The States has been unsuccessful in its attempt to recover costs the island has incurred in dealing with pollution from historic use of fire-fighting foam at Guernsey and Alderney airports.
A long-running claim against the US manufacturer of the foam, 3M, and its subsidiary 3M United Kingdom, ended in the High Court this week. Following testimony from a number of expert witnesses during the trial, the States' legal team advised that a successful outcome was now unlikely.
Under the terms of the settlement, the States will pay a £1.4 million (US$ 2 million) contribution towards 3M's legal costs in defending the claim, as well as the island's own legal costs of around £6.6 million.
By bringing the case to an early settlement, the States avoids the risk of being liable for millions of pounds in additional costs that could be incurred by both sides if the High Court action continued to a conclusion and the judge found in favour of 3M. Both sides have now dismissed any claim against the other.
The High Court trial followed several years of unsuccessful negotiation between the States and 3M, after traces of a chemical known as PFOS, historically contained in fire-fighting foam supplied by the company, was detected in water. This has required substantial remedial action to ensure compliance with drinking water standards.
The States was therefore seeking to recover up to £27 million. This was for expenditure the island has already incurred, totalling more than £10 million, and future costs over the next 20 years. These include ongoing monitoring and water treatment at Guernsey Airport.
The States negotiating team was led by Public Services Department, which has responsibility for both Guernsey Water and Guernsey Airport.
In 2014, based on legal advice, the States rejected an offer of £3.25 million from 3M to settle the claim of £27 million. The parties agreed to mediation, but this was unsuccessful and eventually resulted in the case being brought to the High Court by 3M.
3M contested the States claim, and argued that the legal time limit within which such claims must be brought had expired.
The advice from the States external legal team was that the nature of the contamination meant the action was not 'time-barred'. However following testimony from a number of witnesses during the High Court trial, in their view 3M had successfully established the time limit had passed, and the chance of a claim succeeding was very unlikely.
Public Services Chief Officer Adrian Lewis said the States had attempted to achieve the best result for Guernsey, based on clear and consistent legal advice. Legal action had always been seen as the last resort, but the States had had a duty to try and recover some the costs it had incurred in dealing with the pollution.
The High Court trial arose after 3M brought an action against the States, to strike out any claim. The States then counter-claimed.
Mr Lewis said the final outcome had been 'highly disappointing'.
"Our priorities in dealing with the impacts from the historic use of this foam have been two-fold. First and foremost, to take whatever action is required to protect the island's water supply and ensure our drinking water complies with the very stringent standards set down. That we have achieved."
"The second priority, based on expert legal advice, has been to seek to recover some of the very significant costs we have incurred in dealing with this pollution. We sought to establish whether 3M had adequately fulfilled its duty of care as the supplier of these products.
"There was always a risk that pursuing a claim against the manufacturer would incur significant legal costs. However this had to be balanced against the very significant costs the island has already incurred.
"Expert legal advice was followed throughout, and this course of action was only progressed on the basis that Guernsey had a good prospect of recovering some or all of our costs. We are highly disappointed with the outcome, but once we were advised the prospect of success had diminished we acted quickly to bring the case to a close to avoid any additional costs."
Public Services Minister Deputy Scott Ogier has written to Public Accounts Committee and Treasury & Resources to inform them of the outcome of the High Court action, and offer full assistance should they wish to carry out a review.
Most of the remediation work to deal with the PFOS pollution was undertaken as part of a wider Guernsey Airport redevelopment carried out between 2012 and 2014. Large areas of contaminated soil were removed from hotspots within the airfield, and ground water is now captured and passed through a specially-designed treatment plant to remove PFOS.
The last phase of remediation was completed in May 2015, when contaminated soil was removed from the site of a 1999 aircraft accident adjacent to Forest Road.
A £3 million provision has also been made for the long term treatment of contaminated soil, which is now securely sealed in the grass bund area outside Guernsey Airport.
Although not an identical situation, in 2005 the States of Jersey received a £2.6 million settlement from the manufacturer following use of fire-fighting foam at their airport.