Environmental Issues: What a Director Needs to Know
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1 Environmental Issues: What a Director Needs to Know factsheet Ireland has a sophisticated body of environmental legislation, most of which derives from European law and policy. Companies, directors and persons carrying on business in Ireland are subject to an increasing number of environmental obligations and responsibilities in areas such as water, air, litter, waste, planning and development and natural habitats and wildlife. These obligations derive both from legislation and from common law This factsheet was produced by the Institute of Directors in association with McCann FitzGerald for use in Ireland. McCann FitzGerald is one of Ireland s premier law firms, providing a full range of legal services to many of Ireland s leading businesses. Clients include international organisations, major domestic concerns, emerging Irish companies and clients in the State and semi-state sectors. Licences and Permits The Environmental Protection Agency (the EPA ) and local authorities issue permits to persons intending to discharge emissions to the environment during the course of their activities or business. Depending on the nature of the activity and the emission or discharge, any one of a wide variety of environment or waste-related licences or authorisations may be required. The EPA has the ability to process and issue licences such as Integrated Pollution Control Licences ( IPC Licence ), Industrial Emissions Licences ( IE Licence ), Volatile Organic Chemical Permits, Genetically Modified Organisms Registration, Dumping at Sea Permits, Waste Licences and Greenhouse Gas permits. Local authorities are charged with issuing licences and permits under the Air Pollution Acts 1987 to 2013, Waste Management (Facility Permit and Registration) Regulations 2007 (as amended) and the Fisheries Acts 1959 to 2006, amongst others, and more recently Irish Water are tasked with issuing licences under the Local Government (Water Pollution) Acts 1977 to Compliance Regulatory agencies will act either by way of statutory notice requiring compliance and/or ultimately by prosecution of the offender. Local authorities will generally, depending on the legislation in question, issue warning letters followed by enforcement notices which, if not complied with, may then be followed by legal proceedings, including criminal prosecution. The EPA s Office of Environmental Enforcement, will, in the event of noncompliance with environmental laws, and depending on the urgency of the matter, issue a warning followed, if necessary, by enforcement action. Both local authorities and the EPA have the power to carry out the required work and to recover certain costs of enforcement from the offender. Triggers for Environmental Liability Regulatory authorities will pursue licensee or permit holders in the event of a breach of a licence or permit. However, when the licensee or permit holder is unable or unwilling to remedy the damage or pay the costs of same then the relevant authority will have to pursue other avenues for recovery.
2 Planning and environmental law typically imposes liability on the following categories of persons: Owner of the property or premises where the alleged environmental issue has occurred; Occupier Occupier is generally defined as including the owner, a lessee, any person entitled to occupy the premises and any person having, for the time being, control of the premises. A person in control generally includes an occupier of premises, or a manager or a supervisor or operator of an activity. Waste Holder a waste holder is defined under the Waste Management Acts as the waste producer or the person who is in possession of the waste. The person causing or permitting the substance to leave a property this is really of relevance to water pollution legislation where it is an offence to cause or permit a polluting substance to enter waters. An example could arise in the context of contaminated land where the contamination is seeping into nearby waters. A licence or permit holder or operator. In some instances, the above categories will include directors and officers of a company and, in certain circumstances, the courts have been known to lift the corporate veil and proceed against the directors themselves. The circumstances in which this will be done are very much dependent on the facts of the individual case and on the level of personal responsibility and involvement the director or officer had in respect of the environmental issue. The penalties in respect of breaches of environmental pollution depend on what is specifically provided for in the statute and all environmental legislation imposes penalties in the form of a monetary fine and/or a term of imprisonment. However, in reality it is very rare that prison sentences are imposed on individuals for environmental breaches. Common to all environmental offences, both civil and criminal sanctions apply. Civil and criminal proceedings are mutually exclusive and criminal proceedings can be instigated notwithstanding the prior existence of civil proceedings and vice versa. Criminal Liability for Directors A body corporate can be guilty of a criminal offence and environmental prosecutions are, for the most part, taken against body corporates. For instance, a company which holds an EPA licence will be held liable for a breach of that licence. However, the situation is less clear where the crime or damage is committed by a specific member of that company or an employee acting in the course of his or her duties. The question arises as to whether that person is controlling the mind of the company and if the person s actions are regarded as actions of the company. It is for this reason that most environmental legislation contains a standard clause imposing liability on directors, officers, servants and agents for environmental offences committed by the company. Typically, this standard provision provides that: Where an offence under this Act is committed by a body corporate or by a person acting on behalf of a body corporate and is proved to have been so committed with the consent, connivance or approval of, or to have been facilitated by any neglect on the part of any director, manager, secretary or any other officer of such body, such person shall also be guilty of an offence. 2 iod factsheet environmental issues what a director needs to know
3 This provision or provisions to similar effect are to be found in all recent Irish environmental legislation including the Air Pollution Act , the Local Government Water Pollution Act , the Waste Management Acts 1996 to 2014 (the Waste Management Acts ) 3, the Environmental Protection Agency Act , the Litter Pollution Act and the Environmental Liability Regulations 6. Prosecution attitude of the OEE Whether or not the EPA or the local authority will actually prosecute an offence will depend on the individual facts of the case. When EPA or local authorities are deciding to prosecute, they take into consideration the Office of Environmental Enforcement s (the OEE ) statement on Enforcement Policy. The OEE focuses its investigations on cases of a sufficiently serious nature or where there is a persistent breach. The Enforcement Policy sets out the following key considerations which the EPA takes on board when deciding to prosecute these breaches: a) The environmental and other effects of the offence; b) The forseeability of the offence or the circumstances leading to it; c) The intent of the offender; d) The history of offending; and e) The attitude and level of co-operation of the offender. Sentencing When considering the duration and limit of sentencing, the courts will look at the limits prescribed by the particular legislation. There are no specific principles of sentencing attached to environmental matters and so the general principles of sentencing are applied, which have been set down by Gannon J. in the case of State (Stanbridge) v Mahon 7 "The first consideration in determining the sentence is the public interest, which is served not merely by punishing the offender and showing a deterrent to others but also by affording a compelling inducement and an opportunity to the offender to reform. The punishment should be appropriate not only to the offence committed but also to the particular offender." In order for a director to be prosecuted for an offence, it must be shown that the act was sufficiently serious and the director had a key role to play in the event. Cases which are of a serious nature are generally handled by the Director of Public Prosecution. Many cases which relate to criminal prosecutions are against individuals such as landowners who allowed a person to dispose of, or they themselves dispose of, waste on their land. However, directors of companies have been known to be held liable and fined in respect of such activities. The majority of these cases are taken in the Circuit Court or District Court and, therefore, written judgments of these cases are hard to find. However, the longest known sentence that 1 Air Pollution Act 1987, section 11(2). 2 Local Government (Water Pollution) Act 1990, section 23(1). 3 Waste Management Act 1996, section 9 (1). 4 Environmental Protection Act 1992, section 8(2). 5 Litter Pollution Act 1997, section 25(3). 6 EC (Environmental Liability) Regulations 2008, regulation 24(4). 7 [1979] I.R iod factsheet environmental issues what a director needs to know
4 we are aware of is the 2006 sentencing of Mr. Neville Watson for his role in illegal dumping in Wicklow. It should be noted that this is longest sentence in relation to illegal dumping imposed by the State. Civil Liability for Directors The consequences for directors and other officers of a company in terms of criminal liability is clearly set out in environmental legislation; however, director s liability in respect of civil claims is less certain and is based on the polluter pays principle. That principle effectively means that whoever is responsible for damage to the environment should bear the costs associated with it. This can, in turn, open the web of liability to include, in certain circumstances, directors and officers of a company. Liability of directors and officers will very much depend on the facts of the case. Section 31A of the Waste Management Acts states that in accordance with the polluter pays principle, the costs of waste management shall be borne by the original waste producer or by the current or previous waste holders. The Environmental Liability Regulations seek to implement the polluter pays principle by imposing obligations on operators of licenced facilities, where an operator will include a natural or legal person who operates or controls the occupational activity or the person who has decisive economic power over the technical functioning of the activity. The Air and Water legislation similarly imposes obligations on people who cause or permit emissions or pollution to be discharged, indicating the people other than the licence or permit holder who may be held accountable. Case Law in relation to Director s Liability The majority of case law in Ireland in relation to director s liability for environmental issues relates to waste management. In a number of recent decisions decided under the Waste Management Acts, liability for clean up work has been imposed on directors and other officers of the company. Polluter Pays Principle The first of these was the case of Wicklow County Council v Fenton & Ors 8. In Fenton, O Sullivan J held that orders could be made against two company directors pursuant to section 57 and 58 9 of the 1996 Act on what was termed a fall-back basis ie that if the clean up directed could not be funded by the company, the directors themselves should personally fund that clean up. O Sullivan J stated that one of the objectives of the Waste Management Act 1996 was to implement into Irish law the polluter pays principle, set out in the underlying European Waste Directives. The polluter pays principle, he held, requires that even those indirectly responsible for environmental pollution (eg through their involvement as a company director) should pay for it, rather than leaving it to an innocent party or the community to do so. The Fenton decision was cited with approval in subsequent decisions of the Irish High Court, including by Clarke J in Cork County Council v O Regan & Ors 10 and by Peart J in Laois County Council v Scully [2006] 2 IR [2002] 4 IR Sections 57 and 58 of the Waste Management Act 1996 in essence confer a discretionary jurisdiction on the High Court, where it is satisfied that waste is being or has been held, recovered or disposed of in a manner that causes or is likely to cause environmental pollution, to make such orders of the person holding, recovering or disposing of the waste as it considers appropriate to limit or prevent a recurrence of such pollution or to mitigate or remedy the effects of such holding, recovery or disposal ] IEHC iod factsheet environmental issues what a director needs to know
5 However, in EPA v Neiphin Trading Ltd & Ors 11, Edwards J rejected the approach in Fenton, holding that the polluter pays principle had not in fact been properly transposed in the relevant enforcement provisions of the Waste Management Act 1996 and that fall back orders should, therefore, not be made against individual directors or shareholders of a corporate entity. Waste Holder and Director s Liability In John Ronan & Ors v Clean Build & Ors, orders under section 57 and 58 were sought against a number of former directors and shareholders of a company, Clean Build Limited. By the time the matter came on for hearing Clean Build Ltd had been dissolved. It was not contested that Clean Build itself had liability to remediate the site, however it was equally clear that any order against Clean Build would have been futile. Clarke J considered both the Fenton and the Neiphin Trading Limited judgments. However, he did not express a view as to which approach he favoured. Instead, Clarke J relied on the fact that section 57 of the 1996 Act allows an order to made against the person holding, recovering or disposing of waste. Clarke J held that with the exception of one former director (who was 19 at the time of his directorship and whose only engagement with the operation was at an extremely junior level) each of the former directors, for the periods they were involved with Clean Build Ltd, was sufficiently directly and personally involved in the waste operation as to constitute a holder of waste within the meaning of the 1996 Act. Clarke J identified a number of key criteria in reaching this finding, pointing out that each of the directors had: taken an active role in the management and control of the site; attended the site on a regular basis; taken practical day to day decisions onsite; had a significant personal supervisory role over the operations being carried out; and while the directors were not full time, they were fully aware from direct observation as to what was going on and made the relevant policy decisions and directions as to how activities were to be carried out. Clarke J held that each former director should bear responsibility, to an appropriate extent having regard to the activities which occurred during their watch, for the current consequences of those activities. As the law currently stands therefore, it appears that not only is the corporate body (which is usually the holder of the waste permit of licence) a holder of waste, but also directors and other officers within such a company may themselves have individual responsibilities as holders of waste where they take an active involvement in the activities of the company. The Clean Build decision has not been appealed. Practical Steps to Limit Liability Steps that could be taken to seek to reduce exposure include: appropriate due diligence; indemnities from previous owners; financial provision; insurance (discussed in greater detail below); 11 [2011] IEHC 67 5 iod factsheet environmental issues what a director needs to know
6 risk assessments and regular review of systems and processes; effective monitoring and reporting systems; delegation of responsibility to sufficiently experienced and qualified individuals with defined accountability; formal and transparent organisational structures; training; and documented processes and clear paper trails. Directors and Officers Liability Insurance There are a number of types of environmental insurance available in the Irish market. Some examples of these are: Environmental Impairment Liability Insurance; Contractor s Pollution Liability Insurance; Pollution Liability Insurance; Closure/Post Closure Policies; and Environmental Site Liability. Not all environmental insurance policies will cover directors or officers of the company. Policies can be extended to cover a director or officer in relation to their civil liabilities. However, no insurance policy can indemnify against any potential criminal sanctions. A company may purchase insurance for its directors against any liability attaching to them in connection with any negligence, default, breach of duty or breach of trust by them in their capacity as a director, but generally speaking, fines and penalties arising from pollution offences will be excluded from the policy cover. Policies may, however, cover the costs of defence of proceedings. Conclusion There are numerous legislative provisions which regulate environmental and planning in Ireland. The majority of environmental legislation specifically provides for the ability to hold directors, managers, secretaries or any other officer liable in respect of criminal breaches of such legislation. While there are no analogous provisions in respect of director s liability for civil claims, the concept of polluter pays principle and the obligations imposed on operators and holders of waste has lead to directors and other officers being held liable for remediation and clean up works in the context of a civil claim. For directors to mitigate against the risk of being held responsible, they must ensure that the company follows proper protocols in relation to disposing and handling of waste and the release of emissions, ensure that proper procedures are followed, and that all staff are fully aware of their obligations and have the requisite knowledge and training to carry out their roles. 2 European Communities (Companies: Group Accounts) Regulations 1992 (SI 201 of 1992) (as amended). 6 iod factsheet environmental issues what a director needs to know
7 Further Information Director Training The IoD can help you refresh your skills and improve performance as a director. For information on director development courses and workshops please contact Sheila Byrne on or sbyrne@iodireland.ie For further information on this, or related topics please contact the authors Kevin Kelly McCann FitzGerald Partner ddi kevin.kelly@mccannfitzgerald.ie Books Directors Handbook To order a copy of this publication please contact IoD Ireland on A Handbook for Directors of Regulated Financial Services Companies in Ireland To order a copy of this publication please contact IoD Ireland on Rachel Dolan McCann FitzGerald Solicitor ddi rachel.dolan@mccannfitzgerald.ie Standards for the Board Effective Director To order these publications please telephone or visit Boardroom Centre The IoD operates the Boardroom Centre - a resource for companies seeking non-executive Directors and register for IoD members seeking directorships. For details please contact Thora Mackey on or tmackey@iodireland.ie McCann FitzGerald and Institute of Directors in Ireland All rights reserved. Institute of Directors in Ireland, Europa House, Harcourt Street, Dublin info@iodireland.ie
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