Article 23 of the Belgian Constitution enshrines the right to live a dignified human existence, which includes the right to protection of a sound environment. This article has no direct effect but entails a standstill principle. This was confirmed by the Council of State in an arrest of 20 February 2019.
Belgium is a federal country. The competencies are divided between the Federal State and, notably, the three Regions: the Brussels-Capital Region, the Walloon Region and the Flemish Region.
Competencies relating to environmental protection have been attributed to the Regions. The Federal State remains competent for the establishment of product norms and for protection against ionising radiation (including radioactive waste), as well as for specific matters in the North Sea.
The regulatory framework governing environmental protection is thus divided between the Federal State and the three Regions.
Environmental policies and principles are mainly implemented from European and international regulatory frameworks. It is therefore necessary to consider supranational regulatory frameworks and to refer to them where and when appropriate.
The most important environmental legal regulations for general environmental principles are as follows:
The most important environmental legal regulations for the environmental permit policy are as follows:
These acts determine the framework for issuing permits in the environmental domain. In the Flemish and Walloon Regions, several aspects of one project or facility have been integrated into a single permit.
General, sectorial and specific environmental conditions are determined by implementation decrees and orders, as follows:
Non-compliance with the environmental protection regulations may lead to criminal, civil and/or administrative sanctions.
Environmental policy and enforcement are applied at national, regional and local levels.
At the national level, the most important regulatory authorities are the competent federal minister(s), the Department for Public Health, Safety of the Food Chain and Environment supporting the competent minister(s), the Directorate General for Environment taking care of the co-ordination and collaboration between the different parties involved, and the Federal Inspection for Environment in charge of enforcement, as well as the public prosecutor when it concerns criminal sanctions.
At the regional level, besides the competent ministers the most important regulatory authorities are as follows:
At the local level, provinces and municipalities are also entrusted with the granting of permits as well as control and inspection.
Each competent authority establishes its own surveillance regime for the enforcement of environmental protection regulations, including investigative and access powers. In addition to specific environment-related competencies, the judicial authority has extensive investigative and access powers, based on the general criminal law.
In general, specific officers (also called the reporting authority) are appointed by authorities in order to monitor the proper implementation of environmental regulations. They act as judicial police officers and their key investigative powers are as follows:
Within the scope of their competencies, the authorities are competent to take preventative measures and apply remediation measures and sanctions – ie, criminal (to be imposed by the judicial authority only) and/or administrative sanctions. Following their inspection and in case of infringement, the officers may usually either warn the author of the infringement and let him remedy the situation or record the infringement and draw up an official report. Official reports recording an infringement must be notified to the public prosecutor.
An environmental permit is an administrative authorisation required for the operation of classified activities and installations – ie, those that are likely to harm humans and/or the environment. The activities and installations are classified according to the level of their environmental impact. Only those activities and installations with a more substantial environmental impact are required to operate under an environmental permit. Other less environmentally sensitive activities and installations can be operated without any environmental permit, or are only subject to a notification obligation.
The classification of the activities, the competent authority for the granting of an environmental permit and the procedure depend on the Region in which the activities are operated.
In the Brussels-Capital Region, the installations subject to authorisation are classified in four main categories: 1A, 1B, 2 and 3. The installations classified 1A, 1B and 2 are subject to an environmental permit, while the installations classified 3 are subject to a notification. The regional authority – Brussels Environment – is competent to decide on an environmental permit application in class 1A and 1B (and on certain class 2 permit applications). The College of Mayor and Aldermen of the relevant municipality is competent to decide on the vast majority of environmental permit applications in class 2.
The granting authority assesses the permit application within the following time periods:
These time periods are subject to extension and run from the date on which the application is ruled complete and admissible. In the absence of a decision, the environmental permit is deemed to be refused.
The (absence of a) decision of the authority can be appealed by the permit applicant, any authority and any person concerned within 30 days to a regional administrative body, the Environment College, which assesses the appeal within 60 to 75 days. In the absence of a decision, the decision of the granting authority (including the deemed refusal) is confirmed.
The (absence of a) decision of the Environment College can be appealed by the permit applicant, any authority and any person concerned within 30 days to the Government, which assesses the appeal within 60 to 90 days. In the absence of a decision, the decision of the Environment College (including the deemed refusal) is confirmed.
As a general principle, the appeal has no suspensive effect.
In the Walloon Region, the installations subject to authorisation are classified in three categories: 1, 2 and 3. The installations classified 1 and 2 require an environmental permit, while the installations classified 3 are subject to a notification. The College of Mayor and Aldermen of the relevant municipality is competent to deliver an environmental permit in the vast majority of cases.
The College of Mayor and Aldermen assesses the permit application within the following time periods:
These time periods are subject to extension and run from the date on which the application is ruled complete and admissible. In the absence of a decision, the environmental permit is deemed to be refused, unless the technical report issued during the procedure is favourable. In this case, the environmental permit is deemed to be granted on the conditions set out in the technical report.
The (absence of a) decision of the authority can be appealed by the permit applicant, any authority and any person concerned within 20 days to the Government, which assesses the appeal within 100 days for a class 1 permit application or within 70 days for a class 2 permit application. In the absence of a decision, the decision of the granting authority is confirmed. In the absence of a decision from the granting authority, the decision will be based on the technical report issued during the appeal procedure, if any.
As a general principle, the appeal has no suspensive effect.
In both the Brussels-Capital and Walloon Regions, final administrative decisions can be appealed to the Council of State, which rules on requests in the annulment of administrative decisions. The suspension of such decisions as well as provisional measures can also be obtained in exceptional circumstances, especially to prevent material damages to the protected interests.
In the Flemish Region, the installations subject to authorisation are classified in three categories: 1, 2 and 3. The installations classified 1 and 2 require an environmental permit, while the installations classified 3 are subject to a prior notification. Depending on the project, the Flemish Government, the provinces or the municipalities are competent to deliver the environmental permit.
The competent authority assesses the permit application within 105 to 120 days. This time period is subject to extension and runs from the date the application is ruled complete and admissible. In the absence of a decision, the environmental permit is deemed to be refused.
The (absence of a) decision of the authority can be appealed by the permit applicant, any authority and any person concerned within 30 days to (i) the province if the municipality is the granting authority or (ii) the Flemish Government if the province is the granting authority. An administrative appeal is not possible against a decision rendered by the Flemish Government.
Final administrative decisions can be appealed within 45 days to the Council of Permit Dispute, which rules on requests in the annulment of administrative decisions. The suspension of such decisions as well as provisional measures can also be obtained in exceptional circumstances, especially to prevent material damages to the protected interests.
The Council of Permit Dispute’s decision can be appealed to the Council of State within 30 days. In that case, the Council of State only considers legal irregularities.
In addition, both the Flemish and Walloon Regions provide for an integrated approach, whereby both environmental and construction aspects of the same project are dealt with in the same permit (application).
Very often, applications for environmental permits are subject to various (technical) advices and trigger the obligation to organise a public enquiry, authorising any third party to oppose the project and/or an environmental impact assessment (ie, a study of the impact the installations/activities can have on humans and/or the environment).
Under Belgian law, environmental issues are primarily administrative matters. However, administrative liability is not the only risk following an environmental breach: potential criminal and civil liabilities must also be considered.
Official reports recording an infringement must be notified to the public prosecutor, who can decide to immediately prosecute the offender, to investigate further, or to dismiss the case.
In most cases where the public prosecutor decides not to prosecute, the case is subject to an administrative procedure, leading to administrative sanctions being imposed on the offender (most often a fine).
If the public prosecutor decides to prosecute, the court can impose criminal sanctions, depending on the severity of the infringement, such as a fine and/or imprisonment. The specific regional regulations can authorise the court to impose other measures, such as the remediation of the infringement or other corrective measures like the closure of the plant or cease and desist orders.
Civil liability also plays a role when an environmental breach occurs and harms a third party. Civil liability could lead to the obligation to pay damages to the claimant. For the civil claim to be successful, the claimant must prove the existence of a fault, a damage and a causal relation between the fault and the damage.
Non-fault liability regimes can also apply. One is the objective liability regime introduced by Directive 2004/35/CE on environmental damages, transposed in Belgium through several regulations, whereby, for example, the producer of toxic waste will be responsible for the damage caused by its waste even though no fault has been evidenced. Another one is the liability for abnormal disturbance, which establishes a liability for the abnormal disturbance caused to a third party using a right (eg, the operation of installations or activities that cause contamination to the neighbouring soil).
The “polluter pays” principle is applicable in Belgium. Accordingly, an operator or landowner should not be held liable for an environmental incident or damage caused by another person/entity. In a share deal transaction, the risks and liabilities, if any, remain with the target company and are de facto transferred to the purchaser/new shareholder, including for any historical environmental incidents or damage.
However, based on the soil regulations, an operator might be liable for historical environmental incidents or damage since the three Regions apply a “cascade system”:
Based on the general civil law, the person who executed the soil sanitation obligations will be entitled to (try to) recover the costs incurred from the liable party.
The historical character of an environmental incident or damage plays an important role regarding soil contamination. In both the Flemish and Walloon Regions, historical contamination (ie, contamination caused before 28 October 1995 in the Flemish Region and before 30 April 2007 in the Walloon Region) is subject to risk management, requiring sanitation only in the case of a major threat to the environment.
The following statutes of limitation apply:
Under Belgian law, environmental issues are primarily administrative matters. However, administrative liability is not the only risk following an environmental breach: potential criminal and civil liabilities must also be considered.
In the case of civil liability, the three criteria of fault, damage and causal relation must be demonstrated by the claimant, and can be challenged. In most cases, the defendant shall try to argue that there is no causal relation between the fault and the damage that occurred.
In the case of criminal liability, it can either be argued that the defendant did not deliberately commit the offence, or arguments can be sought to mitigate the penalty.
In the case of administrative liability, one can challenge the lawfulness of the authority’s decision (ie, the way the authority exercised its powers).
In all cases, it could be argued that the authority/the public prosecutor did not respect the applicable procedures. One could also try to challenge the factual elements of the case (eg, the evidence of the offence or incident).
There is no specific corporate liability scheme for environmental damage or breaches of environmental law, but corporate entities can be held liable for environmental damage or breaches of environmental law, pursuant to the general liability principles, including with respect to criminal liability.
Since 1 July 1999, a corporate entity can be held criminally liable for breaches related to the realisation of its company purpose or the defence of its interests. Sanctions such as the dissolution of the corporate entity or the interdiction to exercise its activities could be pronounced. Corporate entities can also have a criminal record.
Shareholders or a parent company cannot be held liable for environmental damage or breaches of environmental law committed by their subsidiary as such, unless the shareholder/parent company was involved, de iure or de facto, in the management of the company, and it is evidenced that they made a fault.
Directors and other officers can be held personally liable for environmental damage or breaches of environmental law (from a civil and criminal point of view). As per the General Criminal Law, the criminal liability of legal entities does not exclude the criminal liability of their directors or officers if it can be evidenced that such individuals committed the breach or participated therein. The penalties will depend on the environmental breaches and the specific applicable legislation (eg, the payment of a fine and/or imprisonment).
As per the Code on Companies and Associations, company directors can be held civilly liable towards the company in the case of management fault.
It is possible for directors and officers to insure – or to let the company insure – their civil liability against financial consequences related thereto (ie, financial damages claimed by third parties). Exclusions will generally apply (eg, wilful loss or damage, misuse of corporate assets, etc). Criminal liability is usually not insurable.
Generally, lenders will not be liable for the borrower’s environmental damages and breaches of environmental law, except in the case of factual management. If the lender becomes the owner of the borrower’s property (ie, in the enforcement of the mortgage), the relevant liability connected to that property may be transferred, such as liability relating to soil contamination or permit compliance.
To be protected from any such liability risk, or to mitigate this risk, financial institutions or lenders usually also include protection clauses in their agreement. For instance, the borrower could (i) confirm it has complied (and will comply) with all environmental applicable laws, (ii) confirm that it will hold the financial institution or lender harmless against any claim from third parties, (iii) commit to indemnify the financial institution or lender in the case of environmental claim or any current or alleged breach of any relevant environmental law, and (iv) commit to notify the financial institution or lender of any details of any environmental claim of which they become aware. These representations of the borrower are usually repeated on any interest payment date and are combined with default and acceleration clauses.
As part of the conditions precedent to draw-down, lenders shall also request soil certificates (to assess the existence of a (potential) contamination or risk of contamination) and a copy of the environmental due diligence (if any).
Civil claims for compensation or other remedies can be brought directly before civil courts, or can be initiated parallel to a criminal litigation.
The claimant must demonstrate an interest in order to bring the case, evidencing a fault, a (suffered) damage and a causal relation between the fault and the damage (fault-based liability).
Non-fault liability regimes can also apply. One is the objective liability regime introduced by Directive 2004/35/CE on environmental damages, transposed in Belgium through several laws, whereby, for example, the producer of toxic waste will be responsible for the damage caused by its waste, even though no fault has been evidenced. Another one is the liability for abnormal disturbance, which establishes a liability for any abnormal disturbance caused to a third party using a right (eg, the operation of installations or activities that cause contamination to the neighbouring soil).
Based on the Law of 12 January 1993, the public prosecutor, a public authority or a legal entity that has the protection of the environment in its corporate purpose and has defined in its corporate purpose the territory on which it carries out its activity can request from the Court, through an accelerated procedure, measures aiming to cease an act that obviously breaches the environmental legal provisions.
Belgian courts cannot award exemplary or punitive damages. The damages awarded in a civil liability action are intended to repair the damage caused to the injured party only.
Belgian law allows class actions in limited cases, which do not include the breach of environmental legal regulations in the broad sense. At the European level, the proposal of Collective Redress Directive does include infringements of environmental and health-related regulations in the scope of class action. If and when adopted, the implementation of the Collective Redress Directive will extend the scope of class action.
However, collective interest actions regarding environmental damages are open to legal entities whose purpose is the protection of the environment.
A landmark case in Belgium, known as the Climate Case, which was initiated by the association Klimaatzaak against the Federal State and the three Regions, is expected to set an important precedent. The association Klimaatzaak requested that the Belgian authorities respect their commitments towards the reduction of their greenhouse gas emissions by 2020. This case is currently pending before the Supreme Court and pleadings are scheduled in March 2021.
Indemnities or other contractual agreements can be used to transfer or apportion liability for incidental damage or breaches of law. However, this is only possible on a contractual basis and to the extent that such limitations or exclusions are not prohibited by law or the public order.
In principle, such arrangement is not enforceable towards the authorities, which are always entitled to claim against the transferor. However, if such arrangement is foreseen by the law, the agreement would be enforceable towards the authorities.
In the three Regions, a person or a company can voluntarily abide by the soil formalities, although they are not required to do so by law.
In the Flemish and Brussels-Capital Regions, a person or a company obliged to sanitise contaminated soil can assign this obligation to a third party under several obligations, one of them being a financial guarantee covering the decontamination obligation. Such possibility is useful to avoid a delay in a real estate transaction. In the Walloon Region, a person can transfer its obligations by agreement to another party. In particular, in an asset deal, both parties can agree upon the transfer of soil obligations. Such transfer is made on a voluntarily basis and must be notified to the competent authority.
Criminal liability cannot be assigned under Belgian law.
Two types of environmental insurance are available.
A company can insure its environmental liability, which used to be covered by civil liability insurance but is increasingly excluded from it. Specific environmental liability insurance is now available, typically covering the civil consequences of a breach of the environmental legal regulations. However, contractual and criminal liabilities are not covered. Furthermore, in the framework of a real estate transaction, Warranty and Indemnity insurance generally covers environmental representations and warranties, except for those relating to soil and ground water pollution, asbestos and other hazardous substances.
A company can also insure the environmental damages to its property – eg, in the case of soil contamination or technical equipment failure. Operating losses can also be insured in such cases.
The legal framework governing contaminated land is established by the three Regions, with the key laws governing contaminated land in Belgium being as follows:
Each Region determines the type and/or level of contamination for which measures are imposed.
Each Region has an inventory of contaminated soils, managed by an administrative body – ie, Brussels Environment in the Brussels-Capital Region, the Direction of the Soils Protection in the Walloon Region and the OVAM in the Flemish Region.
Each Region has determined certain events that trigger the obligations to perform soil surveys and, as the case may be, sanitation.
In the Brussels-Capital Region, a soil survey must be conducted notably:
In the Flemish Region, a soil survey must be conducted notably:
In the Walloon Region, a soil survey must be conducted notably:
In a transfer of rights in rem (asset deal), a soil certificate must be requested from the authority and communicated to the assignee. This certificate is based on the inventory of the contaminated soils and contains the available information. A transfer of rights in rem might also trigger the obligation of a soil survey, depending on the Region (see above).
In the three Regions, depending on the results of the survey and the scope of the contamination, a second (more detailed) survey might be imposed. After this second survey, a risk management programme or a sanitation procedure shall be imposed. The authority can also impose follow-up measures on the person subject to soil treatment.
In addition, in the Flemish and Brussels-Capital Regions, a person or a company obliged to sanitise contaminated land can assign this obligation to a third party under several obligations, one of them being a financial guarantee covering the decontamination obligation. Such possibility is useful to avoid a delay in a real estate transaction. In the Walloon Region, a person can transfer its obligations by agreement to another party. In an asset deal, both parties can agree upon the transfer of soil obligations (eg, sanitation). Such transfer is made on a voluntarily basis and must be notified to the competent authority.
Belgium is a member of multiple international treaties regarding climate change, including the Kyoto Protocol and the Climate Agreement as presented at the Climate Conference of Paris 2015. The key policies in Belgium regarding climate change mainly derive from the objectives set out in the Kyoto Protocol and Paris Agreement, including the goal to keep global warming below 2°C.
In addition to this, Belgium aims to achieve the targets for greenhouse emissions set out by the European Union in its European Green Deal. In particular, the main goal is to achieve carbon neutrality by 2050.
The objectives related to the reduction of carbon emissions are part of the Co-operation Agreement on Burden Sharing 2013–2020 and the National Energy and Climate Plan 2021–2030, which includes the policies and measures of the federal and regional authorities. The National Energy and Climate Plan 2021–2030 provides that measures must be taken through greenhouse emission reduction, energy efficiency, supply security, the internal market and innovation.
In addition, the Governmental Declaration of Intent of 30 September 2020 mentions that the new government will take all the necessary measures in order to reach the reduction of 55% of carbon emissions by 2030 and carbon neutrality by 2050.
Key national regulations related to climate change concern the emission trading system and the energy performance of buildings, for instance.
Each Region has enacted an action plan establishing the objectives regarding climate change and energy, and determining the guidelines and measures that need to be taken in order to attain the objectives, pursuant to EU climate policy.
Directive 2003/87/CE regarding the Emission Trading System has been transposed in Belgium by:
Carbon neutrality can also be achieved by establishing energy performance for buildings. Directive 2010/31/EU on the energy performance of buildings has been transposed in Belgium by:
The European Union set out the following targets to reduce greenhouse gas emissions for Belgium:
In its communication dated 27 February 2019, the European Commission warned that, without additional measures, Belgium was expected to miss both its 2020 and 2030 greenhouse gas emission reduction targets. The situation is pending and will need to be followed up.
The use of asbestos substances has been prohibited in Belgium since 1998, and totally banned from the sale of construction materials since the Royal Decree of 23 October 2001. Regarding health and safety in the workplace, the Royal Decree of 16 March 2006 relating to the protection of workers against the risks linked to asbestos exposure imposes several obligations on employers regarding asbestos.
All activities likely to involve a risk of exposure to asbestos are subject to a risk assessment in order to determine the nature, degree and duration of a worker’s exposure to asbestos. Depending on the results of the risk assessment, the employer shall have the concentration of asbestos fibres in the air at the workplace measured, in order to ensure compliance with the limit value. Asbestos removal is not always imposed. For instance, an asbestos management programme can be imposed (and be updated every year) in order to reduce the risk of asbestos exposure.
Both the removal and disposal of asbestos are governed by regional provisions, so there are differences in the Walloon, Brussels-Capital and Flemish Regions regarding the removal of asbestos (that can be subject to an environmental permit, depending on the cases) and the disposal of asbestos waste (that is subject to the regional waste regulatory framework).
The waste legal framework in Belgium is based on Directive 2008/98/EC on waste, which was implemented in the three Regions through regional waste management plans and the following Ordinance and Decrees:
The waste regulatory framework defines waste as being any substance or object which the holder discards or intends or is required to discard.
These regulations contain several prohibitions and obligations, such as a waste hierarchy imposing a priority order in waste prevention and management, regulations on the production, collection and transportation of hazardous waste, as well as its storage and treatment, the prohibition of abandonment, dumping or uncontrolled management of waste in violation of the law, safety measures, sanctions, etc. In addition, waste treatment installations are subject to an environmental permit.
The shipment of waste, in substance, within the European Union and with non-EU states is governed by Regulation No 1013/2006 of 14 June 2006 on shipments of waste.
Specific regional regulations on waste depending on the type of waste are also applicable, such as the Decree of 18 December 2008 on the management of waste from the extractive industry applicable in the Walloon Region or the Ordinance of 22 April 1999 on the prevention and management of waste from paper and/or cardboard products applicable in the Brussels-Capital Region.
A producer can retain liability for waste after it has been disposed of by a third party if the producer does not comply with the obligations set out in the applicable waste legislation.
When the waste is transferred from the original producer (or holder) to a dealer or an establishment or undertaking that carries out waste treatment operations or is arranged by a competent private or public waste collector, the responsibility for carrying out a complete recovery or disposal operation shall not be discharged as a general rule.
The Brussels-Capital Region waste regulatory framework establishes that the producer shall not be discharged of his liability for carrying out a complete recovery or disposal when transferring waste to the competent persons. In addition, it is foreseen that the producer must ensure that the waste is treated using the best available techniques in terms of health and environmental protection. The producer is required to ensure that the obligations in terms of treatment and recycling are met. In the Walloon Region, the producer or holder of waste must ensure that its management does not harm human health and the environment. To that regard, the initial producer or holder of waste is not discharged of its liability for carrying out a complete recovery or disposal when transferring waste to the competent person.
Under European law, the disposal of waste is now considered a last resort measure. There is, however, no general and harmonised obligation to choose a specific type of waste processing, considering the measures taken by the authorities are not the same in each Region and do not concern all kinds of waste.
For instance, it is known that the Brussels-Capital and Walloon Regions have concluded agreements with stakeholders in order to implement the recycling and take back of waste such as batteries, used wheels, paper waste, outdated medicaments, etc. In addition, for instance, some waste is subject to take back obligations in order to be recovered within the three Regions (eg, Order of 1 December 2016 applicable in the Brussels-Capital Region, Order of 23 September 2010 applicable in the Walloon Region and Order of 17 February 2012 applicable in the Flemish Region).
There are requirements to self-report environmental incidents or damage to regulators. In that regard, the regional soil protection legislation provides for a reporting obligation in case of (possible) contamination of the soil.
The Brussels-Capital Region explicitly imposes that any event likely to result in imminent soil contamination must be declared by the perpetrator of the event as soon as possible to Brussels Environment and, if they can be identified, to the holder of rights in rem and the operator of the land concerned. The same obligation applies to the discovery of soil contamination.
In the Walloon Region, the operator and the person who has custody of land on which there is contamination exceeding the standards must, if informed of the presence of such contamination, notify the competent authority thereof without delay. The same goes when there is a risk of the contamination migrating outside the land.
In the Flemish Region, there is an obligation for the operator, user (ie ,holder of rights in rem) or owner of the land to notify the competent authority of a contamination accident, without delay.
At the European level, the Aarhus Convention (Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters signed on 25 June 1998) and Directive 2003/4/EC of 28 January 2003 regulate public access to environmental information.
According to Article 32 of the Belgian Constitution, everyone has the right to consult any administrative document and to receive a copy thereof, unless otherwise stipulated by law.
The Aarhus Convention and Directive 2003/4/EC have been transposed in Belgium by the Law of 5 August 2006 on public access to environmental information. The three Regions also have their own legal framework: the Ordinance of 16 May 2019 relating to the publicity of the administration applicable in the Brussels-Capital Region, Book 1 of the Environment Code of 27 May 2004 applicable in the Walloon Region, and the Decree of 7 December 2018 on the management applicable in the Flemish Region.
The public authorities have the obligation to provide information spontaneously (active publicity), and have to answer every information request from citizens, who are not obliged to justify any interest in order to make such request (passive publicity). Such request can be refused for several reasons, such as the protection of fundamental rights (eg, the protection of private data) and the confidentiality of information.
Public authorities and bodies are broadly defined and encompass the Federal State, the Regions, the municipalities, administrative authorities, the parliaments, the governments, etc.
The Code of Companies and Associations provides that the annual report of several companies must include a statement on the development and results of the company’s business and its position, as well as a description of the main risks and uncertainties being faced.
The analysis should also include – to the extent necessary for an understanding of the development of the company’s business, results or position – key performance indicators of both a financial and non-financial nature relating to the company’s specific activity. This includes information relating to environmental issues.
Both zoning and planning and environmental review are usual for property transactions, focusing on property-related aspects such as zoning compliance, building requirements, fire safety, environmental permits, soil contamination, environmental taxes and asbestos. In additional to due diligence, asset deals require compliance with specific information and formalities, especially with respect to soil.
For M&A transactions, environmental due diligence is performed on aspects of compliance and permits for health, safety and environment aspects.
Depending on the target (and its environmental activities) and character of the deal (asset or share), several environmental aspects can be reviewed, such as:
Aside from the legal due diligence, it is also highly advisable to have a technical environmental due diligence performed by an environmental expert.
Lenders shall also request copies of the permits and soil certificates, as well as copies of the environmental due diligences, as part of the conditions precedent.
Asset deals trigger administrative formalities relating to the environment. The seller is legally obliged to request some documents and information from the authority and to disclose them to the purchaser (eg, soil certificate, listing of permits). The transaction shall not be completed if these mandatory formalities are not fulfilled.
In addition, the seller is very often requested by the purchaser to disclose environmental information in both asset and share deals. The disclosure of important environmental information is also prudent since, based on the civil law principles, it could be argued that the seller is obliged to provide such information (to a reasonable extent) to prevent him from being liable for misinforming the purchaser, which might have an impact on the validity of the purchase agreement. Parties are also obliged by law to negotiate in good faith.
Article 170 of the Constitution authorises each level of power to levy taxes. This is why several authorities in Belgium, the Federal State, the Regions and the municipalities have all levied green taxes, with the most important ones being listed below. These green taxes are generally established in order to discourage the use or operation of installations and activities that can have a negative impact on the environment, and usually apply on waste, water discharges, and the operation of non-environmentally friendly activities or cars. At the federal level, the so-called “investment deduction” incentive also applies. Recently, Belgium has been urged by the OECD to encourage environmental taxes in order to consolidate public finances.
In order to finance and encourage the production of renewable energies, Belgium has established green taxes such as the offshore surcharge. The nature of this tax is discussed as to whether it should be qualified as being part of a taxation regime or para-fiscality.
In the context of promoting renewable energies and in order to achieve the objectives set by the European Union, Belgium has decided to support the production of electricity from offshore wind turbines, on the one hand, by introducing a mechanism of offshore green certificates and, on the other hand, by imposing an obligation to purchase those green certificates (ie, a public service obligation) on Elia, which is the transmission system operator for high-voltage electricity in Belgium. In order to finance this public service obligation, the Belgian State allowed the grid operator to establish a surcharge (ie, the offshore surcharge), whereby it transfers all costs relating to the purchase of the offshore green certificates to the final consumers of electricity.
Industrial, commercial or agricultural companies and individual practitioners are entitled to claim depreciable (over a period of at least three years) tangible or intangible assets that are newly acquired or achieved during the tax year and which are used in Belgium for professional activities as investment deductions for eligible assets. Assets that are not solely used for professional activities or whose use is transferred to a third party via a lease agreement or another right in rem or in personam are excluded. The investment deduction for companies amounts to 13.5% for patents, energy-efficient investments, environmentally friendly investments for research and development, and smoke exhaust and aeration systems in the hotel and catering industry, and to 3% for investments encouraging the reuse of packaging materials for beverages and industrial products. The percentage applies on the investment value, which also serves as a basis to determine the yearly depreciation.
The investment deduction is applied on the taxable profits and, in the absence of sufficient profits for a given year, it can be carried forward subject to a maximum amount to be deducted per year.
In terms of formalities, the company must fill in the dedicated enclosure to its own tax return. Energy-efficient investments and environmentally friendly investments for research and development are also subject to an official confirmation issued by the competent regional authority in order to be eligible.
At the federal level, the most important taxes related to the environment are:
The three Regions have maintained the former federal road tax. The following taxes on waste and water discharges also apply:
On 1 January 2015, the Brussels-Capital Region introduced an environmental charge known as the COBRACE-tax, imposed on office parking spaces, in order to reduce greenhouse gas emissions and control the use of energy. It aims to reduce the number of parking spaces available in the vicinity of office buildings, thereby discouraging workers driving to work. The accessibility of the office by public transport is first assessed, depending on its location within the territory of the Brussels-Capital Region as divided into three zones. A maximum number of parking spaces for office m² is allowed per zone, free of tax. If this maximum number of parking spaces is exceeded, based on the environmental permit for those parking spaces, each parking space in excess is subject to an environmental tax.
Municipalities are also levying service charges and taxes, mainly on waste, but some of the Brussels municipalities are also taxing parking spaces.
Belgium’s New Government
A new federal coalition government (called Vivaldi) was formed on 30 September 2020.
After being opposition parties for more than 17 years, the two “green” political parties are now part of the government. Due to their respective electoral successes, they have obtained the key environmental competencies – ie, mobility, climate, environment, green deal, sustainable development and energy.
Through its Governmental Declaration of Intent dated 30 September 2020, the government announced an ambitious investment plan in relation to the European Green Deal, as well as concrete measures in relation to climate and energy, a circular economy, the environment and biodiversity, and mobility.
Climate and energy
In order to reach its target greenhouse gas emissions, the government has undertaken to adapt its contribution to the National Energy and Climate Plan through an action plan. To this end, co-ordination between the Federal State and the Regions will be improved. The climate objectives will be transposed into intermediate objectives and will be subject to a yearly assessment.
Addressing climate change will provide an opportunity to establish new partnerships between public authorities, citizens and the private sector.
The climate policy will be achieved through a sustainable energy system, in which the security of supply, sustainability and energy affordability are to be guaranteed. To this end, Belgium supports the development of the capacity allocation mechanism in accordance with the EU's Clean Energy Package.
The government seeks to ensure that electricity costs (at a federal level) will decrease, in order to ensure the competitiveness of the electricity production market. In addition, sustainable energy production will benefit from a new boost, and will also help to create new jobs and develop new skills within sustainable sectors. The Federal Government has confirmed that nuclear energy will be phased out by 2025.
In addition, the fund for energy transition will be used as a priority for innovative projects (ie, projects that are part of the sustainable energy transition and make a real contribution to the reduction of greenhouse gas emissions and the transition to renewable energy). Pilot projects will be encouraged, and a regulatory framework will be developed to accelerate innovation and sustainable projects (eg, offshore renewable energy, gas greening and the capture, reuse and storage of CO₂).
One of the objectives of the Federal Holding and Investment Company will be to draw up a co-ordinated, sustainable and ambitious investment strategy that will aim to reduce investments in fossil fuels and energies. By 2030, the Federal State, through the Federal Holding and Investment Company, must have withdrawn its shareholdings from companies that have high greenhouse gas emissions and are not involved in energy transition. The government will analyse how to achieve the ambition of climate neutrality by 2040 through an investment plan.
Regarding its commitment to renewable energy, Belgium plans inter alia to double offshore wind power capacity, reinforce the current onshore and offshore grid and implement new grid connections (if possible) by 2025–2026.
The new government has stressed that all necessary measures will be taken in order to reduce carbon emissions by 55% by 2030 and to reach carbon neutrality by 2050.
The government will work on phasing out the sale of vehicles that do not meet the “zero emission” standard.
In addition, all new company cars will have to be carbon neutral by 2026. The government will investigate (in consultation with the Regions) how to proceed in the same way for public transport buses, taxis and shared mobility. In general, sustainable mobility alternatives will be promoted (eg, public transport, bicycles and carbon-neutral cars).
The government will keep the energy bills of households and businesses under control, and ensure that the federal share of the electricity bill is reduced. It will also combat energy precariousness.
Adapting taxation to ecological transition
The government aims to make the tax system more favourable to the climate and environment through adopting measures based on the “polluter pays” principle, with the main goal being to discourage the use of fossil fuels as much as possible by introducing new taxes. A support policy will have to be provided in order to preserve the competitive position of business and the purchasing power of households.
The new government will strive for a fully circular economy to combat climate change and move towards a smarter, more efficient and more sustainable use of materials and raw materials.
The Federal Government (in partnership with the Regions) will develop a federal action plan on a circular economy to significantly reduce the consumption of raw materials and the footprint of materials in production and consumption. To this end, Belgium will remove legislative and financial obstacles, normalise products and stimulate the "cradle to cradle" principle (ie, every material used for a product must be reusable).
Circular economy principles will be implemented via public procurements at a federal level.
Environment and biodiversity
The national biodiversity strategy will become compliant with the European biodiversity strategy and the Green Deal, and will also ensure compliance with environmental legislation and the environmental precautionary principle.
For instance, Belgium will fight against illegal trade (eg, timber and wild animals), encourage the EU to update its policy on plant breeding and genetically modified organisms, combat plastic pollution and other forms of marine pollution, focus on plastics made from biocomponents, and analyse possibilities towards waste prevention. In addition, an ambitious plan to reduce pesticides and adopt an ambitious attitude towards reducing chemical materials will be implemented.
Belgium will adopt national policies for the long-term management of waste (in accordance with the “polluter pays” principle).
The government has declared that smooth and sustainable mobility is of paramount importance for the Belgian economy and its citizens. However, the current mobility model affects climate change, air quality and public health. Therefore, the government has announced that it will focus on soft, collective and multimodal mobility.
These changes will involve new funding to enable the national railway company to invest in a sustainable modal shift. Belgium is also announcing major projects in response to the European wish to develop more and faster international (night) rail connections in Europe. Brussels will aim to become an international rail hub. Belgium will also seek to reduce the number of short-distance flights. Connections between regional airports and the rail grid will also be studied.
Green mobility will also be encouraged (eg, the deployment of battery-powered trains, a study of the implementation of hydrogen-powered trains, and efforts by the national railway company to produce green electricity on its own sites and buildings).
Sustainable Investments Within the European Union
Sustainability is garnering growing attention at a European level, with “sustainable investment” meaning that environmental and social considerations are included in investment decisions. But to make such a decision, the investors must be provided with relevant and comparable information about the investment envisaged, and its sustainability claims must be supported by objective data.
This is the objective of Regulation 2020/852 of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment (the Taxonomy Regulation), which was adopted on 18 June 2020 and shall enter into force gradually by 1 January 2023. The Taxonomy Regulation shall not determine the sustainability of an enterprise or an asset but shall fix a series of criteria, which should enable the determination of whether an economic activity is sustainable from an environmental standpoint, and as a result the sustainability level of the investment. Combined with adequate disclosures, these criteria will hopefully guide investors towards more sustainable investments.
A “sustainable economic activity” must meet the following four criteria:
The six environmental objectives are as follows:
This taxonomy shall be used by the EU and its member states, certain entities of public interest and those actors in the financial markets that propose financial products. This last category includes insurance companies, investment companies, credit institutions that offer portfolio management services, retirement schemes, and fund managers (eg, AIFs, UCITS).
The Taxonomy Regulation might have major consequences, certainly for providers and managers of financial products, who will bear an increased information obligation – and as a result increased due diligence inquiries – aligned on the taxonomy. Thanks to the information provided by these managers, investors should be able to determine the share of their investments dedicated to sustainable economic activities. The sustainability level of the underlying activity therefore becomes part of the investment decision tree.
The Taxonomy Regulation applies to 67 sectors, including real estate, which is identified through four economic activities:
The report notes, for instance, that in order to be qualified as sustainable, the construction of a new building must provide a Primary Energy Demand of at least 20% below the applicable national thresholds. The annexes of the report also provide that non-EU states will be able to use their own thresholds and certification schemes to prove that they are sustainable, subject to monitoring by the Sustainable Finance Platform. While the regulation will facilitate sustainable real estate investments within the EU, the non-EU market will not be left aside.
It should be noted that the Taxonomy Regulation does not create a European label for sustainable financial products, but only assessment criteria. The member states can therefore decide to keep their own label but only to the extent they comply with the criteria set forth by the Taxonomy Regulation, which is to date not the case for the Belgian label “towards sustainability”.
“Green REAL ESTATE”
The energy performance of buildings is one of the main ways to achieve climate change transition. The construction and renovation of properties can make a decisive difference on the environment (eg, reducing the use of building materials and promoting their reuse, reducing the content of hazardous substances and products throughout the life cycle, and reducing energy consumption and greenhouse gas emissions).
Belgium has already taken several measures towards mitigating the footprint of the real estate sector on the environment.
The increased use of green leases is to be expected. A green lease is a lease that contains clauses establishing binding obligations between tenants and owners in order to manage and improve the environmental (and energy) performance of a building.
Green leases establish obligations towards both parties regarding co-operation and data sharing, cost sharing, the management of resources, the establishment of audits, the establishment of targets (eg, energy consumption, water reduction, waste management and obtaining certificates), maintenance, etc.
These leases are mainly used for commercial buildings (eg, office and retail). Buildings subject to green leases could be profitable not only for investors and owners, but also for tenants (eg, due to property occupancy costs, the impact on their commercial reputation, and compliance with environmental legislation).
The Brussels-Capital Region adopted a new legal framework regarding the energy efficiency of buildings. The users and owners of large real estate portfolios (>100,000 m²) are obliged to develop an energy management plan in order to reduce their energy consumption. By 30 December 2020, the relevant buildings must be identified by the owners/users and an environmental co-ordinator has to be designated. Then, within 18 months, each building must be subject to an energy audit and an actions programme.
Environmental Protection, Energy Measures and State Aid
On a wider scale, environmental protection and energy measures are on the Belgian government’s agenda. In order to encourage their implementation, the authorities frequently allocate subsidies to undertakings or exonerate them from a burden they would usually have to bear. By doing so, the authorities might affect competition within the internal market.
That is why Belgium must implement such measures with respect to State Aid rules. The authorities should determine if their intervention can be qualified as State Aid (pursuant to EU law). If so, the authorities must notify it to the European Commission, which will then have to assess whether the aid is compatible with the internal market.
With relation to the environment, energy and climate change, the guidelines on State Aid for environmental protection and energy 2014–2020 and the guidelines on State Aid on the EU Emission Trading System are applicable. These guidelines establish the conditions that must be respected in order for State interventions to be considered compatible with the internal market.
The European Commission has prolonged the guidelines on State Aid for environmental protection and energy 2014–2020 until 2021; until then, the adoption process of the new guidelines will have to be followed. These guidelines provide compatibility provisions regarding, for instance, aid to energy from renewable sources, aid for resource efficiency and waste management, aid to energy infrastructure, and aid in the form of reductions in or exemptions from environmental taxes and in the form of reductions in funding support for electricity from renewable sources.
The European Commission has adopted a revised version of the guidelines on State Aid on the EU Emission Trading System, in the context of the system for greenhouse gas emission allowance trading post-2021. They will enter into force on 1 January 2021 and replace the previous guidelines.