UK: Environment Agency Forced To Drop Unfair Waste Export Charges

Last Updated: 24 March 2010
Article by Peter Binning and Andrew Smith

In a landmark decision for the UK's waste management industry, on 22 February 2010 the Environment Agency (EA) dropped charges against two companies alleged to have shipped contaminated waste paper to the Far East.1 The decision came only one week before the trial was due to commence.

That the case was dropped reflects the EA's acceptance that its evidence was inconclusive. That it was dropped at such a late stage points to a more fundamental problem, and one that affects all future prosecutions for such offences – namely, the absence of practical and detailed EA guidance about levels of permissible contamination in exported waste.

Such guidance, which is long overdue, should be issued immediately.

Waste export regulations

The export of waste from the UK is governed by the Transfrontier Shipment of Waste Regulations 2007. These regulations derive from the Waste Shipment Regulation EC 1013/2006, which establishes a "traffic light" system for distinguishing between green, amber and red list waste.

Waste is classified into one of these three categories according to its compositional elements, e.g. whether it contains particular defined plastics or organic materials. This classification dictates which legal regime applies to determine, among other matters, what information should be given to the EA and where in the world the waste can be exported to.

The waste paper in these criminal proceedings was being exported as green list waste. The EA conducted a visual inspection of the paper and concluded that it was so contaminated that it was actually amber list waste, whose export to the Far East would be unlawful. In attempting to distinguish between green and amber list waste, the EA initially asserted that the former should contain no more than 0% contamination, before conceding that it could be contaminated by up to an unquantified minimum threshold.

This latter concession, although ambiguous, is at least consistent with the EA's existing guidance, which states that:

"We will regulate exports of waste in a consistent way to ensure environmentally sound recovery of waste is promoted, whilst at the same time ensuring a high degree of environmental protection. Setting arbitrary percentage figures for the degree of permissible levels of contamination of Green List waste is not compatible with these aims."2

It is, to put it mildly, rather surprising that the EA considers that greater specificity about precisely when it will regard green list waste as unlawful is inconsistent with good environmental practices. There are, on the contrary, at least five reasons why new guidance, which quantifies a percentage of permissible contamination, needs to be issued.

Why is new guidance necessary?

  • Not to issue more detailed guidance might be regarded as excusable if the sanctions for non-compliance were confined exclusively to the civil law. However, individuals and companies risk a criminal record if the EA decides to prosecute. Criminal proceedings are uniquely stressful, drain a defendant's time and resources, carry large financial penalties, and may result in serious and long-lasting reputational and commercial damage, e.g. being barred from bidding for future contracts. Given these consequences, it is unacceptable that the EA refuses to put a percentage on permissible contamination or to issue realistic guidance on when prosecutions will be pursued. It amounts to an abdication of its responsibilities as a regulator because exporters are kept entirely in the dark about the circumstances in which they risk being prosecuted.
  • The UK's waste export business has become increasingly successful in recent times. The UK's recycled paper sector alone has swelled over the past six years from 500,000 tonnes per annum recovery to over 4 million tonnes.3 Such a dramatic increase suggests that strong regulation is necessary to ensure that irresponsible environmental practices do not go unpunished. Equally, however, it suggests there are a significant number of exporters who risk breaching the criminal law but whom the EA are keeping in the dark. Those exporters' risk management strategies would clearly benefit from more detailed guidance.
  • The UK Courts called for good guidance as long ago as 1997. In R v Environment Agency ex parte Dockgrange Limited and Mayer Parry Limited4, which concerned the interpretation of the predecessor legislation to the Waste Shipment Regulation EC 1013/2006, the High Court said that:

"it is appropriate for the [Environment] Agency, as principal prosecuting authority, to have a policy on the matter; a court is likely to be guided by its expert view."

It is difficult to see how the Courts can be meaningfully guided by the EA's existing published policies given that those policies refuse to quantify permissible contamination levels.

  • The judicial concern expressed in Dockgrange has been echoed more widely by Parliament in recent years. Recognising that legal certainty is fundamental to the rule of law and the principles upon which EU law is based, the Hampton Review (2005) and the MacRory review (2006) both recommended that businesses should not be unduly burdened by over-reaching and unclear regulation. The reports led to the Regulatory Enforcement and Sanctions Act 2008 (RESA), one of the principal aims of which was to oblige regulators to clarify their civil and criminal enforcement policies. Section 64(2) of RESA provides that a regulator's guidance must include:

"the sanctions (including criminal sanctions) to which a person who commits the offence may be liable [...] [and] the circumstances in which the regulator is likely to take such action."

  • Quantifying a percentage of permissible contamination presupposes that the EA have the means to prove such contamination empirically in Court. Prior to the Transfrontier Shipment of Waste Regulations 2007, the EA had to call upon the assistance of HM Revenue and Customs to detain waste for up to three days so that it could be inspected. Since 2007, however, these inspection procedures have been improved and streamlined. The EA can now detain waste of its own volition and inspect it for up to five days. The EA thus has sufficient time to conduct more than a merely visual inspection of the waste. For example, it has sufficient time to take samples of the offending items for use as evidence at Court and to undertake detailed weight-based assessments aimed at quantifying the extent of the contamination.

Permissible contamination of green list waste

Assuming that the EA will ultimately publish new guidance, that guidance must give a percentage for permissible contamination in green list waste which is realistic, both in terms of whom the exporters source their products from, and who buys the products once exported. Alternatively, the EA must issue guidance on some other objective basis if unfair prosecutions are to be avoided in future.

All green list waste that is exported is sourced from one of over 100 Materials Recycling Facilities (MRFs) in the UK. A recent independent study concluded that the average minimum levels of contamination present in paper-based MRF products range from 1.86% (newspapers and pamphlets) to 3.77% (cardboard).5 If the EA regards these percentages as too high, it might wish to devote more resources to improving the efficiency of MRFs, rather than targeting through criminal sanctions the exporters who purchase what the MRFs produce.

Exporters will agree upon a percentage of permissible contamination in their contracts with their overseas customers. The EA, assuming it issues new guidance, should have regard to the contamination tolerances agreed between exporters and their customers. These figures (typically around the 2% mark) are not arbitrary, but reflect the capability of the importers' reprocessing plants in managing contamination in an environmentally responsible way. In other words, the figures reflect the commercial reality that an importer will only pay for what can be used: if a shipment is contaminated in excess of what has been contractually agreed, the container would be returned and payment refused.

Moreover, the EA is in any event obliged to consider the management of environmental risks by the importer. Annex III to the Waste Shipment Regulation EC 1013/2006 provides that materials cannot be moved as green list waste if they are contaminated to an extent which "prevents the recovery of the waste in an environmentally sound manner". If, therefore, a contract stipulates a maximum contamination threshold of 2%, the EA should regard this percentage as a reliable indicator of how much contamination can be managed by the importer without causing environmental damage. This in turn should have a bearing on the propriety of prosecuting exporters who sell products within contamination tolerances deemed to be acceptable by their customers.

Regulation must be strong but fair

A booming waste export industry requires strong regulation. However, strong regulation must also be fair. Quantifying a percentage figure for permissible contamination in green list waste is not, as the EA currently suggests, arbitrary. On the contrary, it is arbitrary (as well as profoundly unfair) to refuse to commit to clear and detailed guidance when so many exporters risk being prosecuted. The EA is permitted to allow some latitude in its interpretation of EU law and it should issue guidance accordingly. If that guidance is to be realistic and capable of enforcement, it must take account of the contamination present in the products purchased by exporters, as well as the contamination which overseas customers can manage in an environmentally responsible way. Fair regulation, in other words, must ultimately reflect market forces as well as sound environmental practices.

Footnotes

1. R v APG Atlantic Paper Ltd and Community Waste Ltd, Maidstone Crown Court.

2. EA publication: "Guidance: exports of green list waste for recovery", issued on 17 March 2005.

3. http://www.paper.org.uk/information/factsheets/recovery_and_recycling.pdf

4. CO/4534/96, 22 May 1997.

5. http://www.wrap.org.uk/downloads/MRF_Output_Material_Quality_Thresholds_Report.ffb2e42d.8210.pdf

Corker Binning is a law firm specialising in fraud, regulatory litigation and general criminal work of all types. For further information go to http://www.corkerbinning.com

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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