The legal framework for control of waste, emissions and the handling of hazardous substances is not just a burden – it also sets a much-desired, international, ‘level playing field’.
Environmental legislation has real teeth. Executives of companies that pollute the land, air and (especially) water supply can find themselves in serious trouble and with more than damage to their brand image to worry about. If breaches result in death then penalties can be severe.
February 2011 saw the UK’s first prosecution under the recently introduced Corporate Manslaughter Act. It resulted in a fine of £385,000 against a small, single-director company – Cotswold Geotechnical Holdings – whose reported annual turnover is around the price of a single-bedroom flat in a London suburb; this is not a large organisation that could brush off such a fine as a minor cost of doing business. The company was given 10 years to pay; while ability to pay has historically been taken into account, new guidelines – and the judgement in this case – indicate that a sufficiently serious breach of health and safety legislation would be viewed as a justification for fining a company out of existence.
Directors can now be held personally responsible for breaches of health and safety legislation, facing heavy fines and even imprisonment. These penalties can apply even if the executive was unaware that the breaches were taking place. So it is time to get very serious indeed and ensure that the practices and behaviours that companies have put in place are actually being followed.
Laws across the world on health, safety and pollution are coming into line with each other. Whether a company is operating in the EU, Japan or the Americas, legislation on pollution and environmental responsibility is either already in place or is the subject of animated discussion. According to Caroline Almond and Anita Lloyd, who focus on environmental issues in the Global Automotive Industry Group at international law firm Squire Sanders LLP, the automotive sector in the UK and elsewhere faces increasing legislative pressure in the control of hazardous substances and, they emphasise, the burden is largely on the producer, or on the permit/licence holder. Penalties for noncompliance are severe and may prevent the guilty party from making or using the substances involved, which will have the effect of putting them out of business.
While relevant legislation includes WEEE (waste electronic end electrical equipment) regulations, those of particular concern when it comes to the manufacturing site itself include RoHS (Restriction of Hazardous Substances (RoHS); REACH (chemicals legislation) and environmental permits, such as those required for paint spraying, for example.
Vehicle End of Life (ELV) regulations are also, clearly, within the environmental area but, in the context of this article, focus will be more on controlling substances that can be used, rather than disposal of materials like cadmium, lead, mercury and hexavalent chromium, which should not be part of a new vehicle anyway. Having said that, if ownership of a business is transferred or sold, ELV vehicles for which the original owners are responsible should be included in the transfer and the new owners should be very clear on the responsibilities they are incurring. Similar considerations apply to waste tyres and WEEE and producers should be aware that the situation can be a bit unclear sometimes. For example, a car stereo is subject to ELV regulations, not WEEE.
RoHS has been established for a few years and the regime is pretty embedded for cars built in the EU, Japan and even the USA, although America does not have as stringent a legal regime. Whoever wishes to sell cars in the EU has to comply with the RoHS regulations and, at the end of the day, it does not make much commercial sense to have multiple production lines and associated supply chains; one with hazardous substances and one without.
REACH – the Registration, Evaluation, Authorisation and Restriction of Chemicals Regulation – is a different kettle of fish. It became law on June 1, 2007 and created a new regime for the regulation of chemicals in the EU, although the totality of its measures will be phased in over 11 years. Its aim is to ensure that chemicals are used in such ways as to minimise risks to human health and the wider environment. The intention is to evaluate substances before approval for use and put into place regimes of registrations and authorisation. Registration only applies to substances that are manufactured or imported in quantities of one tonne or more and involves the submission of detailed technical dossiers containing all relevant information about each individual use of a substance. The amount of data needed will vary, depending on tonnage and/or the hazardous nature of any particular substance. Materials or compounds categorised as ‘substances of very high concern’ (SVHCs) are required to undergo authorisation. An authorisation will be granted only if the organisation can demonstrate that the risk from their use of the substance is adequately controlled. The European Chemicals Agency (ECHA) and national bodies – the Health and Safety Executive (HSE) in the UK – will decide whether further testing of a substance is required and the form it will take.
REACH further aims to place the burden for evaluation more onto the supply chain than on public authorities. It thus follows that the entire supply chain has to be aware of the steps necessary to achieve compliance. Squire Sanders says that these regulations are complex and even represent a potential threat to the auto industry, as they can lead to sudden non-availability of materials and unlimited fines. The Automotive Industry Guideline version 3.1 was published in June 2012 and provides a guide for manufacturers, importers and downstream users of chemicals covered by REACH. Typical contaminants involved in the automotive industry include waste oils, solvents, acids, paints, automotive wastes, various cutting oils, soaps, detergents, waxes, and other chemicals.
There is also detailed legislation covering contamination caused by companies and individuals, based around the ‘polluter pays’ principle. If an auto manufacturer, for example, has in the past caused or now causes, contamination of land or water, the UK regime requires the causers, or anyone who knowingly permitted the contamination, to clean it up or pay for the costs of clean-up and, effectively, rehabilitation. The relevant legislation in the UK is the Contaminated Land Regime (CLR) under Part 2A of the Environmental Protection Act 1990. The responsible bodies are, in the first instance, local authorities. They have a duty to inspect and identify ‘contaminated land’ and require remediation. If the original polluter cannot be found the current owner may be liable.
The mere existence of contamination or the presence of pollutants is not necessarily a trigger for a legal requirement to clean up a contaminated site. Land is only considered to be ‘contaminated land’ in the legal sense if it poses an unacceptable risk to human health or the environment. ‘Remediation’ does not necessarily mean removal of all the contamination in the land; it may just be containment of contamination to ensure that it does not pose any further risk to human health or the surrounding environment.
In fact, the planning system has a key role to play in addressing the problem of historical land contamination; the CLR is only used where no appropriate alternative solution exists. Where a contaminated site is going to be redeveloped it is much more likely that clean-up will be dealt with as part of the planning process. Conditions forming part of planning permission may require a developer to identify contamination on a site and undertake any necessary remediation works before the development can go ahead.
While the CLR is primarily aimed at older, or existing pollution, the Environmental Damage (Prevention and Remediation) Regulations 2009 are aimed at newer contaminations and in three specific areas: certain, defined types of damage to water; land damage; and damage to biodiversity. They also impose on businesses the obligation of self-reporting. If there is an imminent threat of environmental damage, operators will be required to take immediate steps to prevent it and have to report it to the relevant authorities.
If damage is being caused and there are reasonable grounds to believe that it is, or may become, environmental damage, then operators will be required to prevent further damage. If environmental damage is caused, operators will have to carry out remediation. Strangely, it is not an offence to actually cause the damage under these regulations, although it might be under others. The aim of the legislation is to remedy the damage or remove the threat of such damage rather than penalise those responsible for it. But failure to comply could be, as would be failure to comply with a remediation notice.
In the past, transgressing businesses would pay when they were found out and no one would go to jail. The cynical would regard it all as merely a cost of doing business. But with Superfund, the principle was established that it did not matter when the transgression occurred, the polluter would be found and obliged to pay (see box on previous page). Similarly, the Corporate Manslaughter Act in the UK has removed barriers to penalising companies to death – no matter how many jobs they supposedly create.
Other legislative measures – the Bribery Act, or Foreign Corrupt Practices Act in the USA – are important because they establish the principle that directors and executives of businesses can be held personally responsible for breaches of the law, and that responsibility can include fines and imprisonment. They have also established the principle that ignorance is no excuse; responsibility lies with the directors even if they were unaware that breaches were happening, and even if such breaches were taking place elsewhere than the UK, EU or USA.
The best thing to do is to ensure that any organisation knows the laws and follows them rigorously, prevention being better than cure. And for that, the legal resources have to be effectively resourced, whether by the internal legal department or, increasingly, by external firms with the right experience.