Supplementary memorandum from the Environment
Agency
ENVIRONMENTAL CRIME
AND THE
COURTS
Use of civil penalties and an outline of alternative
sentencing provisions
1. Whilst taking evidence on the 22 January
2004 from representatives of the Environment Agency, the issues
of the availability of alternative sentencing provisions (particularly
for corporate offenders), and the manner in which "administrative"
or "civil" type penalties are applied in other countries
arose. The particular questions and responses are to be found
at Q49 to Q59 in the transcript. The Agency was asked to clarify
those areas.
2. In respect of the use by other countries
of administrative/civil penalties, whereby the Regulator calculates
and imposes a penalty, the technique has been examined in two
specific studies. Rather than reciting the contents of these,
the Committee's attention is drawn to extracts attached from the
report prepared by Michael Woods LLM and Professor Richard McRory
CBE of University College, London entitled "Environmental
Civil Penalties—A More Proportionate Response to Regulatory
Breach". The report was produced in 2003. Five pages are
attached which deal in general terms with the position in Europe,
Australia and the USA. A further three pages provide more information
concerning the use by the US Environmental Protection Agency (EPA)
of civil penalties. The position in the USA has also been examined
in depth by William Wilson (formerly a DETR lawyer), in his book
"Making Environmental Laws Work" published in 1998 after
the author had finished a secondment in the USA under the auspices
of a Harkness Fellowship.
3. This note seeks only to deal with the issues
in general terms, but Committee members will see that several
European Countries have adopted various methods of imposing administrative
penalties where the regulator imposes a "fine" on an
offender as opposed to initiating a formal prosecution leading
to a court appearance for the causer of the pollution. Germany
in particular has made considerable use of the practice extending
it beyond environmental regulation. The provision would provide
a most useful additional capability for the Agency especially
in dealing with non-intentional and less serious offending. Considerable
study would be required before its adoption and appeal provisions
would be needed, but it could eliminate the expense of court proceedings
and accelerate enforcement generally.
4. In Australia (para 4.13) it can be seen that
the practice has been refined and formalised by incorporation
into the Environment Protection and Bio-diversity Conservation
Act 1999, and para 4.14 indicates civil penalties ranging from
A$550,000 for an individual up to A$5.5 million for a corporation.
5. The practice of imposing civil penalties
is used to the greatest extent and in the most refined way in
the USA. There, as can be seen from para 4.19, the amounts ordered
for payment can be extremely large (eg US$30 million). This alternative
method of enforcing against the environmental offender is based
upon a deliberate attempt to reserve the criminal courts for offenders
who deliberately, wilfully or recklessly fail to comply with environmental
legislation and either cause or risk considerable harm to the
environment. The method of calculation of the penalty is sophisticated
and involves use of a computer system (known as BEN) to calculate
the benefit gained by the offender from non-compliance or from
its activities. Similarly the capability of the offending company
to pay the proposed penalty is also calculated by a computer system
(known as ABEL) which provides information as to the sum that
the company could afford without being put out of business. These
methods of calculation are available to the offending company
so that it knows the penalty that is likely to be imposed on it.
6. Additionally, the American Environmental
Protection Agency also utilises what are known as "Supplemental
Environmental Projects" along with the imposition of civil
penalties (see para 4.20). Those projects, requiring polluters
to undertake environmental projects form part of the overall settlement
that may be reached between the Regulator and the offender.
This capability of the Regulator to set such
a penalty is of considerable interest to the Agency for the reasons
expressed at the Hearing. It could be a most useful additional
enforcement provision. The range of the penalties that might be
available along with the nature of the offences and the type of
offenders who might be subject to such penalties could be the
subject of a detailed study possibly under the auspices of the
new Sentencing Guidelines Council.
However, the addition of civil penalties should
not detract from the need for Magistrates and the Judiciary to
impose higher criminal penalties—it would not be right for
a civil penalty, imposed on the lesser civil standard of proof
to be higher than a criminal penalty imposed on the criminal standard
of proof. It would also be important for civil penalties to be
set at an appropriate level and regularly reviewed.
ALTERNATIVE SENTENCE
PROVISIONS
7. As mentioned in the transcript at Q49 some
initial thought (additional to administrative/civil penalties
mentioned above), has also been given to the devising of alternative
sentences that might be available to courts when sentencing environmental
offenders. Such thinking is embryonic but again might merit the
involvement of the Sentencing Guidelines Council. Following the
creation of the Sentencing Advisory Panel in 1999, that body had
recommended in its initial advice to the Court of Appeal that
the sentencing of companies merited further examination (para
25—Sentencing Advisory Panel—Advice to the Court of
Appeal—Environmental offences). There was then discussion
between the Home Office, the Environment Agency and the Health
and Safety Executive on this topic but these discussions were
never finalised by way of a report and no firm recommendations
were forthcoming. However, initial thought has been given by the
Agency to the following types of alternative offences:
(a) Equity share issues—Such a penalty
would enable a court to order a company to issue shares for a
specified sum related to the avoided costs or the benefits obtained
through the commission of the offence. Failure by the company
to do so would lead to the company being re-sentenced for the
offence. The creation of additional shares would affect the holding
of other shareholders thus making them concentrate upon and demand
changes in the practices of the company. Such a sentence would
mean a company would not have to pay an immediate fine thus preserving
its cash flow.
(b) Corporate Rehabilitation Order—This
would be an order made by the Court for a specified period (possibly
two years), during the course of which the company would have
to undertake specific activities and actions. A range of those
activities would have to be designed but could, for instance,
include training of personnel in environmental matters; adoption
and implementation of environmental action plans; remediation
of environmental harm to the satisfaction of the Agency; Compliance
would be monitored by the Agency but could be attained by the
placing of an Agency representative on the company's Board for
the duration of the Order. Failure to comply with the specific
activities would lead to the company being brought back to Court
to be sentenced in an alternative way.
(b) Community Projects—Here the Court
would have the power to order an offender to complete a project
to the value of a specified sum related to the harm or benefit
that had been obtained by the offender. This project would have
to be completed within a specified period. The project would be
linked to environmental improvement. This provision would also
be capable of application to individual non-corporate offenders
who might not be in a position to pay a high fine. Not infrequently
the Agency encounters such individuals who may well have caused
considerable environmental and amenity damage through fly-tipping
for instance but who are not in a position financially to pay
an appropriate fine. The ability of a Court to make this kind
of order would help to rectify that problem.
(c) Remediation orders—Although there
is power to serve a works notice requiring remediation currently
available to the Agency under s161 Water Resources Act 1991, there
is no provision for a Court to make such an order. No parallel
power exists for either the court or the Agency in relation to
the commission of waste offences. An order as part of a sentence,
requiring an offender to remediate environmental harm to the satisfaction
of the Agency and within a specified time would be extremely valuable
especially if non-compliance with such an order was in itself
made an offence, and the offender capable of being ordered back
to Court so as to be re-sentenced for the original offence.
(d) Corporate Bonds—this is a suggested
provision whereby a corporate offender either pays funds into
a Court account for a finite period or is ordered to obtain compulsory
insurance to a specific value. The amount ordered would be dependent
upon a Risk Assessment of a company's potential for causing environmental
damage. The offender would pay for that assessment to be done.
Once the assessment had been made then the bond would be in an
appropriate sum and for a specific period and would make funds
available for use by the Regulator should environmental harm be
caused during that time so as to remediate any damage. This would
be of value where there was a perceived risk of the possible liquidation
of the company concerned.
(e) Adverse publicity orders—a suggested
provision whereby in addition to any sentence imposed, a Court
could make an order that a notice, (with wording agreed by the
Agency as to the offence and its circumstances), be placed in
the local or even national media within a specific time. Non-compliance
would in itself be an offence. Furthermore, the provision of the
order could be extended to compel an offending company to place
that notice in its annual report.
8. These are ideas that require analysis and
detailed scrutiny. Given the particular difficulties of sentencing
environmental offenders—especially corporate offenders—it
is thought to be a worthwhile exercise that might provide courts
with a more far-ranging and effective form of sentencing regime
that would help to ensure compliance.
February 2004
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