Fundamental changes: new sanctions regime for environment offences

On 21 July 2009 the Department for Environment Food and Rural Affairs (“Defra”) and the Welsh Assembly launched a joint consultation on proposals to improve the enforcement of environment law. The stated aims of the consultation are to create a more proportionate system of sanctions, encourage a more level playing field (i.e. less cost for businesses that typically comply with laws and vice versa) and greater enforcement flexibility for regulators (with greater alignment of sanctions with the seriousness of the non-compliance). This follows the concept of risk based regulation proposed by Sir Philip Hampton’s review and Professor Macrory’s recommendations for more proportionate regulatory enforcement and sanctions.

Civil sanctions (strictly these should be described as “administrative” sanctions) are sanctions which may be imposed by a regulator, but which fall short of a criminal prosecution or caution. The consultation sets out a number of policy options. Defra’s favoured policy option is to introduce civil sanctions and, in criminal enforcement, to establish new powers to assist the criminal courts in sentencing in environment cases.

Whilst the proposals will not change existing offences or defences, they should have a fundamental effect on the way that certain environment offences are dealt with. Although the consultation generally focuses on flexibility and more proportionate alternatives to prosecution, businesses should be aware that it also contains proposed guidance recommending prosecution in certain cases with more extensive sentencing powers for courts.

The offences to which the proposals apply are listed in full in the documentation. They do not include all environment laws at this stage. Most particularly they do not include offences under the present environmental permitting regulations (though the intention is for inclusion at a later stage once revised). They do however contain many aspects of mainstream areas such as waste, packaging and water. The consultation ends on 14 October 2009. Please click here for the consultation documentation.

Regulators

The Government proposes that the Environment Agency, Natural England and the Countryside Council for Wales should be able to use the civil sanctions enabled by the Regulatory Enforcement and Sanctions Act 2008 (the “Act”). The proposals do not cover local authority enforcement but it is anticipated that this will be the subject of a separate consultation.

Introduction of civil sanctions

The Act’s civil sanctions will be put in place by secondary legislation, drafts of which are published as part of the consultation, comprising the Environmental Civil Sanctions Order 2010 (the “Draft Order”) and the Environmental Sanctions (Miscellaneous Amendments) (England and Wales) Regulations 2010 (the “Draft Regulations”). The Government plans to lay these instruments before Parliament in January 2010 with a view to coming into force on 6 April 2010. It is suggested that the new civil sanctions will be reviewed approximately 3 years after they are introduced.

The civil sanctions

Sanctions available under the Act

Compliance Notices, Restoration Notices, Fixed Monetary Penalties, Variable Monetary Penalties (“VMP”), Enforcement Undertakings and Stop Notices are all flexible options available under the Act. The consultation outlines the circumstances when such measures may be used and how penalties should be determined. For example VMPs may be imposed for a moderately serious offence when the regulator decides that prosecution is not in the public interest. There is also the possibility of reducing VMPs, if the offender offers to compensate third parties adversely affected by the non-compliance i.e. “a Third Party Undertaking”.

For readers unfamiliar with the above terms they are summarised as follows:

• Enforcement Notices – a term which includes Compliance, Restoration and Stop Notices. All of these are written notices issued by the regulator:- Compliance Notices require compliance with the law or return to compliance within a specified period. These can be followed by a Non-Compliance Penalty (“NCP”) (see further below) or a prosecution Restoration Notices require restoration of harm caused by a non compliance within a specified period. These may also be followed by a NCP or a prosecution Stop Notices require the cessation of an illegal activity that is causing serious harm or presents a significant risk of causing serious harm. Non compliance with a Stop Notice is a criminal offence and therefore will result in prosecution.
• Fixed Monetary Penalties (“FMP”) are relatively low-level penalties fixed by the Draft Order, that the regulator may impose for a specified minor offence. The FMP in the Draft Order is generally £100 for individuals and £300 for all other persons. It may be reduced or increased depending on particular circumstances including a discount for early payment. FMPs will be enforced through the civil courts.
• VMP are penalties which reflects the seriousness of a case. They will be used to nullify any financial benefit obtained by the wrongdoer by breaching the law and are otherwise aimed at deterring future non-compliance. These will be enforced by the civil courts. For either way offences, which include most environment offences, there is no upper limit to VMPs.
• Enforcement Undertakings are voluntary agreements offered by a wrongdoer to take steps that would make amends for non-compliance and its effects. It is for the regulator to decide whether to accept the enforcement undertaking.

As with the current enforcement regime, it will be noted that more than 1 sanction may be used at any one time (apart from when an enforcement undertaking is accepted).


Incidental sanctions proposed by the Consultation

These are sanctions which are aimed at complementing the main non-criminal sanctions

• Non-Compliance Penalties – being a written notice issued by a regulator imposing a monetary penalty for failing to comply with a Restoration Notice or Compliance Notice (imposed with or without a VMP or a Third Party Undertaking) that the regulator has accepted.
• Regulatory Cost Recovery Notices – being a written notice issued by a regulator which requires payment of the regulator’s investigation, legal or administrative costs when these have been incurred in imposing a VMP, Restoration Notice, Compliance Notice or Stop Notice.

Implementation and extent of the new civil sanctions

The Draft Order and Draft Regulations apply only to the Environment Agency, Natural England and Countryside Council for Wales in their roles as regulators. The Draft Order includes the key features of the scheme and the process for imposing civil sanctions. It includes provisions regarding payment to central government funds, penalties for non-compliance, recovery of unpaid penalties and enforcement costs, appeal provisions, requirements on regulators to consult and publish revised enforcement policies and guidance in respect of the application of the civil sanctions and associated publicity. The Draft Order and Draft Regulations list the offences to be covered.

Application of the new civil sanctions

Regulators will have to satisfy themselves beyond reasonable doubt that an offence has been committed before imposing a civil sanction (other than a Stop Notice or an enforcement undertaking). Once satisfied, the regulator will issue a notice of intent to impose a civil sanction and has to consider any representations that the recipient makes within 28 days before imposing the sanction. The sanction (once served) may be appealed within 28 days to the recently established independent First-tier Tribunal. The grounds of appeal are not prescribed and will include errors of fact or law by the regulator, unreasonableness of the decision or the amount of a financial penalty. An appeal against a decision of the First-tier Tribunal may only be on a point of law and will be heard by the Upper Tribunal. Draft rules of procedure for appeals are being considered with final rules due to be made by September 2009.

The consultation proposes that the Environment Agency should not generally take on civil sanctions powers (for the time being) in relation to enforcement under regulations where it shares enforcement responsibility with another regulator such as the Health and Safety Executive (for example Control of Major Accident Hazards or REACH (the Registration, Evaluation, Authorisation and Restriction of Chemicals).

Draft government guidance on use of civil sanctions

Regulators will have to decide whether to impose traditional criminal type sanctions or to use civil sanctions. Regulators will have to consider government guidance which is included in draft form in the consultation (the “Draft Guidance”).

The Draft Guidance provides an indication of relevant factors which the Government considers, will in the future, normally suggest to a regulator that a prosecution is the proportionate action rather than the use of civil sanctions i.e. there will effectively be a presumption in favour of a civil penalty unless the regulator consciously considers that these are not appropriate. For example, if the offence is a long-term or continuing breach, or has a serious impact or if the offender committed the offence intentionally, recklessly or negligently.

Importantly if a person is later convicted of an environment offence, the regulator will be able to refer to civil sanctions at the sentencing of the offence (i.e. the civil sanctions become part of the “record”).

The Draft Guidance states that for a regulator to accept an enforcement undertaking there must be a clear recognition by the wrongdoer of any failings or harm caused. Where relevant, the regulator will look for director or board level commitment to restoration and future compliance which could be developed into an action plan.

Regulators will be required to publish details of any enforcement action taken using civil sanctions. The Draft Guidance highlights that regulators may also pursue more pro-active publicity options such as issuing press releases

Proposals to strengthen the role of the criminal courts in sentencing environment cases

The consultation proposes new court powers in criminal cases. These include powers to order (1) environment restoration or restitution to adversely affected communities, (2) an offender to publicise its conviction (i.e. an offender would have to carry out its own naming and shaming, and (3) for magistrates to be able to recover any financial benefit gained from non-compliance.

Next steps

The Government proposes to publish a response to the consultation in autumn 2009 subject to which the Draft Order and Draft Regulations shall be finalised. It is important that those likely to be affected review the proposals and contribute to the consultation as appropriate. It is likely that other regulators will be watching closely the response to the consultation. The Draft Order and the Draft Regulations once finalised will be the first legislation applying the new civil sanctions. There are a number of areas where work is in progress but the appetite to expand the remit of regulator response is evident. The potential implications are significant particularly when such sanctions are extended to other offences such as the Environmental Permitting Regulations. In our view, these changes will lead to an increase in the number of “punishments” for environment offences.