Post prepared by Karina Chichkanova (Partner, Head of Salans’ St. Petersburg Real Estate Group) and Galina Pashkovskaya (Associate)
In connection with the constantly increasing volume of construction in Russia, one of the main issues that developers and construction companies encounter is the problem of managing the waste that results from wrecking or construction works, as well as “abandoned” waste located at the land plot under development.
“Ownership of and responsibility for waste” provisions of Russian law and construction work contracts or waste removal and disposal contracts in Russia are very important and should not be ignored by the parties.
The key legal issue that arises in connection with construction waste with regard to the general contractor, subcontractors, and the customer is: to whom does the waste belong and who will be responsible for it? The answer to that question is particularly important, since it is the owner’s responsibility to make the payments for disposal of industrial and consumer waste, which is considered a negative impact on the surrounding environment. Along with the ecological payments, the owner’s responsibility for waste includes the obligation to clear the land plot of waste, to remove and site (store and bury) the waste, and the obligation to perform actions towards the recultivation and renewal of the land, which differs depending on the hazard class of the waste. All of these incurs additional and in some cases very significant expenses for the waste’s owner.
The main regulatory act in the sphere of waste management in Russia is the Federal Law “On industrial and consumer waste” dated 24 June 1998, No. 89 FZ (“Law on Waste”). The Law on Waste establishes two basic situations in which ownership rights to waste arise:
(i) Construction waste. Generally, waste is the property of the entity that owns the raw materials, materials, semi-processed items, and other articles or products, as well as the goods (products) whose use resulted in the creation of such waste. Usually, disposal of waste produced during demolition work will therefore rest with the owner of the building. And the contractor will bear responsibility for the waste created in its activities as a result of using its materials.
Thus, unless the contractor’s agreement or an agreement on waste removal expressly stipulates transfer of the rights to the waste to the contractor, or to the party performing the removal of waste, the customer that ordered the work makes ecological payments and is responsible for waste disposal, waste removal, and clearing the land. However, the transfer of responsibility for waste to contractors is common in Russian practice. Thus it is very important for contractor to have all agreements reviewed by legal and ecological experts to avoid subsequent confusion as to responsibility for waste and properly manage the contractor’s risks and expenses arose from such ownership to waste.
(ii) “Abandoned” waste. The lack of specially-equipped facilities for disposal of the waste (landfills, slurry pits, etc.) has led to the creation of a number of unsanctioned landfills in most regions in Russia. As a result, large areas have been polluted. Historically, all land in Russia was owned by the state, and the state still remains a major land owner and actively grants the state land for development purposes. It is not uncommon for plots of land granted by the state for construction to turn out to be a former landfill site, perhaps containing industrial waste, resulting in significant soil contamination. It also worth mentioning that ecological regulations on maximum permitted emissions (MPE) and maximum permitted concentrations (MPC) in Russia are often stricter than in other parts of Europe, which can lead a foreign investor inadvertently to expose itself to administrative or even criminal liability.
In practice, determining the original owner of the waste – the person who illegally dumped the waste on the empty land plot – is often impossible. Under the Law on Waste such waste is called “abandoned” waste. The state has released itself from liability for abandoned waste by setting forth in the Law that the entity in possession (whether in ownership or lease) of the plot on which the abandoned waste is found may acquire it through the use of such waste or by performing some other action that bears witness to its having been taken into possession in accordance with then Russian сivil law. Thus the owner of abandoned waste becomes the person or entity that has begun to use it. It means in practice that a contractor that begins preparatory work usually bears responsibility for abandoned waste and payment of the ecological fees.
Frequently, in order to speed up the development project, clients will push contractors to start the work before the ecological investigation of the plot has been completed. The contractor, not having full information on the extent of the plot’s contamination when beginning work, takes on all risks connected with hidden waste “buried” on the plot.
We recommend that contractors, when entering into an agreement on performing land works or works for the preparation/clearing of the territory for construction, including removal of the soil, request detailed information from the customer with regard to the condition of the plot’s soil, thoroughly assess the risks connected with this and set out in works contracts legal mechanisms to protect their interests. In this context, it is very important that works contracts contain a provision delimiting responsibility of the parties for waste, both visible and hidden.
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These problems are of course not the only issues. In Russia, one often encounters plots that contain abandoned military dumping (graves, articles, ammunition), or archeologically valuable items. This of course also creates a number of problems for the owners and possessors of land plots, as well as for their contractors. However, this will be the topic of a separate post.