Environmental Round Up

Environmental law continues to become more strict. As it does so, compliance costs incurred by business increase. This article highlights three important environmental law developments which will increase compliance costs across a broad range of UK businesses.

The Environment Act 1995 introduced the UK Contaminated Land Regime (the "Regime") aimed at cleaning up sites that have been contaminated by past pollution. The Regime was brought into force in April 2000.

Liability under the regime falls on the person that "caused or knowingly permitted" the contamination in question. Where these persons cannot be found, liability can fall on the innocent owner or occupier of contaminated land.

It is estimated that between 5,000 and 20,000 sites in England and Wales constitute "contaminated land" that will require remediation to minimise unacceptable risks to human health or the environment.

Local authorities, the bodies with principal responsibility for "designating" land to be contaminated and enforcing its clean up, have designated fewer than 100 sites so far. With so many potential problem sites, why have local authorities designated so few since the Regime came into force? The principal reason is lack of available data. This will not be the case for ever. Local authorities have been putting most of their efforts so far into devising strategies on how they will inspect the land in their areas for contamination. Those strategies have only just been completed. The next step for the local authorities under the Regime will be conducting inspections (over a period of up to 5 years in some cases), which in turn will lead to designations.

In mid-2000, the cost of assessing and cleaning up contamination under the Regime was estimated to be £15.2 billion. This figure has undoubtedly increased, however, due to the stringent controls on waste disposal in the EC Directive on the landfill of waste which were transposed into English law in June 2002.

Implementation of the Directive will necessarily increase waste disposal costs as the disposal on land of some waste is now banned and the number of existing landfills has decreased due to inability to meet the Directive’s new engineering and financial security requirements.

UK businesses and banks cannot afford to be complacent about the potential for enforcement of clean up measures in the UK. It is now more important than ever that share, asset and loan transactions (even in supposedly "clean" industry sectors) are conducted with the potential impact of the Regime in mind.

In the UK, a strict regulatory framework controls activities involving asbestos. This framework:

• prohibits the import, supply and use of blue, brown and white asbestos;

• strictly controls all work with asbestos; and

• requires a licence for work with certain forms of asbestos.

Although the regulatory framework has meant that the use of asbestos in buildings has been illegal for some time, it is estimated that asbestos still remains in half a million buildings in the UK due to its widespread use in the construction industry in the 1950s, 60s and 70s. No law to date has required all asbestos contained within older buildings to be identified and made safe. When asbestos in old buildings is damaged, there is a risk to human health because of the possibility of airborne fibres. Those who work in the building and maintenance trades are particularly at risk. If they do not know whether or where asbestos is present in a building structure, they risk making fibres airborne as they carry out their work.

The Control of Asbestos at Work Regulations 2002 (S.I. 2002 No 2675) were introduced to protect such workers. They introduce a duty to identify and manage asbestos in "non domestic" premises. The duty comes into force on 21 May 2004. The Government estimates that the new duty, together with the other obligations set out in the Regulations, will save 4,700 lives at a cost to industry over a 50 year period estimated at £1.5 billion.

Landlords, employers and managing agents are most likely to be subject to the new duty. The duty will be imposed on every person whose contract or tenancy obliges it to any extent to maintain or repair non domestic premises or any of their means of access or egress. Where there is no contract or tenancy, the duty is imposed on every person who has, to any extent, control of that part of those non domestic premises or their means of access or egress.

In short, persons subject to the duty are required to:

• carry out a "suitable and sufficient" written assessment as to whether or not asbestos is, or is liable to be, present in the premises and keep the assessment under review. In doing the assessment, it must be presumed that materials contain asbestos unless there is strong evidence that it does not.

• carry out a risk assessment where asbestos is or is liable to be present, and prepare, implement and keep under review a written plan for managing any identified risk. The plan must provide details of monitoring, maintenance and, if necessary, removal. The plan must also include adequate measures for ensuring that information about the location of any asbestos is provided to every person who may disturb it and is made available to the emergency services.

The discovery of asbestos in an unexpected location when carrying out an assessment could lead to considerable disruption and cost and possibly even third party claims for compensation. The implications of the new duty must therefore be fully considered as part of any share or asset transaction involving non domestic property.

The recent progress of the EU Directive on environmental liability through the EU legislative system has been such that the Directive could come into force in 2004. As currently drafted, Member States will be required to transpose the Directive into domestic law no later than three years after it has entered into force.

As currently proposed, its main provisions provide for the following:

• strict liability for (1) remediating environmental damage or any imminent threat of such damage and (2) damage to protected species and natural habitats and to any imminent threat of such damage from specifically listed occupational activities;

• fault-based liability for damage to protected species and natural habitats caused by the operation of any other occupational activities;

• liability to be channelled to the "operator" of the relevant occupational activity at the time of the damage;

There are liability exceptions for:

• environmental damage or an imminent threat of such damage caused by "an act of armed conflict, hostilities, civil war or insurrection" or by "a natural phenomenon of exceptional, inevitable and irresistible character";

• liabilities arising under listed nuclear and oil pollution conventions provided that they are in force in the relevant Member State;

• diffuse environmental damage where it is not possible to establish a causal link between the damage and the activities of individual operators; and

• activities, the main purpose of which is to serve national defence or international security or the sole purpose of which is protection from natural disasters.

Member States will be able to adopt "compliance with a permit" and "state-of-the- art" defences if they wish, subject to the operator demonstrating that it was not at fault or negligent.

As currently proposed, Member States are obliged to take measures to encourage the development of financial security instruments and markets by the appropriate economic and financial operators, including financial mechanisms in case of insolvency, with the aim of enabling operators to use financial guarantees to cover their responsibilities under this Directive. The Commission may make proposals for mandatory financial security in the future.

The Environmental Liability Directive, should it become law, will have a profound effect on the environmental liabilities of broad sectors of UK industry. The exposure to liability will be an important aspect of transactions involving these industries.

The above represent the three current environmental law developments that will have the widest impact on UK business generally. A number of other developments will have a significant impact, but on a narrower range of businesses. These include the implementation of the End of Life Vehicles Directive; the Waste Electrical and Electronic Equipment Directive; the Landfill Directive and the Greenhouse Gas Emissions Allowance Trading Directive (which sets up the EU Emissions Trading Scheme due to start on 1 January 2005). Up-to-date details on these and all other environmental legal developments can be found in BLG’s quarterly Environment and Health & Safety Digest. 

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.