Civil sanctions: the key to well-oiled regulation?

11th February 2013


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Two environment lawyers give their views on civil sanctions and the government's decision to restrict their use in future

Angus Evers
Partner, environment group, at SJ Berwin LLP, and member of UKELA

Civil sanctions were introduced for breaches of environment regulation by the previous Labour government. The coalition, however, has been less enthusiastic about their use. In April 2011, cabinet office minister Oliver Letwin described the imposition of civil sanctions by regulators, without recourse to the courts, as “intolerable”.

Letwin also argued that it was unacceptable to make organisations that wish to appeal against civil sanctions face “the full weight of the treasury’s solicitors”. This is, however, a somewhat inaccurate comment since the treasury’s solicitors do not act on behalf of environmental regulators, such as the Environment Agency and Natural England, which have their own legal advisers.

The cabinet office minister further justified his reluctance to expand the use of civil sanctions at a conference on 8 November 2012. In a keynote address, Letwin said he was concerned that regulators might target civil sanctions at small and medium-sized enterprises (SMEs), which could not call on “armies of lawyers” to challenge their imposition.

On the same day, business minister Michael Fallon, stated that, when considering whether to provide regulators with further powers to impose civil sanctions, the government would observe the following principles:

  • Powers to impose fixed-monetary penalties, variable-monetary penalties and restoration notices, will, as a general rule, only be granted against undertakings with more than 250 employees – on the basis that SMEs might feel less equipped to challenge the basis for such sanctions.
  • Powers to impose enforcement undertakings, stop notices and compliance notices may be granted without restriction as to the size of undertaking.

The statement continued that this approach should enable a more flexible enforcement system and reduce the burden on the courts.

However, the views of ministers and the new policy appear to be based on some fundamental misconceptions about the way the environmental civil sanctions system works. The new approach by the government risks significantly restricting the scope for civil sanctions to deal with future environment offences, and could create a two-tier enforcement system – one for SMEs and one for larger organisations.

For SMEs, under these rules, the only enforcement option open to regulators would often be prosecution in the courts. This seems a strange outcome for a government that claims it wants to reduce the regulatory burden on businesses of all sizes, particularly smaller ones.

Government ministers also appear to believe that civil sanctions are easier to impose than criminal penalties and that there is a risk of over-zealous enforcement officers unfairly targeting civil sanctions at smaller businesses.

Again, these views are based on a misunderstanding about the process. Following an incident, the Environment Agency or Natural England must carry out an investigation in accordance with the procedures in the Police and Criminal Evidence Act 1984 before it can form a view as to whether a prosecution or a civil sanction is the appropriate enforcement option.

Furthermore, a director-led national enforcement panel at the Environment Agency is required to approve the imposition of any civil sanctions. So, if anything, the procedures for imposing civil sanctions are actually more rigorous than they are for criminal prosecutions.

Andrew Bryce
Environmental and health and safety lawyer at Andrew Bryce & Co and honorary life member of UKELA

With the move towards outcomes-focused regulation, it is important that regulators, such as the Environment Agency, have the flexibility to match the penalty to the seriousness of the shortcoming in compliance.

Meanwhile, the public interest is often best served by having a system that enables the regulator to achieve remediation or reparation, rather than proceed to a prosecution, which may not actually deter others and, potentially, results in an organisation that wishes to “do the right thing” having a criminal record. Proportionality in any response is essential if public confidence is to be maintained.

The majority of civil remedies are uncontentious and provide a more unified system for serving notices to achieve compliance. Criminal prosecutions, of course, remain an option for the more serious cases. The full suite of sanctions gives regulators the opportunity to call for compliance before taking serious action, and provides for the imposition of significant monetary penalties if the operator’s response is regarded as inadequate.

Most debate around civil penalties centres on whether it is right for a regulator to set a variable-monetary penalty (VMP) without the operator having the right to elect to go to court. Since the regulator could choose to prosecute the operator, the difference is more illusory than real.

The government has now indicated that VMPs will apply only to organisations with more than 250 employees. However, this appears to be based on a fundamental misunderstanding of the system. It has been suggested by some that VMPs prevent regulators having to prove their case to the standard required to achieve a criminal conviction, and are a quick way to impose a burden on businesses. In fact, before VMPs can be used, the regulator has to be satisfied that the case would succeed in the courts.

In addition, most businesses, particularly those of limited means, would be much better served by a tribunal service that is used to dealing with litigants in person, than be faced with the more adversarial environment of the magistrates’ court, with the uncertainties and cost it entails.

So far, regulators have been reluctant to use VMPs because they are resource heavy, but as systems are streamlined and are rolled out to breaches of environment permits they may prove more attractive. To date, the main use of civil sanctions in the environmental field has been the use of enforcement undertakings (EUs), which enable the operator to make amends for its shortcomings in a constructive and voluntary manner.

While further development of the principles surrounding EUs may be needed, in particular the way payments are made, they represent a highly effective way of dealing with cases where the level of culpability is low or where the prime motive should be the mitigation of the impacts of noncompliance, and where financial matters are at the centre of the case.

For this reason they have been particularly useful in dealing with breaches of packaging regulations where the offender has saved costs over a number of years and fees are due to the public purse.

It is highly desirable to give regulators a flexible package of tools to achieve proportionate compliance with environment regulation. To constrain the response of the Environment Agency, for example, solely to the criminal system, and limit options to prosecution or caution, seems an unsophisticated and unnecessary change. Hopefully, the civil sanctions system will be rolled out to the more significant areas of environmental regulation.

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