Following a week off, our Environmental Law News Update returns with four articles covering recent developments. Stephen Hockman QC, William Upton QC, Charles Morgan, Gordon Wignall and Ana Kantzelis consider the inclusion of environmental considerations in IIAs, the treatment of environmental protestors in the civil courts, the duty of care in respect of environmental activities of companies at home and abroad, and publication of new EA guidance containing an extended list of convictions for assessing permit competence.
The inclusion of environmental considerations in IIAs
In recent years there has been a surge in the number of international investment claims filed with an environmental component. A trend towards the inclusion of environmental and sustainability clauses in new generation international investment agreements will ensure that environmental considerations are increasingly taken into account by investment tribunals.
As many readers of this blog will be aware, international investment agreements (IIAs) concluded between States are a common method of regulating the arrangements under which international investors, based in one state party, undertake investment in the other party, which is the host State for the investment. The primary purpose of IIAs is to protect the property rights of foreign investors, whether natural or juridical. They seek to achieve this by establishing specific rules which provide substantive protections, together with procedures for resolving disputes between foreign investors and host states, usually in the form of international adjudicatory arrangements. The result can be open-textured or weak language, resulting in an imprecise and uncertain co-existence between a general unwillingness to reduce environmental standards and the pursuit of economic objectives.
Historically, it has been rare for either bilateral or multilateral IIAs to include any specific reference to environmental considerations. In recent years, however, newly concluded “new generation” IIAs have increasingly included provisions specifically designed to protect the ability of the State to act in pursuit of regulatory objectives, including in the area of environmental protection and sustainable development. This trend is clear and has been well-documented. For example, a 2011 paper by the Organisation for Economic Co-operation and Development (OECD) covering 1623 IIAs showed that, although only 8.2 per cent of these agreements included environmental language, the proportion of newly concluded treaties which did include a reference to the environment increased from the mid-1990s, rose steeply from 2002, and peaked in 2008 when 89 per cent of newly concluded treaties included a reference to environmental concerns.
Two of the main factors driving this trend are as follows. First, in recent decades there has been an increasing internationalisation of environmental law, and a growing awareness of the interconnected and transboundary nature of many environmental problems. References to sustainable development and the role of the private sector are increasingly being integrated into the outcome documents of major multilateral environmental conferences, such as in the UN 2030 Agenda for Sustainable Development and its Sustainable Development Goals and the 2015 Paris Agreement, and the direction of travel is clear – a shift away from a polluting, resource-inefficient economy, towards a global economy with a lower environmental footprint.
A second driver of this trend, and related to the above, is a desire by host States to protect their ability to act in pursuit of legitimate environmental regulatory objectives. The inclusion of regulatory “carveouts” or exceptions in newly concluded IIAs are attempts by host States to minimise the likelihood that regulatory changes will trigger a cause of action by an aggrieved foreign investor; the standard formula for an investor-State claim with respect to adverse regulation being for an investor to sue a host State for indirect expropriation and violation of a “fair and equitable treatment” standard. Although the scope and content of these environmental provisions vary from treaty to treaty, broadly speaking, they are an attempt to:
(i) recognise the rights of States to adopt certain measures designed to ensure that investment activity is undertaken in a manner sensitive to environmental concerns; and/or
(ii) provide guidance as to the kind of regulatory measures which will not amount to indirect expropriation under the agreement.
In recent years there has been a surge in the number of international investment claims filed with an environmental component, a significant number of which arise from host State regulatory changes in renewable energy policy (see, for example, a number of recent cases involving changes to renewable energy policy in Spain). Other categories of disputes have related to the environmental permits and licencing, extractive industries, water and waste management. There are, however, very few awards that demonstrate how environmental carveouts in new generation IIAs may be taken into account by arbitral tribunals. One example is Al Tamimi v Oman (2015, ICSID), a dispute relating to the enforcement of environmental regulations against a limestone quarry project and the US-Oman FTA. In this case, the tribunal referred explicitly to an environmental provision at Article 10.10 of the treaty, and to the ‘environmental’ Chapter 17 of the treaty, as a means to interpret the minimum standard of treatment under Article 10.5, finding that “when it comes to determining any breach of the minimum standard of treatment under Article 10.5, the Tribunal must be guided by the forceful defence of environmental regulation and protection provided in the express language of the Treaty.” It is clear that environmental considerations, clearly expressed in the treaty text, contributed to the tribunal’s decision to reject the claim for a breach of Article 10.5.
Restraining environmental protestors
In these days of environmental protest, what role can the civil courts play? The Court of Appeal has recently had to consider the use of interim injunctions to restrain unlawful acts by Persons Unknown in the case of Boyd & Corre v Ineos Upstream Ltd & Others  EWCA Civ 515. There are certain statutes that allow it – notably, as many in Chambers are aware, section 187B of the Town and Country Planning Act 1990 (when dealing with unlawful traveller and gypsy sites) – but normally a court will be very cautious about granting injunctions against unknown persons since the reach of such an injunction is necessarily difficult to assess in advance. Environmental protest also raises the need for the court to take into account the right to lawful assembly and freedom of expression. In this case, Ineos and several of its subsidiaries had sought a wide ranging set of interim orders to protect its fracking sites and offices from (1) trespass to land; (2) private nuisance; (3) public nuisance; and (4) actions aimed at injuring other companies in the supply chain. The orders had been made by the High Court against two named defendants and a range of “Persons Unknown”, defined by reference to the different alleged torts.
The Court of Appeal did reject the broad argument that there is a conceptual or legal prohibition on suing persons unknown who are not currently in existence but will come into existence when they commit the prohibited tort. This will no doubt disappoint some legal theorists, but it is a proper reflection of the court’s exercise of its discretion whether or not to impose an injunction when faced with likely unlawful acts. Indeed, the key point to bear in mind was that Ineos did satisfy the judge that unidentifiable protestors were likely to commit the relevant torts and that there was a real and imminent risk of their doing so. Faced with that evidence, a court is unlikely to stand idly by – however well motivated the protestors may seem to be – and will seek to frame the injunction in terms that correspond to the threatened tort and which are sufficiently clear and precise as to enable persons potentially affected to know what they must not do. Therein lies the conundrum. The injunctions restraining trespass and interference with private rights of way stood. But the Court of Appeal accepted that the injunctions seeking to limit potential protestors’ right to lawful assembly on the public highway, and the orders regarding interference with the supply chain, were too broad. Indeed, the court went as far as holding that unreasonable obstruction of the public highway is not susceptible to advance definition and that a person faced with such an injunction may well be chilled into not obstructing the highway at all. It is only when events have happened which can in retrospect be seen to have been illegal that wide-ranging injunctions of the kind that had been granted should be considered.
Whilst writing this, the role of managing the ‘Extinction Rebellion’ protests on the capital’s streets has been left to the Metropolitan Police. But it looks like the courts will continue to be called upon by private companies to strike the correct balance between their private law rights and the right to protest.
Toxic Torts at Home and Abroad – the Supreme Court speaks, but definitely not the last word.
The much-awaited decision of the Supreme Court in Vedanta Resources plc v Lungowe  UKSC 20 was published on 10 April. The case concerns the assertion of liability of both Vedanta and its Zambian mining subsidiary KCM for the pollution of a watercourse in Zambia and its environmental consequences. The Supreme Court upheld the decision of both the first instance judge and the Court of Appeal that the claimants were entitled to proceed in the English courts against both Vedanta and KCM. The style of this blog permits no more than a headline summary of the main points decided in the pellucid judgment of the court delivered by Lord Briggs:
- to exercise the established right to sue the English parent company Vedanta in England was not an abuse of EU law (a doctrine found to be of narrow application); whilst the prospect of thereby bringing the Zambian subsidiary KCM before the English courts was a substantial reason for suing Vedanta it was not the sole one; there was a bona fide assertion of direct liability against Vedanta;
- the issue to be tried against Vedanta had a real prospect of success; the circumstances in which a parent might owe a tortious duty of care in respect of its control and management of the activities of its subsidiaries fell to be determined on general principles and did not constitute any special or novel category of common law negligence liability; on the facts, there were triable issues concerning statements made in published materials, the effect of a management services agreement and the evidence of a former employee as to mode of management in practice;
- the allegation of breach of statutory duty under Zambian legislation was similarly arguable;
- nevertheless the natural place to litigate against KCM was Zambia; Vedanta having indicated a willingness to submit to the Zambian jurisdiction, any risk of conflicting and irreconcilable judgments effectively arose from the choice of the claimants nevertheless to sue Vedanta in England;
- the clinching factor in favour of permitting the claim against KCM to proceed in England was the concern that substantial justice could not be obtained in Zambia because of funding problems and lack of suitable size and experience.
For our readership, the main point of interest will be the consideration of the principles upon which a parent company may assume and be in breach of a direct duty of care owed to employees of a subsidiary and third parties in relation to the activities of the subsidiary. Lord Briggs seemed most impressed by the potential effect of published materials “in which Vedanta may fairly be said to have asserted its own assumption of responsibility for the maintenance of proper standards of environmental control over the activities of its subsidiaries, and in particular the operations at the mine, and not merely to have laid down but also implemented those standards by training, monitoring and enforcement …” .
Since it seems unlikely to have been suggested that the Zambian claimants had read such material, the kernel of its relevance seems to be as an admission of what the realities were or should have been. The result may well be to herald in a new cautious manner of expression of environmental credentials in corporate literature – grand but unsubstantiated claims will be asserted to have consequences and parent companies may discover that the law requires them “to put their money where their mouth is”.
It is also interesting to consider the judgment of Lord Briggs in the context of a “one-man” company, where the extent to which the “parent” (read “sole shareholder”) controls and directs the activities of the “subsidiary” (read “company”) to a degree that is effectively total. There is certainly nothing in the reasoning of the court to distinguish between individuals and corporations as “parents”. Would Mr. Salomon today be able to avoid the imposition of a tortious duty of care in respect of the environmental activities of A. Salomon & Co. Ltd on similar facts? Does that represent any change in the law? There is much to be discussed and expect further seminars from Six Pump Court on the topic following our recent “Piercing the Corporate Veil” (already repeated by popular demand).
Extended list of convictions for the purposes of assessing permit competence
On 22 March 2019 the Environment Agency published “guidance” on the Gov.UK website as to the convictions which an operator must disclose when applying for a permit.
This list is extensive (covering about 40 statutes) and extends not only to applicants but also to company officers, even when the conviction in question relates to another company of which an applicant’s officers were officers at the time of the offence. The list makes allowance for spent convictions.
This “guidance” is the response to DEFRA’s 2018 consultation about waste crime.
The issue as to what previous convictions an applicant or permit holder has, is of relevance to the Core Guidance of 2013 (which does not appear to have been updated). This prescribes what is meant by operator competence. The Core Guidance tells an applicant that an operator must not have a “poor record of compliance with regulatory requirements”. Convictions may also result in the removal of a permit because “competence” is no longer demonstrated.
These requirements are in fact a long way from what is specified in the Permitting Regulations themselves about competence. On the matter of an application for a permit, for instance, paragraph 13 of Schedule 5 requires only that an applicant should “operate the regulated facility in accordance with the environmental permit”.
The intention appears to be that the regulator can divine a failure of competence from the fact of convictions.
There has been a considerable degree of litigation at the highest level about the disclosure of convictions and the human rights consequences, in particular in the Supreme Court. On 30 January 2019 in Gallagher the Supreme Court considered whether the requirement to disclose previous convictions in certain (very sensitive) circumstances was lawful (eliciting varied responses).
Whether, in individual cases under the permitting regime, convictions under the new list do in fact justify a refusal to issue a permit, would clearly be a matter of careful consideration. But there are also issues about the validity of the guidance itself, as well as the extent to which the refusal to issue (or to remove) a permit is a sanction and an interference with a right of property. It is not at all clear that an aggrieved person would be entitled to the detailed reasons for an adverse decision.
A decision to refuse a permit on competence grounds is a matter which an inspector can consider on appeal.
Following the same consultation about reducing waste crime, DEFRA has also concluded that it will also make important changes to the exemption regime. These will be announced, it is said, in 2020.
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