1. Liability bounce-back for contaminated sites Keith Davidson

2. Specialist environmental law firm - contaminated land issues Environmental liability transfer projects Chemical companies Developers Environmental support for law firms Addleshaws, DWF, Gateleys, Mills & Reeve, Pinsents Gunnercooke, Pannone, Land Law, JMW, Ward Hadaway Legal Week Green Innovation Award 2015 Business Green Leaders Awards Law Firm of the Year 2015 Environmental liability management

3. Environmental liability regimes Liability bounce-back for contaminated sites Traditional brownfield approach Environmental liability transfer projects  Technical  Legal  Contractual  Insurance Getting the best environmental deal

4. Regulator not knocking on the door 1.Death of the contaminated land regime? 2.Water pollution legislation 3.Environmental damage regulations 4.Permit or lease obligations 5.Third party claims 6.Planning or transaction trigger

5. Environmental liabilities for contaminated land Regulatory actionThird party claimsOther liabilities Planning obligationsPrivate nuisance claims Clean up costs Environmental permit obligations Class action claimsLoss of property value Water pollution legislation Industrial disease claims Impact on transaction Environmental damage regime Professional indemnity claims Accounting provisions Part 2A contaminated land regime Lease claimsNegative publicity

6. Chemical CoDeveloperNew ownerTenant Causer Knowing permitter Planning obligations in some deals Permit clean up Sale contract Indemnity Causer Knowing permitter Planning obligations Permit transfer obligations Sale contract Indemnity Causer Knowing permitter Easy target Class B owner Planning obligations Permit transfer obligations Lease obligations Sale contract indemnity Causer Knowing permitter Class B occupier Class B owner >21 years Permit transfer obligations Lease obligations Who can be targeted for clean up?

7. Chemical Company Developer New owner Everyone retains environmental liability

8. 8 …and then the lawyers get involved

9. Easy to become a knowing permitter

10. What knowledge do you have? Lambson Fine Chemicals Ltd v Merlion Capital Housing Ltd 2008 Former Laporte chemical site with Blue Billy contamination Lambson sold to Merlion, leased back to demolish - £500,000 retention Director said no knowledge of contamination other than in the URS reports Fraudulent misrepresentation? Court held its BUYER BEWARE. Merlion should have reviewed the previous reports and factored this into the price

11. Large chemicals/ industrial companies Seller retains legal liability after the sale if a Class A causer or Class A knowing permitter (via actions of the historic companies you bought) You could be targeted for clean up costs 30 +years after the sale With knowing permitter its Seller beware

12. Liability bounce back – polluter most at risk

13. The traditional approach – clean break? Phase 2, remedial strategy plan, verification report Regulator approval, “no further comments” Discharge planning conditions Reliance letter or collateral warranties

14. What can go wrong? 1. Significant residual contamination 2. Offsite migration has already occurred 3. Remediation, construction mobilises it 4.Flooding mobilises it 5.Changes in law or stricter requirements 6.Buyer quickly sells or leases 7.Indemnity is worthless

15. What defence have you got ? £1m PI is for OUR protection We haven’t been negligent Your consultants Your lawyers Your boss We agreed the indemnity on YOUR instructions You told us we didn’t need the guarantor I’ve to explain this at the Board meeting Why do we still have [X] million liability

16. Environmental liability site?

17. 1955 to 1980 Steetley Chemical Works 1983 Site bought by Crest Nicholson to build 66 homes 1992 Redland buy Steetley (the polluter) 2000 Groundwater contamination identified 2005 Crest and Redland named as “appropriate persons” 2010 Crest and Redland share cost of clean up 2015 Part 2A and civil action - £16million + St Leonards Court, Sandridge

19. The ideal ELT package - layers of protection TECHNICAL Investigations Remediation LEGAL Sold with information Agreement on liabilities CONTRACTUAL Release of liabilities Environmental indemnity deed INSURANCE Pollution Legal Liability Contractors Pollution Liability

20. Environmental liability transfer projects PLL and CPL Chemical Co to Developer/WSP Chemical Co direct to Developer Chemical Co to Developer /Contractor

21. When is environmental insurance needed? 1.Stalemate in transactions 2. Buyer or funder concerns 3.Seller wants a clean break 4.Concerns over indemnities 5.Site being redeveloped

22. Beware the pitfalls in ELT projects Both seller and buyer must become Class A - quickly sell or lease? Inter-group transfers wont work Payments for remediation requires specific reduction for particular remediation Sold with information? Is the SPV a large commercial organisation? Does the env report identify the significant pollutant linkage? Seller retains interest Covenant strength of buyer and guarantor Scope of indemnity cover and limitations Does the PLL/ CPL insurance policy wording cover the gaps?

23. Landlord and tenant negotiations Yield up provision Baseline / end of term Industrial user covenants Aggravated contamination Agreement on liabilities

24. Environmental liability transfer – core ingredients

25. Keith Davidson 07827353652 keith.davidson@elmlaw.co.uk www.elmlaw.co.uk @Elm_Law Any questions?