Alleviating the tension between corporate rescue and environmental responsibility Blanca Mamutse
Introduction How can environmental interests be integrated into corporate rescue? ‘a concern for the livelihood and well-being of those dependent upon an enterprise which may well be the lifeblood of a whole town or even a region, is a legitimate factor to which a modern law of insolvency must have regard. The chain reaction consequent upon any given failure can potentially be so disastrous to creditors, employees and the community that it must not be overlooked.’ Insolvency Law and Practice: Report of the Review Committee (1982) (‘Cork report’) Discharge of debts despite ‘polluter pays’ principle? 2
Rescue and environmental obligations Conflict between compliance/compensation obligations, and debtor’s ‘fresh start’ Scottish Coal Company Limited insolvency: Sells viable mining sites to buyer H saves jobs, benefits local economy Embarks on restoration of other sites with aim of selling to H Enters liquidation to ‘abandon’ sites incapable of restoration estimated £478,000/month to maintain remaining sites (enough funds available for months) cost of restoring the sites estimated £73m 3
UK Coal Operations Ltd Administration: Successful restructure of ‘majority of the Company’s business and assets’ Minimum 1,500 jobs saved Followed by liquidation to disclaim Daw Mill colliery: PWC statement ‘This was essential given it was a high risk site with substantial liabilities attaching to it. The costs of securing and holding the mine (… expected to exceed £100,000 per week) would have been an expense and, as such, these costs would have been paid ahead of the dividend to creditors.’ 4
Integrated approach regulation? Separation between viable assets and overwhelming liabilities, use of liquidation emphasis on saving the business affects taxpayers in environmental context Emerging EU ‘rescue and recovery culture’ liquidation restructuring Entrepreneurship 2020 Action Plan Protection for environmental claims through regime which accommodates different types of obligations, requiring action and/or payment stakeholder involvement 5
A more organic approach Weaving environmental interests into the business rescue package? Effect of environmental damage on value of business/assets; value of assets in relation to business/sector Link between regulatory protection and economic growth: Regulators’ duty to ‘have regard to the desirability of promoting economic growth’ in exercising their functions s.70 Deregulation Bill ‘Regulators should carry out their activities in a way that supports those they regulate to comply and grow’ Regulators’ Code (2014) Waste policy, shift from environmental to economic 6
Assessment Integration through legal reform or change in perspective? transparency and accountability speed and flexibility Developing responsive culture pre-insolvency Report of Independent Review of Regulation of Opencast Coal Operations in East Ayrshire (2014): restoration bond/guarantee deficiencies: ‘biggest failings’ operators’ awareness of breaches, and exploitation of status as major employers, failures in Council compliance monitoring procedures and planning staff’s limited technical knowledge of surface mining 7