An Environmental Surety Bond in Chosen CEE Countries as a Type of Financial Security in Case of an Environmental Damage

Abstract

From year to year, the surety bonds (insurance guarantees) are becoming a more and more popular form of securing receivables of business entities, which is caused by many economic and legal factors. Increasingly, an alternative to civil liability insurance or bills is usually required by law for the purpose of performing a specific activity. Despite the relatively short content and relatively simple structure, the guarantee is an instrument that gives a wide range of possibilities to adapt to the type of transaction being secured, as well as the expectations of those entities that expect such security. It has been eight years since the Environmental Liability Directive 2004/35/CE was fully implemented. New regime, based on the ‘polluter-pays’ principle, has increased environmental liability with regard to prevention and remedying of environmental damage. The paper aims at description of an environmental surety bond as a financial instrument which gives a guarantee from an insurance company ensuring the liabilities of an operator, arising from ELD, will be met. On the one hand, it provides the necessary funds to the local authorities when operator defaults on its obligations and, on the other hand, creates incentives for the companies to promote environmental safeguards.