Civil Sanctions – new regulatory tool in action!

27 Jul

The Environment Agency is the first to use its powers under Part 3 of the Regulatory Enforcement and Sanctions Act 2008 against an organisation that failed to comply with environmental regulations. By using these enforcement powers the Environment Agency is ensuring legal compliance at the same time continuing with its objectives to drive environmental improvement and compliance within business.

The Environment Agency accepted an offer of £21,000 from an engineering and information technology company who had failed to register the group and some of its subsidiaries with the packaging waste regulations. The organisation self-reported the offences which had occurred between 1998 and 2010.

In addition to implementing improvements to comply with the regulations, the organisation offered to fund environmental improvement projects in the local community equivalent to the cost of the offences. The funds will be used to drive environmental improvements and also cover the costs of Environment Agency investigations and future monitoring.

Applicable in England and Wales, Environment Civil Sanctions Orders came into force on 6th April and 15th July 2010 respectively and can be used by the Environment Agency as an alternative to prosecution. They allow the Environment Agency to take action that is proportionate to the offence and the offender and reflect the fact that a number of offences committed by business may be unintentional.

In this instance the organisation failed to register under the packaging waste regulations believing the obligations were applicable to each separate business (meaning they fell below the business threshold) whereas the regulations can also apply to a group of businesses.

The Environment Agency and Defra have published guidance explaining how these powers will be used. Briefly the sanctions include:

  1. Fixed monetary penalty: tend to be at the lower end of the range of potential financial penalties and have a capped maximum the same as could be imposed in a Magistrate’s Court.
  2. Enforcement undertakings: an agreement between the regulator and the operator or individual to require certain works, for example, to be undertaken.
  3. Stop Notices: as the name suggests allows the regulator to serve a notice to require a certain activity to cease, subject to compensatory provisions if the notice is ill-founded.
  4. Discretionary requirements including variable monetary penalties (VMPs)

In the case above the approach taken allows the operator to deal with the regulatory breach in a way that does not attract issues of liability or the negativity of a prosecution. For the regulator and any external stakeholders who may be concerned about the incident, the advantage of this approach is that the focus is on putting right what has previously gone wrong, rather than simply applying a punishment.

More serious offences, such as overtly criminal, reckless, and deliberate acts undertaken with a view to profit, will still result in prosecution. It is expected however that some 20 per cent of matters which have been subject to prosecution may shift to the civil sanctions regime. Moreover it is likely that incidents that are currently subject to warning letters or formal cautions will move to the civil sanctions regime.

As a regulatory tool, and taking this case as the first example, civil sanctions could play a significant part in improving compliance and environmental performance across UK business. It remains to be seen how effective these powers are, however with increased dialogue it seems to me the relationship between regulator and operator can only improve, and local communities stand to benefit too.

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One Response to “Civil Sanctions – new regulatory tool in action!”

  1. Dr Carolyn Abbot July 28, 2011 at 9:08 am #

    Thanks for the update Howard. I think enforcement undertakings are probably the most interesting of the Environment Agency’s new civil sanctions. There are definitely lots of positives to take from their use. As you say, they are very different from most other civil sanctions in that they give something back to the community and the environment – they’re not just about penalising offending. They come from business, rather than being imposed by the Agency. Their use is therefore less likely to damage the relationship between the Agency and the firm, and is more likely to change corporate culture. And in the current economic climate, when Defra, the Agency’s primary sponsor, faces a budget cut of 30% over a four year period, these undertakings are likely to represent better ‘value for money’ than, say, criminal prosecution.
    But it’s early days and I think there are still a lot of questions that need to be answered. I suppose the most important is will they actually work in bringing firms into compliance? Yes, this is difficult to judge but not impossible. Will they actually save money? The Agency will definitely need to ‘monitor’ compliance with the order – this could turn out to be expensive especially if the firm doesn’t do as it promises. Is there a risk that businesses could get positive publicity from carrying out community work as part of an underaking? Surely this wouldn’t be right. Will business see enforcement undertakings as a softer enforcement option? No doubt many of these questions will be answered in the years to come. But will they? Oliver Letwin, the Minister for Government Policy described the civil sanctions as ‘intolerable’ and argued that the powers should be taken away from regulators and given to the courts. As we speak there is a cross-government review of the system. This is bizarre to say the least – they’ve only been operational for six months. But it signals another possible shift in the regulatory landscape …. as if businesses haven’t got enough to do!

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