Environment Update March 2010
Appeal Court calculates the cost of water pollution
Thames Water has secured a fortunate outcome, having had a hefty fine of £125,000 cut to just £50,000, following prosecution by the Environment Agency for a polluting incident in 2007. Over 1,000 litres of sodium hypochlorite were released into the River Wandle from the company’s sewage treatment works in Beddington, South London, resulting in devastating impacts for local wildlife. Over two tonnes of fish and invertebrates were killed through a 5km stretch of the Wandle, constituting a breach of section 85(1) of the Water Resources Act 1991.
It had transpired before the Crown Court that in attempting to improve the Beddington Treatment Works, the company had failed to carry out any kind of risk assessment regarding the maintenance of new equipment supposed to improve the quality of its effluent. This involved the use of sodium hypochlorite in the cleaning process. However, the fact that Thames Water had paid (or pledged to pay) £500,000 in compensation for the incident proved to be of key relevance in saving it from paying an even bigger fine of £250,000. In addition, the company had acted swiftly in order to rectify the failures (both in terms of clean-up measures and by implementing a fail safe system for the future), and had made an early plea of guilty.
However, Thames Water appealed on the basis that the fine of £125,000 was still manifestly excessive. In its view, the £500,000 compensation should have had a substantial impact on the weight of the fine from the outset, and have significantly reduced the starting level of the fine.
The appeal court was in no doubt as to the “extremely serious” nature of the offence committed by Thames Water, recognising that there was a “heavy burden” on water companies like Thames Water to ensure that they do not cause the escape of polluting materials from sewage treatment plants into controlled waters, and the consequent need for water companies to conduct ongoing risk assessments. However, it had to acknowledge that the sum of £500,000 reparation in particular, was a sum vastly in excess of what any court could have ordered by way of compensation.
As such, the court concluded that the appropriate course of action would have been to have entirely removed the £50,000 deterrent element of the £125,000 fine, as the compensation “clearly brought the necessary deterrent message home” to the company, its shareholders and others. Secondly, the remaining £75,000 was reduced by a third due to the early guilty plea, producing the final sentence of £50,0000.
However, the appeal court judges warned that courts dealing with a subsequent offence must not be misled as to the seriousness of the previous offence by the same offender, simply because sentencing principles had led to a reduced penalty of £50,000 instead of the original £125,000 imposed.
Companies should also bear in mind that new civil sanctions powers, which will enter into force next month, will increase the powers of the Environment Agency to make businesses pay the costs for their polluting activities.
The text of the judgement may be viewed via the link:
http://www.bailii.org/ew/cases/EWCA/Crim/2010/202.html
The limits of liability
Following an Opinion given by the Advocate General in October 2009, the European Court of Justice (ECJ) has made its decision in the joined cases concerning the Italian Energy Company Raffinerie Mediterranee SpA (ERG) and others (Cases C-378/08 and C-379/08), in which questions were referred from an administrative court in Sicily to the ECJ, concerning the interpretation of the Environmental Liability Directive (2004/35/EC) and its interaction with the polluter pays principle.
ERG and various other companies operated industrial activities on a site affected by a historic build-up of pollution, which made it impossible to identify the original polluter. However, the companies were required to clean-up the seabed near the sites on which they operated, as well as to construct a barrier along the seafront to prevent further migration of pollution. The companies argued that Italian authorities failed to carry out an environmental assessment prior to their decision.
In her Opinion, Advocate-General Kokot stated that national authorities can in specific cases require prevention or remediation measures without an environmental assessment. Moreover the AG advised the court to rule that companies operating in a polluted area are primarily responsible under the Directive for environmental damage caused – the Directive should not be interpreted so narrowly as to only impose responsibility for environmental damage where there is a direct causal link between the operator and the polluter. The AG also held the view that Member States may also require prevention or remedial measures to be undertaken in areas of a site which have already been remediated, or which are not directly affected by contamination.
The recent ruling shows that the ECJ has adopted the AG’s Opinion to an extent. However, it clarified that the Directive was to be interpreted in a way that was favourable for operators in the following respects:
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In ruling that Articles 7 and 11(4), in conjunction with Annex II of the Directive, permit the competent authority to alter substantially remedial measures which had been agreed on following earlier consultation with operators, and which had already been implemented in whole or in part, it agreed that authorities were permitted to use their own initiative in requiring companies to remedy environmental damage. However, in doing so, the legitimate interests of the affected operators and other interested parties must be adequately safeguarded and therefore operators were to be given an opportunity to be heard, submit any observations and the competent authority must take these, as well as the criteria in Annex II of the Directive, into account. If authorities choose not to make an environmental assessment, they must show that they have considered the criteria set out in Annex II of the Directive, stating in its decision the grounds on which its choice is based, and if appropriate, the reasons which justify the fact that no assessment was carried out in light of the criteria.
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Authorities are entitled to require operators to carry out remedial measures on land even though it has already been decontaminated or has never been polluted. However, this must be justified with the objective of preventing a deterioration of the environmental situation in the area in which those measures are implemented or with the goal of preventing the occurrence or resurgence of further environmental damage in sites adjacent to the areas at which such measures are directed – an objective underlined by the precautionary principle.
The judgement may be accessed via the following website:
http://curia.europa.eu/jcms/jcms/Jo1_6308/
Overcharging for access to justice – UK to pay the price?
The European Commission has warned the UK that it faces legal action over the high costs of taking environmental cases to court, after receiving a complaint lodged by the Coalition for Access to Justice for the Environment (CAJE).
The warning follows a Supreme Court decision concerning the costs arising from a failed cement kiln challenge before the House of Lords in 2008 (Pallikaropoulos v Environment Agency and others). The Court of Appeal had made an order limiting the applicant’s exposure to costs in the event that she failed. However, the House of Lords declined to make any special costs order on Appeal, instead applying the ‘standard cause’ approach. The result was that the applicant paid the appeal costs and an overall bill of almost £90,000.
The appellant challenged these costs, prompting the initial question of the extent to which, in carrying out their assessment, they should have regard to Aarhus principles that costs should not be so prohibitively high as to prevent access to justice. In the eyes of the Supreme Court, the inclusion of these requirements in the Environmental Impact Assessment Directive (EIA) and the Integrated Pollution Prevention and Control Directive (IPPC), demonstrated that compliance with EU directives was a key factor to consider on the detailed assessment of costs in cases to which the directives apply.
In its warning issued this month, the Commission has pushed home the principle that the public’s right to challenge important decisions affecting the environment is crucially underpinned by these challenges being affordable. The Commission expressed concern that the UK legal proceedings can prove too costly and that the potential financial costs of losing challenges is a major turn-off to NGOs and individuals from bringing cases against public bodies. The UK has not helped its position by failing to remedy costs imposed on applicants for interim injunctions, after an initial warning by the Commission in 2007 that it should properly review expensive “cross undertakings in damages” (deposits that may be used to compensate defendants), charged before an injunction is even made by the court. Such a demand is seen as seriously impeding injunctions, which are essential for temporarily halting operations which pose harmful to the environment whilst their legality is being assessed.
This array of financial obstacles led the Commission to conclude that the principles of the IPPC and EIA directives have not been fully transposed and are not being properly applied in practice. A failure to comply with this final warning could therefore see the UK brought before the ECJ.
The European Commission’s statement regarding the UK’s position can be viewed via the following link:
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/312&format=HTML&aged=0&language=EN&guiLanguage=en
Habitats regulations to come into force on 1st April
The Conservation of Habitats and Species Regulations 2010 have been laid before Parliament and are due to enter into force on 1st April 2010. The Regulations consolidate and update the Conservation (Natural Habitats etc.) Regulations 1994 (the 1994 Regulations), which formed the key mechanism by which the Habitats Directive (92/43/EC) was transposed in England and Wales. In so far as the 1994 Regulations extend to Scotland, these are also revoked and replaced by the new Regulations.
The objective of the Habitats Directive is to protect biodiversity through the conservation of natural habitats and species and wild fauna and flora, laying down the rules for their protection, management and exploitation.
The new Regulations do not make substantive changes to existing policies or procedures, but they do attempt to refine and simplify the 1994 Regulations, which became too complex to follow, after undergoing 30 sets of amendments. Through consolidating all the amendments made to the 1994 Regulations over the years together into one set of regulations, the following key results have been achieved:
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Clearer reflection of devolved powers and duties – the extent to which the new Regulations extend to Scotland in respect of certain reserved matters are set out and the areas in which Welsh Ministers can exercise their powers are clearly outlined.
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Implementation of aspects of the Marine and Coastal Access Act 2009 (“the Marine Act”) – the Regulations have been adapted to ensure consistency with related provisions in the Marine Act. Therefore provisions have been introduced allowing for Marine Enforcement Officers (MEOs) to use powers under the Marine Act to enforce certain offences under the new Regulations; and for the transfer of species licensing functions from Natural England (NE) to the Marine Management Organisation (MMO), for a range of purposes which include scientific or educational, the protection of any zoological or botanical collection and preventing the spread of disease.
The new Regulations can be viewed by clicking on the following link:
http://www.opsi.gov.uk/si/si2010/uksi_20100490_en_1
Meanwhile, the Offshore Marine Conservation (Natural Habitats &c) (Amendment) Regulations 2010 have been introduced to amend the Offshore Marine Conservation (Natural Habitats, &c.) Regulations 2007. The Offshore Marine Regulations transpose both the Habitats and the Wild Birds Directive (2009/147/EC) in UK waters. The Offshore Marine Regulations help to fulfil the key objectives in the UK’s offshore marine area by ensuring that offshore activities are carried out in a manner that is consistent with each Directive.
The new Amendments aim to maintain these standards by similarly streamlining the Regulations to reflect the latest legislation – the Regulations are updated so as to refer to the Marine Act, as well as the consolidated Wild Birds Directive (which entered into force on 15 February 2010). The Amendments also introduce clear definition of the functions of Scottish Ministers in the Scottish offshore region.
The Offshore Marine Amendments may be read via the following link:
http://www.opsi.gov.uk/si/si2010/uksi_20100491_en_1
Marine management
Following the recent introduction of a new marine licensing system under the Marine and Coastal Access Act 2009, the Department for Energy and Climate Change (DECC) has launched a consultation seeking views on a number of proposals for the system. The Act provides the framework for the licensing of regulated activities carried out in the marine environment, such as aggregate dredging, offshore wind farms and other construction works. Non-compliance with the marine licensing regime has the potential to harm the environment, human health or pose risk to other sea-users and may also create a competitive advantage to those operators not acting within the law.
The primary objective of the consultation itself however, is to ensure that new enforcement tools are used proportionately and fairly and that regulators make effective decisions using transparent processes.
The DECC therefore wishes to receive views on two principle features:
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A system of monetary principles for licensing offences – to allow enforcement bodies to apply fixed or variable monetary penalties (FMPs and VMPS) in relation to certain marine licensing offences. The aim is to adopt a fairer and more proportionate approach, where use of monetary penalties will save a person from incurring a criminal record – particularly valuable where an operator has not intentionally caused harm; and
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A mechanism for people to appeal against statutory notices – to enable a person to appeal against a statutory notice issued against them as required by section 108 of the Act. The consultation proposes that appeals against all statutory notices are heard by the General Regulatory Chamber of the First-tier Tribunal (FTT) set up under the Tribunals, Courts and Enforcement Act 2007. The FTT will have the expertise and knowledge in place to be able to hear these types of appeals and make consistent and informed decisions. It also brings consistency to operators if these types of appeals are heard by the same body.
Whilst the power to introduce monetary penalties and a system to appeal against statutory notices is provided in the Act, both aspects require secondary legislation to be introduced. The Marine Licensing (Civil Sanctions) Order 2010 and the Marine Licensing (Notice Appeals) Regulations 2010 are therefore intended to be introduced, and enter into force at the same time as the new licensing system, currently planned for spring 2011.
The deadline for responses to the consultation is 1 June 2010.
The consultation document may be viewed via the link:
http://www.defra.gov.uk/corporate/consult/marine-licensing/index.htm
UKIIF announces environmental investment fund
The UK Government’s Innovation Investment Fund (UKIIF), which was launched as part of the Government’s strategy to drive economic growth and create highly skilled jobs, has recently announced an investment fund called the Hermes Environmental Innovation Fund, which will benefit the renewables sector.
The Fund is a £125 million fund, managed by Hermes Private Equity, designed to invest in low carbon and clean technology venture capital funds and will also co-invest in companies in these sectors. It is important to note that co-investment will be in more mature companies, typically those that are revenue generating and the investee companies will require to attract funding from other parties, with the amount raised often matched by the Fund. The Fund seeks to invest in businesses which look to increase the efficient use of resources (both renewable and non-renewable) at all stages of production and consumption. UKIIF has stated it will invest in businesses at pre-profit and pre-revenue stages so the Fund is available to all businesses including start-ups and spin-outs. The Fund is looking to invest between £2 million to £10 million in a range of companies, from early stage to late stage companies.
The Fund is one of the latest to be launched with a focus on environmental matters, evidencing the importance that is being placed on this sector not just in the UK but throughout Europe. For example, the European Investment Bank was awarded the title “2009 Renewable Lender of the Year” and has made lending for renewable energy, energy efficiency and low-carbon a priority, with a flexible approach that involves lending to the public and private sectors and for projects inside and outside the EU. Closer to home, The Carbon Trust recently launched its £22.5 million Marine Renewables Proving Fund, which aims to accelerate the leading and most promising marine devices towards the point where they can qualify for the UK Government’s existing Marine Renewables Deployment Fund and then widespread commercialisation. This fund will advance to successful applicants up to 60% of the project costs (with a maximum investment of £6 million) for building and deploying wave and tidal stream prototypes.
It is hoped that the Fund will help the UK to build upon its existing expertise and innovation in the low carbon industry at a time when the availability of funding is being squeezed due to the current economic climate. The environmental sector is seen as one which can play a key role in leading the UK out of the recession and the Fund should assist the UK in maintaining its position as one of the leaders in this sector. Recent research by The Carbon Trust shows that the UK is now the second largest low carbon and environmental economy in the world, with 3.5% of the global share. It is estimated that this should result in economic benefits and investment in the UK economy of £6-8 billion each year.
The matters covered in this ebulletin are intended as a general overview and discussion of the subjects dealt with. They are not intended, and should not be used, as a substitute for taking legal advice in any specific situation. Semple Fraser LLP will accept no responsibility for any actions taken or not taken on the basis of this publication.
FOR FURTHER INFORMATION CONTACT: FIONA ROSS