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Compensation for Environmental Damage: Progressively Casting a Wider Net, but What's the Catch?

Updated: Oct 16, 2021

By: M P Ram Mohan & Els Reynaers Kini

In the case Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v. Nicaragua)–Compensation Owed by The Republic of Nicaragua to The Republic of Costa Rica (the Costa Rica case), the International Court of Justice (ICJ) had to ascertain the compensation amount due by Nicaragua for the environmental damage it had caused to Costa Rica. This was the first time the ICJ was asked to weigh in and settle an environmental damage compensation claim between two states. After a concise introduction in Part I, this Article will first review the distinction between state responsibility for wrongful acts (as applicable in the Costa Rica case) and the international liability of states in the absence of wrongfulness in Part II. In Part III a detailed analysis of the Costa Rica case will be undertaken, with as its starting point the explicit acknowledgment by the ICJ that compensation is, indeed, due for damage caused to the environment, in and of itself, even if that damage is caused to non-marketable components of the environment, such as damage to a wetland or damage to an ecosystem. Next, this Article will critique the absence of transparency in the ICJ judgment on the valuation method it applied to calculate the final compensation amount as well as the paltry sum which Nicaragua ultimately owed to Costa Rica in this case. The general reluctance by the ICJ to apply punitive damages, in principle, does open an interesting comparative law debate on how common law and civil law countries differ in applying punitive damages in environmental cases. Where punitive damages may not be uniformly applied in national jurisdictions, most domestic courts do readily appoint experts in environmental matters given the inherent technical and scientific nature of such disputes. Therefore, this Article suggests the view that moving forward the ICJ should more actively appoint its own independent experts in environmental disputes, rather than merely relying on the evidence brought forward by the parties. This would go a long way in arriving at more robust scientific conclusions which in turn would allow the ICJ to contribute in a more meaningful manner to the development of international environmental and climate change law. Part IV seeks to demonstrate how domestic responses by the judiciary or the legislature increasingly tend to go further and be more proactive compared to the approaches of international regimes and adjudicating bodies when addressing environmental damage claims. This is illustrated based on a brief analysis of both the Deepwater Horizon and Erika oil spill cases and contrasted with the cases handled and interpretation given by the International Oil Pollution Compensation Funds when interpreting terms such as “environment” and “environmental damage.” Part V offers some concluding thoughts on the overall contribution of the ICJ’s Costa Rica case, including the suggestion that the court could have adopted a more “proactive judicial policy” in such an important transboundary environmental dispute between states.


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