The Regulatory Function of European Private Law
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The Regulatory Function of European Private Law

Edited by Fabrizio Cafaggi and Horatia Muir Watt

In the context of the current debate on the desirability and process of forming European private law (EPL), this book considers one fundamental question addressing its descriptive and normative dimension: does and should EPL pursue regulatory objectives beyond market integration?
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Chapter 5: Regulatory Strategies in Environmental Liability

Michael G. Faure


Michael G. Faure 1. INTRODUCTION The question what the particular task of private law is in remedying environmental damage has in recent years been discussed extensively in the literature. Economists, starting from the idea that, in a situation where transaction costs are prohibitive and hence private bargaining cannot provide efficient solutions, stress that private law may be one of the instruments to be used to address the market failure caused by environmental damage. Indeed, the traditional way in which economists would approach environmental issues is usually by stressing the fact that there is a reason for law to intervene given the market failure constituted by the externality resulting from the environmental damage. Law in general should then, stated very basically, have as a goal that the marginal social costs caused by the externality should be taken into account by the decision maker. The environmental damage should, in other words, be internalized. Lawyers have, with different wordings of course, also pointed at various benefits of private law in remedying environmental damage. Although they tend to attach less belief than economists to the preventive function of liability rules, legal doctrine also has often stressed that it is important to impose the costs due to environmental damage upon polluters since this may provide them incentives to abate environmental pollution. Often legal principles (even incorporated into international conventions) have been used to justify this idea. Well known in this respect is of course the ‘polluter pays’ principle. The goal of this chapter is to...

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