Government authorities

Relevant authorities

What are the relevant government agencies or departments with authority over projects in the typical project sectors? What is the nature and extent of their authority? What is the history of state ownership in these sectors?

Most projects are likely to involve some form of development resulting in the need for planning permission, possible environmental permits and other sector-specific approvals. These are examined below after briefly covering two of the government’s key agencies involved in infrastructure planning and development.

 

Key public agencies

The National Infrastructure Commission (NIC) is an executive agency of HM Treasury, established to provide impartial advice and make recommendations to the government on economic infrastructure.

The NIC is tasked with:

  • setting out its assessment of long-term infrastructure needs and providing recommendations;
  • carrying out studies into the United Kingdom’s infrastructure challenges; and
  • monitoring the government’s progress in delivering projects and programmes recommended by the NIC.

 

The Infrastructure and Projects Authority (IPA) is the government’s centre of expertise for infrastructure and major projects. The IPA works with the Cabinet Office and HM Treasury to support the successful delivery of all types of infrastructure and major projects.

 

Planning

Since 27 March 2012, the National Planning Policy Framework (NPPF) has governed planning policy in England. The NPPF sets out the government’s planning policies for England and how they are expected to be applied, and must be taken into account in the preparation of local and neighbourhood plans.

The NPPF does not, however, apply to nationally significant infrastructure projects (NSIPs) or national waste. NSIPs are governed by the Planning Act 2008 and relevant national policy statements.

Major infrastructure projects in England are likely to be considered NSIPs and so will need a development consent order as well as planning permission from the relevant local authority. The Planning Inspectorate runs the NSIP application process. In Wales, developments will need consent from Welsh Ministers if considered to be a Development of National Significance under the Planning (Wales) Act 2015.

Comprehensive consultation requirements will need to be met for most projects, often involving the Environment Agency, Natural Resources Wales and Natural England (among others, depending on the nature of the project). This means the planning process can be lengthy and expensive compared with that of many other jurisdictions.

 

Environmental consents

The environmental regulator in England is the Environment Agency, while Natural Resources Wales (NRW) carries out the same function in Wales.

The Environment Agency and NRW both are responsible for reviewing and authorising projects where there are any environmental impacts. This is usually evidenced by the issue of an environmental permit. The Environment Agency and NRW will also enforce compliance with permits and relevant legislation.

 

Health and safety

The Health and Safety Executive fulfils important statutory functions, including providing the appropriate regulatory frameworks and assessing major hazard safety reports and inspecting certain establishments.

 

Sector-specific authoritiesOil and gas

All petroleum resources vest in the Crown under the Petroleum Act 1998. However, the government may, via the Oil and Gas Authority (OGA), grant exploration or extraction licences for both onshore and offshore resources (including fracking licences).

The Department for Business, Energy and Industrial Strategy (BEIS) is the competent authority for decommissioning. The OGA works with BEIS to assess decommissioning programmes on the basis of cost, future alternative use and collaboration.

Most offshore works will require consent from the Marine Management Organisation in England or the Welsh government in Wales.

The UK government has had no equity interest in offshore oil and gas production since 1986, following the sale of its oil and gas assets to British Gas.

 

Minerals extraction

Following the privatisation of the coal industry in 1994, the ownership of almost all coal now resides with the Coal Authority, which grants licences for coal exploration and extraction.

The Crown holds the rights to gold and silver (excluding a relatively small number of areas in Scotland). The mines of these metals are known as Mines Royal and the Crown Estate is responsible for granting lease options of Mines Royal.

Other minerals are privately owned, and, although there is no national licensing system for exploration and extraction, planning permission must be obtained from a mineral planning authority for their extraction.

 

Water treatment

Ofwat is the economic regulator in England and Wales and grants licences for water and sewerage undertakers. A company can also be granted an infrastructure provider project licence to carry out a large or complex water or wastewater infrastructure project that has been specified under legislation (such as the Thames Tideway project).

The provision of water and wastewater services in England and Wales was transferred from the state to the private sector in 1989 by the sale of the 10 regional water authorities (RWA). The potable water supply and sewage disposal functions of each RWA were transferred to new, privately owned companies.

 

Power generation and transmission

Regulation of power generation, supply, transmission and distribution is via a statutory licensing regime under the Electricity Act 1989. The electricity and gas regulator is the Office of Gas and Electricity Markets (Ofgem), an independent national regulatory body, recognised by EU Directives. The power generation, supply, transmission and distribution markets were privatised in 1990.

Ofgem also accredits power generation stations for the purposes of receiving various government subsidies, including the feed in tariff and the renewable heat incentive.

 

Transportation

Highways England operates, maintains and improves England’s motorways and major A roads. Highways England works with the Department for Transport. Highways England is a government company formerly known as the Highways Agency.

Highways England does not manage all roads. Local roads in England are managed by the relevant local authority, London roads are managed by Transport for London and all Welsh roads are managed by the Welsh Assembly.

Network Rail owns and operates all railway infrastructure in England and Wales. Passenger services are divided into regional franchises and run by private companies. These companies bid for contracts to run individual franchises. Most contracts are awarded by the Department for Transport.

British Rail operations were privatised between 1994 and 1997. Ownership of the track and infrastructure passed to Railtrack (subsequently transferred to Network Rail), while passenger operations were franchised to individual private sector operators, though, pursuant to the Williams Rail Review, franchising is anticipated to end in the near future.

The Office of Rail and Road (ORR) is the independent statutory regulator that regulates the rail industry’s health and safety performance. It holds Network Rail and High Speed 1 to account and is tasked with ensuring that the rail industry is competitive and fair. ORR monitors Highways England and has regulatory functions in relation to the Channel Tunnel. Network Rail is due to be absorbed into a new Great British Railways body that will maintain the infrastructure, set fares and service levels (taking revenue risk) and let passenger service contracts (rather than franchises) after an interim period of covid-19-related emergency recovery agreements (due to complete by the end of 2022).

The ORR is an independent statutory regulator, operating within a framework and accountable through Parliament and the courts.

 

Ports

The majority of port operations are administered by statutory harbour authorities, each governed by its own legislation.

For new harbours and ports, both a works order and marine licence are likely to be required. These will be processed by the Marine Management Organisation.

From 1 April 2018, Welsh ministers took over responsibility for port development policy for harbours wholly in Wales apart from major trust ports.

 

Telecommunications

Ofcom is the UK regulator of the telecommunications industry in the United Kingdom. This includes television, radio, video-on-demand, telephone lines, mobiles and postal services, plus the airwaves over which wireless devices operate. Ofcom is accountable to Parliament and sets and enforces regulatory rules for the sectors for which it is responsible. Ofcom also has power to enforce competition law in those sectors, alongside the Competition and Markets Authority.

Mobile network operators and satellite service providers will need a licence under section 8 of the Wireless Telegraphy Act 2006, unless the government has exempted the particular use from the need for a licence.

The Telecommunications Act 1984 abolished British Telecommunications’ monopoly of running telecommunications systems and established a framework to safeguard the workings of competition.

Legal issues of general application

Government permission

What government approvals are required for typical project finance transactions? What fees and other charges apply?

Government approvals for a typical project finance transaction may include planning permission (generally within the remit of the local authority unless the project is an NSIP) and environmental approvals and permissions from various governmental agencies and bodies, including in respect of the extraction or abstraction of natural resources.

If the project finance transaction is public infrastructure being privately financed (eg, through the Mutual Investment Model), HM Treasury approvals are likely to be needed if the value of the financing transaction exceeds the delegated authorities of the public body procuring the infrastructure.

Registration of financing

Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable?

Subject to the need to register debentures at Companies House to ensure that the security interests are not void against a liquidator, administrator or creditor, and the debt secured by that charge does not become payable immediately (while not technically a requirement, failure to register accordingly has very serious practical consequences), there are as a matter of course no requirements to register or file any financing or project document, nor any other similar legal formality (outside the document’s due execution), to ensure that it is valid and enforceable.

Arbitration awards

How are international arbitration contractual provisions and awards recognised by local courts? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?

The English courts are supportive of arbitration and will generally seek to uphold contractual agreements to arbitrate. The United Kingdom is a party to the New York Convention and the Geneva Convention relating to recognition and enforcement of foreign arbitration awards. The United Kingdom has ratified the Washington Convention (ICSID) and has enacted the Arbitration (International Investment Disputes) Act 1966, which provides for the recognition and enforcement of ICSID awards. Most types of commercial disputes can be arbitrated. There are some very limited cases in which disputes are not arbitrable, including employment (where an employee has statutory rights to have his or her case heard before an employment tribunal), insolvency proceedings that are subject to the statutory regimes set out in the Insolvency Act 1986 and the Corporate Insolvency and Governance Act 2020 and criminal matters. There are no types of commercial disputes that are automatically subject to domestic arbitration. The Arbitration Act 1996 governs all arbitrations seated in England, Wales or Northern Ireland, both domestic and international.

Law governing agreements

Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law?

While not mandatory, both project and financing agreements are typically governed by the laws of England and Wales where the project is based in England or Wales. Where the project is based in Scotland or Northern Ireland, the real estate elements of the project (eg, leases) will be governed by the domestic law of that jurisdiction (though often the other project and finance documents may generally be governed by the laws of England and Wales). Real-estate-related security interests will also be governed by domestic laws of the relevant jurisdiction in which they are located.

There are some other statutory restrictions on governing law (including public policy requirements), primarily that the constitution of an entity incorporated in one of the jurisdictions in the United Kingdom must be governed by the law of that jurisdiction, and that both employment and insolvency-related matters will be governed by the domestic jurisdiction. English law is also often used for financing agreements (though not necessarily security agreements) for projects based outside the United Kingdom.

Submission to foreign jurisdiction

Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable?

Submission to foreign jurisdiction

Submission to a foreign jurisdiction to settle disputes under a commercial contract is a valid choice under the laws of England and Wales, and the judgments of that foreign jurisdiction may be effective and enforceable subject to the relevant formalities. While the full detail of the relevant rules and legislation is outside the scope of this answer, we set out an overview below.

Broadly, in respect of proceedings commenced prior to 11 pm on 31 December 2020 (the end of the transition period), jurisdiction will be allocated and judgments will be enforceable under Regulation (EU) 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil commercial matters, known as the ‘Recast Brussels Regulation’. In the case of Denmark, the regulation is applicable by separate agreement rather than it having direct effect. Iceland, Norway and Switzerland (ie, the European Free Trade Association members excluding Liechtenstein) reciprocally recognise the jurisdiction of other European states through the (similar but less developed) 2007 Lugano Convention. Many other countries (including Commonwealth countries) have reciprocal bilateral arrangements with the United Kingdom as to the recognition and enforcement of exclusive jurisdiction and judgments.

In respect of proceedings commenced after the end of the transition period, there are significant changes in the allocation of jurisdiction for disputes and in the recognition and enforcement of judgments. Courts in England & Wales will no longer apply the Recast Brussels Regulation, or 2007 Lugano Convention. There are unresolved issues over the application of the Hague Convention of the Choice of Courts Agreements 2005 (the Hague Convention) (particularly in respect of any exclusive choice of the jurisdiction of the English court which was entered into during the transition period).

It is no longer open to the English courts to decide on jurisdiction, or enforce judgments emanating from EU member states, using, as applicable, the Brussels Recast Regulation or the Lugano Convention. While the United Kingdom has applied to re-join the Lugano Convention 2007 (which exists between the EU and EFTA states) the agreement of the EU to do so has not been forthcoming at the time of writing, and indications from the EU Commission are that agreement should not be given. Having decided to leave the bloc, the United Kingdom ‘is a third country without a special link to the internal market’ disentitling the United Kingdom from the benefits of the Lugano Convention, which is described as a ‘flanking measure for the EU’s economic relations with the EFTA/EEA countries’ (see https://ec.europa.eu/info/sites/default/files/1_en_act_en.pdf).

The UK courts will instead determine the appropriate jurisdiction for a matter on the basis of the Hague Convention on Choice of Court Agreements, or common law principles.

The English court will respect the submission by English parties to a foreign jurisdiction where the exclusive jurisdiction of a Contracting State to the Hague Convention has been validly chosen, the United Kingdom having acceded in its own right to the instrument from 1 January 2021. However, there is some potential disparity of treatment of a choice of jurisdiction of the English courts entered into prior to 31 December 2020 but relied on after that date. The EU Commission has indicated that EU27 courts may not recognise such a choice as one to which the Hague Convention may apply, on the basis that it is a choice made prior to the accession of the United Kingdom (as a separate Contracting State) to the Convention. The English courts may respect such a clause on the basis that the United Kingdom has enjoyed continuous status as a Contracting State first in its capacity as an EU member state and now as a Contracting State in its own right. We are not aware that the point has yet been tested in either a EU27 court or the English court.

It is a requirement of the Hague Convention that the choice of jurisdiction should be an ‘exclusive’ choice of court agreement. In the absence of any reciprocal declaration pursuant to A22 of the Convention, a non-exclusive jurisdiction clause will not constitute an effective choice for the purposes of the Hague Convention. It is unclear, but doubtful, whether an ‘asymmetric clause’ would be interpreted by the English courts as an exclusive clause for the purposes of the Hague Convention.

In that and other cases, if proceedings are issued in England in prima facie breach of a legitimate contractual choice of a foreign jurisdiction, the English court will apply common law principles to determine the most appropriate forum for the dispute. The court may be required to consider the appropriate jurisdiction if permission to serve proceedings out of England on a foreign party is required; or after service of proceedings if the defendant disputes the jurisdiction of the English court. At both points, any contractual choice of jurisdiction made by the parties will be one (potentially compelling) factor in determining whether England or another jurisdiction is the appropriate forum.

 

Waiver of immunity

The general rule at English law is that states (broadly sovereigns, executives and departments of the executive) are immune from legal action (including in respect of adjudication, interim actions and enforcement), as governed by the State Immunity Act 1978, subject to exceptions including the state submitting to the jurisdiction of the English courts. As such, an adequately drafted waiver of immunity clause would be effective and enforceable as a matter of English law (see further High Commissioner for Pakistan in the United Kingdom v National Westminster Bank plc and other [2015] EWHC 55 (Ch)).

Environmental, health and safety laws

Applicable regulations

What laws or regulations apply to typical project sectors? What regulatory bodies administer those laws?

Environmental matters in England and Wales are regulated by a complex mixture of increasingly stringent legislation and common law. Health and safety are often considered alongside environmental matters but are governed by separate laws and regulations.

While there are several relevant bodies to the regulation of environmental matters, the key regulators are the Environment Agency (for England) and Natural Resources Wales (for Wales). Other bodies that may be relevant depending on the project include:

  • Natural England, which is responsible for biodiversity, wildlife and habitats;
  • the Marine Management Organisation, which is responsible for marine activities; and
  • local authorities, which can have a number of roles primarily relating to regulation of emissions, planning permissions and waste disposal.

 

The main environmental laws relevant to projects include the following:

  • The contaminated land regime contained in Part 2A of the Environmental Protection Act 1990. Under this regime liability for remediation of any contamination (which includes investigation, mitigation and monitoring of contamination) sits primarily with those who caused or knowingly permitted the contamination. However, this liability can rest with landowners or occupiers, regardless of whether they are aware of the contamination if those who caused the contamination cannot be found.
  • The environmental permitting regime which is set out in the Environmental Permitting (England and Wales) Regulations 2016. Under this regime, if certain activities are being undertaken, the party carrying them out must hold an environmental permit. There is a wide range of activities covered and they tend to be those activities that release emissions to land, air and water or that involve waste.

 

If a project causes contamination, pollution or a nuisance, a party (including a company) who has suffered loss as a result may be able to bring a civil claim in court under the common law of nuisance or negligence. The main aim of such an action is not the remediation of the issue but to compensate the party for its loss.

Any project involving waste (whether it is the production, collection, holding, storage and handling, processing, reuse or disposal) will be subject to statutory regulation.

If a project is an installation in an energy-intensive sector (such as manufacturing facilities, oil refiners and power stations) the UK Emissions Trading Scheme (UK ETS) may be applicable. The UK ETS has replaced UK participation in the EU Emissions Trading System (EU ETS) – although it should be noted that operators were required to comply with their EU ETS obligations relating to the 2020 scheme as recently as 30 April 2021.

The scheme is designed to increase the climate ambition of the United Kingdom’s carbon pricing policy, while protecting the competitiveness of UK businesses. The United Kingdom played a role in developing the EU ETS, and the introduction of the UK scheme therefore provides continuity of emissions trading for UK businesses; it is expected therefore that many of the features and processes in the UK ETS will be familiar to operators.

Biodiversity, habitats and wildlife are also protected by legislation. If the site for a project is a designated site or if there are protected species on the site, there are likely to be significant limitations on the activities and developments that can be carried out on the site.

Breaches of the above laws can have a range of consequences, including:

  • criminal liability and sanctions including fines or imprisonment;
  • civil penalties under the specific regime, which can include fixed monetary penalties, discretionary requirements or stop notices;
  • payment of damages as part of civil court actions; and
  • requirement to carry out and cost of remediation.

 

Health and safety matters are extensively regulated through common law and statutory obligations with the basis of the statutory obligations set out in the Health and Safety at Work etc Act 1974. These obligations are regulated and enforced by the Health and Safety Executive.

The core obligation on employers is, as far as reasonably practicable, to ensure the health and safety of their employees and those affected by their activities. The qualification means that employers do not have to take measures to avoid or reduce risks affecting health and safety if they are technically impossible or if the time, effort and cost of implementing such actions is grossly disproportionate to the risk. Employers also have obligations in relation to the assessment, monitoring and auditing of the health and safety risks associated with its business and must appoint a competent person to implement the measures required to ensure compliance.

Breaches of the statutory health and safety obligations is a criminal offence by the company with a range of accompanying sanctions including:

  • improvement notices requiring an issue to be remedied;
  • prohibition notices requiring an activity to cease;
  • individual liability for directors, company secretary or a manager if the offence was committed with their consent, neglect or connivance; and
  • corporate manslaughter charges.

Law stated date

Correct on

Give the date on which the information above is accurate.

17 June 2020.