giardi, n 3.
45 See, for example, the work of Giovanni Gruni (“The present and future of labour standards in EU’s free trade agreements” (2024) European Journal of Risk Regulation) in this special issue as well as his article with Marco Bronckers “Retooling the Sustainability Standards in EU Free Trade Agreements” (2021) 24 Journal of International Economic Law 25.
46 Giardi n 3.
47 This relationship between form/procedure and substance resembles but is different from Raz’s perspective in that he argues that the rule of law must ultimately mean that individuals are able to exercise their agency in a legal context that is predictable and fair (see: Craig, P. (2017). Formal and substantive conceptions of the rule of law: an analytical framework (R. Bellamy, Ed.). Routledge, p 4 and Raz 1977 n 11.) What is being argued in this article also overlaps with and can be understood by referring to part of Unger’s reflections on the rule of law in post-liberal societies. He warns against the threat to the generality of the law (that which also characterises “good” laws in formal conceptions). Because states and their agents are increasingly tasked with remedying modernity’s ills, laws need to become more open-textured and vague to accommodate the nuances and complexities of those modern ills. These features of “post-liberal” law then lead to increasing space for interpretation by judges, thereby investing the latter with political powers that are incoherent with the liberal notion of the rule of law and which lead to fragmentation and ambiguities in the law’s application. Judges are vested with such political powers because their interpretations are anchored in notions of justice, which authors like Raz (and Unger himself) place in the separate domain of political theory (see: Craig 2017 above and RM Unger, Law in Modern Society: Toward a Criticism of Social Theory (Free Press 1976)). To some extent, the perspective in this article follows the same reasoning but comes to a different conclusion than Unger. In fact, my contention is that the goal of “sustainability” is ever more present in international (economic) relations and that institutions across the globe – regardless of whether they are legislative, executive, or judicial, public or private in nature – are being faced with the responsibility of making political decisions – ie, of balancing different interests.
48 N de Sadeleer, “The Rule of Law: A Core Premise for the Effectiveness of International Environmental Law” (2024) European Journal of Risk Regulation.