Ireland: Environmental Protection Agency In Court Against Landfill Companies, Their Lender Bank And Receiver Seeking Payment Of Landfill Closure And Restoration Costs

  1. Closure, Restoration, Remediation and Aftercare Costs – the law

Operators of landfill sites are obliged to charge fees for disposal of waste ("gate fees") which must be sufficient to cover:

  • The total costs of running the landfill; and
  • The estimated costs for the clean-up, restoration, remediation and aftercare of the landfill, (the "closure and restoration costs"), after the landfill has closed. 

The EPA may refuse to grant a landfill licence if the landfill operator does not provide for the collection of sufficient fees to cover these costs.  The landfill licensee must report annually to the EPA on its fees to demonstrate that the fees are sufficient for this purpose. 

Separately, the EPA also has the power (or possibly the obligation) to require financial security to be put in place by the licensee, as a condition of the grant of the landfill licence, for the estimated closure and restoration costs.

  1. The facts of this case

The Greenstar group companies, Greenstar Holdings and KTK Landfill Ltd, were the relevant landfill licence holders.  Greenstar Holdings' annual accounts for 2011 made provision of €27 million for those costs but the gate fees collected for the landfills were never in fact transferred to Greenstar Holdings.  The funds were retained in the bank account of the landfill operator (another group company) and were used for the benefit of the group.

The Greenstar group companies triggered events of default in their loans. The lender banks ultimately demanded repayment of the entire sum due of over €82 million. Following the appointment of a receiver in 2013 over some of the group assets (though not over the landfills themselves, or associated property, rights and activities), Bank of Ireland transferred funds of €12 million from the accounts of the landfill group to pay off part of the debts owing to the syndicate of lender banks.

The landfill operator, licence holder and gate fees collector were three separate entities within the group structure.  For the purposes of its decision on the preliminary issue, the Court ignored the different functions and roles and treated the question as if the roles were all fulfilled by one company ("Greenstar").

The EPA argued that Greenstar was not entitled to do what it wished with the portion of the gate fees that was required to cover the estimated closure and restoration costs.  Although this restriction of the use of those funds is not expressly set out in the Irish (or European) legislation, the EPA asserted that any other interpretation of the Irish waste legislation, or the European Landfill and Waste Directives would be contrary to the polluter pays principle.  The EPA argued that, unless the funds were so restricted, this would lead to a situation where, if a landfill operator became insolvent, a person other than the polluter would have to pay for the closure, remediation and aftercare of the landfill.

The Court disagreed with the EPA and ruled that the relevant Irish and European legislation did not impose a restriction on the use of the gate fees by a landfill operator, and that the operator was entitled to the use of these fees as its property in the normal way. 

The Court held that the EPA's power or obligation to require financial security from a licensee was the mechanism by which to avoid imposing the costs of closure and aftercare on third parties. 

  1. Where to next?

The EPA had asked the High Court to refer a question to Europe as to whether the €27 million in gate fees could be used by the landfill companies for purposes other than closure, restoration, remediation and aftercare of the landfills.  The EPA argued that the provision of the Landfill Directive that obliges landfill operators to charge gate fees to cover those costs must include a requirement that this money could only be directed for those purposes.  The Court refused to refer a question.  The Irish Court held that, even if the European legislation did impose this type of restriction, the Irish legislation could not support that type of interpretation, despite the obligation to interpret Irish legislation in accordance with the purpose of the parent European Directive. 

It remains to be seen whether this decision on the preliminary issue will be the subject of an appeal to the Supreme Court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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