Legal brief: Managing compliance risk

11th January 2013


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Ross Fairley reminds organisations to always be prepared for environment incidents and potential regulatory investigations in his first 'Laying down the law' column

The debate on the use of new enforcement techniques for environmental offences rumbles on, with the business department (BIS) recently announcing that civil sanctions will, in future, only be used against larger companies. Meanwhile, 2012 saw more than 100 enforcement sanctions brought against businesses, alongside some high-profile environmental enforcement raids.

These new techniques to tackle breaches of environmental rules pose an increased operational risk for many businesses and not just those in the manufacturing sector. Enforcement action for environmental issues, and with it financial penalties and damage to reputation, is no longer confined to the traditional area of polluting land and water, but can arise from a number of events and circumstances.

Many recent prosecutions have focused on non-compliance with packaging and recycling obligations or for failing to ensure that waste produced by the business is properly disposed of. The strict liability of many environmental offences often means that even the best run companies can face the risk of environmental enforcement by the regulator. Therefore, it is always sensible to be prepared to deal with incidents and regulatory investigations.

If a major incident occurs

The relevant authorities will start to investigate as soon as the incident is discovered. The Environment Agency, for example, has extensive investigatory powers including: the power to require the production of records; powers of entry; and the power to take samples. They can also request a formal interview with employees and other relevant personnel.

While the precise response to any environmental incident will depend on the specific event and the nature of the company involved, it is prudent to have an outline strategy in place to guide each stage of the response to the emergency.

There are many practical aspects to consider and, while cooperation with the regulator and other enforcement authorities is generally to be encouraged, businesses should be aware that the statements they or their employees make will weigh heavily in any decision as to whether to prosecute.

Immediately after occurrence or discovery of a major environmental incident, a company needs to:

  • ensure clear communication lines with managers and directors are in place, and that all information is passed to them straight away;
  • brief all relevant staff;
  • cooperate with the regulator and other official bodies, subject to checks and balances and legal advice. Establish a clear dialogue, and emphasise any remediation steps that have been taken by the company; and
  • check the insurance position – it is not possible to insure against criminal penalties, but a policy may cover civil liabilities, such as clean-up costs.

Once the organisation is subject to formal investigation, it needs to review the history of the event, taking note of any remediation action. It should also seek legal advice on criminal liability – this may include individual directors as well as the company.

If a request is made for formal interviews, take legal advice on their conduct. This should include matters such as cooperation with the investigating authorities, the briefing of interviewees, and any follow-up steps – for instance, obtaining copies of the interview tape. If a company receives notice of an intended prosecution, the first step is to seek specialist legal advice.

Also, maintain a detailed record of evidence and a chronology of events. This will assist with instructing specialists and can also help manage costs. Keeping a record of all remediation work undertaken and any related costs is wise as this may form part of a schedule of mitigation, which could alleviate the harshness of any subsequent penalties.

Civil sanctions

As an alternative to criminal prosecution, regulators such as the Environment Agency can, if the organisation has more than 250 employees, enforce certain breaches of environmental law through civil sanctions. These include offences related to packaging waste, oil storage, nitrate pollution, hazardous waste and dangerous substances.

The revised organisational size threshold recently confirmed by BIS means that civil sanctions will cease to be available for smaller businesses, leaving them to face criminal proceedings and possible court hearings. Where civil sanctions are an alternative to criminal prosecution, the penalties available include compliance notices (requiring compliance with the law), restoration notices (requiring harm caused by non-compliance to be restored) and stop notices (requiring the immediate cessation of a harmful activity) as well as monetary penalties.

Notification of a regulator’s intention to use a civil sanction comes via a notice of intent (NOI). If there is failure to comply, formal prosecution remains an option. For this reason, receipt of a NOI should be treated seriously. Furthermore, accepting a civil sanction has implications that need to be thought through by the business.

A company can also make an offer to the agency, for example, in the form of an enforcement undertaking. This is a pledge to take voluntary action to put an environmental problem right.

Ensuring the business has proper procedures in place to deal with environmental enforcement and gaining good legal advice at the outset can save a lot of heartache.


Ross Fairley is a partner at Burges Salmon. Contact him on +44 (0)117 902 6351 or at [email protected]

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