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1.1 What is the basis of environmental policy in your jurisdiction and which agencies/bodies administer and enforce environmental law?
The Environment Agency (EA) is mainly responsible for the enforcement and administration of environmental law. For example, it is the designated regulator for: Part A (1) installations under the Environmental Permitting (EP) regime (see question 2.1); waste management (including producer responsibility initiatives) (see question 3.1); special sites designated under the contaminated land regime in Part 2A of the Environmental Protection Act 1990 (EPA) (see question 5.1); flood defence; and emissions trading (see question 9.1). Local authorities are responsible for the regulation of Part A (2) and Part B activities; the administration and enforcement of the contaminated land regime; the statutory nuisance provisions contained in Part III of the EPA; and the hazardous substances regime contained in the Planning (Hazardous Substances) Act 1990 and subsidiary regulations.
The civil and criminal courts and tribunals of England are also involved in the making and enforcement of environmental law (see question 4.1). There is also a tribunal procedure under which certain rights of appeal, usually against decisions of regulators, are heard.
Other agencies, such as Natural England, the Health and Safety Executive (HSE), the Office for Nuclear Regulation (ONR), the Marine Management Organisation and the Food Standards Agency have an important role to play in ensuring the protection of the environment.
1.2 What approach do such agencies/bodies take to the enforcement of environmental law?
The EA’s Enforcement and Sanctions Policy sets out five key principles of enforcement: proportionality; consistency; transparency; accountability; and a risk-based approach, with higher-risk sites and activities being prioritised. The policy, updated on 8 May 2018, now highlights the outcome-focused approach adopted by the EA. It also emphasises the EA’s regard for the “growth duty”, under which enforcement action or sanctions should only be imposed when necessary, and in a proportionate way. Criminal prosecutions and civil sanctions are an important part of the EA’s enforcement policy, aiming to change the behaviour of offenders, eliminate any financial gain or benefit from non-compliance, and deter future non-compliance, amongst other things.
In June 2018, the EA published an updated list of civil sanctions (including enforcement undertakings) that it has imposed as an alternative to prosecution.
The expansion of civil sanctioning powers in relation to the EP regime was made by the Environmental Permitting (England and Wales) (Amendment) (England) Regulations 2015, subsequently consolidated in the Environmental Permitting (England and Wales) Regulations 2016, which came into force on 1 January 2017 (see question 2.4). In September 2017, Defra published guidance on how prosecution powers of the regulator under the EP regime interact with local authorities’ powers to prosecute statutory nuisance.
The Office for Product Safety and Standards (which superseded the former Regulatory Delivery directorate in January 2018) is responsible for the effective delivery of regulation and ensuring that local authorities deal with enforcement issues in a consistent and co-ordinated manner, with a view to easing the regulatory burden on business.
The Sentencing Council of the Magistrates’ Association publishes sentencing guidelines, which encourage Magistrates to consider the means of companies and the seriousness of offences when they set financial penalties. A set of environmental sentencing guidelines has been in force since 1 July 2014, providing higher starting points for fines, promoting tougher punishment for repeat offenders and placing an increased focus on the proportionality of the fine in relation to the size of the company. Sentencing guidelines for health and safety offences, corporate manslaughter, food safety and hygiene offences came into force on 1 February 2016, which will result in similar approaches being adopted by the courts for such offences.
Environmental regulation is supplemented by other regulatory controls. In the context of energy regulation, the existence of mechanisms such as the climate change levy (essentially a tax on the use of energy from fossil fuel sources by industry and the public sector) and the Renewables Obligation (which requires all electricity suppliers licensed under the Electricity Act 1989 to produce evidence to the Office of Gas and Electricity Markets that they have supplied customers in England with specified amounts of electricity generated from “eligible renewable sources”) have been instrumental in influencing more sustainable energy use and reducing greenhouse gas emissions.
The Renewables Obligation has been closed to new generation projects since 31 March 2017 (subject to grace periods) and the overall scheme is to close in 2037. The Government is replacing the Renewables Obligation with the Contracts for Difference (CfD) scheme, providing for contracts with the Low Carbon Contracts Company Ltd (LCCC), a Government-owned private company. The intention remains to incentivise the use of large low-carbon energy sources by providing greater security to qualifying generators. Under the scheme, the electricity generator is reimbursed the difference between the average market price for electricity, and the price that reflects the cost of investing in low-carbon technology. The costs of funding the CfD are recovered through a levy on suppliers, which is ultimately passed on to domestic and industrial consumers via their electricity bill. However, the Government recognised the significant burden this could place on energy-intensive industries and so in March 2017, following a public consultation, the Government announced that it would amend the Regulations to introduce exemptions from the costs of the CfD for eligible businesses.
The Government published its response to the CfD consultation in two parts: Part A was published in June 2018, with Part B published in August 2018. In July 2018, the Contracts for Difference (Miscellaneous Amendments) Regulations 2018 came into force, making the amendments outlined in Part A of the Government’s response. On 30 August 2018, the Government launched a further consultation to invite views on the way that its decisions will be implemented into the CfD scheme: this consultation closed on 10 October 2018. Separately, in July 2018, the Government also published draft Feed-in Tariffs and Contracts for Difference (Amendment) (EU Exit) Regulations 2018, one of the first statutory instruments to be published under the European Union (Withdrawal) Act 2018. These draft regulations do not affect the operation of the CfD scheme.
1.3 To what extent are public authorities required to provide environment-related information to interested persons (including members of the public)?
An access to environmental information regime has been in place in England since 1992. This regime is now set out in the Environmental Information Regulations 2004 (EIRs), which came into force on 1 January 2005, at the same time as the Freedom of Information Act 2000 (FOIA). Environmental information is effectively excluded from the ambit of the access-to-information regime established by the FOIA, which provides that requests for such information are dealt with under the EIRs.
The EIRs implement Directive 2003/4/EC on public access to environmental information, and also aim to fulfil the UK’s obligations under the Aarhus Convention (the UNECE Convention on Access to Information, Public Participation in Decision-making, and Access to Justice in Environmental Matters). As such, the EIRs have a different legislative background and focus to the FOIA and, on the whole, provide for wider disclosure than is available under the FOIA.
■ organise environmental information held by the public authority so as to enable it to perform the first two duties mentioned above.
The definition of what constitutes ‘environmental information’ in the EIRs is wide, covering not only information on environmental elements and substances, but also information on measures and activities likely to affect them. This can include any information (in written, visual, aural, electronic or any other material form, including information relating to ‘official business’ which is held in the personal email accounts of employees of public authorities) on, among other things, the state of the environment and factors that impact upon it, reports on the implementation of environmental legislation, and cost-benefit and other economic analyses used in environmental decision-making.
In Department for Business, Energy and Industrial Strategy v Information Commissioner (C3/2016/0880), the Court of Appeal held that even information which does not directly concern the environment in itself may be subject to disclosure under the Regulations, as long as it has a sufficient link to a measure that affects the environment.
The definition of a “public authority” for the purposes of the EIRs is also very broad (broader than the definition of “public authority” under the FOIA). It includes any body or person that carries out functions of public administration, as well as any body or person under the “control” of another relevant public authority and which (among other things) exercises functions of a public nature or provides public services in relation to the environment. Guidance issued by the Government indicates that “control” in this context could include a relationship constituted by legislation, rights, licence or contract. Also, a public authority under the EIRs includes any other body or person “that carries out functions of public administration” (regardless of whether these functions relate to the environment). Accordingly, private companies or public-private partnerships with environmental functions, such as public utilities involved in the supply of public services, have been argued to be caught by the EIRs in certain circumstances.
■ commercial entities are capable of being bodies that are under the control of a public authority (and therefore public authorities under the EIRs), if they do not genuinely autonomously determine how they provide their services and their controlling public authority “is in a position to exert decisive influence on their action in the environmental field”. However, a commercial service provider that is only a public authority because it is under the control of another public authority is not required to provide environmental information that does not relate to the provision of the relevant services.
The CJEU judgment was a preliminary ruling, only dealing with the questions referred to it by the Upper Tribunal. The main proceedings and application of the facts to the tests set out by the CJEU to determine if utility companies are in fact public authorities were considered in the Upper Tribunal. It ultimately ruled that private water companies are public authorities for the purposes of the EIRs; basing its decision on the fact that water companies have special powers over and above those in private law. However, the decision did not go as far as laying down broad general principles on when a body was a public authority under the EIRs.
2.1 When is an environmental permit required, and may environmental permits be transferred from one person to another?
In England, environmental permits are required for a wide range of business and commercial activities, with emissions from domestic premises in the main exempt. Permits are generally granted either by the EA or the relevant local authority.
The permit regime is based on the principle of an integrated permitting process to prevent or, where that is not practicable, reduce emissions in order to achieve a high level of protection of the environment as a whole. The high level of protection is achieved by employing so-called best available techniques, i.e. the most cost-effective way, or ways, for the industry to prevent or minimise emissions. The original Integrated Pollution Prevention and Control Directive, requiring Member States to establish a pollution prevention regime, has been recast, along with six other directives, in Directive 2010/75/EU on Industrial Emissions. The Industrial Emissions Directive was implemented in England by the adoption of the Environmental Permitting (England and Wales) (Amendment) Regulations 2015 (now consolidated in the 2016 EP Regulations).
■ Part B installations, which are sites with activities for which only emissions to air are regulated under the IPPC, such installations being the responsibility of the local authority.
An environmental permit is required for the keeping, treating or disposing of controlled waste on non-domestic premises. The EP regime also applies to discharges into controlled waters, groundwater authorisations and radioactive substances, and has been amended to implement Directive 2009/31/EC on the geological storage of carbon dioxide (CO2).
The Environmental Permitting (England and Wales) (Amendment) (No.2) Regulations came into force on 6 April 2016 and replaced the existing flood defence consents with environmental permits for flood risk activities. At the same time, the EA published standard rules for applications for standard environmental permits. There are further plans to bring water abstraction and impoundment licences within the EP regime in the early 2020s. Operators of installations subject to the EU Emissions Trading Directive are required to hold a greenhouse gas emissions permit (see question 9.1). The Environmental Permitting (England and Wales) (Amendment) Regulations 2018 came into force on 30 January 2018, implementing the Medium Combustion Plants Directive 2015 (bringing such plants into the EP regime from 20 December 2018 for new plants and on a staggered basis for existing plants), and introducing controls on nitrogen oxide emissions from certain diesel generators.
Discharges of trade effluent to public sewers are controlled by the grant of a trade effluent consent, granted by the relevant sewerage undertaker. The presence of a hazardous substance on land may also require obtaining a hazardous substances consent under the Planning (Hazardous Substances) Regulations 2015, which came into force on 1 June 2015. The system is operated by hazardous substances authorities (mostly local planning authorities).
In all the above cases, the competent authority granting the licence has the discretion to attach such conditions as it thinks necessary and appropriate to ensure that no harm to human health or the environment occurs beyond accepted limits.
Generally, the operator of the installation that is making the emission or discharge or undertaking the prescribed activity holds the permit authorising this. The definition of the term “operator” varies between the different EP regimes, but is usually the person (natural or legal) who is in control of the installation. Environmental permits can usually be transferred from one person to another, provided the requirements of the particular legislation governing the grant of the permit are met. For example, the transfer of an environmental permit granted under the EP Regulations requires the current operator and the proposed recipient of the permit to make a joint application to the regulator containing certain specified details; the regulator is required to effect the transfer unless it considers that the proposed recipient will not have control over the installation after the transfer is effected, or it will not ensure compliance with the conditions of the transferred permit.
2.2 What rights are there to appeal against the decision of an environmental regulator not to grant an environmental permit or in respect of the conditions contained in an environmental permit?
All of the above permitting regimes include provisions for appeal in certain circumstances. In general, the right of appeal is to the Secretary of State for the Environment, Food and Rural Affairs.
Appeals can be conducted by way of written representations or by holding a hearing, and interested third parties have rights to be involved in such appeals, including rights to address the inspector at any public hearing. The Secretary of State may affirm or quash the regulator’s decision, quash all or any of the conditions imposed in the permit by the regulator, or direct the granting or variation of a permit where one has been refused subject to such conditions as he/she sees fit. The time limit for appeals varies depending on the nature of the permit.
2.3 Is it necessary to conduct environmental audits or environmental impact assessments for particularly polluting industries or other installations/projects?
Various measures are incorporated within the EP regime to prevent pollution during the design and operation of the installation and, subsequently, upon decommissioning, to ensure that the site is returned to a satisfactory state and poses no pollution risks.
In submitting an application for a permit to operate a Part A activity, the operator is required to submit a site report identifying the condition of the site prior to the commencement of the regulated activity. Ongoing monitoring and reporting requirements are aimed at identifying significant pollution occurring during operation of the installation and ensuring that it is attended to immediately either by voluntary action by the operator or through the undertaking of an enforcement action by the regulator.
Where the operator plans to leave or close the site, the EP Regulations require the operator to provide evidence, i.e. a site report, to the regulator on the condition of the site and give details of any contamination discovered. The regulator will only accept the surrender of the environmental permit when the site is put in a condition where it represents no pollution risk and is in a satisfactory state.
The Environmental Impact Assessment (EIA) Directive 1985/337/EC, as amended, requires an environmental assessment to be made on the effect of certain public and private projects, e.g. construction of integrated chemical installations and other chemical plants, paper and board plants, plants manufacturing certain foodstuffs and certain infrastructure projects. Projects are defined according to whether they require an environmental statement to be provided in all cases (Schedule 1 development) or only where the development proposed is likely to have a significant effect on the environment (Schedule 2 development). The secondary legislation implementing the EIA Directive in England requires Schedule 2 projects to be subject to a formal screening process in order to determine whether they will have a significant effect before an application for planning permission is granted. The granting of planning permission is prevented where a development requires an environmental assessment until consideration of the relevant environmental information.
The EIA Directive 2014/52/EU, which was intended to create a uniform and streamlined assessment process across Member States, was implemented in England through the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 and the Infrastructure Planning (Environmental Impact Assessment) Regulations 2017 in May 2017. Key parts of the Directive include the additional consideration of climate change, biodiversity, demolition impact and biodiversity in the assessment, and the mandatory introduction of penalties for non-compliance. It also aims to reduce the burden on developers by making fewer projects subject to assessment.
The Environmental Liability Directive, currently incorporated into English law through the Environmental Damage (Prevention and Remediation) Regulations 2015, establishes a framework of environmental liability requiring the prevention and, where that fails, remediation of various categories of environmental damage. It has no retrospective effect, so does not apply to damage caused by an emission, event or incident that took place before 30 April 2007. The original UK regulations implemented in 2009 conferred no retrospective effect before 1 March 2009 – an anomaly caused by the late implementation of the Directive – and may have caused some operators to undertake assessments of baseline condition in order to avoid liability for historic pollution. In the absence of a baseline condition report, there may be evidential difficulties in proving that particular damage was caused by an emission, event or incident pre-dating this date.
2.4 What enforcement powers do environmental regulators have in connection with the violation of permits?
In general, legislation requiring the grant of a permit or authorisation for the carrying on of an activity or a discharge makes it a criminal offence to carry on the activity, or make the discharge, other than pursuant to a permit and in accordance with any conditions that may be attached to it. These are typically strict liability offences with no requirement to prove intention or negligence in the commission of the offence. In St. Regis Paper Company Ltd v R  EWCA Crim Div 2527, the Court of Appeal confirmed that it is possible for criminal liability to be imposed on a company in circumstances where the actions of one of its employees infringe an environmental permit and the offence in question is one of strict liability; but that, in the case of criminal offences requiring mens rea, liability will only attach to the company where the employee in question can be said to be the “directing mind and will” of the company.
In addition to their powers to pursue prosecution, regulators also have the power to issue notices to vary the terms and conditions of any permit granted or, in very serious cases of non-compliance, to revoke or suspend the operation of a permit. The EA is able to accept enforcement undertakings in relation to the main EP offences.
Civil liability may also flow from a failure to hold a permit or to comply with a condition attached to it. For example, where a breach of a waste management licence occurs and a third party suffers damage as a result, that person is entitled to claim for the damage, subject to certain exceptions.
3.1 How is waste defined and do certain categories of waste involve additional duties or controls?
The definition of “waste” that currently applies in England is set out in the Waste Framework Directive 2008/98/EC (WFD), implemented in the UK by the Waste (England and Wales) Regulations 2011 (Waste Regulations). “Waste” is essentially any substance or object which the holder discards or intends or is required to discard. This can prove to be a difficult definition to apply in practice, and to assist in such cases, Defra published updated guidance on the legal definition of waste in May 2016. Guidance has also been published by the European Commission.
So-called “hazardous waste” is also defined in the WFD. Such waste will display one or more of the 15 hazardous properties detailed in the WFD, e.g.: it will be explosive; highly flammable; corrosive, etc. The Government published guidance on waste classification and assessment (particularly hazardous waste) in May 2015, which was updated in May 2018. Due to the potentially harmful nature of hazardous waste, additional duties and controls are imposed by the WFD, for example, in relation to how such waste is stored, transported and handled.
Additional controls also apply in the context of transboundary shipment of waste, and radioactive waste is subject to different legislative requirements than waste generally.
3.2 To what extent is a producer of waste allowed to store and/or dispose of it on the site where it was produced?
Part II of the EPA introduced the concept of the waste “duty of care”, which requires producers of waste to ensure (among other things) that waste is managed so as to avoid its escape. If the intention is to undertake some treatment activity on the premises or to take in third parties’ waste for storage pending consignment for end disposal, then this requires an environmental permit under the EP Regulations.
Activities involving the actual disposal of waste always require a permit under the EP Regulations and planning permission will also be required. Applications for disposal of waste under both the planning and EP systems require the disposer to demonstrate that operation of the disposal site poses no harm to human health or the environment, and that the person is qualified to operate the site and can offer appropriate financial guarantees relating to the adoption of appropriate environmental control measures both during and following closure of the site.
3.3 Do producers of waste retain any residual liability in respect of the waste where they have transferred it to another person for disposal/treatment off-site (e.g. if the transferee/ultimate disposer goes bankrupt/disappears)?
The waste duty of care requires the person subject to the duty: (i) to take reasonable steps to prevent any other person committing a waste management offence; (ii) to prevent the escape of waste from his control or that of any other person; (iii) to ensure that any transfer of waste is only to an authorised person or to a person for authorised transport purposes, and (when waste is transferred) that a written description of the waste is also transferred, sufficient to enable each person receiving it to avoid committing a waste offence; and (iv) to comply with the duty of care. Under the Waste Regulations, it is now a legal requirement that such transfer notes include a signed declaration that, to date, those handling the waste have applied the waste management hierarchy of options.
It has been common practice for some time for the EA to insist that operators provide a financial guarantee or bond, in order to ensure that funds are available to undertake any clean-up works required during the operation of a landfill site or following its closure, and these provisions are carried over to the EP regime.
In order to effectively pass on the burden of obligations with respect to the safe handling and disposal of waste after it leaves this site, the waste producer must ensure that the person receiving his waste (e.g. as a registered waste carrier) knowingly assumes responsibility for it under a contract.
3.4 To what extent do waste producers have obligations regarding the take-back and recovery of their waste?
■ Waste Electrical and Electronic Equipment (WEEE). EU Directive 2002/96/EC makes producers of WEEE responsible for financing its collection, treatment, and recovery, and obligates distributors to allow consumers to return their waste equipment free of charge through collection systems. The Directive was implemented in England by the WEEE Regulations 2006. A Recast Directive 2012/19/EU on WEEE, extending the current regime, was passed in 2012 and implemented by the WEEE Regulations 2013, which came into force on 1 January 2014. Amongst other changes, the recast directive created an obligation for large electronic retailers to provide collection points in store to allow consumers to recycle small electronic goods. A number of the changes are still due to come into force in England, on 1 January 2019.
■ End of Life Vehicles (ELV). The ELV Directive (2000/53/EC) aims to prevent waste from ELVs and promote the collection, re-use and recycling of their components to protect the environment. The ELV Directive requires Member States to ensure that ELVs are only scrapped (“treated”) by authorised dismantlers or shredders, who must comply with specified environmental standards. Most of the requirements of the ELV Directive were implemented in England by the passing of the ELV Regulations 2003, and the producer responsibility requirements were implemented by the ELV (Producer Responsibility) Regulations 2005. In April 2015, responsibility for the ELV regime was transferred to the National Measurement Office (now part of the Office for Product Safety and Standards).
■ Batteries. The Batteries Directive (Directive 2006/66/EC) includes producer responsibility provisions regarding the setting up of battery collection and take-back systems to be paid for by producers and importers of batteries. These provisions were implemented in England by the passing of the Waste Batteries and Accumulators Regulations 2009. This is expanded by the Batteries Directive 2013/56/EU, which removes certain exceptions to the regime, and was implemented by the Batteries and Accumulators (Placing on the Market) (Amendment) Regulations 2015, which came into force on 1 July 2015.
The Commission’s Work Programme 2018 confirmed that the Commission will continue to work on its Circular Economy regime, which lists four new waste Directives as “priority pending proposals”. The proposed Directives will amend the WEEE Directive, the ELV Directive, the Batteries Directive, the Waste Framework Directive and the Packaging Directive. The Commission published its “European Strategy for Plastics in a Circular Economy” in January 2018.
4.1 What types of liabilities can arise where there is a breach of environmental laws and/or permits, and what defences are typically available?
Breach of environmental law can give rise to both criminal and civil liabilities. Criminal offences arise as a result of polluting an environmental medium which is the subject of protection without holding an environmental permit in relation to the activity undertaken or the discharge or emissions made, or failing to comply with notices that the regulator has served in respect of the activity or pollution. The available defences depend upon the particular environmental legislation engaged. Civil sanctions are available as an alternative to a criminal prosecution in some cases where the EA is the enforcing authority and the breach committed is one designated for the imposition of an administrative penalty. The EA can accept enforcement undertakings, but no other civil sanctions, in relation to the main EP offences (see questions 1.2 and 2.4). As of 30 January 2018, under the Environmental Permitting (Amendment) Regulations 2018, the EA can also use enforcement undertakings to enforce compliance with flood risk activities.
Civil liability may also arise in an environmental context for breach of tort law. The tort of particular relevance to environmental protection is that of nuisance, which gives rise to remedies of damages and/or an injunction where pollution results in an unlawful interference with a third party’s right of ownership or enjoyment of land. In Network Rail Infrastructure Ltd v Williams  EWCA Civ 1514, the Court of Appeal held that the categories of nuisance, encroachment, interference and physical injury are examples of the violation of property rights: a nuisance does not have to neatly fall into one of these categories to be actionable. Furthermore, physical damage is not a requirement for a cause of action and a nuisance can be caused by inaction or omission well as a positive action. See question 4.2 below for a discussion of nuisance and permit defences.
The rule in Rylands v Fletcher establishes the principle of strict liability for damage caused by a dangerous accumulation of a substance escaping from land, provided the damage is foreseeable.
The tort of negligence may also be relevant. To succeed, a claimant must show that the defendant owes a duty of care to him, that there has been a breach of that duty and that the damage of which he complains is a foreseeable consequence of the breach. Unlike nuisance, the claimant does not need to establish an interest in land in order to succeed. However, it is often difficult to establish a duty of care in cases of environmental harm. It is common for negligence to be pleaded as an alternative to nuisance.
The tort of trespass has also been pleaded in environmental cases, but to succeed, the claimant must show that the defendant’s unlawful act has caused a direct physical interference with the land. Proving direct interference has proved difficult as, for example, pollution caused by the discharge of polluting materials into water and carried by the current before reaching a claimant’s property has been held not to amount to a direct interference.
Officers and employees, as well as the undertaking concerned, can in certain circumstances incur personal civil liability if responsible for the event that gives rise to damage (see question 4.3).
4.2 Can an operator be liable for environmental damage notwithstanding that the polluting activity is operated within permit limits?
An operator can be liable for environmental damage caused to a third party, notwithstanding that the polluting activity is operated within permit limits. In Barr and others v Biffa Waste Services Ltd  EWCA Civ 312, the Court of Appeal reaffirmed that defendants who operate under a detailed regulatory scheme and environmental permit can still be liable in private nuisance, notwithstanding that they have not been negligent or breached the provisions of their permit. In Coventry and others v Lawrence and another  UKSC 13, the Supreme Court held that the mere fact that an alleged nuisance has the benefit of a planning permission will not be enough to prevent liability for private nuisance, although it may carry some evidential weight.
Furthermore, it is possible under the EP regime for operators to be found liable for any environmental harm caused, notwithstanding compliance with a permit. Some form of failure to properly manage staff and/or manage or maintain equipment usually forms the basis of such alleged breaches. These provisions are carried over from predecessor regimes.
However, a permit defence is specifically provided for in the Environmental Liability Directive, which was adopted in the Environmental Damage Regulations 2015 (see question 2.3). The availability of the defence means that operators will not be liable to bear the costs of any remedial action that may be required provided they are not at fault or negligent, but only insofar as additional liability arises under the Directive beyond that currently provided for in national legislation (see question 5.1).
4.3 Can directors and officers of corporations attract personal liabilities for environmental wrongdoing, and to what extent may they get insurance or rely on other indemnity protection in respect of such liabilities?
Personal liability for directors and officers of companies can be imposed for breaches of environmental law if, as a result of their own acts or omissions, they can be said to have created the circumstances giving rise to the commission of the offence.
Personal liability can also be imposed for breaches of environmental law where the offence committed by a company is proven to have been attributable to the consent or connivance of any director or officer or other person acting in a similar capacity, or is attributable to any act or neglect on the part of any such person. In such cases, both the company and the director may be prosecuted.
Subject to sections 232 to 234 of the Companies Act 2006, companies can purchase insurance to protect their directors and officers from personal liability for environmental wrongdoing or provide indemnities directly to them; however, as a matter of public policy, it would not be possible to obtain insurance to indemnify a director or officer for criminal fines or penalties imposed on him/her, and the courts might not enforce an indemnity by a company for these matters. Furthermore, liability arising from pollution events is often excluded from such insurance policies, although some policies will provide cover for related defence costs or claims from shareholders (i.e. alleging a fall in value of the company as a result of the pollution-related loss).
4.4 What are the different implications from an environmental liability perspective of a share sale on the one hand and an asset purchase on the other?
The fundamental distinction is that when one buys the shares of a company, one effectively inherits all environmental liabilities associated with the corporate entity concerned, whether relating to the business/sites that the company currently operates, or to those it has historically operated; whereas in an asset purchase, the purchaser does not automatically take on liability for any current and ongoing failure of another entity to comply with environmental law.
A key risk for the purchaser in an asset purchase is that if it is aware of a breach of environmental law and/or an environmental condition in relation to the asset acquired and has the ability to prevent the breach continuing or otherwise to remedy the environmental condition, then the purchaser might be said to be a knowing permitter, if not a causer, of an ongoing environmental problem that can result in liability. In certain circumstances, the purchaser could also become liable merely as a result of being an owner or in occupation of the relevant site.
In the case of a share sale, the seller should (in the absence of any agreement to the contrary) escape any liability that subsequently crystallises in terms of action pursued by the regulator against the company that is sold. However, the availability of a wide range of contractual and other mechanisms for transferring and otherwise allocating environmental risk means that, in many practical respects, the differences between a share and asset purchase are minimal.
4.5 To what extent may lenders be liable for environmental wrongdoing and/or remediation costs?
Lenders under, for example, a mortgage deed are unlikely to incur liabilities for environmental wrongdoing, in the absence of knowledge of the wrongdoing or any real ability to control the application of the monies lent to the borrower to prevent pollution occurring. If, however, a lender enforces its security by taking possession of a property then it may, potentially, become liable for undertaking or paying for remediation of contamination of the property. It is conceivable, for example, that a lender could incur liability as a Class A person under the provisions of Part 2A of the EPA 1990, if it can be said to have caused or knowingly permitted the presence of contamination on the property. Also, if the regulator cannot establish an appropriate Class A person, a lender in possession could be liable as a Class B person on the basis that it is then deemed to be the owner of the site.
Lenders may also face reputational risks as a consequence of lending on what are perceived to be environmentally sensitive infrastructure projects and to companies undertaking controversial activities. As a consequence, many leading UK banks have detailed environmental, social and governance policies and are signatories of voluntary agreements, such as the Equator Principles, a set of voluntary guidelines for financial institutions based on the safeguarding policies and guidelines of the World Bank and the IFC (the private-sector investment arm of the World Bank). The Equator Principles are specifically designed to promote responsible environmental and social practices in project financing, and apply to all industry sectors and to loans for projects above a specified capital cost (in the case of project finance, US$10 million or more).
5.1 What is the approach to liability for contamination (including historic contamination) of soil or groundwater?
The approach of the regulator to liability for historic contamination depends upon the circumstances that apply.
Where it is proposed to redevelop a contaminated site, the usual approach is for the planning permission to be subject to conditions requiring investigation and clean-up of the site to a standard where it becomes fit for its intended purpose. Often, the developer will pay for the cost of remediation, which will normally be factored into the costs of the project and be recoupable as a consequence of the sale or lease of the resulting development.
Where it is not intended to redevelop historically contaminated land in the short term, whether remedial action is required depends on the level of contamination. Part 2A of the EPA 1990 sets out a statutory regime for dealing with the most seriously contaminated land, including land contaminated by radioactivity from nuclear-licensed sites and the situation where land contamination is causing pollution of controlled waters.
Whether land is “contaminated” or is contaminating controlled waters depends on whether the damage is “significant” or there is a “significant possibility” of such harm. Statutory guidance issued by Defra in 2012 confirms the circumstances in which this is deemed to occur. Practitioners may also find the Law Society’s practice note on the contaminated land regime, updated in April 2016, to be of help when applying the regime. This note replaces the Contaminated Land Warning Card, although the recommendations are broadly the same. Compliance with the note is not mandatory, but does reflect the Law Society’s interpretation of best practice in this area.
Local authorities are required to consider whether any land in their areas should be classified as contaminated land (which involves considering source-pathway-target relationships and conducting a risk assessment). There is no general requirement on an owner or occupier to notify the local authority of the existence of contamination (except in circumstances where development requiring planning permission is to be undertaken). If the land satisfies the definition of contaminated land, then a statutory requirement arises on the part of the local authority as regulator (or the EA, in the case of certain “special sites”) to consider whether there is a need for remediation, and exactly what form that remediation should take.
The regime is based on a “suitable for use” approach, and cost and reasonableness considerations are relevant in determining the standard and extent of remediation. Liability to undertake or, in the event that it is not done voluntarily, pay for remediation, lies with the appropriate person (the person who caused or knowingly permitted the presence of the substance that caused the contamination) or, where such a person cannot be found, the owner or occupier for the time being.
The regime is complex and includes detailed provisions on exclusion from liability and allocation of liability on various grounds between groups of polluters (see below), as well as the apportionment of the costs of remediation between such persons.
Liability for historic contamination of soil or groundwater may also give rise to the ability of a third party to bring proceedings in order to claim remedies where pollution has migrated onto its land. This is a civil liability that arises under the law of torts, the most commonly pleaded being the tort of nuisance. Remedies include the grant of a prohibitory injunction and/or damages for the harm caused. Ultimately, clean-up may be required to avoid further claims arising, or for breach of any injunction ordered by the court.
■ land contamination that creates a significant risk of human health being adversely affected.
For occupational activities listed in Schedule 2 of the Regulations, comprising a wide range of activities regulated by EC legislation which are potentially damaging to the environment, liability for all three categories of environmental damage is covered and strict liability applies. Operators of other occupational activities may be liable for biodiversity damage, but only if they are at fault or have been negligent.
Where biodiversity or water damage occurs, it must be remedied by returning the environment to its baseline condition; in the case of damage to land, the risk to human health must be removed. If the harm to biodiversity or protected waters cannot be reversed, then “complementary” remediation by improvement of a similar resource or service may be required to be undertaken to the extent the original resource cannot be fully restored. “Compensatory” remediation may also be required to compensate society for the loss of the use or enjoyment of the resource or service. Both of these are new concepts for English Law.
5.2 How is liability allocated where more than one person is responsible for the contamination?
Statutory guidance under the Part 2A EPA 1990 contaminated land regime sets out the rules that apply where more than one person is deemed to be responsible for contamination. The rules differ depending upon whether the liability group comprises so-called Class A persons, that is persons who have caused or knowingly permitted the presence of the pollutants; or Class B persons, being owners and/or occupiers for the time being where no Class A persons have been found after reasonable enquiry.
The exclusion tests and subsequent apportionment tests are designed to ensure that it is fair for members of the liability group to bear responsibility for remediation. In relation to Class A groups, the regulator is required to first consider whether any of the tests for exclusion from liability apply. There are six tests in total, and judgments in relation to whether or not the tests apply are taken on a balance of probabilities, after considering the relevant information that has been obtained. The exclusion tests must be applied in the sequence in which they are set out. They must not be applied to exclude every member of the liability group. This means essentially that the person(s) responsible for bearing the cost of remediation may well therefore be the last one(s) left.
Having applied the exclusion tests, the regulator is then required to apportion liability between members of the Class A liability group, so as to reflect the relative responsibility of each of those members for creating or continuing the risk now being caused. If no information is available to make an assessment of relative responsibility, the statutory guidance advises regulators to apportion liability in equal shares.
In relation to Class B liability groups, the only exclusion test applicable is to exclude those who do not have an interest in the capital value of land. Again, the test is not to be applied if it would result in the exclusion of all the members of the liability group.
In terms of apportionment between members of a Class B liability group, the guidance indicates that where remediation refers to a particular area of land, liability should be apportioned to members who own or occupy that particular area of land. Otherwise, apportionment should be made on the basis of the capital value of the land in question.
A determination of an appeal against the service of a remediation notice illustrates how this complex regime works in practice. This involved Redland Minerals Limited (Redland) and Crest Nicholson Residential plc (Crest), who were both found to be Class A appropriate persons and liable to remediate contaminated land. Redland had formerly owned the site and Crest had developed it for housing. Chemicals from the site were found to have seeped into the underlying chalk aquifer, leading to the closure of a number of water abstraction boreholes and threatening the potable water supply. Both Redland and Crest were found to have caused the contamination to be on, in and under the site; whilst Crest had not brought the chemicals onto the site, the Secretary of State found that as a result of its action and inaction during its ownership in the way it dealt with the site, it too had caused the contamination. The Secretary of State particularly pointed to the fact that Crest had demolished hard-standings, leaving contaminated soil exposed to rainfall leaching for some two years before the new houses were built, despite it being aware of the presence of contamination on the site. This had caused contaminants that would otherwise have been removed to remain and to leach deeper and faster into the ground.
The Secretary of State apportioned liability between Redland and Crest as 85:15 for one contaminant and 45:55 for another. In the case of the second contaminant, Redland had provided a limited amount of information on its presence, but not sufficient to enable Crest to have been aware of the presence of it in the aquifer. Liability on the basis of the “sold with information” test was therefore only partly reduced. No information had been provided on contamination of the site by the first contaminant.
Civil liability for contaminated land is joint and several. Accordingly, where one of the torts of nuisance, negligence, trespass or breach of statutory duty is made out, then if breaches by different persons caused the claimant to suffer loss, injury or damage, he is entitled to sue all or any of them for the full amount of his loss. This is particularly pertinent in the case of the tort of nuisance, as subsequent owners or occupiers may be alleged to have adopted a continuing nuisance caused by a predecessor. The Civil Liability (Contribution) Act 1978 enables a tortfeasor to claim contribution from other tortfeasors responsible for the same loss or damage (see question 5.4).
Defra has adopted the following approach in the Environmental Damage Regulations where multi-party causation arises: where more than one activity contributes to an incident, the operator of any of the activities can be required to remediate, and where environmental damage is caused by the actions of a small number of identifiable operators, the regulator may notify more than one operator and serve a remediation notice on each one. In the latter case, guidance accompanying the implementing regulations indicates that operators should endeavour to agree between themselves the shares in which they should bear the costs of the measures to be carried out. If remedial action is not carried out, the authority may carry out necessary work and reclaim the costs against any or all of the operators concerned – with operators able to claim contribution from any other operator who is also responsible for the damage (see question 5.4).
In November 2016, in the case of Price and another v Powys County Council, the High Court confirmed that a local authority could be a “responsible person” under Part 2A of the regime, in respect of contamination caused by a predecessor; however, the local authority later successfully appealed this decision on other grounds.
5.3 If a programme of environmental remediation is “agreed” with an environmental regulator, can the regulator come back and require additional works or can a third party challenge the agreement?
The nature of contaminated land is such that it is not always possible to determine at the outset of a remediation programme exactly what will be required to be done to remediate it. Consequently, and subject to procedural safeguards such as the concept of the regulator acting reasonably and the requirement for appropriate and proportionate regulation, a regulator can require additional works to be carried out even though a programme of environmental remediation has been “agreed”, such as when the regulator becomes dissatisfied with the progress of the remediation works or considers that the works will not achieve the agreed remediation objectives.
In terms of third party challenges, it is conceivable that where an agreement is reached between a party and a regulator with regard to remediation works to be carried out on the party’s land, a third party could challenge the agreement by way of judicial review in the Administrative Court on the basis of the agreement representing a decision by the regulator. Cases may also be heard by a dedicated fast-track court for environmental and planning judicial review cases, as detailed in the Criminal Justice and Courts Act 2015. To successfully challenge the agreement, the third party would be required to show grounds for bringing judicial review, by demonstrating that the decision-maker reached its decision on the basis of illegality, irrationality or procedural impropriety.
Third parties may complain to the Local Government Ombudsman if they feel that a local authority’s behaviour has resulted in injustice as a result of maladministration. The Ombudsman will investigate the complaint and make findings including rulings for compensation in the event that the complaint is upheld. The Parliamentary Ombudsman investigates complaints concerning such issues where the EA is involved.
5.4 Does a person have a private right of action to seek contribution from a previous owner or occupier of contaminated land when that owner caused, in whole or in part, contamination; and to what extent is it possible for a polluter to transfer the risk of contaminated land liability to a purchaser?
Whilst it is a general principle of environmental law that the polluter should pay for any pollution he causes, this conflicts with the general rule in relation to property transactions of caveat emptor, or “let the buyer beware”. Accordingly, a potential buyer or tenant must satisfy itself as to the state and condition of the property to be acquired or leased, subject, however, to the seller or landlord’s obligation to disclose matters about which the other party expressly seeks information (other than where the seller makes no representation other than to insist upon the buyer relying on its own inspections). Private rights of action may arise where there has been a failure to make such disclosure or as a result of a breach of contract for misdescription, misrepresentation or fraudulent concealment. Representing that a property is free from contamination when it is, in fact, heavily contaminated may give rise to a remedy. Misrepresentation requires there to be a misrepresentation of a material fact in relation to the property, which may arise, for example, where answers to preliminary inquiries are false or misleading. It gives rise to a right of action for damages and/or rescission of the contract depending on the nature of the misrepresentation. Similar remedies apply in relation to fraudulent concealment, which involves the seller actively concealing some defect in the property.
Liability in environmental law for contamination is typically predicated on the basis of “causing” or “knowingly permitting”, and subsequent owners or occupiers may be liable for contamination which pre-dates their ownership or occupation of a site, where they have both the knowledge of the presence of the substance causing pollution, and the power to prevent the substance being there or escaping from their site. As a consequence, a private right of action to recover against the original polluter may also arise where the subsequent owner or occupier has been found jointly and severally liable at common law for contamination. The Civil Liability (Contribution) Act 1978 allows any person liable in respect of any damage suffered by another to recover a contribution from any other person liable in respect of the same damage (whether jointly or otherwise). A person is liable under the provisions of the Act whether the basis of his liability is in tort, breach of contract, breach of trust or otherwise. The amount of contribution that can be ordered is such as may be found by the court to be just and equitable, with regard to the extent of the person’s responsibility for the damage in question. The court’s powers are, however, subject to the overriding principle that one defendant cannot be found liable to pay a greater sum than can be recovered from him by the claimant.
The statutory guidance under Part 2A EPA 1990 also provides mechanisms whereby a seller of land can effectively transfer the liability risks associated with contamination to a purchaser, for example, where a seller has provided knowledge of contamination to a purchaser and it is reasonable that the purchaser (who is a member of the same Class A liability group) should bear liability for its remediation, although it is also possible for a purchaser in such circumstances to agree with the seller that the seller will retain remediation liability.
5.5 Does the government have authority to obtain from a polluter, monetary damages for aesthetic harms to public assets, e.g. rivers?
The power to obtain monetary damages for aesthetic harm to public assets is limited. Under the Environmental Damage Regulations, aesthetic harm to public assets could, for example, be covered by the definition of biodiversity damage (see question 5.1), provided the other triggers specified apply, e.g. the site affected is an SSSI. Where biodiversity damage is caused, public authorities are able to claim damages for aesthetic harms, in the sense of requiring the operator to remediate the harm caused by returning the habitat to its baseline condition or, where this is not possible, to provide complementary or compensatory remediation (see question 5.1).
6.1 What powers do environmental regulators have to require production of documents, take samples, conduct site inspections, interview employees, etc.?
Regulators have wide powers to obtain information to enable them to discharge their functions. The nature of these powers depends on the circumstances. For example, under paragraph 4 of Schedule 5 of the EP Regulations 2016, applicants for an environmental permit must provide such further information as is reasonably required by the regulator in order to determine the application. Regulation 61(1) also provides that the relevant authority may, by written notice, require any person to furnish such authority with such information as it reasonably considers it needs to discharge its functions under the EP Regulations 2016, in such form and within such period as is specified in the notice; it is an offence to fail, without reasonable excuse, to comply with any requirement of such a notice.
Various general and specific powers of enforcing agencies and persons authorised by them are set out in section 108 of the Environment Act 1995, including powers to: (i) require any person whom an authorised person has reasonable cause to believe to be able to give any information relevant to any examination or investigation, to answer such questions as the authorised person thinks fit to ask and to sign a declaration of the truth of his answers; and (ii) require the production of certain records. The powers do not, however, extend to requiring the production of documents that are protected by legal privilege.
In addition to information-gathering powers contained in environmental legislation, regulatory authorities have powers, where criminal offences have been committed, to obtain information about the commission of the offences pursuant to powers under the Police and Criminal Evidence Act 1984. These include powers to search premises, conduct sampling and interview persons (including employees) in the course of investigating whether an offence has been committed.
7.1 If pollution is found on a site, or discovered to be migrating off-site, must it be disclosed to an environmental regulator or potentially affected third parties?
■ a “duty to warn” may arise in certain circumstances under common law, such as where a person responsible for a dangerous incident or state of affairs is aware that it poses a danger to third parties.
Also, in circumstances where the person responsible for pollution has committed a criminal offence (e.g. by illegally causing waste to be deposited or polluting matter to enter controlled waters), the proactive disclosure of information concerning the existence of pollution or its migration may provide mitigating facts which would be taken into account when a court is assessing the penalties for the offence.
7.2 When and under what circumstances does a person have an affirmative obligation to investigate land for contamination?
A person does have an affirmative obligation to investigate land for contamination in certain circumstances. For example, it is a requirement that a site condition report be submitted to the enforcing authority where the (proposed) operator of a Part A EP activity is contemplating making an environmental permit application. Site investigations may also be necessary where they are stipulated in a remediation notice served under the contaminated land provisions of Part 2A of the EPA 1990 or a works notice served under section 161A of the Water Resources Act 1991. They may also be required as a condition to a planning consent; whether any given land is contaminated to an extent that it requires remediation in order for a proposed development to proceed, being a material consideration in the planning process.
7.3 To what extent is it necessary to disclose environmental problems, e.g. by a seller to a prospective purchaser in the context of merger and/or takeover transactions?
The basic position in England is caveat emptor or “let the buyer beware” (see question 5.4). Purchasers will usually undertake environmental due diligence to reveal any environmental risks associated with the target’s business or assets. Environmental representations and warranties are often required by prospective purchasers as a contractual mechanism effectively requiring disclosure of information by the seller. This is because merger and acquisition transactions are normally documented so that a purchaser cannot sue for breach of a representation or warranty to the extent that the seller has fairly disclosed information about the subject matter of the representation or warranty. Sellers should always be careful when giving replies to enquiries raised by prospective purchasers concerning environmental matters, as providing a false or misleading response could be actionable.
In hostile takeover transactions, prospective purchasers are normally reliant on whatever information they can glean about the target’s environmental problems from publicly available sources. In the context of friendly takeovers, such information may well be provided by agreement of the target. Pursuant to the Seveso-III Directive, implemented by the COMAH Regulations 2015, and the Aarhus Convention, there is now an increase in the amount of public information required to be provided in relation to COMAH sites (including lower-tier COMAH sites). As such, prospective purchasers in a hostile takeover may have greater access to environmental information than was previously possible.
Recent legislation on narrative corporate reporting will also affect, to some extent, the way companies report on environmental information, as well as social and human rights matters. The Non-financial Reporting Directive 2014/95/EU was implemented in the UK in December 2016, following a consultation launched by BEIS (then the Department of Business, Innovation and Skills) in February 2016. The Directive provides for mandatory reporting on environmental and non-environmental matters by large companies throughout the EU. This overlaps with existing obligations in England under sections 414A–414D of the Companies Act 2006, but extends to “public interest entities” which may not already be covered by the English regime.
8.1 Is it possible to use an environmental indemnity to limit exposure for actual or potential environment-related liabilities, and does making a payment to another person under an indemnity in respect of a matter (e.g. remediation) discharge the indemnifier’s potential liability for that matter?
Environmental indemnities provide important contractual mechanisms for allocating environmental risks in transactions. It is possible to use an environmental indemnity to limit exposure for actual or potential environment-related liabilities, as well as to effectively transfer risk for such liabilities to another person. The use of such indemnities is a common way of allocating environmental liabilities as between a seller and a purchaser. Following the implementation of the contaminated land provisions of Part 2A of the EPA 1990, the contractual allocation of environmental risks has assumed increased importance. For example, the Statutory Guidance under Part 2A specifically provides for agreements on liabilities to be entered into between persons who are responsible for the costs of a remediation action concerning contaminated land under Part 2A, and that the enforcing authority should generally make determinations on the exclusion, apportionment and attribution of liability in order to give effect to such agreements.
Typically, environmental indemnities contain detailed provisions as to the scope of the indemnities and the events that trigger claims under them. The indemnities normally contain a range of financial and other limitations to govern the relationship between the parties. For example, financial limitations may include de minimis, aggregate thresholds and respective caps for claims, and sometimes costs-sharing as between the parties; there are normally also other limitations limiting the purchaser’s ability to claim where the claim arises as a result of post-completion actions by the purchaser. Conduct and dispute-resolution provisions are also typically included.
8.2 Is it possible to shelter environmental liabilities off balance sheet, and can a company be dissolved in order to escape environmental liabilities?
There is nothing to prevent a company establishing English-incorporated companies with limited liability (special purpose vehicles – SPVs) to own and occupy property that may incur future liabilities to third parties. It is essential, however, that such ownership is made known to third parties and that steps are taken to minimise the risk of third parties believing the company in question is acting as an agent or that another company is the owner or occupier. This is an ongoing process, as an agency can arise at any time by conduct. It may be possible to isolate the liabilities arising from site-specific environmental problems by transferring properties that have contamination issues into SPVs.
An exception arises where the liability results from acts or omissions of persons (other than the SPV established to hold the relevant properties) who caused or knowingly permitted the environmental problems. If, for example, those persons remain companies within the group, it is difficult to see how they would escape liability unless they are wound up (see below).
Another exception concerns situations where the liability in question is an existing one. Where this is the case, the courts would examine the facts and circumstances carefully to determine whether it was in fact the intention of a party in setting up the SPV to evade the obligation, as the courts have demonstrated a lack of sympathy for use of the corporate form as a device for evading existing liabilities.
Even where this type of SPV is created and run properly in holding contaminated properties that may give rise to environmental liabilities, it could well be that the financial amount of liabilities stated in the SPV’s balance sheet would need to be consolidated with the group’s accounts.
If a company is insolvent either as a result of environmental liabilities or otherwise, subject to the directors doing all they can to minimise losses to creditors, liquidation will be inevitable. The liquidation process requires the appointed liquidator to realise all available assets of the company and to distribute their value to creditors according to statutory priority. At the end of the liquidation process, the company will be dissolved. Any creditors (including environmental creditors) remaining unpaid or partly unpaid will then be highly unlikely to receive any further payment.
This may seem a rather drastic “solution” to the problem of an environmental liability arising, particularly if the company owns valuable assets and/or has an otherwise healthy business. Such a company may instead consider effecting a transfer of its business and assets to a “clean” corporate vehicle, leaving behind some or all of its liabilities (including environmental liabilities). However, the company must receive fair consideration. If it does not, the appointed liquidator may use statutory powers to challenge the transaction as being at an undervalue, provided that it occurred no more than two years before the entry into liquidation (there is no time limit if it can be shown that the transaction was effected in order to put assets beyond creditors’ reach). If the challenge is successful, the court has the power to make a wide range of orders for the purpose of restoring the company to the position it would have been in had the transaction not occurred. Directors’ duties and disqualification issues may also arise.
In certain circumstances, where a regulatory authority itself incurs costs, it may be entitled to serve a charging notice specifying the amount which the authority claims is recoverable from the company concerned (e.g. section 78P of the EPA 1990, concerning costs incurred by the enforcing authority in cleaning up contaminated land). Where a charging notice has been validly served (and subject to any rights of appeal against the notice), the cost becomes a charge on the premises and is registrable as such, taking priority over non-statutory creditors.
8.3 Can a person who holds shares in a company be held liable for breaches of environmental law and/or pollution caused by the company, and can a parent company be sued in its national court for pollution caused by a foreign subsidiary/affiliate?
As a general principle, a company’s acts are not the acts of its shareholders, nor are its liabilities the liabilities of its shareholders. The liability of shareholders in a limited liability company is usually limited to paying up the unpaid amount of the nominal value of their shares; the courts strictly apply this principle. By way of exception to this general rule: (a) if a company acts as an agent for its shareholders then, on normal agency principles, its shareholders may be liable for its acts. The conduct of the parties will be looked at closely and each situation will turn on its facts; (b) a company’s shareholders may have given direct contractual “comfort” to third parties (e.g. guarantees or indemnities); and (c) the courts will not allow shareholders to “hide behind” a limited company in order to facilitate fraud or use such a company as a device or “sham” to evade its own existing obligations.
If directors are (or become) accustomed to acting on the directions or instructions of the shareholders, those shareholders in certain circumstances, typically involving fraudulent or wrongful trading, could be personally liable as “shadow directors” for the liabilities of the company. Even if a company is “wholly owned” by a parent, that is not of itself sufficient to give rise to an agency relationship. However, a subsidiary could, on the facts, be the “puppet” of the parent and, as such, be found to act as its agent. In that case, the parent could be liable as principal for the express (or implied) authorised acts of its agent subsidiary.
Statute also intervenes in certain cases. The EPA 1990 and the Water Resources Act 1991 contain provisions which can make a company’s shareholders liable “where the affairs of a body corporate are managed by its members” (e.g. section 157 of the EPA 1990). Under that section, a member of a company may be prosecuted as though he is a director where an offence is committed by the company and is proved to have been attributable to any neglect on the part of the member in question. This gives rise to a criminal (as opposed to a civil) liability, although it is likely that, were a prosecution to succeed, the prosecuting authority would also seek an order for recovery of its costs, which may include the clean-up costs it had incurred.
In Chandler v Cape plc  EWCA (Civ) 525, the Court of Appeal held, essentially, that Cape owed a direct duty of care to its subsidiary’s employee, who had developed an asbestos-related disease. The Court emphasised that the duty of care owed by a parent company to a subsidiary’s employees does not exist automatically and only arises in particular circumstances: parent companies have a separate legal personality and, on the facts, it was inappropriate to “pierce the corporate veil”. However, the Court considered, having regard to the particular facts of the case, that Cape had assumed duties of care to its subsidiary’s employees, on the basis that: (i) Cape and the subsidiary had relatively similar businesses; (ii) Cape knew (or ought to have known) that the subsidiary’s system of work in relation to asbestos was unsafe; and (iii) Cape knew (or ought to have foreseen) that the subsidiary or its employees would rely on Cape applying its superior knowledge to protect the subsidiary’s employees.
■ A duty may be owed by a parent company to an employee of a subsidiary, or a party directly affected by the operations of that subsidiary, in certain circumstances.
■ Those circumstances may arise where the parent company (a) has taken direct responsibility for devising a material health and safety policy the adequacy of which is the subject of the claim, or (b) controls the operations which give rise to the claim.
■ The first of the four indicia in Chandler v Cape Plc (i.e. that the businesses of the parent and subsidiary are in a relevant respect the same) requires not simply that the businesses of the parent and the subsidiary are in the relevant respect the same, but that the parent is well placed, because of its knowledge and expertise to protect the employees of the subsidiary.
■ Such a duty may be owed in analogous situations, not only to employees of the subsidiary but to those affected by the operations of the subsidiary.
Under common law, English courts have jurisdiction to hear cases involving incidents occurring abroad where the defendant company is “domiciled” within England. In Lubbe v Cape plc ( 4 All ER 268), South African claimants were entitled to bring proceedings “as of right” in the English courts – meaning that they invoked the traditional territorial jurisdiction of the English Court over a corporate defendant who is “domiciled” in England.
Previously, an English defendant against whom a claim had been brought by an overseas claimant could apply to stay the proceedings on the grounds of forum non conveniens.
The Owusu principle was recently confirmed by the Court of Appeal in Lungowe and others v Vedanta Resources Plc, noted above (although the decision of the Court of Appeal in Lungowe is currently under appeal to the Supreme Court).
Another case, in which Nigerian claimants alleged damage resulting from oil spillages at the defendant’s pipelines, was heard before the Court of Appeal in February 2018. In contrast to the decision in Lungowe, the Court of Appeal found in Okpabi and others v Royal Dutch Shell plc and another ( EWCA Civ 191) that the defendant parent company did not owe the claimants a duty of care. On the facts of the case, there was not sufficient proximity between the parent and its operating subsidiary to establish a direct duty of care by the parent: for example, although the parent issued group-wide policies and standards, day-to-day operational control remained within the subsidiary, and the parent company did not exercise majority control over that subsidiary.
Similarly, in February 2017, a group of Kenyan nationals were unsuccessful in bringing an action against an English parent for failing to prevent ethnic violence, as it was held that there was not sufficient proximity for the parent company to owe a duty of care on behalf of the subsidiary (AAA and others v Unilever plc and another  EWHC 371 (QB)). This judgment has since been affirmed by the Court of Appeal ( EWCA Civ 1532), albeit on slightly different grounds.
8.4 Are there any laws to protect “whistle-blowers” who report environmental violations/matters?
Sections 43A to 43L and 103A of the Employment Rights Act 1996 (as inserted by the Public Interest Disclosure Act 1998) have the effect of rendering an employee’s contractual duty of confidentiality towards their employer void to the extent that those duties would prevent the employee from making a “protected disclosure”. Protected disclosures are allowed where (in the reasonable belief of the person disclosing) they show one or more of a number of matters stipulated in section 43B of the Employment Rights Act 1996, which include the committing of a criminal offence, the endangering of the health and safety of any individual, or damage to the environment.
The disclosure must be made in good faith and cannot be regarded as a “protected disclosure” if the person disclosing commits a criminal offence in doing so (e.g. a disclosure which would fall under section 1 of the Official Secrets Act 1989). If an employee is dismissed on the basis of a “protected disclosure”, the dismissal is automatically unfair.
Section 43F also allows an employee to make a disclosure to a “prescribed person” if they reasonably believe that a “relevant failure” has occurred or is occurring and that information they are disclosing is true or substantially true. Both defined terms refer to the Public Interest Disclosure (Prescribed Persons) (Amendment) Order 2003, and include disclosure to bodies such as the EA, the HSE, and the Food Standards Agency.
The Enterprise and Regulatory Reform Act 2013 requires that for disclosures made on or after 25 June 2013, the whistle-blower must have a reasonable belief that the disclosure is in the public interest in order for it to be considered a “protected disclosure”.
Employment tribunals can send details of whistle-blowing claims directly to a regulator (also known as a prescribed person) where the claimant has given its express consent, under the Employment Tribunals (Constitution and Rules of Procedure) (Amendment) Regulations 2010.
8.5 Are group or “class” actions available for pursuing environmental claims, and are penal or exemplary damages available?
US-style “class actions” are not currently available in the UK. The Court of Appeal’s decision in the case of Emerald Supplies Ltd v British Airways Plc  EWCA Civ 1284 has made it clear that the English courts are not prepared to interpret the existing court rules to allow a form of class action to be created without specific legislation that would allow such claims. For example, the Consumer Rights Act, which came into force on 1 October 2015, introduces a specific procedure pursuant to which opt-in and opt-out private actions can be brought for breaches of competition law.
Under the existing rules governing Group Litigation Orders, environmental claims can be brought by groups of claimants, but all members of the group must be identified at the start of the litigation or at a point in the pre-trial procedure laid down by the court. Although the action may be mounted by way of collective or “generic” pleadings, ultimately each member of the group must prove that their particular injury or loss was attributable to the causative agent or event of which they complain and damages are awarded on an individual basis. In order to obtain collective damages or injunctive relief a separate, simultaneous claim can be brought under Civil Procedure Rule 19.6.
Damages awards in the UK are set by professional judges, not juries, and do not generally contain any punitive element. They therefore tend to be lower than in the US.
On 26 January 2018, the European Commission published a report on the progress made by Member States on the implementation of its 2013 recommendations on collective redress, finding that the availability of such mechanisms, as well as the implementation of safeguards against their potential abuse, are still not consistent across the EU. As part of its “New Deal for Consumers”, announced on 11 April 2018, the Commission proposed a new draft Directive on representative actions to strengthen consumer rights, under which redress would be available where a trader is shown to have breached identified consumer protection legislation. These laws are set out in the Annex to the current draft Directive, which contains a number of provisions relevant to the environment, such as the Classification, Labelling and Packaging Regulation ((EC) No 1272/2008), the Ecodesign Framework Directive (2009/125/EC), the Energy Performance of Buildings Directive (2010/31/EU) and the Energy Labelling Directive (2017/1369), among others. If passed, the draft Directive would need to be implemented into national law (before the end of the Brexit transition period).
8.6 Do individuals or public interest groups benefit from any exemption from liability to pay costs when pursuing environmental litigation?
This depends on the type of proceedings being pursued and also, to some extent, whether the individual (and the case) qualifies for public funding from the Legal Services Commission via the Community Legal Service (previously known as legal aid). In the rare cases where the latter applies to environmental litigation, some or all of the costs involved in pursuing the case will be funded from the public purse.
The general rule in English litigation is that “costs follow the event”: the loser will be required to pay the winner’s legal costs after taxation (if appropriate), as well as its own costs. One exception to this is in cases involving environmental judicial review proceedings engaging the Aarhus Convention (see question 1.3): English courts have the power to make an order to reflect the Aarhus principle that access to justice in environmental matters should not be prohibitively expensive. These orders are known as Costs Capping Orders (CCOs) (previously “Protective Costs Orders” or PCOs).
The old rules gave the courts considerable discretion regarding the ability to make PCOs. In its 2013 consultation on proposals for further reform of judicial review, the UK Government expressed its concern that the courts’ expansive approach to PCOs had tipped the balance too far by allowing such orders to be used when a claimant is bringing judicial review for their own benefit.
Accordingly, the new rules (contained in sections 88 to 90 of the Criminal Justice and Courts Act 2015) introduced a new code for costs capping in judicial reviews and a new form of judicial review costs capping order (JRCCO).
■ The proceedings are “public interest proceedings” (meaning there is an issue that is the subject of the proceedings which is of general public importance and the public interest requires the issue to be resolved and the proceedings are likely to provide an appropriate means of doing so).
■ In the absence of the order, the applicant for judicial review would withdraw the application for judicial review or cease to participate in the proceedings.
■ It would be reasonable for the applicant to do so.
■ The financial resources of the parties to the proceedings (including the financial resources of any person who provides, or may provide, financial support to the parties).
■ The extent to which the claimant is likely to benefit if he is granted relief.
■ The extent to which any person who has provided, or may provide, the claimant with financial support is likely to benefit if relief is granted to the applicant for judicial review.
■ Whether legal representatives for the claimant are acting free of charge.
■ Whether the claimant is an appropriate person to represent the interests of other persons or the public interest generally.
In March 2017, the Aarhus Convention Compliance Committee published its findings that the EU had violated the Aarhus Convention by failing to secure sufficient access to justice in environmental matters for members of the public. The European Commission published a communication in response in April 2017, highlighting discrepancies in standing rules across Member States as being problematic, particularly for NGOs, and launching environmental implementation review dialogues between the Commission and each Member State.
In May 2018, the European Commission adopted an Inception Impact Assessment on how the Aarhus Convention had been implemented with regard to access to justice in environmental matters. The Commission intends to carry out targeted consultations with public authorities and experts in the Member States, the outcome of which is likely to be a Commission Staff Working Document published in Q2 2019. In June 2018, Council Decision (EU) 2018/881 requested the Commission to prepare a report on improving the EU’s compliance with the Aarhus Convention by submitting: (i) a study exploring how the EU can comply with the convention in a way that is compatible with the principles of the EU and its system of judicial review; and (ii) a proposal for a regulation to amend Regulation (EC) No 1367/2006 (the regulation which applies the three pillars of the Aarhus Convention to EU institutions and to other EU bodies) by 30 September 2020.
9.1 What emissions trading schemes are in operation in your jurisdiction and how is the emissions trading market developing there?
The EU emissions trading scheme (ETS) created by Directive 2003/87/EC applies. The EU-ETS creates a scheme for greenhouse gas (GHG) emissions allowance trading within the Community which began operation in 2005. Following political agreement on Directive 2009/29/EC, the third phase of the scheme, which runs from 2013–2020, is now in force. In March 2018, Directive (EU) 2018/410 introduced several changes for the fourth phase of the scheme, which will run from 2021–2030. Only CO2 emissions were covered under the initial operation of the EU-ETS; coverage has now been extended to include other GHG emissions. In addition to energy-intensive industries (e.g. production/processing of ferrous metals, mineral products, and pulp and paper) and large combustion installations (those with a 20 megawatt or greater thermal capacity), from 1 January 2013, CO2 emissions from petrochemicals, ammonia and aluminium production were brought into the scheme, as well as nitrous oxide (NOx) emissions from nitric, adipic and glyoxylic acid production and perfluorocarbons from the aluminium sector. The capture, transport and geological storage of greenhouse gas emissions are also covered. All installations covered by the EU-ETS scheme need a GHG emissions permit (non-tradable) to emit GHG. Operators of installations must surrender a number of allowances equal to the total emissions from that installation during the preceding calendar year. The penalty for non-compliance was set at 100 Euros/tonne CO2 in 2013, and rises annually in line with Eurozone inflation. The Greenhouse Gas Emissions Trading Scheme Regulations 2012, implementing the EU-ETS, set out rules for the issue, transfer and surrender of permits and penalties for non-compliance.
In July 2018, the Effort Sharing Regulation 2018/842 (ESR) introduced GHG emission reduction targets for each Member State for non EU-ETS sectors such as transport, buildings, agriculture, non-ETS industry and waste. These annual targets are binding and will apply for the period 2021–2030. Under the ESR, to help reach their targets, Member States may: borrow a proportion of their emissions allocation from the following year or bring forward any unused portion of their allocation from the previous year; sell a proportion of their allocation to another Member State; and, where a Member State has exceeded its allocation, offset some of its emissions against credits from certain categories of land (for instance, managed grassland and cropland).
On 12 October 2018, the Government published a technical notice on how a “no deal” Brexit may affect the regulation of GHG emissions under the EU-ETS, indicating that in those circumstances, participating in the EU-ETS would be replaced initially with a carbon tax.
Subject to certain exceptions, the EU-ETS also recognises trading in credits generated under Clean Development Mechanism (CDM) and Joint Implementation (JI) projects approved under the Kyoto Protocol.
Member States must prepare a base national allocation table (NAT), setting out the allocation of allowances. The NAT must be adjusted annually and submitted to the European Commission for approval. Allocation of allowances is now on the basis of fully harmonised rules. A Market Stability Reserve will be introduced from 2019 which will automatically adjust the annual supply of allowances up or down in accordance with the number of allowances in circulation at the time.
Since January 2012, emissions from the aviation sector have been included in the EU-ETS. However, the 2013 “Stop the Clock” Decision suspended the EU-ETS obligations on operators for flights into and out of the European Economic Area (EEA) until April 2014. The April 2014 deadline in the Decision was effectively extended until 31 December 2016 by the EU-ETS Aviation Extending Regulation 2014 (Regulation 421/2014) and – according to a provisional agreement between the Council of the European Union, the European Council and the European Parliament – now further extended until 31 December 2023. International aviation organisations and non-EU countries have expressed strong opposition to the EU-ETS scheme for the aviation sector. The delay to its operation was to facilitate discussions within the International Civil Aviation Organisation (ICAO) on a global market-based mechanism (GMBM). In October 2016, the ICAO agreed to establish such a GMBM through which airlines may offset the growth of their CO2 emissions. There will be a pilot phase from 2021–2023, followed by a voluntary first phase from 2023–2024, with compulsory participation from 2024–2026. In 2021, the number of allowances allocated to aircraft operators will be set at a level 10 per cent below the average allocation of the period 2015–2016, and will decrease annually at the same rate as the total cap for the EU-ETS. Half of the allowances for extra-EEA flights would be auctioned from 2021.
Phase IV of the EU-ETS will run from 2021–2030, and will introduce a number of key changes to the current EU-ETS, aimed at enhancing the flexibility of the system to react to changes and maintain an appropriate market balance.
The CRC Energy Efficiency Scheme (CRC) was introduced in April 2010. It is a mandatory carbon emissions reporting and pricing scheme which tackles GHG emissions from large non-energy-intensive organisations using more than 6,000 megawatt-hours (MWh) per year of electricity. Participants of the CRC need to measure and report their carbon emissions annually. From 2012, participants could buy allowances from the Government each year to cover their emissions in the previous year. Over the years, the CRC has been the subject of substantial modification in response to criticism from participants regarding its complexity and the administrative burden it places on them to ensure compliance. In the 2016 Budget, the Government announced its intentions to abolish the CRC after the 2018/19 compliance year, and accordingly the CRC Energy Efficiency Scheme (Revocation and Savings) Order 2018 entered into force on 1 October 2018. The scheme will close at the end of the 2018/19 compliance year (31 March 2019), which marks the end of Phase II of the Scheme. No businesses need to register for Phase III (which had been due by December 2018). Existing Phase II participants will continue to be required to report their emissions at the end of the 2018/19 compliance year, and allowances for 2017/2018 must be surrendered by the last working day of October 2019.
In place of the CRC, the Government intends to: (i) increase the main rates of the climate change levy from April 2019 (to recover any revenue lost from abolishing the CRC); and (ii) introduce a new streamlined energy and carbon reporting regime under the Companies Act 2006, which will extend the existing requirements for reporting CO2 emissions and energy use in company annual reports. Both of these changes will take effect from 1 April 2019.
9.2 Aside from the emissions trading schemes mentioned in question 9.1 above, is there any other requirement to monitor and report greenhouse gas emissions?
Since 1 October 2013, legislation requires the mandatory disclosure of annual GHG emissions from activities for which a company is responsible, to the extent it is practical for such emissions to be assessed. The requirement applies to quoted companies, namely all UK-incorporated companies whose equity share capital is listed on the main market of the London Stock Exchange, officially listed in an EEA state or admitted to dealing on the New York Stock Exchange or NASDAQ. The information must be provided in the directors’ report.
Environmental Reporting Guidelines: Including mandatory GHG emissions reporting guidance published by Defra indicates that the reporting requirement covers both UK and overseas operations (if appropriate). Companies do not need to report on supply chain emissions, nor on outputs from the company, e.g. emissions from their products when they are used by consumers. The guidance does suggest that companies should consider reporting these separately “to give a wider picture of [the organisation] to investors and shareholders”.
The legislation is not prescriptive as to the methodology to be adopted to report emissions data; it simply requires the directors’ reports to state the methodologies used to calculate the disclosed information. The guidance emphasises the importance of using robust and accepted methods, and recommends the use of a widely recognised independent standard such as ISO 14064, the Greenhouse Gas Protocol or the Government’s own Environmental Reporting Guidance.
The sanction for non-compliance is limited to an investigation by the Conduct Committee of the Financial Reporting Council, and follow-up action (if appropriate) by way of preparation of a revised report. Whilst the Conduct Committee has the power to apply to the court for a declaration that the report does not comply with the requirements of the regulations, and for an order requiring the preparation of a revised report, this is seen very much as a weapon of last resort, with the Conduct Committee seeking to operate by agreement with companies.
As noted in response to question 9.1 above, the Government has introduced a new streamlined energy and carbon reporting regime (SECR) under the Companies Act 2006 which will apply from 1 April 2019. SECR introduces additional requirements for quoted companies to report on their total global energy use across all energy types. In addition, large unquoted companies will now be subject to the same reporting requirements as quoted companies, and must now report on: all emissions arising from activities for which the company is responsible (Scope 1 emissions); emissions resulting from the purchase of electricity, heat, steam and cooling for the company’s own use (Scope 2 emissions); total global energy use; and an intensity metric. The disclosure of Scope 3 (energy indirect) emissions will remain voluntary for quoted and large unquoted companies.
Article 8(4) of the EU Energy Efficiency Directive 2012 requires all Member States to introduce a regime of regular energy audits for large enterprises to promote energy-efficiency measures. These audits must be carried out by 5 December 2015, and then every four years thereafter. In the UK this is achieved through the Energy Savings Opportunity Scheme (ESOS) which has been in force in the UK since 17 July 2014.
In November 2016, the High Court delivered its judgment in a long-running judicial review application brought by ClientEarth regarding the Government’s failure to comply with the Air Quality Directive 2008/50/EC. The Court quashed the Government’s proposals to introduce clean air zones because they failed to comply with the Directive or the Air Quality Standards Regulations 2010. Following the judgment, in July 2017, the Government submitted a revised Air Quality Plan for tackling NO2 that requires specified local authorities to carry out studies to identify how to meet the legal limits of NO2 in the shortest possible time (the Revised NO2 Plan). The plan included: setting up a £255 million Implementation Fund to support local authorities; establishing a Clean Air Fund for local authorities to bid for additional money; and a £100 million budget for retrofitted and new low-emission buses. In March 2018, the £220 million Clean Air Fund was launched. More than £40 million of the £255 million Implementation Fund has also been awarded to local authorities.
In February 2018, the High Court granted ClientEarth’s third application for judicial review in respect of the Government’s Revised NO2 Plan, holding it to be unlawful on grounds that it did not include sufficient measures to ensure compliance with the Air Quality Directive and the Air Quality Standards Regulations 2010, and did not include a compliant air quality plan for Wales. The Court granted a mandatory order requiring the Government to produce a supplement to the Revised NO2 Plan addressing these shortcomings. The Government’s supplement was published on 5 October 2018.
As noted above (at question 2.1), the Medium Combustion Plants Directive 2015 was implemented in the UK through the Environmental Permitting (England and Wales) (Amendment) Regulations 2018.
The revised National Emission Ceilings Directive, which places additional restrictions on several atmospheric pollutants, came into force on 31 December 2016. The National Emission Ceilings Regulations 2018 came into force on 1 July 2018, implementing the Directive in the UK. Under the 2018 Regulations, UK emissions of NOx, sulphur dioxide, ammonia and PM2.5 must be reduced below a specified percentage of overall emissions when compared to emission levels for each pollutant in 2005.
In July 2018, Defra published an updated National Action Plan on climate change for the period 2018–2023, which includes a strategy for inviting infrastructure operators to report on the actions they are taking to adapt to climate change.
The Government also recently consulted on the performance of the Capacity Market mechanism introduced under the Energy Act 2013 and the Emissions Performance Standard. That consultation closed on 1 October 2018.
9.3 What is the overall policy approach to climate change regulation in your jurisdiction?
Passed in 2008, the Climate Change Act has the twin aims of helping the UK transition towards a low-carbon economy, and demonstrating UK leadership internationally. Under the Act, the Government committed the UK to a legally-binding target of an 80 per cent reduction in GHG emissions by 2050, as against 1990 levels. It also requires a reduction in emissions of at least 34 per cent by 2020. To assist in meeting these targets, binding carbon budgets for successive five-year periods are set by the Committee on Climate Change (CCC). The CCC is an expert, independent public body tasked with assessing how the UK can best achieve its emissions reduction targets through the effort made by the part of the economy covered by cap-and-trade schemes (the traded sector), and by the rest of the economy (the non-traded sector), as well as assessing progress towards the statutory carbon budgets.
In July 2016, the Government publicly accepted the recommendations made in the CCC’s fifth carbon budget report and announced that the budget for the period 2028–2032 will limit annual UK GHG emissions to an average of 57 per cent below 1990 levels.
In October 2017, the Government published the Clean Growth Strategy (CGS), a GHG reduction strategy setting out the processes through which the Government intends to meet future statutory carbon budgets under the Climate Change Act 2008. The CGS (amended in April 2018) contains proposals including the phasing-out of new petrol and diesel cars by 2040, the upgrading of as many homes as possible to Energy Performance Certificate Band C by 2035, and phasing out the installation of high-carbon fossil fuel heating in homes and businesses off the gas grid during the 2020s. The Government published a CGS progress report in October 2018. At both the EU and national levels, the means to achieve emissions reductions include the EU-ETS (see question 9.1), as well as measures to encourage investment in renewable energy technologies and increased energy efficiency (see question 1.2).
The UK is also subject to the EU targets set in the Climate and Renewable Energy Package, which sees the EU as a whole having to achieve a minimum 20 per cent reduction in EU GHG emissions by 2020 (against 2005 levels). In October 2014, the EU set out its 2030 Climate and Energy Framework, centred on a target of a 43 per cent reduction in domestic greenhouse gas emissions (against 2005 levels). The framework also sets the target of increasing the share of renewable energy to at least 27 per cent of total energy consumption by 2030, and proposes to reform and stabilise the EU-ETS regime. In November 2016, the Commission published the “Clean Energy for All Europeans” draft legislation formalising the framework, including: a draft revised Renewable Energy Directive; a draft revised Energy Efficiency Directive; and several proposals for EU electricity market reform and regulation. In June 2018, the EU introduced the first piece of legislation under the package, adopting a directive amending the Energy Performance of Buildings Directive 2010 (Directive 2018/844/EU).
Local authorities are required to ensure that new development is sustainable, which includes achieving GHG emission reductions. The National Planning Policy Framework (NPPF), together with Planning for Climate Change – A Guide for Local Authorities, set out how planning should contribute to reducing emissions and stabilising climate change, as well as adapting for the anticipated effects. The NPPF (revised in July 2018) directly cites the 2008 Climate Change Act as a relevant consideration in decision-making, making the objective of an 80 per cent reduction in CO2 emissions by 2050 clearly relevant to the duty of planning authorities (including local authorities in that role) to shape policy which reduces CO2 emissions. The 2018 NPPF amends the list of climate change factors to include rising temperatures, implementing the Government’s proposal contained in the February 2017 White Paper, Fixing our broken housing market.
In November 2016, the UK ratified the United Nations Framework Convention on Climate Change (UNFCCC) Paris Agreement. Principal commitments under the Agreement include a target for zero net emissions from 2050 onwards, and a maximum 1.5 degrees Celsius increase in global temperature.
In November 2017, the UK ratified the Kigali amendment to the UN Montreal Protocol that commits nations to reducing hydrofluorocarbon greenhouse gases (HFCs) by 85 per cent between 2019 and 2036. The Kigali amendment will enter into force on 1 January 2019.
In December 2017, Plan B Earth, a charity with the mission to realise the goals of the Paris Agreement, and 11 citizen claimants, filed a climate change lawsuit against the Secretary of State for Business, Energy, and Industrial Strategy. The claimants alleged that the Secretary of State violated the Climate Change Act by failing to revise the Government’s 2050 carbon reduction target (which was consistent with limiting average warming to 2 degrees Celsius above pre-industrial levels) in light of new international law and scientific developments, in particular the Paris Agreement. In July 2018, the claimants were refused permission to apply for judicial review of the Secretary of State’s decision.
10.1 What is the experience of asbestos litigation in your jurisdiction?
Whereas the first US asbestos-related disease cases were brought in as early as the 1930s, it was not until 1950 that the first asbestos-related claim was settled in the UK, and the early 1970s that a series of cases against the Central Asbestos Co. Ltd. resulted in an award of damages by the English courts. A number of factors may explain the relatively slow growth of litigation in the UK, including, for example: (1) the historical existence of compensation schemes and insurance obligations relating to occupational asbestos exposure (the first UK scheme was established in 1932, and since 1972 employers have been legally obliged to purchase employer’s liability (EL) insurance to meet claims for work-related injuries or illness); (2) the difficulties for claimants in proving that their claims are not statute-barred and, where they worked for more than one employer, that they should be able to recover damages for “non-cumulative” diseases (such as mesothelioma); and (3) the unavailability in the UK of “class actions”, contingency fee arrangements and punitive damages.
In recent years, civil litigation procedure in England has undergone substantial reform, aimed at ensuring more uniform access to justice for claimants and increasing the efficiency and speed of the litigation process. A Practice Note published by the Senior Master of the English High Court created a special “fast-track” claims-handling procedure for mesothelioma cases. Also, the availability of after-the-event (ATE) insurance for legal costs, and judicial erosion of the prohibition on US-style conditional fee arrangements, meant that funding was more readily available for asbestos disease claims.
In 2014, the Government confirmed it would not be introducing an out-of-court process or a dedicated pre-action protocol; it planned to bring into force provisions in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 for mesothelioma, whereby claimants in successful mesothelioma cases would no longer be able to recover success fees and ATE insurance premiums from defendants. In R (Whitston (Asbestos Victims Support Groups Forum UK)) v Secretary of State for Justice  EWHC 3044 (Admin), this decision was challenged in judicial review. Judgment was handed down in October 2014, establishing that a full impact review should have been undertaken before bringing the relevant provisions into force for mesothelioma cases. As such, the Government would not be able to remove the exception relating to ATE premiums and success fees until it had undertaken a review of the likely impacts.
The Mesothelioma Act 2014 established a payment scheme for individuals with diffuse mesothelioma and their dependants where the employer or EL insurer cannot be found. The so-called Diffuse Mesothelioma Payment Scheme, which came into force in April 2014, is funded by levies on existing liability insurers, based on their percentage of the current insurance market. In 2015, amendments led to an increase in the level of payment that eligible applicants could receive. The payment was raised from 80 per cent to 100 per cent of average civil damages for people diagnosed on or after 10 February 2015, or their eligible dependants.
The English courts have generally taken a pro-claimant approach to asbestos claims. For example, in Fairchild v Glenhaven Funeral Services Ltd  UKHL 22, a previous decision was overturned that had effectively barred claimants exposed to asbestos dust by more than one employer from recovering damages for mesothelioma on the grounds that the claimant could not prove which of the employers was responsible. The Compensation Act 2006 confirmed that all employers of a claimant who has developed mesothelioma are potentially “on the hook” for the full amount of his or her loss.
Furthermore, in Bussey v 00654701 Ltd (formerly Anglia Heating Ltd)  EWCA Civ 243, the Court of Appeal overturned a High Court judgment that barred a claim because the deceased was exposed to a lower level of asbestos than that recommended in a technical data note published in 1970. The Court confirmed that there is no acceptable “minimum level of risk”: it should be judged on a case-by-case basis whether developing mesothelioma was foreseeable and whether adequate precautions were taken in response to that risk. Whether there is a material increase in the risk of contracting mesothelioma is relevant to causation, not to whether a duty has been breached. The Court also held that the employer’s duty is of a reasonable and prudent employer taking positive thought for the safety of his workers, given what he knew or ought to have known.
As regards insurance, in Durham v BAI (Run Off)  UKSC 14 (the “Employers’ Liability ‘Trigger’ Litigation”), the Supreme Court held, in relation to EL policies, that where policy wording refers to disease having been “sustained” or “contracted”, the trigger for the policy responding is when the employee is wrongfully exposed to asbestos, not at the time the tumour starts to develop. As a result, liability is triggered as long as the EL policy was in place at the date of the exposure. The Court also confirmed that in construing EL policies, the concept of a disease being “caused” during the policy period must be interpreted flexibly enough to embrace the role assigned to exposure by the Fairchild rule. Consequently, once a number of employers have been found liable for having caused the exposure, the employers’ insurers were also liable. The ruling reflects general industry practice, although it is a significant departure from the Court of Appeal’s judgment in the case, which had held that the trigger for the policy responding is when the tumour starts to develop.
The English courts have taken a less claimant-friendly approach to the question of the availability of compensation for persons suffering from pleural plaques who, though they have not yet contracted the symptoms of an asbestos-related disease, are nonetheless worried that they may do so in future.
10.2 What are the duties of owners/occupiers of premises in relation to asbestos on-site?
The Control of Asbestos Regulations 2012 (the Asbestos Regulations) implement Directive 2009/148/EC. They impose an express duty to “manage the risk” from Asbestos-Containing Materials (ACMs) and require employers and other duty holders to ensure that, as far as is reasonably practicable, no-one can come to any harm from asbestos on their premises.
If ACMs are in good condition, not likely to be damaged and not likely to be worked on or disturbed, the Asbestos Regulations provide that it is better to leave them in place and implement a system of management, and impose a duty to manage the risk of those ACMs. Appropriate steps to be taken might include: (a) noting the presence of ACMs and maintaining a register of location and condition; (b) labelling such locations with an asbestos warning sign; and (c) introducing an on-site “permit to work” system (to ensure that anyone who comes to carry out work on the premises does not start before they are presented with the relevant information on asbestos risks, and to record the use of any protective measures or equipment required).
ACMs in poor condition must be repaired under the Asbestos Regulations (e.g. by sealing or enclosing the ACMs to prevent further damage), or removed.
More generally, the Asbestos Regulations oblige duty holders to: (a) find out whether there is asbestos in or on their premises, its amount and what condition it is in (presuming that materials contain asbestos unless there is strong evidence that they do not). This will generally involve engaging a suitably trained person to conduct a survey of the premises; (b) make and maintain records of the location and condition of ACMs or presumed ACMs on the premises; (c) assess the risk from the material, seeking specialist advice, if necessary, from an asbestos surveyor, a laboratory or a licensed contractor; (d) prepare a detailed plan setting out how the risk from the material will be managed; (e) implement the plan and review it periodically; and (f) provide information on the location and condition of the material to anyone who is liable to work on or disturb it. From April 2015, additional obligations under the Asbestos Regulations came into force, requiring medical surveillance for those undertaking “non-licensable work” with asbestos, which includes sporadic, low-intensity and short-term exposure to asbestos.
The basic position in the UK is that employers have a degree of latitude in deciding on the means to control site asbestos exposures, against the background of a duty to carry out continuous risk assessment.
11.1 What types of environmental insurance are available in the market, and how big a role does environmental risks insurance play in your jurisdiction?
Notwithstanding that, historically, environmental insurance has not been widely purchased in the UK, there are signs that the uptake of policies is increasing.
It is possible to obtain cover for remediation liabilities, with the relevant policies written on a claims-made, site-specific basis. Typical policy periods are 10 years for “pre-existing conditions” (i.e. environmental conditions existing before policy inception, but manifesting during the policy period) and one to five years for “new conditions” (i.e. incidents/pollution that first exist after policy inception). The scope of cover would typically include enforced regulatory clean-up costs for on-site contamination and cover for off-site third party injury and asset damage. Cover may also be available for third party claims arising from migration of known conditions, although typically excluding on-site clean-up of such conditions. Some environmental insurance is also available for gradual pollution.
A further type of insurance available is known as contractor’s pollution legal liability cover, which is designed to protect contractors against pollution conditions caused by the operations covered under the policy, including work performed by sub-contractors.
Many large companies have historically covered themselves primarily through the use of captive insurers, but some companies are looking either to reinsure their captive environmental liabilities or to purchase direct environmental insurance to plug gaps in the cover provided by the captive.
The Flood Reinsurance Scheme (the insurance scheme preferred by both the Association of British Insurers and the Government) came into force on 4 April 2016 and offers affordable insurance to homeowners whose properties are deemed to be at high risk of flooding.
Environmental insurance is sometimes used as a method of allocating environmental risk as part of M&A transactions, although it is not likely to supplant traditional risk allocation tools such as warranties and indemnities. However, there is a growing awareness of the role that insurance can play as a transaction solution, both pre- and post-disposal, particularly as lenders have become more risk-averse given current market conditions. There are also a number of innovative insurance-backed environmental risk-transfer products coming onto the UK market.
11.2 What is the environmental insurance claims experience in your jurisdiction?
It is difficult to obtain environmental insurance claims figures, as insurers carefully guard such information.
However, there appears to have been very little significant claims experience to date in respect of the relatively new products described above. This is not surprising, as these products have not been written in any volume until very recently and tend to be relatively “long-tail” in nature.
12.1 Please provide, in no more than 300 words, a summary of any new cases, trends and developments in environment law in your jurisdiction.
The European Union (Withdrawal) Act 2018 will repeal the European Communities Act 1972 at the date of “exit”. Only directly-applicable EU law adopted before the end of the transition period (currently targeted as being 31 December 2020) will automatically apply in the UK. The Government has published a number of technical notices relating to environmental law and protection in the event of a “no deal” Brexit.
At least until Brexit, the UK will continue to be obliged to implement and enforce EU environmental laws. It seems likely that the UK would continue to apply the substance of much of EU environmental legislation, albeit with no direct say by the ECJ on how the UK implements and enforces it (again, subject to any agreed transitional arrangements). The Government’s July 2018 White Paper committed to “maintaining high standards on the environment [and] climate change”.
Unrelated to Brexit, there appears to be a developing trend for using England as a forum for bringing collective redress proceedings founded on environmental or human rights grounds (see the Unilever, Vedanta and Okpabi cases discussed at question 8.3; also Arroyo v Equion Energia Ltd  EWHC 1699). This trend reflects increasing European interest in this area: the French loi de vigilance, adopted in March 2017, imposes a statutory duty on qualifying companies to take steps to ensure that their subsidiaries are complying with environmental law; a similar provision is also being considered in Switzerland (where the National Council approved a counter-proposal to the citizen-led Responsible Business Initiative in June 2018).
In March 2018, the UK Green Finance Taskforce formally endorsed the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosure (TCFD). It plans to publish guidelines on the implementation and recommendations of the TCFD by mid-2019.

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