View from City Road: Pollution could carry a heavy price

Lawyers and environmentalists are awaiting eagerly the outcome in the next few weeks of an appeal to the House of Lords in a pollution case involving an East Anglian tannery. It could have a big impact on any company that accidentally pollutes its surroundings. Shareholders should be taking an interest, too.

The decision, expected by the end of the year, will determine whether companies are liable retrospectively for pollution regarded as damaging now, but which at the time it occurred was within accepted standards.

The appeal court last year awarded pounds 1m damages and costs against Eastern Counties Leatherwork, which between 1950 and 1976 had accidentally spilled a chemical, perchloroethane, that slowly found its way through the ground into a well more than a mile away. New systems at the tannery stopped the leaks in 1976.

Cambridge Water Company began supplying water from the well in 1979, when contamination was below the then maximum permissible level. But it was forced to abandon the well when, in 1985, a European directive slashed the acceptable level. The case went to the Lords last month.

The risks for companies are clear, since if the Lords uphold Cambridge's appeal victory polluters will be liable for damages going back many years, even if there was no reason at the time for them to foresee a problem.

For those hit by pollution this would appear a fair extension of the principle that the polluter pays. But for plenty of companies, it could knock big holes in their businesses. It will also give banks much to think about, since some polluting companies will inevitably go bust over the years. Their bankers could end up responsible for the backlog of liabilities if they repossess property held as security. They will become even more cautious about lending.