Who’s Who Legal brings together Paul Davies at Latham & Watkins, Michael Gerrard at Arnold & Porter Kaye Scholer and Leonard Griffiths at Bennett Jones to discuss issues currently faced by practitioners in the field, including recent legislative developments, the uptick in both contentious and product compliance work and changing competition in the market.
Paul Davies: The most material development concerning environmental issues in the UK (and which is likely to remain the most material development for the next two to three years) is the prospect of the UK’s exit from the European Union (Brexit). Clients are already looking at the effects of Brexit, particularly in areas such as chemical regulation (REACH), the EU Emissions Trading Scheme and the Industrial Emissions Directive (which concerns permitting for material operations and installations). We have seen a number of clients who are looking to see the likely post-Brexit regulatory landscape and understand the likely relationship between the European regulatory institutions and the UK.
Additionally, we see significant developments regarding non-financial reporting, environmental, social and governance (ESG) risks. These come from both regulatory developments (such as the EU Directive concerning Non-Financial Reporting) and the voluntary standards that large corporate organisations are subscribing to (such as the UN Guiding Principles, the Sustainable Development Goals and the targets under the Paris Agreement).
Michael Gerrard: The United States Congress has not enacted any major environmental legislation since 1990 (with the sole exception of 2016 amendments to the Toxic Substances Control Act, which resulted from a decade’s worth of negotiations with industry and the environmental community). The partisan divisions in Congress are so sharp that no other major environmental bills have achieved passage in 27 years.
By far the most important development in US environmental law in the past year was the election of Donald Trump as president in November 2016. President Trump is hostile to most forms of environmental regulation, and is doing everything he can to reverse the pro-environmental legacy of his predecessor, Barack Obama. Among his most prominent actions are the cancellation of the Clean Power Plan and his plan to withdraw the United States from the Paris Climate Agreement.
Leonard Griffiths: There have been legislative changes and increased attention with respect to the manufacture, use, importing and exporting of chemical substances. These changes have been occurring over the course of years, but implementation and enforcement are ramping up. Similarly, we have seen and continue to see new requirements regarding labelling and safety data sheets for materials and substances. These changes are occurring in Canada, but also in the United States and Europe.
Paul Davies: Absolutely! Litigation risk for large multinational organisations from environmental (and, in particular, ESG) risks has materially increased. Claimants are seeking to rely on non-financial reporting of ESG risks to demonstrate that parent companies owe a duty of care to individuals impacted by the alleged acts or omissions of subsidiaries.
In addition, NGO behaviour is becoming increasingly sophisticated (we would highlight the successes of Client Earth in this regard) and this is giving rise to quasi-contentious work, where clients are having to address reputational risk in the court of public press.
Michael Gerrard: During the Obama administration, there was a great deal of litigation brought by industry against the Environmental Protection Agency (EPA), chiefly claiming that EPA regulations and other actions went beyond the statutory power of EPA, or were not taken following the required procedures, or on other grounds. The states that supported industry in these positions (mostly Republican states) often joined in this litigation.
Since the inauguration of President Trump, this sort of industry-led litigation has largely stopped, as the EPA is now taking few actions that industry finds objectionable. Instead there is now a large and growing number of lawsuits brought by environmental groups (often joined by states that favour the environmental position – mostly Democrat states), claiming that EPA’s retreat from regulation in many areas is contrary to law.
Leonard Griffiths: There have not been significant changes to the type of work we’re seeing, overall, but we are experiencing an increasing trend toward more litigation, particularly related to contaminated properties. There has also been increased insolvency work with environmental aspects.
As noted above, given new requirements that are being implemented, there is an increased focus on the manufacture, import and export of chemical substances, which is occurring in many countries.
Paul Davies: It is true to say that product compliance work continues to increase and with Brexit (see above), will likely increase still further. However, we would highlight that the main growth area concerns supply chain risks and, as such, is broader than just product regulation. The impact of ESG on asset managers and, consequently, fund managers (such as private equity funds) is leading to a material increase in activity on both transactional and contentious work (see above). We see environmental broadening out to address ESG more broadly, with a particular focus on modern slavery risks and other social and human rights risks.
Michael Gerrard: The 2016 amendments to the Toxic Substances Control Act are leading to major changes in the way new chemicals are regulated. This is slowly emerging as a practice area.
There have been several highly publicised incidents of drinking water supplies contaminated by chemicals. The most prominent of these was in Flint, Michigan. This has led to greater attention to drinking water contamination.
The rapidly declining cost of solar and wind energy equipment has helped spark a major increase in the construction of renewable energy facilities. This has led to a great deal of work in such areas as environmental, financing, real estate, construction contracting, and electricity regulation. The Trump administration is promoting the development of fossil fuel resources; that will lead to more work, both supporting and opposing such development.
Leonard Griffiths: Yes, we have seen increased work in product compliance, both in terms of chemical substances, but also with respect to product compliance/liability, and more broadly, general compliance.
Growth areas have not changed in my practice. The practice continues to include general compliance advice; litigation (civil actions, regulatory orders and prosecutions); chemical regulation/compliance advice; the purchase, sale and management of contaminated properties; corporate transactions with environmental components; project approvals; and insolvency matters with environmental components.
Paul Davies: Our view is that increasingly we see the market place dividing into two: large global law firms (particularly in the US and continental Europe) and boutique operators. We see that the middle tier of law firms is being squeezed, notably for specialist expertise such as environmental services. As such, we see a number of environmental practitioners having to broaden their practices to cover other areas of law.
Michael Gerrard: There is a great deal of uncertainty about the effect that the Trump administration will have on environmental law practice. There will be few if any new environmental regulations at the federal level, but some of the states are stepping up their own regulatory programmes to try to fill the gap. Many assume that federal enforcement activity may decline, but that is not yet known for certain. State enforcement activity may not be much affected.
So far the number of environmental lawyers in the private sector has not gone significantly up or down as a result of the election. However, the budgets of the federal environmental agencies are being cut, which may lead to the firing of many government lawyers. On the other hand, many environmental groups are hiring more lawyers to fight against the Trump administration.
Leonard Griffiths: Overall, the legal market is very competitive, with many lawyers vying for increasingly limited matters.
However, at a micro level (in my practice area), there is often too much work to do and not enough lawyers’ time, or enough properly qualified/experienced lawyers to call on. An environmental practice, by its nature, is filled with emergencies and fast-paced demands, which require extensive experience. There continues to be good demand for “higher-end” issues that require extensive expertise and experience, with a relatively short supply of lawyers who can do this.