The principle of ‘polluter pays’ is fundamental to environmental law. However, the principle becomes problematic in the case of environmental damage caused during conflict. The international community acknowledges that reparation should be forthcoming, but it is not clear in every case how compensation should be funded. Compensation related to environmental damage caused by military intervention has been settled by either diplomacy or political means. In the summer of 2006 Israel entered into a conflict with Lebanon that had substantial environmental impacts, including a major oil spill on the Lebanese coast and forest fires in Israel. The situation is complex because, although the Israeli attacks were sanctioned by the Israeli state, the Hezbollah actions were carried out independently of the Lebanese government. We analyze the different settlement schemes available and their applicability in such a case. The analysis is framed by the three main methods of international dispute settlement between conflicting parties. The paper concludes that the only way to claim compensation would be through unilateral recourse to the United Nations Security Council. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.