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Regulatory framework and policy

Domestic legislation

What is the primary environmental legislation in your jurisdiction?

Environmental legislation in England and Wales is widespread and is not confined to one legislative instrument (ie, there is no environmental code).

Key primary legislation includes:

  • the Climate Change Act 2008, which sets targets for emissions reductions;
  • the Environment Act 1995, which created the Environment Agency (EA);
  • the Environmental Protection Act 1990, which includes the contaminated land regime and various other pollution provisions;
  • the Water Resources Act 1991, which contains a significant part of the water regime; and
  • the Wildlife and Countryside Act 1981, which is the principal domestic source of wildlife law.

Key secondary legislation includes:

  • the Conservation of Habitats and Species Regulations 2010;
  • the Environmental Damage (Prevention and Remediation) (England) Regulations 2015;
  • the Environmental Permitting (England and Wales) Regulations 2016;
  • the Town and Country Planning (Environmental Impact Assessment) Regulations 2017; and
  • the Waste (England and Wales) Regulations 2011.

As the United Kingdom is a member of the European Union at present, EU legislation also applies. Much of the environmental legislation of England and Wales reflects and implements the requirements of EU legislation, which has given rise to significant uncertainty surrounding the impact of Brexit on UK environmental legislation.

International agreements

Is your jurisdiction a signatory to any international environmental agreements/commitments?

The United Kingdom is a party to a large number of international environmental agreements, both in its own right and by virtue of its EU membership. Key environmental agreements to which the United Kingdom is a party at present include:

  • the Convention on Wetlands of International Importance especially as Waterfowl Habitat 1971;
  • the Convention concerning the Protection of the World Cultural and Natural Heritage 1971;
  • the Convention on International Trade in Endangered Species of Wild Fauna and Flora 1973;
  • the Convention on the Conservation of Migratory Species of Wild Animals 1979;
  • the Convention on the Conservation of European Wildlife and Natural Habitats 1979;
  • the Convention on Biological Diversity 1992;
  • the Vienna Convention for the Protection of the Ozone Layer 1985;
  • the Montreal Protocol on Substances that Deplete the Ozone Layer 1987;
  • the United Nations Framework Convention on Climate Change 1992;
  • the Kyoto Protocol 1997;
  • the Paris Agreement 2016;
  • the Convention on Environmental Impact Assessment in a Transboundary Context 1991;
  • the Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters 1998;
  • the International Convention for the Regulation of Whaling 1946;
  • the International Convention on Civil Liability for Oil Pollution Damage 1969; 
  • the Protocol of 1992 to amend the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971;
  • the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter 1972;
  • the International Convention for the Prevention of Pollution from Ships 1973;
  • the United Nations Convention on the Law of the Sea 1982;
  • the Convention for the Protection of the Marine Environment of the North-East Atlantic 1992;
  • the Convention on Long-Range Transboundary Air Pollution 1979;
  • the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal 1990;
  • the Convention on Third-Party Liability in the Field of Nuclear Energy 1960; and
  • the Vienna Convention on Civil Liability for Nuclear Damage 1963.

Regulators

Which government bodies regulate compliance with environmental legislation and what is the extent of their powers?

In England, the EA is the primary regulator of compliance with environmental legislation and permitting. In Wales, the role is filled by Natural Resources Wales (NRW). Local authorities are responsible for certain areas of environmental protection, including:

  • air quality management;
  • the identification of contaminated land;
  • local environmental quality issues; and
  • planning and certain product regulation.

Among other matters, the EA and NRW manage:

  • pollution control;
  • waste regulation;
  • water resources;
  • the issuance of environmental permits; and
  • the provision of advice and guidance to industry and businesses on best practices and compliance.

Specialised agencies (eg, the Marine Management Organisation, Natural England and the Drinking Water Inspectorate) are charged with enacting and enforcing regulations that relate to their specific remits. The Health and Safety Executive is the principal regulator in relation to the EU chemicals regime (including the EU Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals (1907/2006) and the EU Regulation on the Classification, Labelling and Packaging of Substances and Mixtures (1272/2008)).

The EA’s formal enforcement powers include:

  • issuing warnings;
  • issuing statutory enforcement and works notices; 
  • issuing prohibition notices;
  • suspending or revoking environmental permits;
  • varying permit conditions;
  • issuing injunctions;
  • carrying out remedial works;
  • issuing civil penalties;
  • issuing other civil and financial penalties, including fixed penalty notices;
  • issuing formal cautions; and
  • undertaking prosecution and orders ancillary to prosecution.

Other regulators have broadly similar powers.

Policy

How would you describe current government policy on environmental regulation and how does it compare on an international scale?

At present, the United Kingdom is, comparatively speaking, subject to stringent environmental regulation by virtue of its EU membership. However, this status is in flux due to Brexit. Going forward, it is anticipated that environmental regulation will remain robust, but enthusiasm for this area of regulation may diminish over time as a result of political pressure to prioritise economic growth.

Permits

Appeal

Activities subject to permit

Which activities require an environmental permit and how are they classified for such purposes?

The main permitting regime for England and Wales is set out in the Environmental Permitting (England and Wales) Regulations 2016, which act as an integrated permitting regime and implement numerous pieces of EU environmental legislation (eg, the EU Industrial Emissions Directive (2010/75/EU)). The regulations regulate various activities, including:

  • a range of power generation activities;
  • waste operations;
  • mining waste operations;
  • discharges into water; and
  • waste incineration.

Issuing authority

Which authority issues permits?

Environmental permits are issued by:

  • the Environment Agency (EA), which is the primary regulator of compliance with environmental legislation and permitting in England;
  • Natural Resources Wales (NRW), which fills this role in Wales; and
  • the relevant local authority (under certain circumstances).

Requirements

What are the procedural and documentary requirements to obtain a permit?

Standard or bespoke environmental permits can be obtained from the EA depending on the industrial activity concerned (typically more complex and more polluting activities are subject to bespoke permits). Standard environmental permits contain a single condition, which refers to a standard set of rules with which the permit holder must comply. The procedure for applying for an environmental permit includes completing a form and providing relevant environmental information (set out in a schedule to the Environmental Permitting (England and Wales) Regulations 2016).

Fees

Do any permit fees apply?

Yes. Fees levied vary by activity and include an application charge on applying for a new environmental permit and a charge for amendments to a permit.

Validity period and renewal

What is the validity period for permits and how can they be renewed?

Environmental permits do not expire as a matter of course unless specified. However, the issuing authorities must review permits periodically.

Transferral

Can permits be transferred? If so, what procedure applies?

Yes, either completely or partially. The Environmental Permitting (England and Wales) Regulations 2016 provide for a transfer procedure, which involves either a joint application of the transferor and transferee or an application by the transferee. The EA publishes environmental permit transfer forms online.

Appeal

Are permit decisions subject to appeal? If so, what procedure applies?

Certain permit decisions can be appealed to the secretary of state for environment, food and rural affairs (in England) or the Welsh government (in Wales), including:

  • environmental permit application refusals;
  • variation application refusals; 
  • transfer application refusals;
  • the imposition of permit conditions; and
  • the service of an enforcement, revocation, suspension or prohibition notice.

Appeals must be submitted in writing, but all parties have the right to request a hearing.

Non-compliance

What are the consequences of violating permit rules and decisions?

It is a criminal offence to violate an environmental permit or the terms of an enforcement or suspension notice. The regulator has a range of enforcement mechanisms available with regard to permit violations, including:

  • serving an enforcement or suspension notice;
  • mandating that operators take certain steps when there is a high risk of pollution; or
  • undertaking enforcement action where an accident or incident has significantly affected the environment, with any remediation costs being recovered from the operator.

The Proceeds of Crime Act 2002 also contains obligations to self-report criminal liability to the National Crime Agency in certain circumstances where there has been a financial benefit from criminal conduct (including where a business has profited from operating either without an environmental permit, where one was required, or in breach of its terms).

Environmental impact assessments

Projects subject to assessment

What projects require a preliminary environmental impact assessment?

Applications for planning permission or development consent for certain projects require an environmental impact assessment (EIA). The Town and Country Planning (Environmental Impact Assessment) Regulations 2017 require applications for development to be subject to an EIA if the development:

  • is likely to have a major environmental impact (as listed in a schedule to the EIA regulations); or
  • may have a significant environmental effect due to its size, nature or location.

Scope of assessment

What environmental factors and risks fall within the scope of the impact assessment report?

The environmental statement produced as part of an EIA must include the direct and indirect likely significant effects of the development on the environment resulting from, among other things:

  • its construction and existence (including demolition works);
  • the use of natural resources (and their sustainable availability);
  • the emission of pollutants, noise, vibration, light, heat and radiation;
  • nuisance;
  • waste disposal;
  • risks to human health or cultural heritage;
  • the impact of the project on the environment (eg, its greenhouse gas emissions); and
  • the project’s vulnerability to climate change.

Notably, these impacts must be considered in conjunction with the effects of other existing and approved projects. The environmental statement must also describe any measures which the applicant intends to take to mitigate the identified significant adverse effects on the environment and their likely success.

Assessor

Who conducts assessments?

Applicants retain advisers to conduct assessments on their behalf.

Publication

Are the results of impact assessments publicly available?

Yes. Planning authorities must publish EIAs that they receive online.

Challenge

Can the results of an impact assessment be contested? If so, what procedure applies?

Under certain circumstances, decisions made by a local planning authority or the secretary of state based on an EIA may be challenged. Challenges can be made throughout the process – from its commencement (concerning whether an EIA is needed) through to the grant or refusal of planning permission (in relation to whether the decision to grant such permission duly considered all relevant environmental information).

The procedure for challenging a decision depends on the precise challenge, but can be done:

  • through a judicial review;
  • through a statutory procedure under the Town and Country Planning Act 1990; or
  • under EIA regulations.

Challenges to EIAs or environmental statements have been one of the principal sources of environmental case law in England and Wales.

Soil pollution

Liability

What regime governs liability for soil pollution (including the allocation, transfer and limitation of liability)?

Part 2A of the Environmental Protection Act 1990 and the Environmental Damage (Prevention and Remediation) (England) Regulations 2015 regulate the clean up of contaminated land. It sets out a framework for identifying and remediating land that poses a significant risk to health or the environment where there is no alternate solution. The regulations focus on the most significant cases of damage to the environment, including, in relevant part, risks to human health arising from the contamination of land.

Under Part 2A, liability for remediating contaminated land initially sits with the parties that caused or knowingly permitted the contamination (ie, the Class A liability group). Unless otherwise exempted or no longer in existence, liability for contaminating the land remains with polluters or knowing permitters that no longer own or occupy the land. Where it is impossible to identify any members of the Class A liability group, liability for remediation falls on the existing owners or occupiers of the land, regardless of their responsibility for, or awareness of, the contamination. Liability is strict and joint and several.

Part 2A provides that parties buying or selling land may allocate (ie, effectively transfer) liability for contamination on that land between themselves contractually, so that one party (often the buyer) accepts liability for the contamination to the exclusion of the other party (often the seller). It further provides that if parties enter into such an agreement to allocate liability, the enforcing authority (ie, the Environment Agency) should generally give effect to the agreement on the allocation of liability as between those parties. A similar provision under Part 2A applies where the land is sold with information regarding the contamination thereon. There is a presumption that where a large organisation buys land, it will have made inquiries as to the presence of contamination. Law Society guidance encourages solicitors to make inquiries as a matter of course.

Due diligence

What environmental due diligence measures are recommended before concluding land transactions?

Common due diligence measures include:

  • a review of any historic environmental reports, statements, findings or audits relating to the land’s condition;
  • inquiries to the local authority to assess whether the land is included in any register of potentially contaminated land in the relevant area;
  • a review of vendor records of disclosed or publicly available information concerning any spills, leaks or emissions of contaminants or hazardous substances on, near or under the land;
  • a review of any contractual obligations entered into by the target or its precursors in relation to the land;
  • a review of any ongoing rights or obligations that may run with the land with respect to environmental remediation or management; and
  • intrusive investigations conducted on the land in order to ascertain the presence and level of contamination (rare).

Remediation

What remediation and clean-up measures are typically applied and how can remediation costs be recovered?

Remediation requires the removal, treatment or control of contamination such that:

  • the risk that it presents is reduced to an acceptable level (determined by the regulator); or
  • the land is rendered suitable for its existing use under an agreed remediation strategy.

Common soil remediation techniques include:

  • on-site treatment, excavation and removal;
  • cover systems (where the source contamination is contained, but not removed); and
  • solidification and stabilisation.

Failure to comply with a remediation notice is a criminal offence. In the event that remediation does not occur or is inadequate, the regulator can take any necessary remedial steps and recover the costs from the liable parties (although, in practice, this is rare and limited to more serious instances). 

Air and water pollution

Regulation

How are air emissions regulated? What air quality standards and emission limits apply?

Unauthorised discharges into air are criminal offences under Regulation 38 of the Environmental Permitting (England and Wales) Regulations 2016.

EU air quality standards are implemented in the United Kingdom through the Air Quality Standards Regulations 2010.

What rules govern the discharge of wastewater and the protection of water resources?

Unauthorised discharges into water are criminal offences under Regulation 38 of the Environmental Permitting (England and Wales) Regulations 2016.

EU water quality standards are implemented in the United Kingdom through the Water Supply (Water Quality) Regulations 2016.

Non-compliance

What are the consequences of non-compliance with air and water regulations?

Non-compliance with Regulation 28 of the Environmental Permitting (England and Wales) Regulations 2016 is punishable by an unlimited fine (although the guidelines for the sentencing of environmental criminal offences provide an indicative range of between £50 and £3 million for organisations depending on the impact of the non-compliance and the organisation’s culpability and size). If the offence is committed by a body corporate – and it is proved that an officer of the body corporate consented to the offence or that the offence is attributable to any neglect on the officer’s behalf – both the officer and the body corporate may be guilty of an offence and can be liable to be prosecuted. In practice, such prosecutions of directors and managers are unusual.

Waste and hazardous substances

Definition

How is ‘waste’ defined in your jurisdiction?

‘Waste’ is defined under the Environmental Protection Act 1990 (implementing the EU Waste Framework Directive (2008/98/EC)) as “any substance or object that the holder discards, intends to discard or is required to discard”.

The UK waste regime is principally set out in:

  • the Environmental Protection Act 1990;
  • the Waste (England and Wales) Regulations 2011; and
  • the Environmental Permitting (England and Wales) Regulations 2016, implementing the relevant EU regime derived from the EU Waste Framework Directive.

In general, any business which imports, produces, collects, transports, recovers or disposes of waste has a legal duty to handle it by applying the following waste hierarchy:

  • prevention;
  • preparation for reuse;
  • recycling;
  • other recovery; and
  • disposal.

Further elements concerning the duty of care are set out in the Waste Duty of Care Code of Practice 2016. The following sections outline obligations in relation to non-hazardous waste only, as a special regime applies in relation to hazardous waste (see Hazardous substances section below).

Waste handling

What rules and procedures govern the handling of waste, with particular respect to:

(a) Storage?

Waste storage is a permitted activity under the Environmental Permitting (England and Wales) Regulations 2016 and thus requires an environmental permit, although it is acceptable to store certain quantities of waste without a permit for a limited period after registering an exemption with the Environment Agency.

(b) Transport?

Waste transporters are subject to the legal duty of care as set out above. Waste transporters must register to operate under the Control of Pollution (Amendment) Act 1989 and the Waste Regulations and it is a criminal offence to transport controlled waste without being registered. The regulator is the Environment Agency (EA) in England or Natural Resources Wales (NRW) in Wales. Written descriptions of waste, in the form of waste transfer notes, are required when waste is transferred between parties.

(c) Disposal?

Waste must be handled in such a way that it is unlikely to cause pollution or harm to human health. It is an offence to deposit controlled waste under an environmental permit or a registered waste exemption. Therefore, waste disposal requires an environmental permit (see above).

(d) Recycling/reuse?

There is no overall recycling target in place for commercial and industrial waste (although the EU Waste Framework Directive sets recycling targets for the United Kingdom in relation to household waste). Producers of packaging, batteries, electrical and electronic equipment and vehicles must ensure that a proportion of their products is recovered and recycled in accordance with EU requirements.

Liability

What is the extent of a waste producer’s liability after transferral of waste (eg, to a waste disposal agent)?

A waste producer must ensure that it transfers waste only to an authorised party (which must be registered as a waste transporter and have an environmental permit or a registered exemption to accept waste). Such parties must also complete a waste transfer note when transferring waste to another party. This must be signed by both the waste producer and the transferee and contain a statement confirming that the waste producer has applied the above waste hierarchy. The waste producer must keep the waste transfer note for two years (or longer in certain cases).

Failure to adopt adequate procedures for managing contractors in relation to waste management procedures may leave a business vulnerable to prosecution in the event that its waste is improperly disposed of. The courts have found businesses liable for failure to exercise control over waste on their premises where they have not had mechanisms in place to ensure that contractors complied with the relevant waste disposal law.

Waste recovery

Are waste producers bound by any waste recovery obligations?

In practice, businesses are expected, at a minimum, to recycle their waste, where possible. The legal duty of care that applies to waste producers and waste transfer notes includes an affirmation that the transferor has applied the waste hierarchy, as set out in the duty of care.

Waste disposal agents

How are the business activities of waste disposal agents/landfill operators regulated?

Any business or person that arranges for waste to be collected, disposed of or recycled must be registered as a waste broker. The EA and the NRW issue registration certificates which are valid for three years.

Waste brokers must ensure that:

  • waste is safely contained,
  • waste transfer notes are correctly completed and correctly describe the waste; and
  • the waste duty of care and the waste hierarchy are applied.

Landfill and waste incineration operations are regulated under the Environmental Permitting (England and Wales) Regulations 2016 and parties undertaking such operations must hold an environmental permit (see above). The United Kingdom historically sent most of its waste to landfill, but this position has changed and an increasing amount of waste that cannot be recycled is being incinerated in waste-to-energy installations.

Hazardous substances

What special rules, regulations and safeguards apply to the handling and disposal of hazardous materials?

The handling and disposal of hazardous materials is regulated by a variety of domestic and EU instruments. Key EU instruments include:

  • the EU Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals (1907/2006);
  • the EU Regulation on the Classification, Labelling and Packaging of Substances and Mixtures (1272/2008);
  • the EU Regulation concerning the Making Available on the Market and Use of Biocidal Products (528/2012); and
  • the EU Regulation concerning the Export and Import of Hazardous Chemicals (649/2012).

Key domestic instruments include:

  • the Dangerous Substances and Explosive Atmospheres Regulations 2002;
  • the Control of Substances Hazardous to Health Regulations 2002; and
  • the Carriage of Dangerous Goods and Use of Transportable Pressure Equipment Regulations 2009.

A specific regime applies to hazardous waste as set out in the EU Waste Framework Directive, which is implemented into UK legislation by the Hazardous Waste (England and Wales) Regulations 2005.

Liability

Types of liability

What types of liability can arise for environmental damage (eg, administrative, civil, criminal)?

Environmental liability can arise under:

  • criminal law; 
  • civil law;
  • public or administrative law; and
  • company law.

In terms of its enforcement approach, the Environment Agency (EA) has traditionally regarded prevention to be better than a cure and has thus sought to engage with businesses to educate and enable compliance and offer information and advice to regulated persons. The EA has also committed to a proportional, consistent and transparent enforcement approach. However, its ability in this regard has been affected by significant budgeting constraints, which may have contributed to an impression of less predictable approaches to enforcement. The EA uses formal enforcement powers, such as issuing enforcement notices and bringing prosecutions in certain circumstances, often where:

  • significant damage has occurred or been narrowly avoided;
  • there is evidence of dishonesty or putting profit before compliance; or
  • there is a prior pattern of poor compliance practices.

In 2014 revised guidelines for the sentencing of environmental criminal offences significantly increased the financial risks associated with prosecution. These sentencing guidelines state, for example, that fines for organisations should meet the objectives of punishment, deterrence and the removal of gain derived through the offence.

The new sentencing regime provided for by the guidelines aims to ensure that sentences match:

  • the seriousness of the offence;
  • the resultant harm; and
  • notably, the perpetrator’s financial standing.

Fines will be calculated based on the financial information provided in the annual accounts of the past three years (with particular attention being paid to turnover). Under the guidelines, ‘very large organisations’ (ie, those with a turnover greatly exceeding £50 million) may be fined an amount necessary to achieve a proportionate sentence. The guidelines specify that any such financial order must be “sufficiently substantial to have a real economic impact which will bring home to both management and shareholders the need to improve regulatory compliance”.

Directors’ and officers’ liability

Can directors and officers be held personally liable for company environmental offences? If so, can liability be limited through insurance coverage and/or contractual indemnities?

Company directors, managers and officers can be prosecuted if a criminal offence is committed with their consent or connivance or is attributable to their neglect. However, the hurdle for the prosecution of individuals is relatively high and the prosecution must show that the defendant was in a position to control and guide the company’s strategy and policy. The formal delegation of management responsibility will help to protect directors from prosecution, but does not exclude the risk of prosecution. Liability does not usually extend beyond the legal entity responsible for the incident to a holding company unless there is clear evidence of de facto control, which is typically absent. Directors’ and officers’ insurance is widely available for successful defence costs; however, contractual indemnities for criminal liability are unenforceable under public policy.

Liability for authorised activity

Can environmental liability arise even in the course of authorised activities (eg, operations subject to environmental permits)?

Provided that an entity operates in compliance with its environmental permit, regulatory liability is unlikely to arise. However, third parties, including non-government organisations, can challenge the terms of an entity’s environmental permit through a judicial review and have an express right to request that regulators take action if:

  • environmental damage is occurring; or
  • there is an imminent threat of environmental damage.

It is a criminal offence to violate an environmental permit or the terms of an enforcement or suspension notice served on a permit holder. The regulator has a range of enforcement mechanisms available in relation to environmental permit violations, including:

  • serving an enforcement or suspension notice;
  • mandating that operators take certain steps where there is a high risk of pollution; or
  • undertaking an enforcement action where an accident or incident has significantly affected the environment, with any remediation costs being recovered from the operator.

If damage is caused to individuals or property, civil liability may arise in tort if it can be shown that a duty of care existed and that the harm was foreseeable. It is not a defence for such liability that the harmful activity was not in breach of regulatory requirements.

Clean-up obligations may also arise for damage to unowned land under the Environmental Damage (Prevention and Remediation) (England) Regulations 2015.

Defences

What defences are available to environmental offenders?

For certain regulatory environmental offences, it is a valid defence to prove that:

  • all reasonable steps or precautions were taken and all due diligence was exercised to avoid committing the offence; or
  • the act was necessitated by an emergency to avoid a danger to the public.

Ignorance of the law or claiming to be acting under an employer’s instructions are invalid defences.

Liability in share sale/asset purchase

What rules govern the transfer of environmental liability in share sales and asset purchases?

The allocation of financial risk in respect of environmental liability is usually negotiated as a contractual matter and will depend on the commercial context. Liability at law sits with the entity that held the permit or undertook the act or omission at the relevant time.

Where a regulator may take enforcement action against a seller that has since divested itself of the relevant property requiring remediation of contaminated land, the seller may seek to produce evidence of the contractual allocation of liability to a court for enforcement. Part 2A of the Environmental Protection Act 1990 contemplates such allocations and their enforcement by a court.

Under Part 2A, liability for remediating contaminated land initially sits with the parties that caused or knowingly permitted the contamination (ie, the Class A liability group). Unless otherwise exempted or no longer in existence, liability for contaminating the land remains with polluters or knowing permitters that no longer own or occupy the land. Where it is impossible to identify any members of the Class A liability group, liability for remediation falls on the existing owners or occupiers of the land, regardless of their responsibility for, or awareness of, the contamination. Liability is strict and joint and several.

Part 2A provides that parties buying or selling land may allocate (ie, effectively transfer) liability for contamination on that land between themselves contractually, so that one party (often the buyer) accepts liability for the contamination to the exclusion of the other party (often the seller). It further provides that if parties enter into such an agreement to allocate liability, the enforcing authority (ie, the Environment Agency) should generally give effect to the agreement on the allocation of liability as between those parties. A similar provision under Part 2A applies where the land is sold with information regarding the contamination thereon. There is a presumption that where a large organisation buys land, it will have made inquiries as to the presence of contamination. Law Society guidance encourages solicitors to make inquiries as a matter of course.

What environmental due diligence measures are recommended before concluding share sales/asset purchases?

Environmental due diligence is common in commercial transactions, although its extent can vary substantially based on, among other things:

  • the target’s activities;
  • whether the sale is being conducted through an auction;
  • the transaction’s size; and
  • the purchaser’s risk appetite.

Due diligence may extend to:

  • a review of environmental permits and other consents, including any unusual or onerous conditions;
  • environmental reports and audits (both commissioned for the purpose of the transaction and historic);
  • regulatory activity, complaints, notices and claims (whether filed or threatened) and other regulatory correspondence;
  • historic and potential breaches of environmental law and any fines or remediation required by regulators or complaints or litigation in respect of damage or injury;
  • spills, emissions or leaks on or close to the site; and
  • the environmental obligations of the business or that run with the land, including remediation obligations, indemnities and other outstanding liabilities.

Health and safety issues may also be included in environmental due diligence.

Lender liability

Can lenders be held liable for environmental offences?

Liability rarely falls on lenders. However, broadly speaking, lenders can become liable for remediation in certain limited circumstances under:

  • Part 2A of the Environmental Protection Act 1990;
  • the water pollution regime under the Water Resources Act 1991; or
  • the common law of nuisance.

Such liability depends on whether a lender:

  • became involved in the management of the pollution;
  • enforced security; or
  • now owns the contaminated land.

Reporting and disclosure obligations

Required reporting

Under what circumstances must environmental damage be reported to the authorities?

At present, the Environmental Damage (Prevention and Remediation) (England) Regulations 2015 implement the EU Environmental Liability Directive (2004/35/EC) in England (similar regulations apply across the rest of the United Kingdom). This regime requires businesses to notify the relevant regulator of and remedy any environmental damage that they have caused where the damage:

  • affects protected species or areas; or
  • constitutes land pollution that poses a risk to human health.

The obligation covers operations that require an environmental permit and any business which negligently causes damage to protected species or areas.

In addition to complying with their reporting obligations with respect to the environment, operators must notify dangerous incidents (those that caused, or could have caused, death, major injury or disease) to the Health and Safety Executive under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013.

Reporting environmental damage early and cooperating with the regulator may be taken into account by a court under the 2014 revised guidelines for the sentencing of environmental criminal offences.

Publication

Is information on environmental damage/compliance available in a public register?

The Environment Agency, Natural Resources Wales and the local authorities maintain public registers of various matters under the Environmental Permitting (England and Wales) Regulations 2016, including in relation to:

  • waste operations;
  • installations;
  • discharges to groundwater;
  • radioactive substances;
  • waste carriers; and
  • brokers and dealers.

Notably, a register of enforcement actions is also maintained. These registers are publicly available online.

Audits

Are regular environmental audits required?

Environmental audits are not routinely required under UK law. However, there are requirements for baseline reports to be prepared at the start of certain activities that require an environmental permit and as part of any process to surrender such a permit when the operation is being closed.

Further, under the Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016, which implement the EU Non-Financial Reporting Directive (2014/95/EU), large public companies must disclose “information to the extent necessary for an understanding of the group’s development, performance, position and impact of its activity, relating to, at a minimum, environmental, social and employee matters”. This obligation, in addition to an increased stakeholder focus on transparency, has contributed to some large companies commissioning internal or third-party audits of their environmental management systems and environmental impact.

Disclosure

What environmental disclosures are required in sales transactions?

The so-called ‘buyer beware’ principle applies with respect to environmental issues in asset and share sales, meaning that a seller is not obliged to disclose information in relation to environmental matters. However, should a seller mislead a buyer through its conduct or by making misrepresentations, it can be held liable. In the sale of a business or in a share sale it is common for the seller to give warranties and disclose any significant issues against these warranties. In practice, it is common to:

  • provide vendor pre-prepared due diligence information or permit the purchaser to ask questions; and
  • undertake reasonable diligence.

Insurance

Coverage

What types of environmental insurance are available and what do they cover?

Specialist environmental insurance is available to cover both known and unknown contamination and other liabilities. Options include:

  • pollution liability insurance, which protects against losses resulting from known and unknown pollution, including historic contamination; and
  • remediation cost cap insurance, which covers cost overruns from contamination remediation.

Is environmental insurance mandatory and/or commonly purchased?

Insurance is neither mandatory nor frequently purchased. It is often difficult to negotiate in a timely way due to:

  • the limited size of the market and the fact that insurance cover is typically influenced by the existing and historic uses of the target site;
  • the risk of remediation being required; and
  • further pollution occurring.

Market practice is usually to rely on contractual protections (warranties and indemnities) to allocate risk between buyers and sellers.

Tax

Taxes

What environmental taxes are levied in your jurisdiction?

The principal environmental taxes in the United Kingdom are:

  • the Climate Change Levy, which is a tax on the use of energy by certain industries and the public sector;
  • the Carbon Reduction Commitment Energy Efficiency Scheme, which imposes a requirement to buy allowances to cover emissions (although this will cease in 2019);
  • the EU Emissions Trading Scheme;
  • the aggregates levy, which is a tax payable on the exploitation of rock, gravel and sand; and
  • landfill tax, which is paid by businesses and local authorities disposing of waste at landfill sites.

Climate change issues

Emissions, renewables and efficiency

What regulations, targets and/or incentive schemes are in place to:

(a) Reduce greenhouse gas emissions?

The principal piece of legislation addressing reductions in greenhouse gas emissions in England and Wales is the Climate Change Act 2008, which, among other things:

  • sets targets for the reduction of greenhouse gas emissions (ie, an 80% reduction of 1990 emissions by 2050);
  • creates a requirement for the UK government to produce carbon budgets;
  • creates a specific UK government advisory body on climate change (the Committee on Climate Change);
  • provides the framework for emissions trading schemes (ETS); and
  • prescribes other policy measures addressing adaptation to climate change.

At present, the United Kingdom, as an EU member state, is part of the EU ETS. The EU ETS establishes a mandatory cap and trade system for certain heavy industrial installations. Operators must surrender allowances (representing the emission of a single tonne of carbon dioxide equivalent) covering their total greenhouse gas emissions at the end of specified compliance periods. EU allowances can be traded through online registries as necessary. Credits can also be obtained through investment in projects to reduce emissions. The EU ETS covers 45% of EU emissions, including in energy intensive sectors, and approximately 12,000 installations.

(b) Promote renewable energy/energy efficiency?

Under the EU Renewable Energy Directive (2009/28/EC), the United Kingdom must ensure that 15% of its overall energy is from renewable sources by 2020. Further information is provided in the UK National Renewable Energy Action Plan 2009. Pursuant to its obligations under the EU Energy Efficiency Directive (2012/27/EU), the United Kingdom is aiming for an 18% reduction in its final energy consumption, relative to the 2007 business-as-usual projection, by 2020. The UK National Energy Efficiency Action Plan 2014 sets out the various schemes designed to achieve this goal.

Biodiversity conservation

Regulations

What regulations are in place to protect biodiversity and natural areas?

The regulatory regime in respect of biodiversity in England and Wales derives from a mixture of numerous domestic, EU and international instruments and is largely fragmented.

The principal piece of domestic legislation is the Wildlife and Countryside Act 1981, which is supplemented by the United Kingdom’s implementation of the EU Directive on the Conservation of Natural Habitats and of Wild Fauna and Flora (92/43/EC) and the EU Directive on the Conservation of Wild Birds (2009/147/EC). The United Kingdom is also a party to the following international conventions on conservation:

  • the Convention on Wetlands of International Importance especially as Waterfowl Habitat 1971;
  • the Convention concerning the Protection of the World Cultural and Natural Heritage 1971;
  • the Convention on International Trade in Endangered Species of Wild Fauna and Flora 1973;
  • the Convention on the Conservation of Migratory Species of Wild Animals 1979;
  • the Convention on the Conservation of European Wildlife and Natural Habitats 1979; and
  • the Convention on Biological Diversity 1992.

The Wildlife and Countryside Act 1981, the EU Directive on the Conservation of Natural Habitats and of Wild Fauna and Flora and the EU Directive on the Conservation of Wild Birds, among other laws, each create a system of protected areas regarding specific species of animals which impose significant substantive and procedural constraints on the scope for development affecting those species or areas. In addition, the National Planning Policy Framework 2012 requires local authorities to consider biodiversity in certain circumstances when developing local plans or granting planning permission for development.

The Wildlife and Countryside Act 1981 creates various criminal offences in relation to wildlife (eg, intentionally killing or injuring wild birds). Non-compliance is punishable with an unlimited fine.

At present, the Environmental Damage (Prevention and Remediation) (England) Regulations 2015 implement the EU Environmental Liability Directive (2004/35/EC) in England (similar regulations apply across the rest of the United Kingdom). This regime requires businesses to notify the relevant regulator of and remedy any environmental damage which they have caused where the damage:

  • is to protected species or areas; or
  • constitutes land pollution that poses a risk to human health.

The obligation covers operations that require an environmental permit and any business which negligently causes damage to protected species or areas.