Regulatory Outlook: Environment - November 2016

Current Issues

Definition of environmental ‘damage’: In July 2016 the Court of Appeal clarified the definition of ‘damage’ under the Environment Liability Directive for the first time. In R v NRW, the court upheld the first instance decision: environmental ‘damage’ should be restricted to environmental deterioration and should not include the deceleration of environmental progress (a drop in water quality and fish numbers in this case). The judgment provides clarity for those seeking to rely on the Directive, which should only be invoked where there has been actual adverse environmental damage.

Brexit – environmental change on the horizon?: The UK’s Brexit vote has opened up the possibility of change to UK environmental law. With estimates that 80–90% of UK environmental legislation is derived from the EU, there is significant scope for reform in areas such as waste, chemicals, air and water pollution, where the EU is a major driver. Despite government plans for a ‘Great Repeal Bill’ and the transposition of all EU laws into domestic law, the UK is expected subsequently to ‘cherry-pick’ those EU laws it wishes to retain and be free to legislate in the remaining areas.

UK to ratify Paris Agreement by end of 2016: The UK Prime Minister, Theresa May, announced in September 2016 that the UK will continue to tackle climate change after leaving the EU, and pledged to ratify the Paris Agreement by the end of the year. Amidst concerns that Brexit may impact the UK’s climate change commitments, the Prime Minister’s recent speech to the UN evidenced the UK’s dedication to a collaborative approach to tackling climate change.

Government consultation – implementation of the Medium Combustion Plant Directive 2015: On 5 February 2016, the European Commission published the final version of the Directive, which must be implemented into the national law of all Member States by 19 December 2017. The UK Government has announced it will publish a consultation on the implementation of the Directive, particularly following the UK’s Brexit vote, in autumn this year. The Directive forms part of the EU’s Clean Air Policy Package and is designed to help deliver a significant part of the Member States’ emission reduction obligations.

REACH – comprehensive updates to guidance on substances: In December 2015, the European Chemicals Agency published updated guidance on REACH substances to reflect the ECJ’s decision in Case C-106/14. The ECJ considered the definition of ‘article’ under REACH, deciding that producers and suppliers have certain obligations in relation to substances of very high concern in each component part of a complex product, rather than just the finished product. A comprehensive update to the December guidance is expected by the end of 2016.

In Focus: Enforcement

Various public authorities, or regulators, are responsible for investigating and dealing with environmental issues throughout the UK – the most prominent of which is the Environment Agency. The relevant environmental legislation is enforced by regulators and the courts through a combination of civil and criminal sanctions, with proceedings being brought against both legal and natural persons. These sanctions typically take the form of monetary penalties, enforcement undertakings, remediation orders or imprisonment. Notably, the substantial body of UK and EU environmental law continues to emphasise remediation over punishment.

Traditionally, regulators have relied on the criminal law to protect the environment, with convictions generally leading to fines. In recent years, however, the Regulatory Enforcement and Sanctions Act 2008 has given the Environment Agency a range of new powers to impose civil sanctions, depending on the circumstances of the offence. The civil sanctions, such as enforcement undertakings, compliances and stop notices, enable regulators and the courts to deal with breaches of environmental law more flexibly than those available under the criminal law.

More recently, it has been recognised that fines imposed under the criminal law have not always reflected the offender’s ability to pay, which could reduce the effect of fines as deterrents. In response to these concerns, the Sentencing Council published the new Definitive Guideline for the sentencing of environment offences in the Magistrates and Crown Court, effective from 1 July 2014.

The Definitive Guideline

The Definitive Guideline provides the courts with a framework when deciding sentences for environmental crimes, as well as ‘starting points’ for fines. This is based on the category of harm, the degree of the defendant’s culpability and the size of the defendant organisation, which is calculated by reference to the defendant’s annual turnover. While aggravating and mitigating factors are taken into account, the Guideline emphasises that fines be proportionate to the defendant’s financial means. The Guideline also clearly states that fines should be “sufficiently substantial to have a real economic impact to improve regulatory compliance”.

The Guideline has generally been well received, with an assessment by the Sentencing Council indicating that the majority of cases have been sentenced within the appropriate category range. There have also been reports of a decrease in the number of environmental offences since the introduction of the Guideline.

As a result, several organisations and individuals have received significant fines. Noteworthy are Thames Water’s fine of £1m in January 2016 and Yorkshire Water’s fine of £1.1m in April 2016. The courts are clearly adopting a tough approach when applying the Guideline, which comes as a warning to all, but particularly large organisations and high net worth individuals, that the courts will act robustly in ensuring compliance with environmental regulations.

Increased fines are also attributable to changes in the law, which mean magistrates are now able to impose unlimited fines for offences committed on or after 12 March 2015. Nevertheless, the effect of these changes combined should be to encourage careful and informed decisions on environmental policies, procedures and systems needed to ensure compliance with relevant environmental legislation.

Dates for the diary

13 October 2016

The Committee for Climate Change is due to publish a new analysis of the implications of the Paris Agreement for UK climate targets and strategy. The analysis will indicate whether the UK needs to change its current global warming targets in order to meet the new targets under the Agreement.

Autumn 2016

A government consultation is expected on the implementation of the Medium Combustion Plant Directive 2015.

31 December 2016

By the end of 2016, it is anticipated that the UK will begin its domestic procedure to enable ratification of the Paris Agreement.

31 December 2016

A comprehensive update to the European Chemicals Agency’s guidance on REACH substances is expected by the end of 2016.

1 April 2017

Under the Finance Act 2016, the lower rate of landfill tax will be increased to £2.70 per tonne and the standard rate will increase to £86.10 per tonne.

19 December 2017

Deadline for the implementation of the Medium Combustion Plant Directive 2015.

January 2019

Legislation is expected to come into force which will set binding emission limit values on relevant air pollutants from diesel engines. The proposed legislation follows the Department of Environment and Climate Change’s consultation on further reforms to the Capacity Market in March 2016.

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