Challenges in recovery of money to pay for remediation – experiences in Scotland 3 October 2014

Structure of presentation  Attempting to ensure funds for remediation exist in absence of financial provision having been made  Remediation toolkit under Regulatory Reform (Scotland) Act 2014  Water Environment Fund

The Question

Petition by the Joint Liquidators of the Scottish Coal Company Limited

Petition by the Joint Liquidators of the Scottish Coal Company Limited – Outer House  SEPA argued:-  ““responsible person” means the person who is responsible for securing compliance with the terms of a water use licence and has been identified as such by SEPA in accordance with regulation 8(6), and includes…  …(c)(iii) if the responsible person is a company and a liquidator has been appointed, the liquidator.”  (Reg 2(1) Water Environment (Controlled Activities)(Scotland) Regulations 2011

Petition by the Joint Liquidators of the Scottish Coal Company Limited – Outer House  SEPA argued (cont):-  Regulation 27, where authorised activity ceased, responsible person must apply to SEPA to surrender authorisation. In determining application, SEPA required to take account of any steps necessary to avoid risk of adverse impact on water environment arising from cessation, and leave the water environment so it complies with, amongst other things, Water Framework Directive and Groundwater Directive.  Marleasing v La Comercial Internacional de Alimentacion

Petition by the Joint Liquidators of the Scottish Coal Company Limited – Outer House  Joint liquidators argued:-  Although s178 Insolvency Act 1986 didn’t apply in Scotland, effect same due to s169(2) giving liquidators same powers as trustee on a bankrupt estate.  Re Celtic Extraction Limited – polluter pays principle didn’t extend to requiring unsecured creditors of insolvent polluter to pay

Petition by the Joint Liquidators of the Scottish Coal Company Limited – Outer House  Lord Hodge :-  All things being equal, would have preferred Justice Neuberger’s reasoning in Re Mineral Resources Limited BUT  Section 101 Scotland Act 1998 competency point

Petition by the Joint Liquidators of the Scottish Coal Company Limited – Inner House  Lord Advocate and Advocate General  CAR a self-contained code  “responsible person” clear statement of intention

Petition by the Joint Liquidators of the Scottish Coal Company Limited – Inner House  “…The Water Framework Directive is extensive in its scope and ambitious in its objectives…it would seem to be beyond argument that the broad interpretation of CARs will better achieve the desired result. As a consequence, SCC’s environmental obligations will be treated as liquidation expenses, thereby giving them priority over other obligations.” (paragraph 143)”

 “…there is nothing surprising in the notion that the legislature should have intended that continued compliance with a WML should override the interests of the creditors or contributories of a company…the interest in the protection of the environment should prevail over the interest in fair and orderly winding up of companies.”  Justice Neuberger, Re Mineral Resources Limited Petition by the Joint Liquidators of the Scottish Coal Company Limited – Inner House

 “true nature and character”, “pith and substance” was protection and control of activities in the water environment  No appeal to Supreme Court

Challenges in securing remediation  S59 Environmental Protection Act 1990  “Occupier”  Quash if satisfied occupier didn’t deposit or knowingly cause/knowingly permit deposit  Practical issues re recovery of costs  Regime-dependant whether can serve notice on unauthorised offender

Regulatory Reform (Scotland) Act 2014  Integrating authorisation regimes, proportionate and effective toolkit for SEPA and courts  Framework for remediation notices to be standardised cross regimes, and for unauthorised persons  Section 41 – where significant environmental harm, if appears to court within power of offender to remedy, can order that, in addition to any other sentence passed.

Regulatory Reform (Scotland) Act 2014

 Enforcement Undertakings  Rationale to allow usually compliant operators to voluntarily and pro-actively offer a quick and effective resolution of non-compliance.  Effect – if accepted, no FPN/VPN or criminal prosecution for offence, unless SEPA certify didn’t comply with Enforcement Undertaking

 Enforcement Undertakings in practice :-  No obligation to accept, need confidence will be complied with  No protracted negotiations  Need reasonable grounds for suspecting offence committed, wont accept if should be referred for prosecution – Lord Advocates guidelines  Has to commit operator to returning to, and remaining in, compliance. Must remediate where possible. Expect operator to go beyond minimum. More favourable if community consultation? Regulatory Reform (Scotland) Act 2014

 Environment Agency in England accepted undertaking from operator re oil storage offence, offer to decommission old pipework, install new, implement planned maintenance regime, remediation works and charity donation.  South Australia Environment Protection Authority offensive odour problems by upgrading equipment and detection, update local community quarterly, pollution hotline, further engagement with local community group  Undertakings in response to notice of intent to serve VPN too

Water Environment Fund  Managed by SEPA, with support from SNH, Forestry Commission and Scottish Government  Commenced 2008, over £2million projects funded last year  Deliver improvements to tackle impacts on morphology or physical condition of water environment, where goes beyond applicants legal responsibility, so delivering non-regulatory improvements  Eg historical legacies, restoring morphology, fish barriers, invasive non-native species  Decision factors on website, eg multiple benefits for biodiversity, natural flood risk management, amenity value, as well as match funding

Challenges?  Practical challenge where offender no longer has funds.  May well be case eg unauthorised waste offences. Go up chain?  Proactive, intelligence based approach

Conclusion