The HSE have confirmed that the FFI scheme is about to commence. This will enable them to recover costs of an investigation where there has been a “material breach” by a Defendant, even where there is no formal prosecution. The HSE have issued Guidance on the application of FFI, a copy of which can be found at: http://www.hse.gov.uk/pubns/hse47.pdf.

There has been concern within industry about exactly what would be classified as a material breach enabling the HSE to make use of the FFI scheme. The Guidance confirms that a “material breach” is when “in the opinion of an inspector, there is or has been a contravention of health and safety law that requires them to issue a notice in writing of that opinion to the dutyholder” (paragraph 16, page 7 of the Guidance). That notice can be by way of the issue of an Enforcement notice (ie Improvement or Prohibition Notice), a prosecution, or by “notification of a contravention”. It is the latter trigger for FFI which is the main area of concern for dutyholders, some of whom hold the view that the HSE will be prompted to increase the number of written notifications of material breaches in order to help recover the costs of their investigation to support in the HSE’s finances.

Relevant to such concern is the case of AgChemAccess Ltd, an international agrochemicals supplier, which has stated that they intend to sue the HSE for £2m for loss of business resulting from a Prohibition Notice being incorrectly issued against them. The enforcement action followed an incident in which a small amount of product leaked. The HSE took the view that there had been a breach of safety regulations relating to the product’s packaging and subsequently issued a Prohibition Notice on 10 July 2012 which prohibited the company from moving any of its UK stock. After the company sought a judicial review of the decision, the HSE agreed to lift the Prohibition Notice on 29 August, before the hearing date. However, by that stage, not only had legal fees been incurred by AgChemAccess totalling £200k, but the company also alleges that they were forced to make ten employees redundant as a direct result of the inability to trade. AgChemAccess has confirmed its intention to sue the HSE for damages for the contracts lost during the 8 week period estimated at £2m. In view of the ongoing investigation and legal action, the HSE have not commented on the episode, but it is clear that the case illustrates the concerns of some dutyholders about the potential for disproportionate action by the HSE and the economic impact that may have.

There is also a concern that when investigations into an incident become complex, take a significant period, or require the use of multiple experts which result in significant cost, even where no prosecution follows the HSE may require a dutyholder to refund the entire investigation costs if they notify a material breach in writing. The HSE maintain that the decision making approach that their inspectors take will continue to follow the underlying principle of proportionality to the risks involved. However, until the scheme is put into practice it is difficult to know whether the concerns that dutyholders raise are well founded.

The scheme also raises a question for insurers who provide cover for prosecution costs as an extension to their liability policies. Will costs that the HSE seek to recover under the FFI scheme be defined as “Prosecution costs” where there has been no prosecution? We will keep you updated on the progress of the FFI scheme as it is put in place.