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					Chapter 13




England and
Wales                                                                                    Daniel Lawrence




Freshfields Bruckhaus Deringer                                                             Paul Watchman




 Environmental permits                                          and control permit prior to the commencement of
                                                                operations. In the case of existing plants, the IPPC regime
1.     When is an environmental permit required?                is being phased in on a sector-by-sector basis up to 2007,
Environmental law in England and Wales looks to the             save where the operator proposes to make a substantial
prevention, or, if that is not possible, the minimisation, of   change to the plant or activity. Most of these existing
polluting discharges and emissions to air, water and land       plants are currently regulated by the integrated pollution
in the name of protecting human health and the                  control (IPC) regime under Part I of the Environmental
environment, including the flora and fauna that make up          Protection Act 1990 (EPA 1990).
ecosystems.                                                        The PPC Regulations set up three distinct regimes:
   One of the main ways of achieving this is by the             I Part A(1) installations, regarded as sites where poten-
requirement for permits to be held in relation to discharges        tially more polluting activities are carried out. Emis-
and emissions to environmental media which seek to                  sions to air, land and water from these installations are
regulate the amount and type of discharges and emissions,           regulated, with the Environment Agency responsible
the source of these and the time periods over which they            as regulator for regulating such activities;
can take place. In England and Wales, environmental             I Part A(2) installations, which are sites where activities
permits are required for a wide range of business and               regarded as having a lesser potential to pollute are
commercial activities, with emissions from domestic                 conducted but which are still considered to have
premises in the main exempt. Permits are generally                  impacts on all environmental media. Accordingly,
granted either by the Environment Agency or the relevant            emissions to all environmental media are regulated.
local authority for the area in question.                           Regulation is the responsibility of the local authority in
   Council Directive 96/61/EC on integrated pollution               whose area the installation is, or will be, situated; and
prevention and control (IPPC) required member states to         I Part B installations, which are sites with activities for
introduce a regime to prevent or reduce pollution from a            which only emissions to air are regulated under IPPC.
range of specified industrial activities, including activities       These installations are also the responsibility of the
covered by the Landfill Directive (Council Directive 99/             local authority. The regime set up by the regulation of
457/EC). The regime is based on the principle of an                 Part B installations represents a continuation of the
integrated permitting process to prevent or, where that is          local air prevention and control regime (LAPC)
not practicable, reduce emissions in order to achieve a             established by Part I of the Environmental Protection
high level of protection of the environment taken as a              Act 1990 (EPA 1990), though with the additional
whole. The high level of protection is achieved by                  activities under Part A (2)
employing best available techniques, that is the most cost      The requirements of the IPPC regime and the LAPC
effective way, or ways, for the industry to prevent or          regime in many ways reflect requirements of Part I of the
minimise emissions. The IPPC directive has been imple-          EPA 1990, though the requirements are expanded to a
mented in England and Wales by the passing of the               wider array of activities and place significantly more
Pollution Prevention and Control Act 1999, and which            emphasis on protection of the land and associated water
enables the Secretary of State to make secondary                environment. Once the transitional phase of the IPPC
legislation. The Pollution Prevention and Control (Eng-         regime is completed, it is the government’s intention to
land and Wales) Regulations 2000 (PPC Regulations)              repeal the relevant provisions of Part I EPA 1990.
came into force on 1 August 2000 and provide the detail            The Pollution Prevention and Control Act 1999 also
of the regime and the transitional provisions for its phasing   allows for the introduction of emissions trading schemes,
in. In outline, new plants which are proposing to undertake     such as the forthcoming EU emissions trading scheme
an activity described in Schedule 1 of the PPC Regulations      (which will start on 1 January 2005) for greenhouse gases.
are required to apply for and obtain a pollution prevention     Under this scheme EU Member States are required to set

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                       an emission cap for all installations covered by the scheme     2.     Is there any right of appeal against the decision of
                       with each installation then being allocated allowances for             an environmental regulator not to grant an
                       specific commitment periods.                                            environmental permit or in respect of unduly
                          A waste management licence is required to keep, treat               onerous conditions contained in an environmental
                       or dispose of controlled waste on non-domestic premises,               permit?
                       including by means of mobile plant; however the majority        All of the above permitting regimes include provisions for
                       of landfilling activities are now covered by the require-        appeal in certain circumstances. In general, the right of
                       ments of the IPPC regime. Controlled waste is defined as         appeal is to the Secretary of State for the Environment,
                       household, industrial and commercial waste. Waste is            Food and Rural Affairs.
                       Directive waste as defined in the 1975 Framework                    The handling and determination of appeals is usually
                       Directive on waste (Council Directive 75/442/EEC) as            delegated to an inspector appointed by the Secretary of
                       amended in 1991 (see below).                                    State who is effectively given the same powers as the
                          Waste management licences are granted by the                 Secretary of State for this purpose. Appeals can be
                       Environment Agency under Part II of the EPA 1990 and            conducted by way of written representations or by holding
                       are subject to conditions that the Environment Agency           a hearing and interested third parties have rights be
                       deem appropriate, including conditions relating to the          involved in such appeals, including rights in addition to
                       precautions to be taken and the works to be carried out         those of the appellant and the regulator to address the
                       in connection with, or in consequence of the activities to      inspector at any public hearing. The Secretary of State
                       be undertaken. A number of exemptions to the need to            generally has a wide discretion in relation to appeals and
                       hold a full waste management licence are authorised by          may affirm or quash the regulator’s decision, quash all or
                       the Waste Management Licensing Regulations 1994,                any of the conditions imposed in the permit by the
                       through the exemptions still need to be registered with         regulator or direct the granting or variation of a permit
                       the Environment Agency in order to benefit.                      where one has been refused subject to such conditions as
                          Discharges to controlled waters, defined in the Water         he/she feels fit. In the case of the IPPC regime and
                       Resources Act 1991 to include almost all inland and             permits granted under Part I of the EPA 1990, the
                       coastal waters and all territorial waters out to a prescribed   bringing of an appeal against the conditions of a permit
                       distance, are subject to a need to hold a discharge consent     does not suspend the operation of the permit nor the
                       and regulated by the Environment Agency. Discharges of          condition being appealed. The time limit for appeals
                       trade effluent to public sewers are controlled by the grant      varies depending on the nature of the permit. For
                       of a trade effluent consent, granted by the relevant             example, the time limit for appeals relating to discharge
                       sewerage undertaker for the area in which the discharge         consents granted under the Water Resources Act 1991 is
                       takes place. Licences are also required for the abstraction     three months, whereas the time limit for appeals relating
                       and impounding of waters including for use in industrial        to radioactive substances consents to 2 months.
                       processes, and specified discharges to ground water are             While there is generally a right of appeal against
                       controlled by way of permits issued under the Ground-           revocation or suspension of a permit, the permit is usually
                       water Regulations 1998.                                         revoked or suspended pending the outcome of the appeal
                          The presence of a hazardous substance on land may            and no compensation is available for the revocation or
                       also require a hazardous substances consent under the           suspension (also see Question 8 below).
                       Planning (Hazardous Substances) Act 1990. The system
                       is operated by hazardous substances authorities, which          3.     Are there any special permitting requirements (e.g.
                       are mostly the London boroughs and district councils.                  requirements to conduct environmental audits or
                       The Secretary of State for the Environment, Food and                   environmental impact assessments) for particularly
                       Rural Affairs prescribes the identity and quantities of
England & Wales




                                                                                              polluting industries or large-scale installations/
                       hazardous substances subject to control.                               projects?
                          The deliberate release of genetically modified organisms      Various measures are incorporated within the IPPC
                       is controlled by way of a consent granted by the Secretary      regime to prevent pollution during design and operation
                       of State for the Environment, Food and Rural Affairs.           of the installation and, subsequently, on decommissioning
                       The controls apply to persons importing, acquiring,             to ensure that the site is returned to a satisfactory state
                       releasing or marketing any genetically modified organisms        and poses no pollution risks.
                       that could pose a risk to the environment and are subject          In submitting an application for a PPC permit to
                       to the requirement to conduct risk assessments.                 operate a Part A activity, the operator is required to
                          The Radioactive Substances Act 1993 requires the             submit a site report identifying the condition of the site
                       grant of an authorisation by the Environment Agency for         prior to the commencement of the regulated activity. For
                       the disposal and accumulation of radioactive waste on or        new installations and changes to existing operations, this
                       from any premises used for the purposes of an undertaking       is aimed at ensuring that the risk of pollution particularly
                       or for the disposal of radioactive waste from any mobile        to soil and ground water is avoided. Ongoing monitoring
                       radioactive apparatus or as part of a waste disposal            and reporting should also identify significant pollution
                       undertaking.                                                    occurring during operation of the installation and ensure
                          In all the above cases the competent authority granting      that it is attended to immediately either by voluntary
                       the licence has the discretion to attach such conditions as     action by the operator or through the undertaking of an
                       it thinks necessary and appropriate to ensure that no           enforcement action by the regulator. The regulator is also
                       harm to human health or the environment beyond                  given powers to prevent or remedy pollution if it is of the
                       accepted limits occurs.                                         opinion that the operation of the installation, or the
                                                                                       operation of it in a particular manner, involves an
                                                                                       imminent risk of serious pollution.

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   Where the operator plans to leave or close the site, the     have the power to issue notices to vary the terms and condi-
regulations require the operator to provide a site report       tions of any authorisation or permit granted or, in very seri-
to the regulator providing evidence on the condition of         ous cases of non-compliance, to revoke or suspend the
the site and giving details of any contamination discovered.    operation of a permit or authorisation. The circumstances
This report will be compared with the baseline report           in which revocation and suspension can take place vary ac-
submitted by the operator at the application stage. The         cording to the permit or authorisation being considered.
regulator will only accept the surrender of the IPPC                Civil liability may also flow from a failure to hold a per-
permit when the site is put in a condition where it             mit or to comply with a condition attached to it as a result
represents no pollution risks in consequence of the             of breach of statutory duty. For example, where a breach
activities undertaken on it and is in a satisfactory state.     of a waste management licence occurs and a third party
   The waste management licensing regime includes               suffers damage as a result of the offence, that person is en-
similar provisions in relation to surrender of waste            titled to claim for the damage subject to certain exceptions.
management licences, so that a surrender of a licence will      In such a case the claimant may bring proceedings in re-
only be accepted if following an inspection and consulta-       lation to the torts of nuisance, negligence or trespass,
tion with the relevant local planning authority, the            pleading breach of statutory duty in the alternative.
Environment Agency are satisfied that the condition is
such that it is unlikely to cause health or environmental        Waste
problems.
   The Environmental Impact Assessment Directive (EC/           5.      What is waste and are there special categories of
85/337 as amended by EC/97/11) requires an environ-                     waste that involve additional duties or controls?
mental assessment to be made on the effect of certain           The definition of waste that applies in England and Wales
public and private projects, including e.g. construction of     is set out in the Waste Framework Directive adopted by
integrated chemical installations and other chemical            the European Union. This is essentially any substance or
plants, paper and board plants, plants manufacturing            object falling within certain categories listed in the Waste
certain foodstuffs and certain infrastructure projects.         Framework Directive which the producer, or any other
Projects are defined according to whether they require an        person in possession of it, discards or intends to discard.
environmental statement to be provided in all cases             The categories of substances to be regarded as waste
(Schedule 1 development) or only where the development          range from residues of industrial processes to any material,
proposed is likely to have a significant effect on the           substances or products whose use has been banned by
environment (Schedule 2 development). The secondary             law. The last category in the list consists of ‘‘any materials,
legislation which implements the EIA Directive in               substances or products which are not contained in the
England and Wales requires Schedule 2 projects to be            above categories’’ and this ‘‘catch-all’’ category means
subject to a formal screening process to determine whether      that any material, substance or product that the holder
they will have a significant effect before an application for    discards or intends to discard is waste for the purposes of
planning permission is granted. The grant of planning           English law. There is however a limitation in that anything
permission is prevented where a development requires an         that is excluded from the scope of the Waste Framework
environmental assessment until consideration of the             Directive is not waste, irrespective of the intention or
relevant environmental information. Failure to comply           obligations of the holder who discards it. The items
with this requirement has been the source of numerous           excluded are (a) gaseous effluence emitted into the
challenges to the High Court by way of judicial review,         atmosphere and (b) where they are already covered by
sometimes resulting in the quashing of the planning             other legislation radioactive waste, waste resources result-
permission.                                                     ing from mineral workings or workings of quarries, animal




                                                                                                                                             England & Wales
                                                                carcasses and certain agricultural wastes, waste waters
4.     What civil and/or criminal enforcement powers does       and decommissioned explosives.
       the government have in connection with the                   The term discard is given the same meaning that has
       violation of permits?                                    been given to it by the European Court of Justice in
In all cases, the legislation requiring the grant of a permit   interpreting the Waste Framework Directive. Accord-
or authorisation for the carrying on of an activity or the      ingly, the intention of the holder is crucial in determining
making of a discharge or emission to the environment            whether something has been discarded, and the fact that
establishes that it is a criminal offence to carry on the       a substance can have a positive value does not mean that
activity, or make the discharge or emission, other than         it has not been discarded. Furthermore, a substance that
pursuant to a permit and in accordance with any                 is to be reused does not need to have been subjected to a
conditions that may be attached to it.                          recovery or disposal operation before it is reused in order
   The offences are generally strict liability offences and     to have been discarded and hence capable of being
accordingly there is no requirement to prove intention or       controlled waste.
negligence in the commission of the offence. Intention              In the UK Circular 11/94 Environmental Protection
and/or negligence are instead aggravating features that         Act 1990: Part II Waste Management Licensing, the
can increase the penalty imposed following conviction.          Framework Directive sets out additional guidance as to
   Environmental offences are usually triable either            the meaning of waste and states that:
summarily or on indictment, and the maximum penalties                 ‘‘the purpose of the Directive is to treat as waste, and
may include up to six months imprisonment or a £20,000                accordingly to supervise the collection, transport, storage,
fine on summary conviction in the magistrate courts or 2               recovery and disposal of those substances or objects which fall
to 5 years imprisonment or unlimited fines if the matter is            out of the commercial cycle or out of the chain of utility.’’
tried in the Crown Court.                                           This indicates that the concern arises from the fact that
   In addition to their powers of prosecution, regulatorsalso   waste poses possible threats to human health or the

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                       environment and that once something is waste, producers          tributors of electrical and electronic equipment can return
                       of the substances or objects may no longer have the self-        such equipment from private households free of charge.
                       interest necessary to ensure that appropriate safeguards         The aim of these measures is to increase recycling of waste
                       are adopted. It is, however, recognised in this guidance         electrical and electronic equipment and to reduce the total
                       that the waste can cease to be waste once it has been            quantity of such waste going to final disposal. Producers
                       subject to a recovery operation which results in it being        will thus have increased incentives to design electrical and
                       able to be used as a raw material in the same way as raw         electronic equipment in an environmentally more efficient
                       materials of non-waste origin.                                   way, taking waste management aspects into account.
                          Some special categories of waste are subject to                  In addition, the End of Life Vehicles (ELV) Directive
                       additional duties and controls. The law recognises the           (2000/53/EC), adopted on 20th October 2000, aims to
                       concept of special waste, which is defined as being               prevent waste from ELVs and promote the collection, re-
                       dangerous or intractable waste. The keeping, treating and        use and recycling of their components to protect the
                       disposal of special waste is governed by a separate regime       environment. The ELV Directive requires Member States
                       which provides additional duties and controls on the             to ensure that ELVs can only be scrapped (‘treated’) by
                       consigner, carrier and disposer of it. Special waste is          authorised dismantlers or shredders, who must comply
                       defined by reference to a hazardous waste list and certain        with tighter environmental standards.
                       general property indicators set out in the Schedules to the
                       Special Waste Regulations 1996. These require the
                                                                                        6.     Can I store and/or dispose of waste on my property?
                       Environment Agency to allocate an identifying code to
                       consignments of special waste or carrier rounds (regular         Part II of the EPA 1990 introduces the concept of the waste
                       movements of the same type of special waste). There are          ‘‘duty of care’’ which requires (in addition to other requi-
                       detailed provisions for the preparation and use of               rements) producers of waste to ensure that waste is stored
                       consignment notes including a requirement for pre-               safely on their premises so as to avoid its escape. This how-
                       notification of special waste movements in certain cases          ever only applies in the case of waste arising from the prem-
                       and requirements to keep records and documents for a             ises itself. If the intention is to undertake some treatment
                       certain period of time.                                          activity on the premises or to take in third parties’ waste
                          Radioactive waste is subject to different legislative         for storage pending consignment for end disposal then this
                       requirements than waste generally. The Radioactive               will require the grant of a waste management licence under
                       Substances Act 1993 requires a person to hold an                 Part II of the EPA 1990. Planning permission will also be
                       authorisation in order to dispose of any radioactive waste       required for this use if a change of use of a property is in-
                       whether on land, by water or by atmospheric discharge            volved. Depending on the type of storage undertaken, it
                       on or from any property which the person uses for the            may, however, be possible to register for an exemption
                       purposes of an undertaking or to cause or permit any             from the requirement to obtain a waste management li-
                       such waste to be disposed of if the person knows or has          cence provided the limitations and exceptions that apply
                       reasonable grounds to believe it is radioactive without an       can be complied with. This will not, however, discharge
                       authorisation. An authorisation is also required for the         the need for planning permission.
                       accumulation with a view to subsequent disposal of                  Activities involving the actual disposal of waste will
                       radioactive waste upon premises other than premises used         always require a permit of some kind – this may for
                       by the Atomic Energy Authority or for which there is a           example be under the waste management licensing regime
                       nuclear site licence. Substances resulting from the produc-      or under the IPPC regime. Planning permission will also
                       tion, keeping or use of radioactive materials on premises        be required for such activities. Applications for disposal
                       and which remain there for more than three months are            of waste under both the planning and environmental
                                                                                        licensing systems will require the disposer to demonstrate
England & Wales




                       presumed to be radioactive waste for the accumulation of
                       which an authorisation is required.                              that operation of the disposal site poses no harm to human
                          As a separate category packaging waste is subject to          health or the environment, or that measures will be taken
                       producer responsibility obligations for its reuse, recovery      to prevent this occurring, and that the person is qualified
                       and recycling. Companies with a turnover of over £2              to operate the site and can offer appropriate financial
                       million handling over 50 tonnes of packaging annually            guarantees relating to adoption of appropriate environ-
                       are required to recover and recycle a proportion of their        mental control measures both during and following
                       packaging waste. Packaging includes cardboard, glass,            closure of the disposal site. It should not be automatically
                                                                                        assumed that it will be possible to dispose of waste on
                       plastics and metals together with wood and other
                                                                                        one’s own property. Furthermore, there may be objections
                       packaging products. The level of obligation depends upon
                                                                                        from local residents to any application for planning
                       the use to which the company puts the packaging products
                                                                                        permission or for an appropriate environmental consent
                       and the amount of packaging handled. Producer respon-
                                                                                        and such objections must be taken into account by the
                       sibility obligations are discharged either by dealing directly
                                                                                        decision maker in reaching its decision.
                       with reprocessors and providing data to the Environment
                       Agency on an annual basis together with certificates of
                       compliance and returns or by joining a collective scheme,        7.     If I transfer waste to a lawful recipient, do I retain
                       which, for a fee, bears the burden of compliance on behalf              any residual liability in respect of it (e.g. if the
                       of its members. Various offences arise as a result of breach            transferee/ultimate disposer goes bankrupt/
                       of these obligations.                                                   disappears)?
                          A further category of waste that is dealt with specifically    The short answer to this is no. However in English law all
                       is waste electrical and electronic equipment. European           waste is subject to the waste duty of care, which is a cradle
                       Union Directive 2002/96/EC requires Member States to             to grave responsibility. The waste duty of care requires
                       set up collection systems under which final holders and dis-      the person subject to the duty to take reasonable steps to

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prevent any other person committing a waste manage-              environmental legislation regulating the conduct of
ment offence, to prevent the escape of waste from his            potential polluters. In relation to waste offences, the
control or that of any other person, to ensure that on the       following defences are available,
transfer of waste such transfer is only to an authorised         I Due diligence defence, so that if the defendant can
person or to a person for authorised transport purposes             show that in the process of depositing waste illegally he
and when waste is transferred to ensure that there is also          took all reasonable precautions and exercised all due
transferred a written description of the waste sufficient to         diligence to avoid commissioning the offence, prose-
enable each person receiving it to avoid committing a               cution is avoided.
waste offence and to comply with the duty of care. That          I Agency type defence, so if the defendant can show he
said, a person is only expected to take measures which              was acting under instruction from his employer and
are applicable to him in whatever capacity he acts and              neither knew, nor had reason to suspect, that the acts
which are reasonable in the circumstances. Accordingly a            constituted an offence then the defence may be relied
producer of waste will be required to identify the                  upon.
composition of waste, prepare and supply a waste                 I Acted in an emergency defence, which requires the
consignment note, pack the waste safely for consignment,            defendant to prove that the acts constituting the offence
store it safely and transfer it to a person who has the             were done in an emergency to avoid harm to human
appropriate environmental licences to handle and dispose            health and all steps as were reasonably practicable in
of it. So, for example, a producer must check that any              the circumstances for minimising pollution of the
person proposing to transport its waste has an appropriate          environment and harm to human health were taken
licence (known as a carriers’ licence) and that the place of        and particulars furnished to the Environment Agency
intended final disposal is registered to accept the type of          as soon as reasonably practicable.
waste being consigned.                                           Defences to water pollution offences are available under
   It has been common practice since the implementation          the Water Resources Act 1991 where the defendant can
of Part II of the EPA 1990 for the Environment Agency            show in relation to the discharge that it was in accordance
to insist that operators provide a financial guarantee or         with licence conditions, or in relation to an unauthorised
bond, in order to ensure that funds are available to             discharge that it was necessary in an emergency to avoid
undertake any clean up works required during the                 danger to life or health, all reasonable steps were taken to
operation of a landfill site or following its closure.            minimise the harm and particulars were furnished to the
   Whilst the general concept is that the polluter pays,         Environment Agency as soon as possible.
where the producer of waste has taken adequate and                  In relation to the contaminated land regime, it is a
reasonable steps to comply with his obligations and duties       defence to a prosecution for failure to comply with a
under the law with regard to safe handling and disposal          remediation notice to show that the reason it was not
of waste then he effectively passes this burden on to the        complied with was because a joint polluter could not, or
end disposer who then becomes responsible for ensuring           would not, pay his allocated share of the cost of
that it does not pose a risk of harm to the environment or       compliance.
to human health on the basis of having been paid to                 In relation to statutory nuisance (i.e. any of several
undertake this task by the waste producer or its agent           categories of nuisance set out in section 79 of the EPA
through the chain of disposal.                                   1990, including smoke, dust, noise, etc, which are
                                                                 prejudicial to human health or a nuisance) it is a defence
 Liabilities                                                     to a prosecution in respect of a statutory nuisance on an
                                                                 industrial trade or business premises to show that the best
8.     What sort of liabilities can arise where there is a       practicable means were used to counteract the effects of




                                                                                                                                       England & Wales
       breach of environmental laws and/or permits, and          the nuisance.
       what defences are available?                                 Civil liability may also arise for breach of tort law. The
Breach of environmental law can give rise to both criminal       tort of particular relevance to environmental protection is
and civil liabilities. Criminal offences are normally            that of nuisance, which gives rise to remedies of damages
structured so that offences arise as a result of polluting the   and/or an injunction where an unlawful interference with
environmental medium which is the subject of protection          a third party’s right of ownership or enjoyment of land
by legislation, such as failing to hold an environmental         takes place. This is commonly pleaded in relation to
permit in relation to the activity undertaken or discharge       spillages, leakages and emissions, including noise and
or emissions made and for failing to comply with notices         dust, from one party’s land to that of its neighbour(s). The
that the regulator has served in respect of the pollution. It    principle of strict liability also applies to nuisance. The
is also a criminal offence to prevent the regulator using its    harm, however, must be reasonably foreseeable at the
powers of entry and investigation in certain circumstances.      time of creation of the nuisance, but if it is, regardless of
The offences are generally strict liability offences so that     whether the company took all steps to prevent the
no intention to commit the crime or malice or negligence         nuisance from occurring and used state of the art
is required in order for a prosecution to succeed. Criminal      technology in its industrial processes, the offence is still
liability may also attach to directors, managers, secretaries    made out, other than in limited circumstances where the
or other similar officers (or persons purporting to act in        defendant can rely on a defence of statutory authority
such a capacity) where an environmental offence that was         (such as in the case of Gateshead Metropolitan Borough Council
committed by a corporate entity is proved to have been           v Secretary of State for the Environment [1995] Env LR 37,
committed with the consent or connivance of, or to have          where planning permission for a commercial dock
been attributable to any neglect on the part of, any such        development changed the character of an area to an
person.                                                          extent that provided a defence to nuisance claims).
    The available defences depend upon the particular               Importantly, action can be taken even if no environ-

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                       mental offence has been committed; compliance with an            9.     Can an operator be liable for environmental damage
                       authorisation does not, for example, provide an automatic               notwithstanding that the polluting activity is
                       defence against a civil action for nuisance.                            operated within permit limits?
                           The tort of negligence may also be relevant. To succeed      An operator can be liable for environmental damage
                       a claimant must show that the defendant owes a duty of           caused to a third party, notwithstanding the polluting
                       care to him, that there has been a breach of that duty and       activity is operated within permit limits.
                       the damage of which he complains is a foreseeable                   Furthermore, it is possible under the IPPC regime and
                       consequence of the breach. Unlike nuisance, the claimant         Part I of the EPA 1990 for operators to be found liable
                       does not need to establish an interest in land in order to       for any environmental harm caused, notwithstanding
                       succeed. Difficulties in establishing duties of care may          compliance with the requirements of a PPC permit or
                       exist where environmental harm results and can often be          Part I authorisation, on the basis of a breach of the
                       problematical, and it is common for negligence to be             implied conditions requiring adoption of best available
                       pleaded in the alternative to nuisance. A further barrier        techniques (BAT) in the case of the IPPC regime and best
                       to recovery is that in the absence of personal injury or         available techniques not entailing excessive cost (BAT-
                       physical damage to property occurring, a person is unable        NEEC) for the purposes of Part I of the EPA 1990. Some
                       to recover for purely economic loss.                             form of failure to properly manage staff and/ or manage
                           The tort of trespass has also been pleaded in environ-       or maintain equipment usually forms the basis of such
                       mental cases but to succeed the claimant must show that          alleged breaches.
                       the defendant’s unlawful act has caused a direct physical
                       interference with the land. Furthermore, the claimant
                                                                                        10.    Can directors and officers of corporations attract
                       must have an interest in land. Proving direct interference
                                                                                               personal liability for environmental wrongdoing?
                       has proved difficult as, for example, the discharge of
                       polluting materials discharged into water and carried by         Personal liability for directors and officers of companies
                       the current before reaching the claimant’s property has          can be imposed for breaches of environmental law if, as a
                       been held not to amount to a direct interference.                result of their own acts or omissions, they can be said to
                           Statutory civil liability may also arise, for example        have created the circumstances giving rise to the commis-
                       under section 73(6) of the EPA 1990 which provides that          sioning of the offence.
                       where any damage is caused by waste deposited in, or on,            Personal liability can also be imposed for breaches of
                       land in such a manner as to constitute an offence, the           environmental law where the offence committed by a
                       person who deposited, or knowingly caused or permitted           company is proved to have been attributable to the
                       it to be deposited, is liable for the damage. Liability arises   consent or connivance of any director or officer or other
                       whether or not the person is prosecuted for a waste              person acting in a similar capacity, or is attributable to
                       offence (see also Question 4).                                   any act or neglect on the part of any such person. In such
                           The rule in Rylands v Fletcher may also form the basis of    cases both the company and the director may be guilty of
                       a civil claim, although it is now clear that this is not a       an offence.
                       separate cause of action distinct from nuisance but is              In the UK few prosecutions for breach of environmental
                       rather a particular type of nuisance claim. The case             law have been brought against directors of companies, as
                       establishes the principle of strict liability for damage         opposed to the company itself, and where this has been
                       caused by a dangerous accumulation of a substance                the case it has tended to involve the direct involvement of
                       escaping from land, provided the damage is foreseeable.          the director or officer in the offence committed e.g. where
                       It does, however, require that the land from which the           there are small firms involved and the director is the sole
                       escape takes place be used for a non-natural user. Storage       director of the company.
England & Wales




                       of substantial quantities of chemicals on industrial
                       premises was considered by the House of Lords in                 11.    What are the different implications from an
                       Cambridge Water Company v Eastern Counties Leather plc [1994]           environmental liability perspective of a share sale on
                       2 AC 264 to be an almost classic case of non-natural use                the one hand and an asset purchase on the other?
                       of land. However, the House of Lords in that case held           The fundamental distinction is that when one buys the
                       that in 1976 it was not reasonably foreseeable to those          shares of a company one effectively inherits all environ-
                       responsible for the day-to-day operation of the tannery          mental liabilities associated with the business that the
                       that incidental spills and leaks of chemicals that occurred      company operates, or has historically operated, and any
                       in the course of such operation would result in contami-         property that it currently owns and has owned; whereas
                       nation of an aquifer utilised by a water company for large       in an asset purchase the purchaser does not automatically
                       volume public water supply, and accordingly no liability         take on liability for any current and ongoing failure of
                       for damages resulted.                                            another entity to comply with environmental law in
                           There are some categories of harm which English law          relation to the asset acquired. A key risk for the purchaser
                       does not recognise, such as in the cases of Hunter and others    in an asset purchase is that if the purchaser is aware of a
                       v Canary Wharf Ltd and Hunter and others v London Dockland       breach of environmental law and/or an environmental
                       Development Corp [1997] All ER Vol. 2, where interference        condition in relation to the asset acquired and has the
                       with television reception caused by the mere presence of         ability to prevent the breach continuing or otherwise to
                       a building was held not capable of constituting an               remedy the environmental condition, then the person
                       actionable private nuisance.                                     concerned might be said to be a knowing permitter, if not
                           Officers and employees as well as the undertaking             a causer of an ongoing environmental problem that can
                       concerned can incur personal civil liability if responsible      result in liability, or in certain circumstances become
                       for the event that gives rise to damage (see also Question       liable merely as a result of being an owner or in
                       10).                                                             occupation.

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   In the majority of cases, breaches of environmental law     should take to avoid the contamination continuing to
attach to operation of the business to be acquired and/        satisfy the definition of contaminated land.
or ownership of a site and so the situation is the same or        The regime is based on a suitable for use approach and
similar in relation to current and ongoing breaches            cost and reasonableness considerations are relevant in
whether the transaction is structured as a share or an asset   determining the extent of remediation. Liability to
purchase. It could, however, be said that in the case of an    undertake or, in the event that it is not done voluntarily,
asset purchase, an environmental regulator might be            pay for remediation lies with the appropriate person. This
more concerned to pursue the seller of the assets for          is the person who caused or knowingly permitted the
historical claims although the potential for concurrent        presence of the substance that caused the contamination.
action being taken against the new owner should not be         Equally however it could be a person who has subse-
ruled out.                                                     quently acquired the site (whether by acquiring a freehold
   In the case of a share sale, as the purchaser essentially   or leasehold interest) who though aware of the presence
steps into the outgoing shareholders shoes, the seller         of the pollutant had allowed the situation to continue.
should (in the absence of any agreement to the contrary)       Such a person could incur liability either by action it took
escape any liability which subsequently crystallises in        or by doing nothing to prevent the continued presence of
terms of action pursued by the regulator against the           the pollutant where it poses an apparent risk, in
company. This will instead normally be focused on the          circumstances where the person concerned had assumed
company itself.                                                the risk or otherwise had a nexus with the contamination
   In practice, the availability of a wide range of            such that the person should be taken to be responsible,
contractual and other mechanisms for transferring and          such as by actively allowing a source-pathway-target
otherwise allocating environmental risk means that in          relationship to arise with respect to the contamination in
many respects the difference between a share and asset         the context of a redevelopment. On the other hand, it is
purchase may be minimal.                                       possible that a lower test of standing by with knowledge
                                                               might satisfy the test, depending on how the Courts
                                                               choose to interpret the term knowingly permitted under
 Contaminated Land                                             Part IIA EPA 1990. The appropriate person may equally
                                                               be the owner or occupier for the time being if the original
12.    What is the approach to liability for historic          polluter cannot be identified after reasonable enquiry.
       contamination of soil or groundwater?                      The regime is complex and includes detailed provisions
The approach of the regulator to liability for historic        on exclusion from liability and allocation of liability on
contamination depends very much upon the circum-               various grounds between groups of polluters (see below)
stances that apply.                                            as well as the apportionment of the costs of remediation
    Where it is proposed to redevelop a contaminated site      between such persons. In light of the liabilities that can
in the short term pursuant to a grant of planning              arise under this regime it is good practice to ensure that,
permission, the usual approach is for the planning             on acquiring a freehold or leasehold interest in a site,
permission to be subject to conditions requiring investi-      adequate consideration is given to the potential for
gation and clean up of the site to a standard where it         environmental liabilities to arise as a result of historic
becomes fit for its intended purpose pursuant to that           usage of the site, and address apportionment of the risk
permission. In this case usually the developer will pay for    between the parties as they agree. Such agreements may
the cost of remediation which will normally be factored        be upheld by the regulator though they may also be
into the costs of the project and recoupable as a              disregarded by the regulator. This does not, however,
consequence of the sale or lease of the resulting develop-     affect the question of liability sharing as between the




                                                                                                                                     England & Wales
ment.                                                          parties, although the current and continued solvency of
    Where it is not intended to redevelop historically         the parties should be considered before entering into any
contaminated land in the short term, whether action is         such agreement.
required to be taken depends on the level of contamina-           Liability for historic contamination of soil or ground-
tion. Part IIA of the EPA 1990, which came into force on       water may also give rise to an ability for a third party to
1st April 2000, sets out a statutory regime for dealing with   bring proceedings to claim remedies where pollution has
the most seriously contaminated land. The regime also          or is migrating onto its land. This is a civil liability that
covers the situation where land contamination is causing       arises under the law of torts and that most commonly
pollution of controlled waters.                                pleaded is the tort of nuisance. Nuisance arises where
    Under the regime local authorities are required to         there is an unlawful interference with the use and
consider whether any land in their areas should be             enjoyment of land or some right enjoyed over, or
classified as contaminated land (which involves consider-       connected with it. The remedies include the grant of a
ing source-pathway-target relationships and risk assess-       prohibitory injunction and/ or damages for the harm
ment). There is no general requirement on an owner or          caused. Ultimately, clean up may be required to avoid
occupier to notify the local authority of the existence of     further claims arising, or breach of any injunction ordered
contamination (except in circumstances where develop-          by the court.
ment requiring planning permission is to be undertaken).          Purchasers and tenants of land which is in a state giving
If a finding is made that land satisfies the definition of        rise to an actionable nuisance can be liable for continuing
contaminated land, then a statutory requirement arises         the nuisance if they knew, or ought reasonably to have
on the part of the local authority as regulator (or the        known of it, could have reasonably foreseen that it would
Environment Agency, in the case of certain sites known         cause the harm and could have taken reasonable steps to
as Special Sites) to consider whether there is a need for      prevent or abate it but have failed to do so. In such a case,
remediation, and exactly what form that remediation            liability is joint and several so that liability for the whole

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                       of any damage caused could fall upon the buyer/tenant            contamination as a result of escapes of substances from
                       in addition to the person who originally caused the              other land where another Class A person is responsible
                       nuisance.                                                        for that escape, and Test 6 excludes from liability those
                                                                                        persons who would be liable solely because somebody else
                       13.    How is liability allocated where more than one            has subsequently introduced a relevant pathway or
                              person is responsible for the contamination?              receptor. This test however only applies where develop-
                       This question depends upon whether liability arises as a         ment or a change of use has occurred on the contaminated
                       result of liability under the contaminated land regime or        land itself.
                       under tort law.                                                      Having applied the exclusion tests, the regulator is then
                          Statutory guidance issued in connection with the              required to apportion liability between members of the
                       contaminated land regime sets out the rules that apply           Class A liability group so as to reflect the relative
                       where more than one person is deemed to be responsible           responsibility of each of those members for creating or
                       for contamination. The rules differ depending upon               continuing the risk now being caused. If no information
                       whether the liability group comprises so called Class A          is available to make an assessment of relative responsibility,
                       persons, that is persons who have caused or knowingly            the statutory guidance informs regulators to apportion
                       permitted the presence of the pollutants, or whether it          liability in equal shares.
                       comprises Class B persons, as a result of being the owners           In relation to Class B liability groups, the only exclusion
                       and/ or occupiers for the time being, in the absence of an       test applicable is to exclude those who do not have an
                       inability to identify Class A persons after reasonable           interest in the capital value of land. Accordingly, regulators
                       enquiry.                                                         are told to exclude any person who either occupies the
                          The exclusion tests and subsequent apportionment tests        land under a licence or under any other agreement of a
                       are designed to ensure that it is fair for members of the        kind which has no marketable value, which is not legally
                       liability group to bear responsibility for remediation. In       capable of being assigned or transferred, and those liable
                       relation to Class A groups, the regulator is required to         to pay rent which is equivalent to the rack rent for such
                       first consider whether any of the tests for exclusion from        of the land in question as is occupied and who hold no
                       liability apply. There are 6 tests in total and judgments in     beneficial interest in that land other than the tenancy to
                       relation to whether or not the tests apply is to be on the       which rent relates. A rack rent is a rent representing the
                       balance of probability, after considering the relevant           full or nearly full annual valuation of the property on a
                       information that has been obtained. The exclusion tests          given set of terms and conditions. Again the test is not to
                       must be applied in the sequence in which they are set out.       be applied if it would result in the exclusion of all the
                       They must not be applied to exclude every member of              members of the liability group.
                       the liability group. This means essentially that the                 In terms of apportionment between members of a
                       responsible person for bearing the cost of remediation           Class B liability group, the guidance indicates that where
                       may well therefore be the last one or ones left. Test 1          remediation is referable to a particular area of land,
                       relates to excluded activities and excludes those persons        liability should be apportioned to members who own or
                       who have had a minimal involvement in land as a result           occupy that particular area of land. Otherwise apportion-
                       of carrying out certain activities e.g. lenders, underwriters,   ment should be made on the basis of the capital value of
                       consultants, lawyers and persons performing any contract         the land in question. The statutory guidance contemplates
                       by providing a service of supplying goods where the              the scenario where contamination of land may well be
                       contract is made with another person who is also a               referable to more than one pollutant linkage, that is, the
                       member of a liability group in question. Test 2 relates to       identification of a specific contaminant, a pathway by
                       payments made for remediation so that where members              which it can be conveyed and a specified receptor (which
England & Wales




                       of the liability group have already made payments to             must be one of the objects identified within the statutory
                       other members of the liability group for remediation but         guidance) and significant harm is being caused, or there
                       that remediation has not been carried out the persons            is a significant possibility of such harm occurring, or
                       making the payment are excluded. Test 3 is the sold with         pollution of controlled waters is likely to occur. Where
                       information test. This test excludes members who have            two or more significant pollutant linkages are identified
                       sold or let on a long lease land which is contaminated and       in respect of land, or where those linkages each require
                       have ensured that the purchaser or lessee had sufficient          the same action (or a particular action is the best combined
                       information about the nature and presence of the                 remediation package for two or more linkages) it may be
                       contaminant and have had the opportunity to take that            necessary to apportion between different liability groups
                       into account in agreeing the purchase price. This guidance       i.e. it may be both a Class A and a Class B liability arise.
                       indicates that in respect of transactions carried out since      If that is the case the resulting apportionment will depend
                       1990 between large commercial organisations or public            upon whether the action is necessary to address a number
                       bodies, where permission by the seller has been given to         of pollutant linkages or if there is a remediation package
                       the purchaser to carry out investigations this may in some       to deal with a number of different types of remedial
                       cases be enough to satisfy the test. The purchaser or lessee     action.
                       essentially steps into the shoes of the seller or lessor and         In terms of civil liability for contaminated land, liability
                       takes on their responsibility to undertake or pay for            is joint and several. Accordingly if one of the torts of
                       remediation. Test 4 excludes persons who have brought            nuisance, negligence, trespass or breach of statutory duty
                       substances on to the land that have only become                  is made out then if breaches by different persons caused
                       contaminants due to the introduction of other substances         the claimant to suffer a single loss, single injury or damage,
                       by other persons or other persons have caused physical           he is entitled to sue all or any of them for the full amount
                       changes to those substances.                                     of his loss. This is particularly pertinent in the case of the
                          Test 5 excludes persons who are the victims of                tort of nuisance as subsequent owners or occupiers can be

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said to adopt a continuing nuisance caused by predecessor       need to serve a remediation notice. Accordingly, despite
in certain circumstances. Until 1978, the general rule of       any agreement reached between the parties, it would be
common law was that one concurrent tortfeasor, even if          possible to insist on additional works, though again so
he had satisfied the claimant’s judgment in full, could not      long as the regulator is satisfied that the agreed remedia-
recover indemnity or a contribution towards his liability       tion works are achieving their objectives it is precluded
from any other tortfeasor liable. In 1978 the passing of        from serving a remediation notice.
the Civil Liability (Contribution) Act changed the general          In terms of third party challenges, then it is conceivable
rule, enabling a tortfeasor to claim contribution from          that, where an agreement is reached between a party and
other tortfeasors responsible for the same loss or damage.      a regulator with regard to remediation works to be carried
In apportioning responsibility for the loss or damage, the      out on the party’s land, a third party could challenge the
court must do so on the basis of the evidence, with all         agreement by way of judicial review in the Administrative
allowances being in the claimant’s favour. In the last          Court on the basis of the agreement representing a
resort it may however be required to use arbitrary matters      decision by the regulator. However, in order to successfully
in order to apportion liability. The Act does not prevent       challenge the agreement, the third party would be
the claimant from recovery of his whole loss from which         required to show grounds for bringing judicial review. In
other defendant he chooses.                                     summary the grounds are:
                                                                I Illegality, that is to say the decision maker has failed to
14.    If a programme of environmental remediation is               understand the law which regulates its powers and give
       ‘agreed’ with an environmental regulator can the             effect to it;
       regulator come back and require additional works or      I Irrationality, that the agreement reached or the actions
       can a third party challenge the agreement?                   intended to be taken pursuant to the agreement are so
The nature of contaminated land is such that it is not always       outrageous in their defiance of logic or accepted
possible to determine at the outset of a remediation pro-           standards that no reasonable regulator, who had
gramme exactly what will be required to be done to reme-            applied his mind to the question of remediation, could
diateit. Consequently,andsubjecttoproceduralsafeguards              have arrived at the same decision; and/or;
such as the concept of the regulator acting reasonably and      I Procedural impropriety, that there has been a failure
the requirement for appropriate and proportionate regula-           to act fairly or the agreement was reached in breach of
tion, a regulator can require additional works to be carried        the rules of natural justice;
out even though a programme of environmental remedia-           Applications for judicial review must be made promptly,
tion has been ‘‘agreed’’, as where the regulator becomesdis-    within three months of the date when the grounds for the
satisfied with the progress of the remediation works or          application first arose. The applicant must also show that
considers that the works will not achieve the remediation       it has sufficient interest in the matter, mere busybodies will
objectives which had been agreed.                               be refused. That said, it is likely that a court would find
   A good example of this principle arises in the context       that there is sufficient interest for a neighbour who is, or
of the contaminated land regime. One of the main policy         may be affected by the presence of contamination from the
aims of the regime is that remediation should be                contaminated site, and/or local residents who may be con-
undertaken by voluntary agreement, rather than formal           cerned about the local environment more generally. In ap-
action by the regulator. There are various incentives to        propriate circumstances, environmental pressure groups
do this including an exemption from the requirement to          may also be found to have sufficient interest.
pay landfill tax in respect of material removed from                 Third parties may complain to the Local Government
contaminated land in order to prevent harm or to facilitate     Ombudsman if they feel that a local authority’s behaviour
the development of the land for particular purposes.            has resulted in injustice as a result of mal-administration.




                                                                                                                                      England & Wales
   The standard of remediation to be achieved is that           The Ombudsman will investigate the complaint and make
where the land is fit for its current purpose or use or any      findings including rulings for compensation in the event
other intended or allowed lawful uses of it. The level of       the complaint is upheld. The Parliamentary Ombudsman
remediation is determined on a cost/ benefit analysis so         investigates complaints concerning such issues where the
that remediation should be cost effective compared with         Environment Agency is involved.
the harm the contaminant represents in the context of
those uses.
   When a person is willing to undertake remediation            15.    Contaminated Land: Does a person have a private
voluntarily, the regulator is required to consider what is             right of action to seek contribution from a previous
proposed and whether it would achieve the appropriate                  owner or occupier of contaminated land when that
standard of remediation. So long as satisfied this would                owner caused, in whole or in part, contamination?
be achieved, the regulator is precluded from serving a          Much depends upon the details of the particular matter.
statutory remediation notice. Instead, the person who is        Whilst it is a general principle of environmental law that
carrying out, or will carry out, the remediation is required    the polluter should pay for any pollution he causes, this
to prepare and publish a remediation statement. The             conflicts with the general rule in relation to property
regulator is urged to keep under review the remediation         transactions of ‘‘caveat emptor’’ or buyer beware. Accord-
that has been, or will be, carried out pursuant to the          ingly, a potential buyer or tenant must satisfy itself as to
remediation statement and to consider whether any               the state and condition of the property to be acquired or
additional remediation is necessary. The statutory guid-        leased, subject though to the seller or landlord’s obligation
ance indicates that if the regulator is at any time not         to disclose matters about which the other party expressly
satisfied that appropriate remediation has been or will be       seeks information. Private rights of action may therefore
carried out, for example as a result of information             arise where there has been a failure to make such
obtained during the carrying out of remediation, it may         disclosure or as a result of a breach of contract for

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                       misdescription, misrepresentation or fraudulent conceal-           the polluter either to remedy the consequences of any
                       ment. Representations about the state or condition of the          harm caused or pay the costs incurred by the regulator in
                       land could amount to misdescription where the result is            doing this. For example under the Water Resources Act
                       to deprive the purchaser of what he contracted to buy              1991, the Environment Agency is given powers to take
                       and would have effected his decision to purchase the               action to prevent or remedy the pollution of controlled
                       property. The remedy is the rescinding of the contract             waters. The consequences of such pollution may give rise
                       and the provision of damages to compensate for any loss            to a need for actions to prevent aesthetic harm to the river
                       that results. Representing that a property is free from            e.g. by preventing a fish kill or replacement of dead fish
                       contamination when it is, in fact, heavily contaminated            or containing and cleaning up oil pollution. The Environ-
                       may give rise to a right to remedy. Misrepresentation              ment Agency is entitled to carry out works itself in certain
                       requires there to be a misrepresentation of a material fact        circumstances and recover any expenses reasonably
                       in relation to the property, which may arise for example           incurred or it can serve a works notice on the responsible
                       where answers to preliminary inquiries are false or                person requiring them to conduct remedial works.
                       misleading, and gives rise to a right of action for damages           This issue is addressed, to an extent, by the recent
                       and/or rescission of the contract depending on the nature          European Council common position on an EU environ-
                       of the misrepresentation. The remedies are also the same           mental liability directive (the ‘‘Common Position’’), which
                       in relation to fraudulent concealment, which involves the          proposes to extend a public liability regime across Europe
                       seller actively concealing some defect in the property.            to include both unowned and natural resources as well as
                          Liability in environmental law for contamination is typ-        owned natural resources that have a particular value.
                       ically predicated on the basis of ‘‘causing’’ or ‘‘knowingly          The liability regime focuses on: damage that signifi-
                       permitting’’, and subsequent owners or occupiers may be            cantly adversely affects the ecological, chemical and/or
                       liable for contamination which pre-exists their ownership          quantitative status and/or ecological potential of waters
                       or occupation of a site where they both have the knowledge         covered by the Water Framework Directive; land and soil
                       of the presence of the substance causing pollution and the         contamination from human activity which creates a
                       possession of the power to prevent the substance being             significant risk of human health being adversely affected;
                       there. As a consequence a private right of action to recover       and ‘environmental damage’ that is limited to damage to
                       against the original polluter may also arise where the sub-        species or habitats which are protected under EU law or
                       sequent owner or occupier has been found joint and sev-            any national law of an EU Member State. This latter
                       erally liable at common law for contamination. The Civil           category essentially amounts to biodiversity damage.
                       Liability (Contribution) Act 1978 allows any person liable            The inclusion of biodiversity damage could potentially
                       in respect of any damage suffered by another to recover a          give public authorities the ability to claim damages for
                       contribution from any other person liable in respect of the        aesthetic harms, given that the Common Position specifi-
                       same damage (whether jointly or otherwise). A person is            cally allows for ‘compensatory remediation’, which is
                       liable under the provisions of the Act whether the basis of        action taken to compensate for the interim loss of natural
                       his liability is in tort, breach of contract, breach of trust or   resources and the services they provide pending recovery.
                       otherwise. The amount of contribution that can be or-              The Common Position states that this type of compensa-
                       dered is such as may be found by the court to be just and          tion (which is in addition to primary and/or complemen-
                       equitable having regard to the extent of the person’s re-          tary remediation) consists of additional improvements to
                       sponsibility for the damage in question. Where the court           protected natural habitats and species or water at either
                       considers it appropriate it can exempt the defendant from          the damaged site or at an alternative site, and that it does
                       any liability to make a contribution or direct that the con-       not consist of financial compensation to members of the
                       tribution recoverable shall amount to a complete indem-            public. Thus effectively the public authority could seek
                       nity. The court’s powers are however subject to the                financial compensation from the person responsible where
England & Wales




                       overriding principle that one defendant cannot be found            the environmental damage had had a material impact on
                       liable to pay a greater sum than can be recovered from him         the aesthetic amenity of the damaged protected habitat.
                       by the claimant.                                                   Of course, this type of compensation remedy is to some
                          It is apparent from the above that difficulties may exist        extent already available under the UK contaminated land
                       in terms of a subsequent owner being able to pursue a              regime, where remediation (or payment of remediation
                       private right of action against the original polluter because      costs) can be required where significant harm results in
                       an action must fall under one of the headings identified.           an irreversible adverse change or some other substantial
                       Accordingly the sensible approach is to ensure that the            adverse change to the functioning of protected ecological
                       potential for contamination is identified at the outset of          systems or harm endangering the long term maintenance
                       the property transaction, by for example commissioning             of the population of any species of special interest.
                       an environmental consultant to report on these issues,
                       and to include provisions within the contract for sale or
                       agreement for lease allocating liability between the parties        Powers of regulators
                       according to their intentions.                                     17.    What powers do environmental regulators have to
                                                                                                 require production of documents, take samples,
                       16.    Does the government have authority to obtain from                  conduct site inspections, interview employees, etc?
                              a polluter monetary damages for aesthetic harms to          Environmental regulators have wide powers to obtain
                              public assets, e.g., rivers?                                information to enable them to discharge their functions.
                       The government does not at present have specific                    The nature of these powers depends on the circumstances.
                       authority in the UK to obtain monetary damages for                 For example, under section 36(1) of the EPA 1990
                       aesthetic harm to public assets. Environmental regulators          applications for waste management licences must be
                       do, however, usually have clean up powers which require            accompanied by such information as the waste regulation

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authority reasonably requires. Another example is Section        typically included in water discharge and abstraction
19(2) of the EPA 1990 which provides that the relevant           licences.
regulatory authorities for the purposes of integrated               Also in certain circumstances a ‘duty to warn’ may
pollution control and local authority air pollution control      arise under common law, as where a person responsible
may by written notice require any person to furnish the          for a dangerous incident or state of affairs is aware that it
authority with such information as the authority reason-         poses a danger to third parties.
ably considers it needs, in such form and within such
period as is specified in the notice; it is an offence to fail,   19.    When and under what circumstances does a person
without reasonably excuse, to comply with any require-                  have an affirmative obligation to investigate land for
ment of such a notice. A similar provision appears in                   contamination?
section 71 of the EPA 1990 enabling waste regulation
authorities to require persons to provide information            There are certain circumstances where a person does
about waste management and disposal activities. An               have an affirmative obligation to investigate land for
almost identical provision appears in section 202 of the         contamination. For example, it is a requirement that a
Water Resources Act 1991, concerning information                 site condition report be submitted to the enforcing
reasonably required by the Environment Agency in                 authority where the (proposed) operator of a Part A IPPC
connection with the control of water pollution. It would         activity is contemplating making an IPPC permit appli-
also be open for the Environment Agency under section            cation. Site investigations may also be necessary where
161A of the Water Resources Act 1991 to serve a works            they are stipulated (or could be included) in a remediation
notice on a person who caused any poisonous, noxious or          notice served under the contaminated land provisions of
polluting matter to be present in any controlled waters,         Part IIA of the EPA 1990 or a works notice served under
or to be present in a place from which it is likely (in the      section 161A of the Water Resources Act 1991. They
opinion of the Agency) to enter any controlled waters,           may also be required as a condition to a planning consent,
requiring the person to conduct investigations and to take       given that the issue of whether any given land is
samples and provide other information about the circum-          contaminated to an extent that requires remediation in
stances pertaining to the pollution or likely pollution.         order for a proposed development to proceed is a material
Applicants for integrated pollution, prevention and              consideration in the planning process.
control permits in respect of so-called Part A activities
must provide a site condition report with their application      20.    Is it necessary for a seller to disclose environmental
and this may in certain circumstances require intrusive                 problems to a prospective purchaser in the context
investigations to prepare. Inspectors under Part VI of the              of a merger and takeover transactions?
EPA 1990, in relation to genetically modified organisms,          The basic position in England and Wales is caveat emptor
have wide powers of entry and inspection, including              (let the buyer beware), and sellers are not required under
power to conduct tests and inspections, and to take              the law to disclose environmental problems to a purchaser
samples of any organisms, articles or substances found in        in the context of merger and takeover transactions.
or on any premises which the inspector has power to              However, the usual approach in mergers and acquisitions
enter.                                                           is for environmental representations and warranties to be
   In addition to information gathering powers contained         required by prospective purchasers as a contractual
in environmental legislation, regulatory authorities also        mechanism to encourage disclosure of information by the
have powers where criminal offences have been commit-            seller. This is because merger and acquisition transactions
ted to obtain information about the commission of the            are normally documented so that a purchaser cannot sue
offences pursuant to powers under the Police and Criminal        for breach of a representation or warranty to the extent
Evidence Act. These include powers to search premises,           the seller has (prior to giving the representation or



                                                                                                                                      England & Wales
conduct sampling and interview persons (including em-            warranty) fairly disclosed information about the matter
ployees) in the course of investigating whether an offence       that would otherwise be a breach of the representation or
has been committed.                                              warranty. Sellers can however be sued for breach where
                                                                 they provide insufficient information to amount to fair
 Reporting/disclosure obligations                                disclosure of the matter concerned. Sellers should always
                                                                 be careful when giving replies to enquiries raised by
18.    If pollution is found on a site, or discovered to be      prospective purchasers concerning environmental mat-
       migrating off-site, must it be disclosed to an            ters, as providing a false or misleading response could be
       environmental regulator or potentially affected third     actionable. In public takeovers, prospective purchasers
       parties?
                                                                 must normally rely on environmental information that is
In England and Wales there is no general legal duty to           publicly available, subject to any contractual arrange-
inform and involve the regulatory authorities upon               ments that may be in place between the parties requiring
becoming aware of an environmental problem. However,             the target to provide information.
there may be reporting obligations in permits. For
example, a permit authorising the operation of a Part A
installation under the UK IPPC regime must include a              General
condition requiring the operator to supply the regulator         21.    Is it possible to use an environmental indemnity to
regularly with the results of the monitoring of emissions               limit exposure for actual or potential environment-
and to inform the regulator, without delay, of any incident             related liabilities?
or accident which is causing or may cause significant
                                                                 Environmental indemnities provide important contrac-
pollution. Monitoring and reporting obligations are also
                                                                 tual mechanisms for allocating environmental risks in
                                                                 transactions. It is possible to use an environmental

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                       indemnity to limit exposure for actual or potential                 Even where this type of special purpose company is
                       environment-related liabilities as well as to effectively        created and run properly in holding contaminated
                       transfer risk for such liabilities to another person, and the    properties that may give rise to environmental liabilities,
                       use of such indemnities is a common way of allocating            it could well be that the financial amount of liabilities
                       environmental liabilities as between a seller and purchaser.     stated in the special purpose company’s balance sheet
                       Following the implementation of the contaminated land            would need to be consolidated with the Group’s accounts.
                       provisions of Part IIA of the EPA 1990, the whole issue
                       of environmental indemnities and the contractual alloca-         23.    Can a parent company be held liable for pollution
                       tion of environmental risks has assumed increased                       caused by an affiliate and/or sued in its national
                       importance. For example, the Statutory Guidance under                   court for pollution caused by a foreign affiliate?
                       Part IIA specifically provides for agreements on liabilities      It was established under the law of England and Wales as
                       to be entered into between persons who are responsible           long ago as the nineteenth century that, as a general
                       for the costs of a remediation action concerning land that       principle, a company’s acts are not the acts of its
                       meets the definition of contaminated land under Part IIA,         shareholders, nor are its liabilities the liabilities of its
                       and that the enforcing authority should generally make           shareholders. The liability of shareholders in a limited
                       determinations on the exclusion, apportionment and               liability company is usually limited to paying up the
                       attribution of liability in order to give effect to such         unpaid amount of the nominal value of their shares. With
                       agreements.                                                      limited exceptions the courts strictly apply this principle
                          Typically environmental indemnities will contain de-          whenever it is sought to attribute the rights or liabilities of
                       tailed provisions as to the scope of the indemnities and         a company to its shareholders, or to regard the property
                       the events that will trigger claims under them. The              of a company as belonging to its shareholders. By way of
                       indemnities normally contain a range of financial and             exceptions to this general rule: (A) If a company acts as
                       other limitations to govern the relationship between the         agent for its shareholders then, on normal agency
                       parties. For example, financial limitations may include de        principles its shareholders may be liable for its acts. The
                       minimis, aggregate thresholds and respective caps for            conduct of the parties will be looked at closely and each
                       claims. There are normally also other limitations limiting       situation will turn on its facts; (B) A company’s sharehold-
                       the purchaser’s ability to claim where the claim arises as       ers may have given direct contractual ‘comfort’ to third
                       a result of post-completion actions by the purchaser.            parties (e.g. guarantees or indemnities); (C) The courts
                       Conduct and dispute resolution provisions are also               will not allow shareholders to ‘‘hide behind’’ a limited
                       typically included. It is not unusual for complex and            company to facilitate fraud or, as mentioned above, use
                       lengthy environmental indemnity agreements to be                 such a company as a device or ‘‘sham’’ to evade its own
                       drafted which result from detailed negotiation.                  existing obligations. For example, in September 2000 the
                                                                                        UK Court of Appeal was highly critical of a financial
                       22.    Is it possible to shelter environmental liabilities off   manoeuvre by which a British company had effectively
                              balance sheet?                                            dissipated almost its entire assets after facing claims from
                       There is nothing to prevent a company establishing               workers and families of deceased employees who were
                       English incorporated companies with limited liability to         employed at a mercury reprocessing plant operated by a
                       own and occupy property which may incur future                   subsidiary in South Africa.
                       liabilities to third parties. It is essential, however, that        If the directors of a company are (or become)
                       such ownership is made known to third parties and steps          accustomed to acting on the directions or instructions of
                       are taken to minimise the risk of third parties believing        the shareholders, those shareholders in certain circum-
                       the company in question is acting as agent or that another       stances, typically involving fraudulent or wrongful trading,
England & Wales




                       company is the owner or occupier. This is an ongoing             could be personally liable as ‘‘shadow directors’’ for the
                       process, as an agency can arise at any time by conduct.          liabilities of the company. Even if a company is ‘‘wholly
                       By transferring properties that have contamination issues        owned’’ by a parent, that is not of itself sufficient to give
                       (which may result in future liabilities) into such vehicles,     rise to an agency relationship. However, a subsidiary
                       in may be possible to isolate the liabilities arising from       could, on the facts, be the ‘‘puppet’’ of the parent and, as
                       site-specific environmental problems to the company that          such, be found to act as its agent. In that case, the parent
                       has been created to hold the relevant properties.                could be liable as principal for the express (or implied)
                          An exception arises where the liability arises as a result    authorised acts of its agent subsidiary.
                       of acts or omissions of persons (other than the special             It is important to note that under general principles of
                       purpose company established to hold the relevant prop-           English company law, directors generally owe their duty
                       erties) who caused or knowingly permitted the environ-           to the limited company of which they are directors not to
                       mental problems. If, for example, those persons remain           its shareholders. Thus, even if they are appointed by the
                       companies within the Group it is difficult to see how they        parent company they must act independently in the
                       would escape liability unless wound up (the rules for            interests of their ‘‘own’’ company. In so acting they may
                       which would be governed by insolvency law).                      be made aware of the interests and wishes of the parent,
                          Another concerns situations where the liability is not in     but they must not follow them slavishly or automatically.
                       fact a future liability but is rather an existing one. Where        Similarly, merely because the director of a subsidiary
                       this is the case the courts would be likely to examine the       company is also a director of the parent does not of itself
                       facts and circumstances carefully in order to determine          make the parent the agent of that subsidiary, as one
                       whether it was in fact the intention of a party to evade the     reason for common board membership is often that the
                       obligation, as the courts have demonstrated a lack of            subsidiary’s director ‘‘represents’’ the views of that
                       sympathy for use of the corporate form as a device for           company on the board of its holding company.
                       evading existing liabilities.                                       Statute also intervenes in certain cases. The EPA 1990

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and the Water Resources Act 1991 contain provisions              concerns over the treatment of ‘‘whistle-blowers’’ and the
which can make a company’s shareholders liable ‘‘where           use of wide confidentiality clauses in employment con-
the affairs of a body corporate are managed by its               tracts, statutory protection was enacted. Sections 43A to
members’’: see for example section 157 of the EPA 1990.          43L of the Employment Rights Act 1996 (as inserted by
Under that section a member of a company may be                  the Public Interest Disclosure Act 1998) have the effect of
prosecuted as though he is a director (or other person           rendering an employee’s contractual duty of confidenti-
acting in a managerial capacity) where an offence is             ality toward their employer void to the extent that those
committed by the company and is proved to have been              duties would prevent the employee from making a
attributable to any neglect on the part of the member in         ‘‘protected disclosure’’. Protected disclosures are allowed
question. This gives rise to a criminal as opposed to a civil    where (in the reasonable belief of the person disclosing)
liability, although it is likely that, were a prosecution to     they tend to show one or more of a number of matters
succeed, the prosecuting authority would also seek an            stipulated in section 43B of the Employment Rights Act
order for recovery of its costs which may include clean up       1996, which include the committing of a criminal offence,
costs it had incurred.                                           the endangering of the health and safety of any individual,
   Under the common law English courts have jurisdiction         or damage to the environment.
to hear cases involving incidents occurring abroad where            The disclosure must be made in good faith and cannot
the defendant company is ‘domiciled’ within England and          be regarded as a ‘‘protected disclosure’’ if the person
Wales. In Lubbe v Cape plc ([2000] 4 All ER 268), South          disclosing commits a criminal offence in doing so, for
African claimants were entitled to bring proceedings ‘as         instance a disclosure which would fall under section 1 of
of right’ in the English courts – meaning that they invoked      the Official Secrets Act 1989. If an employee is dismissed
the traditional territorial jurisdiction of the English Court    on the basis of a ‘‘protected disclosure’’ the dismissal is
over a corporate defendant who is ‘domiciled’ in England         automatically unfair.
or Wales.                                                           Section 43F allows an employee also to make a
   A defendant may apply to stay the proceedings on              disclosure to a ‘‘prescribed person’’ if they reasonably
grounds of forum non conveniens. In deciding whether             believe that a ‘‘relevant failure’’ has occurred or is
to do this, the court will apply a two-stage test: (1) has the   occurring and that information they are disclosing is true
English parent company shown that the courts of another          or substantially true. Both defined terms refer to the
jurisdiction are clearly or distinctly the more appropriate      Public      Interest    Disclosure     (Prescribed      Per-
forum for the issues raised in the action, having regard to      sons)(Amendment) Order 2003, and includes disclosure
the ends of justice? And (2) if so, can the claimant show        to bodies such as the Civil Aviation Authority, the
that there are factors and circumstances which in the            Environment Agency, the Health and Safety Executive,
interests of justice require that the action be heard in         and the Food Standards Agency.
England, notwithstanding that the action has its closest
connection with another country? If either the defendant         25.    Are group or ‘‘class’’ actions available for pursuing
fails the first limb or succeeds on the first limb but fails on           environmental claims, and are penal or exemplary
the second, then the action can proceed before the English              damages available?
courts. If the plaintiff fails on the second limb, then the      US-style ‘‘class actions’’ are not available in the UK.
proceedings will be stayed.                                      Claims can be brought by groups of claimants, but all
   As was seen in Lubbe, the fact that legal aid and/or          members of the group must be identified at the start of
conditional fee arrangements are relatively freely available     the litigation or at a point in the pre-trial procedure laid
in England in comparison to many other jurisdictions is a        down by the Court. Although the action may be mounted
key consideration for claimants in this type of litigation       by way of collective or ‘‘generic’’ pleadings, ultimately,
since justice may be seen to be more readily available in



                                                                                                                                       England & Wales
                                                                 each member of the group must prove their particular
England. The Lords recognised in Lubbe that there may            injury or loss was attributable to the causative agent or
also be other arguments based on the Brussels Convention         event of which they complain. Group actions of this sort
or the European Convention of Human Rights which                 are normally brought in respect of the same occurrence
might allow claimants to take forward cases in England.          where they are connected by common facts and events.
   The decision in Lubbe may encourage potential claim-              In addition, US-style ‘‘inventory’’ settlements – where
ants and their lawyers to commence proceedings in the            the plaintiff’s attorney brings a class action in respect of a
English courts against UK-based parent companies,                mixed list of plaintiffs, some of whom are suffering serious
notwithstanding that the Lubbe case itself did not decide        illness and some of whom merely fear the onset of such
the central question of whether a parent company owes a          disease, and forces a settlement by threatening to litigate
duty of care for the activities of its subsidiaries.             each individual action separately – are not available in
   The Corporate Responsibility (CORE) Bill, a Private           the UK.
Members Bill which is supported by Green and human                   Damages awards in the UK are set by professional
rights pressure groups, proposes that parent companies           judges, not juries, and do not generally contain any
should be liable for environmental harm and health and           punitive element. They therefore have tended to be lower
safety breaches attributable to its subsidiaries.                than in the US.

24.    Is there any legislation to protect ‘‘whistle-blowers’’    Asbestos
       in environmental matters?
Until recently, the only defence an employee had to an           26.    Are England and Wales likely to follow the lead of
allegation of a breach of the duty of confidentiality owed               the US in terms of asbestos litigation?
to an employer was a vague common law defence relating           Recently there has been a sharp rise in the US in annual
to disclosure of information in the public interest. Due to      filings of asbestos related claims. The Rand Report on

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                       Asbestos Litigation (Rand Institute for Civil Justice,         illness suffered by their employees; (2) The difficulties in
                       Asbestos Litigation Costs and Compensation, September 2002)    litigating for asbestos-related injury in the UK – litigants
                       estimates that over 600,000 asbestos claims have been          have faced a number of difficulties in proving that they
                       filed and over 6000 companies have been named as                should be covered by the asbestos-control legislation in
                       defendants including companies well beyond the asbestos        question, that their employer could reasonably have
                       and building products industries. The potential financial       protected them from harm, that their claims are not
                       burden resulting from the increased number of claims           statute-barred and, where they worked for more than one
                       and size of awards can be seen by the significant drop in       employer, that they should be able to recover damages
                       share value of a number of major US companies. It also         for ‘‘non-cumulative’’ diseases (such as mesothelioma).
                       led to a significantly increased number of US companies         The long periods between asbestos exposure and the
                       filing for bankruptcy. The situation seems likely to worsen     development of symptoms is also a source of difficulties
                       before it improves with estimates that the numbers of          for claimants; (3) Personal injury litigation in the UK is
                       claims have not yet peaked and that the likely total costs     generally less attractive than in the US – the availability
                       of all claims will be between $200 billion and $265 billion    of ‘‘class actions’’, contingency fee arrangements, and
                       (Rand Report).                                                 punitive damages all serve to make the US litigation
                           In the EU, as in the UK, most experience to date           process more appealing to a litigant;
                       concerning asbestos liabilities has come from the occupa-          However, asbestos litigation in the UK is likely to grow
                       tional health sector. In most of the major EU jurisdictions    over the coming years for a number of reasons. First, the
                       compulsory employers’ liability schemes exist covering         incidence of asbestos-related disease in the UK has
                       asbestos claims. In some continental European jurisdic-        probably not reached its peak. The general trend in
                       tions, occupational health claims lie exclusively under        mortality and morbidity in asbestos-related diseases
                       government-constructed insurance regimes (rather than          (identified by the UK Health and Safety Commission) is
                       giving rise to a direct cause of action in court against       one of continuing growth. Up to 10,000 deaths a year are
                       employers and manufacturers). In other jurisdictions,          expected by 2010. Second, high profile insurance insol-
                       such as in the UK and Ireland, claiming from an                vencies may force claimants to resort to litigation. The
                       employer’s insurer is simply easier than litigating.           UK insurance industry (wary of the US experience) is
                           The EU social model means that state social security       taking an increasingly combative approach to threatened
                       support is similarly more freely available to sufferers of     lawsuits. Third, in recent years civil litigation procedure
                       asbestos-related disease in the EU than elsewhere, which       in England and Wales has undergone substantial reform,
                       again militates against litigation.                            aimed at ensuring uniform access to justice for claimants
                           Continental European jurisdictions, and to a lesser        and increasing the efficiency and speed of the litigation
                       extent, the UK (as discussed below), have tended to lack       process. Although these reforms have succeeded in
                       a litigation/compensation culture similar to that in the       decreasing the number of claims that actually reach court,
                       US.                                                            through their emphasis on early settlement of claims,
                           Market experience throughout the EU has to date,           procedures for group litigation have conversely been
                       therefore, been rather more focussed on questions of           streamlined. For example a recent Practice Note published
                       asbestos regulation and control than litigation. Neverthe-     by the Senior Master of the English High Court created
                       less, similarities in the EU member states’ historical         a special ‘‘fast-track’’ claims handling procedure for
                       experience of asbestos use may mean that asbestos              mesothelioma cases. Also, the availability of after-the-
                       litigation will increase Europe-wide in the years to come.     event insurance for legal costs and judicial erosion of the
                       Other factors – such as disease latency issues and the         prohibition on US-style conditional fee arrangements
                       current widespread difficulties of the European insurance       means that funding is readily available for such claims.
                                                                                      Lastly, the courts are adopting a more pro-claimant
England & Wales




                       sector – point to the same conclusion.
                           The UK occupies the ‘‘middle ground’’ between the          approach in asbestos cases than has been evident in the
                       US and continental Europe in its experience of asbestos-       past. Two key decisions in the House of Lords (Lubbe and
                       related litigation. Its regulatory attitude, because of past   Fairchild) have provoked concern that an upsurge in
                       domestic industrial and construction practices and cen-        asbestos litigation may occur.
                       tralised enforcement systems, is probably as well-policed          Lubbe (mentioned above) established that legal funding
                       as any other EU Member State. It is a useful model of an       is available as grounds for granting jurisdiction to foreign
                       ‘‘active’’ European jurisdiction in relation to asbestos and   claimants wishing to bring a personal injuries action
                       public health issues.                                          against a UK-based defendant even where the claimant
                           Asbestos litigation in the UK is of surprisingly recent    lives overseas and the disease occurred outside England.
                       origin and is still, in some senses, in its infancy. Whereas   In Fairchild, a previous decision was overturned that had
                       the first US cases were brought as early as the 1930s, it       effectively barred claimants exposed to asbestos dust by
                       was not until 1950 that the first asbestos-related claim was    more than one defendant from recovering damages for
                       settled in the UK and not until the early 1970s that a         mesothelioma on the grounds that the claimant could not
                       series of cases against the Central Asbestos Co. Ltd.          prove which of the defendants was responsible.
                       resulted in an award of damages by the English courts. A           In addition to increased litigation, the UK regulation
                       number of factors may explain the relatively slow growth       of the asbestos industry is becoming tighter. In particular
                       of litigation in the UK: (1) The historical existence of       there is evidence that the Health and Safety Executive is
                       compensation schemes and insurance obligations relating        exercising increasing enforcement vigilance with respect
                       to occupational asbestos exposure – the first UK scheme         to health and safety/environmental regulations relating
                       was established in 1932 and since 1972 employers have          to asbestos.
                       been legally obliged to purchase employer’s liability
                       insurance to meet claims for work-related injuries or

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27.    What are the duties of owners/occupiers of premises         The newness of the market has been reflected in
       in relation to asbestos on site?                         reported levels of uptake for its products. Historically,
The Control of Asbestos at Work Regulations 2002 (‘‘the         environmental insurance has not been widely purchased.
2002 Regulations’’) make it an express a duty as from           However, insurers are now reporting far greater interest
May 2004 to ‘‘manage the risk’’ from Asbestos Containing        in the market on the part of FTSE 250 companies than
Materials (ACMs). This probably does little more than           was the case as little as 12 months ago. Many large
spell-out what has long been part of general UK health          companies have historically covered themselves primarily
and safety law. Nevertheless, the primary duty is formally      through the use of captive insurers, but it seems that these
re-defined by the Regulations. This express duty has an          companies are now looking either to reinsure their captive
18 month lead in period, meaning that the new obligations       environmental liabilities or to purchase direct environ-
are not binding until May 2004. Under the Regulations           mental insurance to plug gaps in the cover provided by
employers are expected to ensure that as far as reasonably      the captive.
practicable no one can come to any harm from asbestos              Environmental insurance is still very much a novel and
on the premises. It is clear that this involves an obligation   rarely used method of allocating environmental risk as
to repair or remove ACMs in certain circumstances.              part of M&A transactions and is not likely to supplant
   If ACMs are in good condition, not likely to be              traditional risk allocation tools such as warranties and
damaged and not likely to be worked on or disturbed, the        indemnities. However, there is a growing awareness of
Regulations reflect that it is better to leave them in place     the role insurance can play as a transaction solution, both
(rather than disturb the ACMs by attempting removal)            pre and post-disposal. There are also a number of
and implement a system of management, and therefore             innovative insurance backed environmental risk transfer
they impose a duty to manage the risk of those ACMs. In         products coming on to the UK market broadly based on
such circumstances, appropriate steps to be taken might         tried and tested US models. For example, some environ-
include: (a) noting the presence of ACMs and maintaining        mental consultants are now offering perpetual indemnities
a register of location and condition; (b) labeling such         against a range of environmental risks on a site specific or
locations with an asbestos warning sign; and (c) introduc-      portfolio basis in return for lucrative and exclusive
ing an on-site ‘‘permit to work’’ system (to ensure that        remediation contracts.
anyone who comes to carry out work on the premises
does not start before they are presented with the relevant
                                                                29.    What types of environmental insurance are
information on asbestos risks and to record the use of any             available in the market?
protective measures or equipment required).
   ACMs in poor condition must be repaired under the            In line with the market growth described above, there is
Regulations (e.g. by sealing or enclosing the ACMs to           an increasing array of environmental insurance products
prevent further damage) or removed.                             available in the UK. However, many of the current
   More generally, the Regulations oblige employers to:         products are relatively new, with the result that they are
(a) find out whether there is asbestos in their premises, its    comparatively untested and there is a lack of judicial
amount and what condition it is in (presuming that              authority and client/practitioner experience as to their
materials contain asbestos unless there is strong evidence      precise scope and effect.
that they do not). This will generally involve engaging a         Different insurers use different terminology to describe
suitably trained person to conduct a survey of the              the cover they offer, but in broad terms, the different
premises; (b) make and maintain records of the location         types currently available, either separately or in composite
and condition of ACMs or presumed ACMs on the                   policies, can be summarised as follows:
premises; (c) assess the risk from the material, seeking        I First party environmental damage/clean-up




                                                                                                                                    England & Wales
specialist advice, if necessary, from an asbestos surveyor,        costs: providing indemnity in respect of the costs of
a laboratory or a licensed contractor; (d)prepare a detailed       remedial action required by law to be carried out by
plan setting out how the risk from the material will be            the insured or for costs recoverable from the insured
managed; (e) implement the plan and reviewing it                   by the relevant regulatory authority in respect of
periodically; and (f) provide information on the location          remedial work carried out by that authority. May also
and condition of the material to anyone who is liable to           cover business interruption losses.
work on or disturb it.                                          I Third party environmental liability: providing
   The basic position in the UK is that employers have a           indemnity in respect of civil claims by third parties for
degree of latitude in deciding on the means to control site        bodily injury or damage to third party property
asbestos exposures against the background of a duty to             resulting from sudden, accidental and, in some cases,
carry out continuous risk assessment.                              gradual pollution emanating from the insured’s prop-
                                                                   erty. May also cover legal defence costs.
 Environmental insurance Liabilities                            I Clean-up cost cap cover: providing indemnity
                                                                   against the risk of on or off-site remediation plan cost
28.    How big a role does environmental risks insurance           overrun due, for example, to the discovery of previously
       play in the UK?                                             unknown contamination during the course of carrying
The environmental insurance market in the UK is still              out a remediation plan or the unexpectedly higher
very much a developing one. It has grown dramatically              costs of dealing with known pollutants (such as higher
over the past five years. By way of illustration of this            standards being required by the regulator or the extent
growth, market sources value the overall UK environmen-            of pollution having been underestimated).
tal insurance market in 2003 as worth approximately             I Contractors pollution liability cover: providing
US$50m in realisable premium, compared with an                     indemnity to contractors working on any site that is or
equivalent value of only around US$2-5m five years ago.             might be polluted against regulatory and contractual

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                           liabilities as well as the risks of causing new pollution          30.    What is the environmental insurance claims
                           or disturbing dormant pollutants.                                         experience?
                       Such cover will typically now be written on a claims                   It is very difficult to obtain accurate environmental
                       made/losses incurred and reported basis (so that insurers              insurance claims figures as insurers carefully guard such
                       are not exposed to claims many years after the policy                  information.
                       period expired) and will obviously include various                         However, there appears to have been very little
                       important conditions and exclusions that must be read                  significant claims experience to date in respect of the
                       carefully to ascertain the precise extent of the cover                 relatively new products described above. This is not
                       provided. Currently rates are relatively favourable to the             surprising as these products have not been written in any
                       insured.                                                               volume until very recently and tend to be relatively ‘‘long-
                           In addition to these broad categories of available cover,          tail’’ in nature (offering cover of up to 10 years or more
                       it is possible to purchase very specific site based cover for           in some cases) so one would not necessarily expect to see
                       special risks, for example against liabilities associated with         substantial claims coming through before now in any
                       underground or above-ground storage tanks (commonly                    event.
                       otherwise excluded from standard policy wordings).                         It appears, however, that the market is beginning to
                           As noted above, there are also now a number of                     gear itself up for a more significant flow of claims in the
                       innovative insurance based environmental risk transfer                 coming years and this would be in-line with the US
                       products coming on to the UK market offering perpetual                 experience of such products. That said, at present the
                       indemnities against a range of environmental risks on a                environmental insurance market appears optimistic about
                       site specific or portfolio basis. Such products have been               its future and there is no suggestion of future catastrophic
                       available and purchased in the US for some time.                       claims experience.
                       However, there is as yet no experience of how these
                       products will work in practice in the UK.
                                                                                               Acknowledgement
                                                                                              The authors would like to acknowledge the assistance of
                                                                                              their associates, Sharon Long and Nick Rock in preparing
                                                                                              this chapter.

                                                Daniel Lawrence                                                         Paul Watchman
                                                Freshfields Bruckhaus Deringer                                           Freshfields Bruckhaus Deringer
                                                65 Fleet Street                                                         65 Fleet Street
                                                London EC4Y 1HS                                                         London EC4Y 1HS
                                                Tel:     +44 20 7427 3917                                               Tel:      +44 20 7832 7515
                                                Fax:     +44 20 7832 7001                                               Fax:      +44 20 7832 7001
                                                Email:   daniel.lawrence@freshfields.com                                 Email:    paul.watchman@freshfields.com
                                                WWW:     www.freshfields.com                                             WWW:      www.freshfields.com

                        Daniel Lawrence is environmental counsel in the Freshfields
                        Bruckhaus Deringer EPR group. He is recognised as a leading            Paul Watchman is a partner specialising in EPR matters and is
                        environmental lawyer in the UK and has extensive experience of         widely recognised as a leading environmental lawyer.
                        negotiating and documenting the allocation of environmental risk         His international practice is very broadly based, dealing with:
                        and liabilities in corporate, finance and property transactions,        I the allocation of environmental risks and liabilities in major
                        including mergers and acquisitions, demergers, flotations, privatis-       M&A and funding transactions relating to the building,chemical,
England & Wales




                        ations and refinancings. Daniel has advised on environmental and           energy, engineering, food, healthcare, leisure, mineral and
                        regulatory issues affecting a wide range of industry sectors,             pharmaceutical sectors;
                        including water and sewerage, chemicals, engineering, power,           I management of large-scale infrastructure and transportprojects,
                        telecommunications, biotechnology and nuclear. He also has                including PFI projects relating to airports, courts, police stations,
                        substantial experience of conducting complex litigation involving         prisons, railways, roads, schools and military and state security
                        pollution.                                                                establishments;
                           Daniel sits on the Council of the United Kingdom Environmental      I acquisition, funding development and disposal of surplus land
                        Law Association and is a convenor of the UKELA Biotechnology              and property assets in respect of government, financial
                        Working Group.                                                            institutions, property companies and industrial clients;
                                                                                               I acquisition, funding, disposal and development of nuclear, gas
                                                                                                  and coal-fired power stations, including large generating
                                                                                                  capacity CCGT and CHP power stations;
                                                                                               I management of environmental claims in respect of breaches of
                                                                                                  warranties and indemnities;
                                                                                               I development of offices, retail and industrial premises, including
                                                                                                  the world headquarters of financial institutions, the main
                                                                                                  European plant of a car manufacturer and landmark buildings
                                                                                                  in areas of strict heritage and environmental protection; and
                                                                                               I the management of waste disposal facilities and water treatment
                                                                                                  facilities.
                                                                                                 Paul has lectured widely on these subjects and is the author of
                                                                                               books and articles on EPR law.




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                                                                                                                   ICLG OF ENVIRONMENT LAW 2004
Freshfields Bruckhaus Deringer                                                        England and Wales




     Freshfields Bruckhaus Deringer is an international law firm with over 2,500 lawyers in 18 countries
     across Europe, Asia and the US. We have a wealth of expertise in our chosen practice areas. Our
     EPR group provides an integrated pan-European industrial risk management service in response to
     the increasing demand from corporations for co-ordinated advice across Europe. We also advise
     regulators, industry bodies and a wide range of industrial and commercial organisations on EPR
     issues.
     Our Environment, Planning and Regularory EPR group comprises more than 100 specialist lawyers
     in Austria, Belgium, France, Germany, Hungary, Italy, the Netherlands, Spain and the UK. Many of
     these lawyers are recognised as leading practitioners in this field, sitting on industry panels and
     publishing specialist books and articles. The members of the EPR group have extensive experience
     of advising on relevant EU and international legislation and global conventions as well as on national
     laws. We advise in the context of corporate transactions, major projects, dispute resolution and
     general corporate risk management.




                                                                                                                   England & Wales




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ICLG OF ENVIRONMENT LAW 2004

				
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