A land owner who has been unable to fell an area of forest due to provisions in the Species Protection Regulation has been awarded compensation from the state by the Supreme Court The judgement finds that a land owner does not normally have the right to compensation by the state for restrictions in land use that are a direct result of the Species Protection Regulation, but that such a right can exist under specific circumstances. According to the Supreme Court, the right to compensation presupposes that the restriction has constituted a major burden for the individual, who has requested, but been denied, a dispensation pursuant to the Species Protection Regulation.
A forest business that conducts forestry operations and has extensive forest holdings notified the Swedish Forest Agency in 2015 that it intended to fell an area of 17.4 hectares for regenerative purposes. In the subsequent consultation between the company and the Swedish Forest Agency pursuant to chapter 12, section 6 of the Environmental Code, information emerged that the area constituted a major capercaillie breeding site.
The Swedish Forest Agency prohibited the company under penalty of a fine from carrying out all forms of logging in the area. The decision was justified in that in the Swedish Forest Agency's judgement, logging was forbidden according to section 4 of the Species Protection Regulation as it would potentially damage the capercaillies' breeding areas or roosting sites.
The forestry company appealed the Forest Agency's decision, but the Land and Environment Court dismissed the appeal. The company also applied for a dispensation according to section 14 of the Species Protection Regulation, but the County Administrative Board rejected the application. The forestry company subsequently brought proceedings against the state with a claim for compensation because the Forest Agency's decision had entirely prevented the company from harvesting the forest in an area totalling some 22 hectares. The forestry company claimed that the state had considerably impaired exploitation of the area and thereby caused the company damage in the form of impaired value of the forest property that was subject to the decision.
THE SUPREME COURT'S ASSESSMENT
The case raises the question of whether individuals can be entitled to compensation from the state when prohibited from harvesting their forest due to the provisions of the Species Protection Regulation.
The Environmental Code is based on the conception that, in utilising their land, land owners are obliged, without claiming compensation from the public purse, to take thorough consideration to avoid damaging the environment, with certain exceptions that are either required by the law or general principles. The Supreme Court starts with a review of the different options for compensation that are available in connection with injunctions or prohibitions according to chapter 12, section 6 of the Environmental Code.
There is a provision in chapter 31, section 4 of the Environmental Code that gives a property owner the right to compensation and redemption due to certain regulations, injunctions and prohibitions. However, the Court observes that compensation cannot be paid pursuant to chapter 31, section 4 of the Environmental Code if in practice the prohibition is a confirmation of a previously applicable restriction on land use.
As a rule, neither can a land owner receive compensation for restrictions on the land's usage resulting from the general consideration provisions in chapter 2 of the Environmental Code. Land use in contravention of these provisions is namely not permissible and consequently counts as ongoing land use. However, if the restriction in question is due to additional circumstances for which the land owner cannot be held responsible or been able to foresee, it can constitute an obstruction of ongoing land use, which gives entitlement to compensation according to chapter 31, section 4 of the Environmental Code.
The Species Protection Regulation has been deemed to constitute a clarification of the general rules of consideration in chapter 2 of the Environmental Code. There is no regulation therein that gives individuals the right to compensation for such restrictions on land use that its provisions can entail. The Supreme Court indicates that the starting point is therefore that the individual does not have a right to compensation, but it also states that that does not in itself preclude the fact that under specific circumstances there can be a right to compensation according to general principles.
The judgement that the land owner has the right to compensation with the support of general principles must be made taking into consideration the Instrument of Government's provisions on constitutional protection, chapter 2, section 15. According to the second paragraph in the aforementioned provision, individuals have a constitutional right to compensation, based on legally specified grounds, when the public restricts the use of land in such a way that ongoing use of the land that the property comprises is substantially impeded. This can be claimed by individuals directly from the state if such legal rules that the provision prescribes have not been introduced. However, there are exceptions to this right in the third paragraph, for example, in connection with restrictions on the use of land for environmental protection reasons. Instead, in such specified exceptions, legal requirements apply.
If the legislation that enables the restriction on disposition does not provide guidance in the question of compensation, according to the Supreme Court, a proportionality assessment should instead be made in the individual case. In specific circumstances, the state can be required to pay compensation for damage after the restriction on disposition through a decision justified by environmental protection, if the restriction has substantially impeded the land use. In the individual case, the restriction shall be sufficiently burdensome for the individual that it does not seem reasonable that this individual alone should bear the consequences of the restriction. According to the court, the right to compensation shall presuppose that the individual has requested, but been denied, a dispensation pursuant to the Species Protection Regulation.
In the situation relevant to the judgement, the Supreme Court performed a proportionality assessment, whereby the court took account of the fact that the obstacle to logging entailed a substantial impediment to the ongoing land use and that the restriction depended on circumstances that the company would not have been able to foresee or influence. Further, the obstacle concerned a relatively significant area with extensive financial impact on the company, consisting of the reduction in the value of the property. The Supreme Court's conclusion was therefore that the obstacle to logging contributed to such significant damage that, despite its extensive operation, the company should be compensated by the state for the damage caused.
The Supreme Court's judgement has been well received by the forest industry. The judgement's clarificatory statement on which conditions apply for individuals to have the right to compensation from the state for such costly restrictions in land use, for example, those arising from the Species Protection Regulation, provide the necessary clarity.
The right to compensation that has now been articulated is a part of property protection, and the fact that there are clear rules that indicate how interventions in the individual's property imposed by the state can be compensated is fundamental for the rule of law. It remains to be seen whether the outcome in the Supreme Court will entail constitutional amendments. Amendments to chapter 31, section 4 of the Environmental Code, which the judgement concerned, have previously been proposed by the Species Protection Enquiry in SOU 2021:51 (supplement in the form of an item no. 8 indicating that dispensation with specific conditions or rejection of a dispensation can also give entitlement to compensation if ongoing land use is substantially impeded), and seems to be necessary as a matter of urgency after the Supreme Court's judgement.
The judgement implies that companies with large forest holdings must bear larger costs or losses of revenue in absolute terms than owners with smaller forest holdings in order to observe the consideration requirements in the legislation, as a large company is deemed to have better conditions to bear the effects of the restriction.
In the particular case, the land owner was a forestry business with a total land holding of more than 20,000 hectares. The obstacle to felling related to an area of 22 hectares, and correspondingly a decrease in value of the property in question of some SEK 2.8 million. Under these conditions, the obstacle to felling was considered to give rise to sufficiently significant damage that the Supreme Court considered that the company – despite its relatively extensive operation – should be compensated by the state for the damage.
The judgement consequently has a potentially major practical significance for all forest owners in the country that have had the right to exploit their forest restricted with no compensation. As always it will also be an assessment in the individual case of the circumstances on which the logging prohibition is based, as to whether these circumstances could not have been foreseen or influenced by the individual and whether the decision for restrictions can be said to constitute a major burden for the individual.
We are following continued developments with interest at Lindahl.
If you have any questions concerning the judgement or its implication for your forest operations, you are welcome to contact us!