South Africa: Liability Of Directors For Corporate Environmental Transgressions – A South African Case Study

The risk environment for directors of companies that pollute is changing. In South Africa, a raft of recent prosecutions of directors and officers for corporate environmental transgressions bring into focus the limits of D&O cover for claims of this nature, and the importance of ensuring adequate cover is in place.

At the heart of environmental legislation in South Africa is Section 24 of the Constitution, which gives everyone the right to an environment which is not harmful to their health or wellbeing, and to have the environment protected for the benefit of present and future generations through reasonable legislative and other measures that:

  1. Prevent pollution in ecological degradation,
  2. Promote conservation; and
  3. Secure ecologically sustainable development and the use of natural resources while promoting justifiable economic and social development.

This section is given effect through the National Environmental Management Act 107 of 1998 (NEMA), an umbrella act, and a suite of sector-specific environmental acts. These include acts related to air and water pollution, land waste, biodiversity and conservation of protected areas.

The obligations and liability provisions in these acts are broad and far-reaching, particularly for directors of companies in pollution-intensive industries.

NEMA places an overarching duty of care on every person who causes, has caused or may cause significant pollution or degradation of the environment to:

"...take reasonable measures to prevent such pollution or degradation from occurring, continuing or recurring, or, insofar as such harm to the environment is authorised by law or cannot reasonably be avoided or stopped, to minimise and rectify such pollution or degradation of the environment."

The legislated penalties for non-compliance under NEMA and its related acts are severe. These include fines of up to ZAR10 million, imprisonment for a period of between one and ten years, or both a fine and imprisonment.

The reach of these acts means that directors (both past and present) who occupy positions of authority in companies at the time when offences are committed by those companies may be guilty of offences, and liable upon conviction for monetary penalties, in addition to potentially having to compensate organs of state or affected third parties by way of damages for carrying out remediation, as well as the costs of the prosecution.

In a recent claim, local and foreign D&Os of a multinational industrial producer were indicted for serious air and land pollution offences by their company. Their company operated in a competitive industry with tight margins and, over a number of years, fell behind in its compliance with progressively more onerous emissions and land remediation standards.

The local subsidiary of the company did not remedy these failings despite repeated compliance ultimatums by the environmental inspection authority, with the result that the D&Os were charged with environmental offences after the local entity entered receivership. It appears likely that the indicted D&Os may receive substantial fines together with suspended sentences.

Claims were brought against the D&O policies of the local entity and its international parent. In the case of the local policy, the usual Side A & B cover was extended to include an extension for environmental impairment defence costs. This extension operates to permit the advancement of defence costs for a claim for environmental impairment (which is generally excluded from D&O cover in terms of very wide pollution exclusion clauses).

The growing risk of environmental liability for D&Os has led underwriters to offer a range of bolt-on extensions of this nature to their standard liability wordings. These extensions generally do not extend to cover liability for fines, penalties or damages consequent upon an environmental transgression but, importantly, provide cover to affected D&Os for the costs of defence subject, to the usual D&O policy terms and exclusions.

In a similar prosecution recently reported in the press, the CEO of a waste management company was criminally charged, together with the company, for serious breaches of air quality legislation at a landfill site near Durban. He faces a maximum fine of ZAR 10 million.

These cases demonstrate that the authorities responsible for enforcing environmental compliance do not hesitate to use the personal liability provisions of legislation to indict D&Os in positions of responsibility.

The South African example is a reminder of the importance of ensuring that your D&O cover is bespoke to your risk environment. D&Os in pollution-intensive businesses would be well advised to make certain that their cover includes the necessary extensions to mitigate this risk.

Over in England & Wales, environmental considerations in the D&O sphere have been increasing as well, particularly since the Companies Act 2006 introduced a new duty on directors to "have regard to...the impact of the company's operations on the community and the environment" as part of a director's duty to promote the success of the company.

Many environmental offences provide that when a company is found guilty of an offence, its directors and other officers could be concurrently criminally liable. This could mean that an individual director or other officer may be tried for offences arising out of the same facts as those that give rise to the offence that the company is charged with. Generally, the regulator will have to prove that the individual director or officer knowingly caused or knowingly permitted the offence which could be challenging in large companies.

Where penalties are imposed on directors and officers, a key issue will be whether these can be recovered under a D&O policy. Of course, the first question is the policy wording. However, even if the policy positively provides cover for fines and penalties, there remains a question over whether the insurer can be required to pay out if the fines and penalties are uninsurable at law. The starting point here is often the public policy question of whether it is possible to recover an indemnity for a loss that results from your own wrongdoing, but complexities arise when one deals with conduct which is, in effect, criminal negligence.

As environmental issues and particularly the impact of climate change continue to be hot topics on the global political stage, it certainly seems like D&Os could face significant exposures in years to come from a variety of sources.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Christopher MacRoberts
James M Cooper
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions