ENVIRONMENTAL LIABILITY RESOLUTION
CD: Could you provide an overview of environmental liability and how related risks have evolved in recent years? How would you describe the volume of environmental liability cases?
May: When the Environmental Protection Act 1990 was introduced in England and Wales there was an expectation that this would give rise to US-style multi-party civil litigation for environmental damages claims. However, this has not materialised, partly due to the lack of litigation funding and class actions in the UK, but also due to the legal difficulty of having to establish harm and damage to personal property. Until the introduction of the Environmental Liability Directive in 2004 there was no ability for third parties to make claims on behalf of the environment. That has now changed and the availability of conditional funding agreements to pay for litigation costs and the ability of non-governmental organisations (NGOs) to bring claims on behalf of the environment for habitat preservation has increased the likelihood of an increase in claims. However, the number of cases is still low and tends to revolve around significant high-profile projects, such as those in the transport and energy sectors, rather than more day-to-day transactions. The majority of cases still arise in the regulatory arena as a result of actual or anticipated enforcement action, such as that of the Environment Agency (EA) and Natural England, or as a result of commercial transactions, where environmental due diligence is now commonplace and factored into contractual drafting. It is part of the fabric of standard due diligence and the rise of environmental, social and governance (ESG) reporting and sustainability issues will only enhance and highlight this.
Ogley: Environmental liability is an area of increasing importance, with heightened community awareness due to the Attenborough and Thunberg effect and the climate change agenda. At a global level, we now have increased corporate risk of liability for pollution incidents in non-UK territories, with parent companies facing exposure for incidents caused by subsidiaries. Within the UK, the issue of environmental protection and sustainable practices has increasing importance with consumers and carries heightened reputational risk for failures and breaches. The EA has a renewed emphasis on enforcement, while the average fine imposed by courts has risen quite dramatically over the last six years with a corresponding impact on the risks involved. In our experience, corporate organisations are taking a keener interest in these risks and broader environmental sustainability. The progress with the Environment Bill and initiatives such as the plastic packaging tax will continue to raise the profile of environmental issues. The increased availability of protective costs orders (PCOs) for third parties, including non-governmental organisations (NGOs) such as Client Earth, is leading to more High Court challenges to development with environmental impacts, and is most recently highlighted by the successful challenge concerning the expansion of Heathrow Airport.
Jul-Sep 2020 issue
Norton Rose Fulbright LLP
Reed Smith LLP
Skadden, Arps, Slate, Meagher & Flom LLP
Walker Morris LLP