The Regulator: Environmental civil sanctions in practice

30 March 2012

SPRING 2012

The civil sanctions scheme for environmental offending under the Regulatory Enforcement and Sanctions Act 2008 (RESA) formally came into force on the 06 April 2010, nearly two years ago. RESA was passed as part of an ambitious approach towards regulatory reform, of which an increased scope of civil sanctions in place of criminal prosecution of regulatory style offences was an important part. RESA established a framework for a civil sanctions scheme, providing statutory endorsement for a number of specific remedies and penalties, along with provisions for appeal. The scheme is available to many potential regulators, including national bodies and local authorities. Any specific scheme is to be implemented by statutory instrument.

The only scheme to have been established so far is for environmental offences as regulated predominantly by the Environment Agency, but also Natural England, under the Environmental Civil Sanctions (England) Order 2010 (ECSO). A significant exclusion from the ambit of covered environmental offences are the Environmental Permitting Regulations 2010 (EPR), dealing primarily with pollution offences. This covers a sizeable proportion of Environment Agency enforcement work. Civil sanctions can come in the form of fixed or variable monetary penalties, compliance, restoration or stop notices, and third party or enforcement undertakings.

There had been some debate about the workability and European Convention of Human Rights (Convention) compatibility of various parts of the intended civil sanctions scheme. Part of this debate included a published exchange of letters in 2009 between James Maurici, a practising barrister, and Professor Richard Macrory, whose report “Regulatory Justice: Making Sanctions Effective” in 2006 underpinned the civil sanctions element of RESA. The
Order and associated guidance answered some of these concerns, though interesting legal arguments remain outstanding. In particular, the nature of some civil sanction penalties would almost certainly be characterised as criminal in nature within the specific meaning of the Convention and Article 6, which provides for additional protections for defendants as compared with civil regimes.

One safeguard which was implemented upon the recommendation of Professor Macrory was the required publication of guidance for regulators in the use of civil sanctions, the enforcement of relevant offences and the publishing of enforcement outcomes. This is provided for in RESA section 63 and ECSO articles 11 – 14. Consistent and proper guidance would ensure a level playing-field for regulated entities and reduce the prospect of arbitrary enforcement decisions. Such guidance was promulgated by the Department for Environment, Food and Rural Affairs and the Environment Agency in the triple-layered form of an Enforcement and Sanctions Statement, an Enforcement and Sanctions Guidance, and Offence Response Options.01 The first and third of these provide moderately short statements of basic principles or offence responses respectively. However, the Enforcement and Sanctions Guidance is a considerably more detailed document whose current version covers 40 pages and includes a highly quantitative 12 page method of calculating variable monetary penalties if imposed.

One safeguard which was implemented upon the recommendation of Professor Macrory was the required publication of guidance for regulators in the use of civil sanctions, the enforcement of relevant offences and the publishing of enforcement outcomes. This is provided for in RESA section 63 and ECSO articles 11 – 14. Consistent and proper guidance would ensure a level playing-field for regulated entities and reduce the prospect of arbitrary enforcement decisions. Such guidance was promulgated by the Department for Environment, Food and Rural Affairs and the Environment Agency in the triple-layered form of an Enforcement and Sanctions Statement, an Enforcement and Sanctions Guidance, and Offence Response Options.01 The first and third of these provide moderately short statements of basic principles or offence responses respectively. However, the Enforcement and Sanctions Guidance is a considerably more detailed document whose current version covers 40 pages and includes a highly quantitative 12 page method of calculating variable monetary penalties if imposed.

Provisions relating to Enforcement Undertakings (EUs) have met with
greater success, with around 40 adopted nationwide, mostly for packaging waste offences. EUs allow entities to undertake to ensure the offence does not recur and to provide restoration for the harm or action that will secure equivalent benefit or improvement to the environment”. This latter provision in paragraph 2(1)(d) of schedule 4 of ECSO has presently ensured the payment of around £434,000 across the country toward environmental and restoration charities, with another £300,000 offered as part of on-going negotiations: individual sums varying from a few thousand pounds to tens of thousands.
EUs are backed up by the threat of criminal prosecution or more punitive civil sanctions if they are breached at a later stage.

During the consultation prior to the civil sanctions scheme coming into effect, it was decided that a national panel would review potential sanctions to provide a consistent response. It is not yet decided whether this arrangement will be temporary or permanent. For example, the national panel has developed “consistency guidelines” for EU offers requiring full payment of investigation and enforcement costs.02 In addition, in the case where a “proactive” offer is made, that is to say an offer following a self-reported offence, repayment of financial benefit from the offending plus an uplift of 10% is required. In “reactive” offers, following an investigation by the Environment Agency, the uplift is 30%. 

Such payments must be to genuinely independent third parties for environmental improvements. This methodology was developed in response to early cases, and the national panel has indicated that further points of principle may be established. This guidance currently fits on a single A4 page and amounts to 450 words.

By way of contrast the main Enforcement and Sanctions Guidance runs to 5,400 words. A variable monetary penalty is imposed in three stages, with two “components”, twelve multipliers for aggravating or mitigating factors and five categories of deductions from costs. This “guidance”, though required under RESA, goes beyond the commonly accepted definition of guidance and creates closely defined top-down rules which in reality leave little room for
discretion and plenty of room for legal challenge. Some of the formulae in the
variable monetary penalty methodology can produce some unusual results for
hypothetical examples. It is understood that Environment Agency staff have not
so far used fixed or variable monetary penalties as they fear that they will be
challenged on any number of grounds, thus leaving it to criminal prosecution or other traditional methods instead. 

In conclusion, the civil sanctions scheme has significant potential to move many regulatory type offences out of the criminal courts and to rationalise an unnecessarily complex area of law with many multiple legal regimes of sanction and appeal routes. The system, though passed under the previous Government, has much in its philosophy to commend it to the current Coalition, particularly its duty of consultation, consistency and move away from the prosecution of commercial enterprises, which is both expensive for the public purse and adds costs to these enterprises which are eventually passed
on to the consumer. However, the initial omens are unpromising. Other government departments are looking to the Environment Agency’s scheme before making their own decisions, and were it to assume that the scheme is not apt to work, a potential swathe of regulatory response will remain in the criminal courts. It is to be hoped that the scheme can be widened to EPR offences and the “guidance” re-drafted so that this potentially wide-ranging and useful scheme has the chance to succeed.

Hamish Common

Hamish Common is a barrister at 23 Essex Street. He specialises in environmental law, general and corporate crime and financial regulatory law.

 

FOOTNOTES

01 All three documents can be found via the following link:
http://www.environment-agency.gov.uk/business/
regulation/116844.aspx

 

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