Head of Retail & Consumer | Head of Risk Advisory
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The Government has launched a consultation on proposed strengthening of the Environment Agency’s (EA) powers to issue monetary penalties by increasing both the level and scope of such penalties.
The consultation follows an Environment Agency Assessment in 2022 which concluded that the performance of England’s nine water and sewerage companies fell to the lowest level since reporting began in 2011. This prompted the Government to agree an EA proposal that their powers to impose civil penalties should increase dramatically from £250,000 to £250 million. The Government is specifically seeking views to help decide on the extent of the increase to the Variable Monetary Penalties (VMPs) cap and whether VMPs should be also available for breaches of the Environmental Permitting (England and Wales) Regulations 2016 (EPR).
Following the consultation, the Government propose amending the Environmental Civil Sanctions (England) Order 2010 and the EPR with the aim that the reformed penalties will reduce pollution and increase protection of the environment.
Whilst these changes are primarily prompted by the increase in pollution incidents by water companies, in practice the impact will be much wider reaching making it easier for the EA to impose significant civil penalties for environmental breaches across all industries.
There are currently a range of civil sanctions available to the EA including restoration notices and enforcement undertakings, (which are the most used sanctions), and Fixed and Variable Monetary Penalties amongst others. The proposed changes relate specifically to the use of VMPs which are currently capped at £250,000 for individual breaches.
As VMPs are a civil penalty they are a quicker enforcement option and can be used as an alternative to criminal prosecutions. However, under the civil procedure, companies only have a very short timeframe to respond to allegations and there are also far less requirements upon the EA to set out their case in detail or provide disclosure as is the case in criminal proceedings.
In essence, all that is required of the EA is to serve a notice of intent once they are satisfied that the company has committed the offence. The recipient has an opportunity to make representations in writing within 28 days after which a penalty can be imposed (after the EA has of course given due consideration to any representations).
Appeals against the notice are to the First-tier Tribunal of the General Regulatory Chamber. The grounds for appeal include errors of fact and/or law and that the amount of the penalty is unreasonable. Whether or not the penalty is unreasonable is likely to be considered against the backdrop of the trend of increased fines in EA prosecutions.
The consultation invites views on raising the VMP cap to £25m, £250m or removing the cap entirely and making all penalties unlimited.
Any of these increases may cause concern for duty holders given the civil process has far less rigorous procedural and evidential requirements for the EA to meet before a fine can be imposed than the criminal process which is also independently overseen by a judge. It is a lot easier for the EA to arrive at a position where a penalty is imposed. Civil penalties are also payable to the EA directly unlike court fines which go to the Treasury – cynics might consider this will increase the likelihood of enforcement action by the EA. In light of this, our view is that any such increases should be accompanied by a more rigorous procedure for findings of breach alongside more opportunities for appeal. However, there are no suggestions for this in the consultation.
The Environmental Permitting Regulations 2016 (EPR) address waste management and pollution prevention together with the permitting of activities. These largely apply to businesses involved in the waste and water sector but also apply to manufacturing, power generation, radioactive substances, mining, flood risk activities and pig and poultry farming.
Currently, breaches of the EPR can be dealt with as a criminal offence by way of warning, formal caution or prosecution, or by civil sanction in the form of an enforcement undertaking. There are no monetary civil penalties available for such breaches in the majority of cases.
The consultation invites views on increasing the scope of civil penalties so that the EA can issue VMPs for breaches of the EPR.
This is likely to lead to increased civil penalties in this area, which is a cause for concern for companies due to the limited opportunities to respond and appeal as outlined in relation to the VMP cap increase (see above).
No one would argue that those who damage the environment should not be held to account. The current mechanism to do so for serious offences is to bring criminal proceedings. The marked increase in the level of fines that we have witnessed, including noticeably £135m in 2021 imposed on Southern Water, indicates that the judiciary has responded to the risks posed by environmental offences.
However, the civil process has the advantage for the EA that it requires a lot less evidence gathering, is quicker and the proceeds of fines go to their bank account not the governments. Duty holders will be concerned that this is a rough and ready form of justice that does not afford them the same due process and procedural protection as the criminal system.
If you would like to share your views on the proposed changes you can provide input via the Department for Environment Food & Rural Affairs' Consultation Hub.
Any responses need to be submitted before the consultation closes on 15 May 2023.