The proposed Environmental Civil Sanctions Order will give regulators powers to impose penalties on construction firms that damage the environment

The construction industry needs to be aware of proposals for the introduction of new powers that will enable regulators to impose significant civil penalties for environmental-related offences. In severe cases businesses could be fined up to 10% of turnover – comparable to fines imposed for breaches of competition law.

This is relevant because according to the Environment Agency the construction industry is responsible for 25% of pollution incidents in England and Wales. Combined with the number of waste and nature conservation-related offences committed by those in construction, the new powers could have a significant impact on the sector.

Further to the introduction of the Regulatory Enforcement and Sanctions Act 2008, the government has been consulting on the draft Environmental Civil Sanctions Order, expected to come into force in April next year.

The new proposals are expected to provide environmental regulators with the power to:

  • Issue a range of enforcement notices, including compliance, restoration and stop notices
  • Negotiate enforcement undertakings if an operator offers to voluntarily undertake works to rectify any harm caused to the environment
  • Negotiate third party undertakings – if an operator offers to voluntarily compensate those affected by its actions
  • Issue fixed monetary penalties for specific minor offences
  • Issue variable monetary penalties (VMP) that enable regulators to impose a financial penalty for non-compliance when they decide that prosecution is not in the public interest. It is suggested that VMPs could be up to 10% of an operator’s turnover.

The new civil powers will mean that any offences, other than the most severe (which will still be dealt with by the criminal courts), will now fall into the civil arena. The government has established the first tier tribunal for this purpose, to hear appeals against the imposition of sanctions.

The sanctions are imposed by the regulator without initial recourse to the courts, which could give rise to a greater level of enforcement activity. It also raises concerns about the consistent use of the new powers by regulators across England and Wales.

The new powers could herald an ‘act first and ask questions later’ approach by the regulators

The new powers could also herald an “act first and ask questions later” approach by the regulators. The burden will be on operators to appeal to the first tier tribunal against the imposition of the new sanctions, rather than the regulator satisfying the court that an offence has been committed.

The burden of proof that the regulators will have to satisfy will remain “beyond all reasonable doubt”, other than in relation to stop notices and enforcement undertakings, in which case the burden of proof will be on the “balance of probabilities”.

Do not rely on the regulators to provide proper advice regarding your options. You need to understand the new scheme so you can suggest the use of civil rather than criminal sanctions. You also need to understand which civil sanctions are appropriate. Would the use of an enforcement undertaking, for example, help to avoid any further action and if so what commitments should the enforcement undertaking include?

It is also important to understand your right to make representations to the regulator prior to the imposition of a sanction, along with your right of appeal within 28 days once a sanction has been imposed.

Other considerations include the impact of the new scheme on contractual arrangements and responsibilities. How would discussions with regulators in the form of third-party undertakings and the admission of liability affect the indemnities and confidentiality provisions?

The new proposals represent a sea change in environmental regulation and although they should be seen as an improvement with potential benefits for both businesses and regulators, they do come with a health warning.