Environmental Law News Update

In this latest Environmental Law News Update Nicholas Ostrowski, Charles Morgan and Mark Davies consider a new ECJ case dealing with questions about the meaning of waste, record fines in water pollution cases and the power of corporate law in the environmental sphere.

Waste and the CJEU (again)

In July the CJEU handed down its decision in the case of Openbaar Ministerie v Tronex BV C-624/17. This will be of interest to those dealing with questions about the meaning of waste and, particularly, those dealing with consumer electrical products which have been returned by customers.

As AG Kokott puts it at the start of her opinion this case ‘once again’ deals with questions about the definition of waste under the Waste Directive. So, what can we learn from this case? And does this finally create the longed for ‘logical coherence in the ECJ case law’ about waste which Carnwath LJ referred to in 2007 in OSS Group v Environment Agency [2007] EWCA Civ 611?

The answers to these questions are ‘something’ and ‘no’.

So what can we learn from the case? Well, Tronex is a wholesale stockist which bought some goods for €2,396 and wished to ship them to a third party in Tanzania. The goods consisted of [§14, AG Kokott] ‘goods from retailers, wholesalers and/or importers. The consignment of goods consisted of electric kettles, steam irons, fans and shavers. Most of the appliances were in their original packaging, although some of the appliances in the consignment were unpackaged. The consignment consisted of appliances which had been returned by consumers under a product guarantee, on the one hand, and goods which, because of a change to the product range, for example, were or could no longer be sold (normally), on the other. A number of the boxes in which the appliances were packaged carried a notice stating their defects. The glass in some of the glass kettles was damaged. The shipment was to take place without notification or consent in accordance with the Waste Shipment Regulation.’

The Dutch court held that the products were waste and fined the company €5,000 for not obtaining the authority’s consent before shipping under the EU Transfrontier Shipments of Wastes Regulation (EC) No. 1013/2006.

The kernel of the CJEU’s decision was that [§43, judgment] ‘the shipment to a third country of a consignment of electrical and electronic appliances, such as those at issue in the main proceedings, which had been initially intended for retail sale but which were returned by the consumer or which, for various reasons, were sent back by the retailer to its supplier, is to be regarded as a ‘shipment of waste’ within the meaning of Article 1(1) of Regulation No 1013/2006, read in conjunction with Article 2(1) thereof, and Article 3(1) of Directive 2008/98, where that consignment contains appliances the good working condition of which has not been previously ascertained or which are not adequately protected from transport damage. Such goods which have become redundant in the seller’s product range and which are in their unopened original packaging, on the other hand, must not, without indications to the contrary, be regarded as waste.’

Moving on then, does this create logical coherence to EU waste law? While the operative part of the decision is relatively conventional several commentators (see, for instance, here and here) have noted that the ruling appears to require regulators to look at a consignment and come to a conclusion about the different types of product contained therein (finding that appliances which have not been ascertained to be in good working order or which are not in their packaging are waste while those products in their packaging and in good working order are not waste). This will be difficult to do in practice when regulators are faced with a container at a port which is filled with a mixed consignment of products. Indeed, the recent case of R. v Biffa Waste Services Ltd [2019] EWCA Crim 20 (discussed in the blog here,) albeit involving very different facts, is an example of the reluctance of the Environment Agency to delve into a container of material and categorise a consignment as either waste or, as the Defendant in that case asserted, mixed paper designation.

Wat-er Large Fine

In 2015, when unsuccessful in reducing on appeal its fine of £250,000 imposed by the Crown Court at Reading for water pollution offences, Thames Water must have looked back nostalgically to the days before the arrival of the Environmental Offences Sentencing Guideline in 2014. In 2019, it must again be looking back nostalgically to the days when fines were “only” £250,000. In December 2018 Thames was fined £2,000,000 by the Crown Court at Oxford upon its pleading guilty to three charges of making discharges of untreated sewage into a brook in the Cotswolds, as a result of which 146 fish died. Last week, the Court of Appeal upheld that penalty, despite inadequacies in the reasoning process of the trial judge (a fact which, it was said, of itself did “not take Thames Water very far”).

The offences were the result of what the judge had found, after a Newton hearing, to be a reckless failure to put in place and to enforce proper systems for the maintenance and monitoring of pumps (isn’t it always pumps?). The Court of Appeal reviewed the sentence by reference to the Guideline, the most interesting aspect being the proper treatment of Thames Water as a “very large organisation”, with a turnover exceeding forty-fold the £50M p.a. by reference to which the Guideline sets its tariffs for “large organisations”.

In between times, Thames Water had of course set the record in 2017 with a fine of £20M imposed by the Crown Court at Aylesbury. The judge at Oxford had accepted that the offences before him were more “Reading” than “Aylesbury”, but had nevertheless imposed a fine 8 times larger than that imposed at Reading. However, the Court of Appeal pointed out that in 2015 it had remarked of the Aylesbury fine that it “would have had no hesitation in upholding a very substantially higher fine” on that occasion. The Court declined the invitation to create its own guidelines as to the sentencing of very large organisations beyond those to be found in the 2015 appeal. “The Court is not bound by, or even bound to start with, the range of fines suggested by the Sentencing Council in the cases of organisations which are merely “large””.

The Court stressed the need to achieve the Guideline objectives of “punishment, deterrence and removal of gain”.

The full judgment can be found here.

The power of corporate law in the environmental sphere

Corporate law and environmental law might not, at first blush, seem like the likeliest of bedfellows. Yet, as covered previously in this blog (the reporting of companies for failing to properly address climate change risks), there is a growing use of corporate law mechanisms for the advancement of environmental aims and the protection of shareholders’ interests. In the most recent use, ClientEarth secured success (again) in taking shareholder action against Enea, co-owner of the project behind the EUR 1.2bn construction of the coal fired power plant Ostrołęka C in Poland.

The action was advanced on two grounds: the first that the company resolution authorising the construction of the power plant (which is still, at this stage, I understand, underfunded) ‘was an impermissible instruction to the management board of the company and therefore legally invalid’ and the second that ‘it would harm the economic interests of the company and should therefore be annulled’.

The District Court in Poznań agreed with ClientEarth on the first ground, which demonstrates the impact that corporate law challenges can have in furthering environmental aims and is something which all corporations acting in areas liable to environmental challenge should be aware of.

As the Court found in favour of ClientEarth’s arguments on the first ground, it did not, sadly, determine whether the construction of the plant would harm the economic interests of the company. That should not, however, in this author’s opinion detract from the attractiveness of the argument: where a company is proposing to create an asset for which there is compelling evidence to assert that it will become stranded, directors should be increasingly aware of the risks arising from shareholder action. The growing trend towards a ‘greening of finance’ must only lead support to this warning.

The full judgment on the Ostrołęka C is to be published in the coming months and may still be subject to appeal.

ClientEarth’s press release may be found here.

Please note – our blog will be having a holiday for the next three weeks. The next environmental law news post will be published during the second week of September.

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