Australasian Biotechnology (backfiles) AusBiotech ISSN: 1036-7128 Vol. 10, Num. 5, 2000, pp. 37-39

Australasian Biotechnology, Vol. 10 No. 5, 2000, pp. 37-39

GMO's

LIABILITY FOR GM “CONTAMINATION”

Keir Bristow, Corrs, Chambers and Westgarths, Melbourne

Code Number: au00056

Abstract

The greatest legal risk facing the agricultural biotechnology industry may be the risk of liability for contamination of non-GM crops or products by GM crops. This article examines the major elements of the debate over liability for contamination.

  Introduction

The greatest legal risk facing the agricultural biotechnology industry may be the risk of liability for “contamination” of non-GM crops or products by GM crops. Contamination in this sense is intended to mean simply the presence of a genetically modified plant or plant part in the production process of a crop or product (such as honey) which is intended by the grower or producer to be “GM-free”. Contamination may occur by accidental provision of GM seed where non-GM seed is ordered. At the production stage of the supply chain, common causes of contamination are movements of pollen and seeds by wind, water, birds or insects. At handling, processing and transport stages, the cause of contamination is likely to be the successive use of handling or processing equipment or transport containers for GM and non-GM crops or products.

The risk of liability for contamination is quite real. Incidents of contamination have already occurred overseas and have led to claims for compensation and settlement payments in some cases. Examples are:

• In June 2000, Advanta Seeds (partially owned by AstraZeneca P.l.c.) agreed to pay “fair and equitable compensation” to growers in the UK, France, Germany, Sweden and Luxembourg who were accidentally given GM canola seeds for planting.
• In Canada, a farmer being sued by Monsanto for growing Roundup Ready canola without a licence is counterclaiming for alleged losses of US$6.5M caused by what he asserts is unwanted contamination.

As an indication of the seriousness with which the risk of contamination has been treated in other jurisdictions, breach of a UK requirement to maintain a physical barrier around a GM crop trial to prevent contamination resulted in Monsanto being fined GBP17,000 in February 1999.

Although there have been no legal actions involving GM contamination to date in Australia, a 1999 decision of the Australian High Court (involving the contamination of a potato crop in South Australia by blight) could clearly suggest to potential litigants a framework for a negligence claim based on GM contamination.¹ There are, however, undoubtedly significant differences between the facts of that case and the likely scenarios for GM contamination.

This article examines the major elements of the debate over liability for contamination.

  Contamination need not threaten public health or the environment

A critical aspect of the issue of liability for contamination is that it need not involve any threat or harm to public health or to the environment. Contamination can potentially cause loss (and therefore potentially give rise to liability) simply as a result of:

• statements being made on packaging or advertising that the crop or product is GM-free;
• regulatory regimes applying to the labelling of GM foods or to the growing of GM crops;
• industry production standards requiring the crops or products to be GM-free (such as the various standards applied by Australia’s seven accredited organic agriculture industry organisations when determining whether to certify growers as “organic”); or
• contractual warranties that the crop or product is GM-free.

If the crop or product is in fact not GM-free, the types of losses incurred may include the following:

• the costs of recalling products sold, altering packaging and advertising, cleaning equipment used in the handling and processing of the crop or product, and cleaning transport containers used in its transport;
• loss of sales of other currently available crops or products because of perceptions that they may not be GM-free;
• loss of sales of the crop or product in the future, because of lingering perceptions that they may not be GM-free;
• loss of certified organic status of the grower or producer (and therefore loss of the ability to market produce in Australia as “certified organic” and the ability to export produce labelled as organic);² and
• loss of a “GM-free” image coupled with a general loss of public confidence, image and reputation (not just in the minds of domestic consumers but also potentially in major export markets).

Some of the above types of losses may be direct losses to the grower or producer. Others may be incurred by a third party down the supply chain. In such a case, the third party may have a claim against those further up the supply chain, for example for breach of a contractual warranty that the crop or product would be GM-free.

  Taking legal action against contamination

There is a range of types of legal actions which a person who suffers loss caused by GM contamination may initiate in order to obtain compensation or to seek a court injunction preventing threatened or further contamination. (The specific actions that may be available are not discussed in this article.) It seems that the risk of litigation is quite real, and the Organic Federation of Australia has declared that it has obtained legal advice from a leading class action and plaintiff law firm on the range of actions available. With increasing commercial adoption of GM crops in Australia, it may only be a matter of time before threats of legal actions for contamination occur here as they have in Europe and North America.

In the more litigious context of the USA, where the use of GM crops has been more widely adopted, it has been said that the risk of liability for contamination is already deterring growers from adopting GM crops.³ It is not clear whether the risk of legal actions has had any deterrent effect in Australia so far, however the agricultural biotechnology industry should be vigilant in detecting and minimising the effect of any such deterrence, particularly if it is the result of unfounded or misleading statements from the organic agriculture industry or other anti-GM groups.

Organic agriculture industry organisations and other anti-GM groups have used the threat of litigation to deter not just growers but everybody else involved in agricultural biotechnology. Perhaps because taking legal action against individual growers is likely to be unpopular and because growers are unlikely to have the “deep pockets” of other potential defendants, various groups have adopted the view that legal actions can and should be directed against:

• the companies that developed the GM crop or own intellectual property rights in the GM crop that caused the contamination;
• directors and officers of those companies;⁴
• the government regulators that approved the release of that GM crop; and
• government agencies which do not promptly release information about specific incidents of contamination or potential contamination.

If they have not already done so, all potential defendants of legal actions based on GM contamination should consider whether to review their insurance policies to see whether they are covered against such actions, including both the costs of defending such actions and the damages that may be awarded against them if the action is successful. If not, potential defendants may wish to investigate whether it is possible and worthwhile obtaining an insurance policy to cover such costs and damages.

  Liability and compensation proposals by the organic agriculture industry

Organic agriculture industry organisations and other anti-GM groups have taken the view that the issue of liability and compensation for GM contamination is critical to the regulation and use of GM crops.

In this regard, these groups have made a number of proposals for regulatory reform, including the following:

• imposing a requirement for persons dealing with GM crops to hold adequate insurance;
• imposing a requirement for persons dealing with GM crops to lodge money as an assurance bond (as exists in some mining legislation);
• the establishment of a “strict liability” compensation regime (similar in effect to a broad “indemnity” obligation in a contract); and
• the establishment of a statutory compensation fund.

The above proposals, which are not specifically included in the Gene Technology Bill currently before the Senate, are discussed below.

Insurance and assurance bond

To ensure that private sector defendants will be able to afford compensation and not simply disappear into bankruptcy or insolvency, organic agriculture industry organisations and other anti-GM groups have been pushing for those dealing with GM crops to be required to obtain appropriate insurance coverage and to provide money as an assurance bond to cover possible claims, as conditions of licences to grow GM crops under the proposed new gene technology regulatory regime (outlined in the Gene Technology Bill 2000).

Although the Office of the Gene Technology Regulator will probably have the right to impose such conditions under the Gene Technology Bill, the Interim OGTR has not indicated an intention to do so. The sorts of licence conditions the IOGTR has proposed so far to address the contamination issue have related to minimising the risks of contamination, such as by prescribing (on a crop-by-crop or case-by-case basis) isolation distances, physical barriers, years between land use, cleaning of equipment and transport of seed between sites.⁵ These are the types of matters that are already included in GMAC advice on proposed releases⁶ and are covered to some extent by the draft regulations under the Gene Technology Bill 2000.⁷

“Strict liability” to pay compensation and a statutory compensation fund

Organic agriculture industry organisations and other anti-GM groups are not satisfied with the current avenues of legal action for seeking compensation. In their view, there are a number of legal and practical obstacles to recovering compensation through these actions. These include the requirement to identify the source of the contamination, the requirement for those who have suffered loss to engage in potentially long, expensive and factually complex litigation, and the requirement of proving “fault” or wrongdoing by defendants.⁸ The perceived difficulties in mounting a successful legal action for compensation seem likely to lead to increased opposition to GM crops amongst those who believe that their crops and products are at risk of being contaminated. These difficulties therefore have arguably led to increased support for the campaigns in various States and rural districts for a moratorium on GM crops.

As a result, the organic agriculture industry organisations and other anti-GM groups have pushed for:

• those (deemed to be) responsible for contamination to be held “strictly liable” to pay compensation when contamination occurs, essentially removing the need for proving fault and limiting the types of legal defences available; and
• the establishment of a statutory compensation fund, funded by the agricultural biotechnology industry via licence fees or a levy or tax on sale of GM seed or trade in GM crops or products.

Both these proposals have been raised in a number of jurisdictions. Apart from Germany and Austria, which seem to have adopted a form of strict liability to compensate for loss caused by deliberate release of GMOs,⁹ no jurisdiction has yet legislated for either strict liability to pay compensation when contamination occurs or a compensation fund.

  Conclusions

There have been a number of incidents overseas where GM contamination has lead to claims for compensation by growers. Whether or not legal actions seeking compensation for GM contamination are ultimately successful, the threats of liability for contamination are quite real. The risk of liability (and even just the risk of incurring the legal costs of defending a legal action) may already be deterring growers from adopting GM crops.

The perceived risk of contamination, coupled with the justified belief that there are considerable legal and practical obstacles to the success of a legal action for compensation, seems likely to have the effect of increasing opposition to GM crops amongst grower and producer organisations. Coupled with uncertainty surrounding the available measures that can be taken to manage the risk of contamination, the issue of availability of compensation seems to have been used to support campaigns in various States and rural districts for a moratorium on GM crops.

In addition to pushing for the imposition of more stringent risk management measures, the organic agriculture industry can be expected to continue to push for a more liberal contamination regime. So far, such a regime has generally been rejected in Australia and overseas.

In a more general sense, the continual debate about “contamination” (or “genetic pollution”, another term which is often used) may also be playing a role in creating or entrenching public perceptions that there is something unhealthy or undesirable about GM crops. It may also have contributed to a public willingness to accept and excuse the destruction of GM crops by anti-GM groups who claim they are motivated by a fear of the contamination of nearby non-GM crops in some jurisdictions, such as the UK.

It appears that the issue of liability for contamination has not been fully explored in the Australian legal context. With the Gene Technology Bill and the proposed GM food labelling standard likely to be law within the next 12 months, it may be time for potential defendants of such actions, and especially the agricultural biotechnology companies, to take steps to understand and minimise these risks.

• Keir Bristow is a lawyer in Corrs Chambers Westgarth’s Intellectual Property practice group. He can be contacted on (03) 9672 3574 or by e-mail to the following address: Keir_Bristow@corrs.com.au.

1. Perre v Apand Pty Ltd [1999] HCA 36 (12 August 1999).

2. Although the organic agriculture industry seem to insist that organic production standards prohibit the presence of GM contamination, it is not clear whether accidental contamination will in fact lead to a loss of certification. There are generally allowable levels of contamination by pesticides and herbicides in organic production standards. In apparently the only case to date where certified organic status was under threat because of GM contamination issues, a UK farmer decided in March 1999 to grow GM crops on part of his holding and “organic” crops on another part. He abandoned this decision after pressure by the Soil Association (the peak UK organic agriculture industry organisation).

3. “Down on the farm as controversy mounts, farmers second guess the rush to plant biotech crops”, The Boston Globe, 26 September 2000.

4. In July 1999, Friends of the Earth (an anti-GM organisation in the UK) sent letters to 200 directors of agricultural biotechnology companies and research institutes in the UK warning them of the potential for personal liability on their part for damage caused to human health or the environment by GM crops. According to FOE, the “outraged replies” it received showed that “company directors are clearly shaken by the prospect of liability ending up at their front door”.

5. See the submission of the IOGTR to the recent Inquiry into the Gene Technology Bill 2000 of the Senate Community Affairs References Committee, at pages 139 and 142.

6. See for example GMAC advice of 21 March 2000 on a deliberate release proposal (PR-132) by Aventis CropScience Pty Ltd, regarding a GM canola variety. The advice includes the following procedures for release: “The trial plots will be planted with a small plot seeder or by hand. Seeders, windrowers and headers will be cleaned using compressed air on the trial site to minimise seed escape. The trial sites will be separated by 400 metres from other Brassica crops and the trial sites will be surrounded by a 15-metre buffer of non-transgenic canola or a non-Brassica crop of similar flowering timing. A 50-metre zone around the site will be monitored for sexually compatible species one month before planting, and from a week before the crop begins to flower until the crop stops flowering. Any sexually compatible plants found in this area will be removed.”

7. The draft regulations propose that an applicant for a licence to release a GM crop be required to provide details of the proximity of “centres of agricultural activity” to the site of the proposed release, as well as details of any sexually compatible plants living near the site (including the quantity and the chances for cross-pollination).

8. Although never raised by the organic agriculture industry, for obvious reasons, another obstacle to recovery of compensation may be the fact that that industry by and large determines its own production standards and has apparently decided on its own initiative over the last few years to prohibit GM contamination absolutely as a condition of certified organic status. However, the National Standard on Organic and Bio-dynamic Produce, which is the reference point for AQIS when determining whether exports may be labelled as organic, recognises the impossibility of guaranteeing the absence of any contamination (General Note 9).

9. See the submission of the IOGTR to the recent Inquiry into the Gene Technology Bill 2000 of the Senate Community Affairs References Committee, at pages 145, 147 and 151.