Environmental liability in transboundary harms

We examine strict liability and negligence and show that the socially optimal levels of care can be implemented in negligence only if the actions of the firm that caused the harm are adjudicated using the standards of the jurisdiction in which the harm occurs. [...] The plaintiffs appealed, and because of the jurisdictional issues involved, the Appellate Court in The Hague asks for clarification of the treaty from the European Court of Justice, whose job it is to ensure uniform interpretations of European Union law. [...] Potential abuses of forum selection are examined by Plambeck (1985) in the case of the Union Carbide methyl isocyanate disaster at Bhopal, India in 1984 and by Eskenazi (1993) in the case of the Amoco Cadiz oil spill, involving the Torrey Canyon, in 1967.16 To the best of our knowledge, Darmody (1988) is the only economic analysis of forum. [...] In the first, damages occurring to the foreign country are adjudicated according to the standard of the firm’s home country, while under the second approach, damages occurring to the foreign country are adjudicated according the foreign country’s standard. [...] Approach 1. First, we will suppose that the firm is subject only to the standard of its home country, but must pay damages both to the home country and to the foreign country if it is in violation of the domestic standard.