The International Who’s Who of Environment Lawyers has brought together five of the leading practitioners in the world to discuss key issues facing lawyers today. Casper Herler of Borenius, David B Weinstein of Greenberg Traurig, Owen Lomas of Travers Smith, Peter Briggsof Herbert Smith Freehills and Wolfgang Berger of Haslinger/Nagele & Partner reflect on levels of enforcement, energy-related work and the impact of economic recovery on this sector.
David B Weinstein
Herbert Smith Freehills
Haslinger/Nagele & Partner
Who’s Who Legal: Environmental regulation and enforcement has become increasingly strict around the world. How would you describe the level of enforcement in your own jurisdiction? Which areas are the authorities concentrating on?
David B Weinstein: Enforcement in the US is often multi-faceted. Businesses engaging in activities with environmental implications are generally subject to oversight by multiple agencies, sometimes with competing or conflicting agendas. This is true not only at the federal level, but also at the state and local levels of government. Additionally, federal and state statutory schemes often provide causes of action to private parties for harms allegedly caused by environmental violations. Businesses must, therefore, be vigilant both in ensuring they are complying with statutes, rules and regulations enforced by authorities on the one hand, and vigorously defending against private actions on the other.
Under existing statutory schemes, authorities have concentrated and continue to concentrate on actions involving contamination of surface and ground waters, as well as air pollution by toxic chemicals. Moreover, in recent years the public policy discussion has focused heavily on proposals for the regulation of carbon dioxide and other greenhouse gases. Following the 2007 US Supreme Court ruling in Massachusetts v EPA, which held that greenhouse gases are subject to regulation under the federal Clean Air Act, authorities have proposed various regulations involving carbon emissions, including limits and reporting requirements. As additional regulations are proposed and adopted, enforcement activities in these areas are almost certain to increase.
Peter Briggs: There is an increasing trend towards greater regulation and enforcement of environmental laws in Australia, particularly in NSW and Queensland.
In the past year, significant legislative changes were made to strengthen requirements for industry to notify and respond to pollution incidents. Fines have been doubled for not complying with these requirements.
The Environment Protection Agency (EPA) has become more proactive in carrying out environmental audits (particularly of licensed premises), which are usually followed up with civil enforcement notices and/or prosecutions.
There are various regulatory mechanisms available to the EPA to deal with environmental issues, which usually depend on the seriousness of the issue and the harm posed to the environment.
In the past 12 months in NSW alone, the EPA has:
• brought 56 prosecutions;
• issued 18 clean-up notices and 14 prevention notices; and
• issued 1,664 penalty notices.
The NSW EPA has been particularly focused on enforcing its reporting requirements and has also targeted specific industries, including the waste tyre industry.
Wolfgang Berger: Though my main practice area focuses on representing clients in licensing and permitting procedures for the construction or alteration of plants, power stations and other sites including Environmental Impact Assessments (EIA), a growing part of my work is dealing with the enforcement of the close-down of (at least partly) unlicensed plants, waste disposal issues and the enforcement of the payment of the so-called Altlastenbeitrag. This tax is imposed on the landfill, incineration, intermediate storage or export of waste, and the Austrian tax authorities’ and the Ministry of Environment’s interpretation of this law has become quite strict in an attempt to raise tax revenues. Other issues are the enforcement of new legislation transposing the EU Water Framework Directive (WFD) with regard to the December 2015 deadline for the step-by-step implementation of this directive, and the transposing and enforcing of the EU Directive on Industrial Emissions (environmental inspections, BAT documents, upgrading to the state of the art). Tackling these issues, the importance of cooperating with engineers, which has always been a key aspect of environmental law, will most likely continue to grow.
Casper Herler: In Finland, enforcement in the field of environmental law has traditionally consisted mainly of environmental authorities exercising administrative compulsion. In recent years there has been a substantial public discussion supporting a conception that the prosecuted amounts of environment-related crimes has been too low. After a number of individual cases where companies have been suspected and subsequently convicted due to environmental crimes, the scrutiny related to criminal liability has increased in the last 12 months. This spring the Ministry of the Environment published new instructions for supervisory environmental authorities in order to encourage the authorities to notify the police if an environmental crime is suspected in course of supervision. Further, the supervisory environmental authorities are instructed to use less informal instructions and make use of coercive fines as administrative measures at an earlier stage than had previously been authority practice.
Owen Lomas: Enforcement can, of course, be measured in various ways. In terms of recorded prosecutions and the severity of penalties, the UK remains a country with relatively light enforcement. Prosecution rates remain low and penalties are generally tiny when compared to the US. Enforcing authorities have also seen reduced resources in recent years and this has had an impact on enforcement activity, despite efforts to prioritise and focus on areas of particular concern. That said, maximum penalties have edged upwards and there is evidence that this has resulted in higher actual fines. Another feature of the past few years has been the introduction of civil sanctions as an alternative to prosecution for some regulatory offences and this has resulted in prosecution rates in some areas declining. An example is in prosecutions by the EA for failure to comply with the packaging waste recycling regulations. Despite the lack of formal enforcement action, however, non-compliance, where detected by the enforcing authorities, is unlikely to be tolerated. Through a combination of statutory notices and informal imposition of corrective requirements and the implicit threat of formal action, enforcement will be achieved. In terms of areas of focus, the EA claims to adopt a risk-based approach, directing its efforts at those whose activities give rise to or create the risk of serious environmental damage (and those involved in deliberate or organised crime). The main focus thus remains big industry, water companies and waste management. With the introduction of the civil sanctions regime, the EA also has the opportunity to concentrate on other areas but it has, so far, used this very sparingly and almost exclusively on the packaging waste offences already mentioned.
The impact of economic recovery
Who’s Who Legal: As economies around the world begin to recover, what impact is this having on your environmental practice? Are you seeing an uptick in transactional work? Is there more real estate-related work? Are there any further areas of your practice you expect to resurface with the improving economy?
David B Weinstein: Until relatively recently, a significant part of the real-estate related US environmental practice involved refinancing and other transactions involving existing projects and associated due diligence work. Significant investments in real estate are now taking place, particularly in certain markets, leading to increased transactional work. There has also been a surge in M&A activity leading to increased attention regarding the treatment of environmentally impaired assets and a focus on risk mitigation, generally from a corporate standpoint.
More recently, there has also been an uptick in construction projects. US home construction, for example, has risen steadily for the past year, leading to increased opportunities for permitting and due diligence work. Much of the work involves “in-fill” projects in urban or brownfield locations, which has led to more careful and creative environmental solutions, including assisting with obtaining appropriate pollution liability insurance products. “Green” building initiatives continue to emerge as well. As investors and developers become more sensitive to energy issues – and as tax credits and other incentives have become and remain available for such initiatives – more buildings are being designed with energy efficiency in mind. In some cases, existing buildings are being upgraded to meet efficiency and environmentally friendly standards.
Peter Briggs: Mining, energy and infrastructure projects have been a major focus of our practice over the past 12 months. We have been involved in a number of large M&A transactions, advising on a range of environment and planning issues.
We have also seen an upswing in real estate and urban development work in the past few months.
Wolfgang Berger: Whereas in the early phase of the economic depression we witnessed projects being called off overnight and afflicted companies selling shares (involving due diligence reviews), what we can see now is that companies have begun to modernise and expand their plants. The major challenge ahead of us is to get these developments under a more stringent environmental legal framework.
Casper Herler: Economic recovery has not had a major impact on the workflow of environmental law practice in Finland. Most of the work done is regulatory and thus not as dependent on increased number of transactions. An increase in the amount of transactions related to environmental work has been taking place throughout 2013. A significant part of environment-related assignments have originated from the natural resources sector, especially the mining industry, and renewables have been key market drivers. Furthermore, the stability of Nordic countries has made major infrastructure investments such as energy networks attractive for foreign investors.
Owen Lomas: It is in the nature of environmental practices in commercial law firms that the difference between feast and famine, in terms of transactional work, can be one or two major deals. Thus, an environmental team busy on transactional work does not necessarily equate to an uptick in transactional work overall. Similarly, even a substantial increase in transactional work may not translate into significantly more work for environmental specialists unless in certain areas – such as industrial manufacturing, oil and gas and power and infrastructure projects, etc. With these cautionary points noted, however, at Travers Smith we are certainly experiencing a significant increase in transactional work. This is partly attributable to increased activity in mid-cap private equity deals – an area of particular strength for Travers but there is certainly some evidence of an overall uptick in activity.
More generally, the real estate sector remains sluggish but power and infrastructure work continues to grow. This is perhaps more a reflection of the long-term decarbonisation agenda and fears about security of power supplies than the economic cycle. So, we are seeing a steady stream of work in areas such as solar renewables, power station investments (including CHP) and now also investment in shale gas fracking. As the economy picks up, we expect to see more transactional work as investment and M&A activity grows. On the stand-alone regulatory side, as businesses begin to loosen slightly the purse strings, we expect an increase in general regulatory work – notably in relation to product regulation and the wider environment, social and governance (ESG) agenda, with issues relating to sustainability, carbon, working and production conditions in the developing world and bribery and corruption all coming to the fore. In the medium term, we also anticipate renewed focus on carbon reduction through investment in renewables and new carbon reducing regulatory measures, probably still relying on carbon trading, as well as fiscal measures.
Who’s Who Legal: According to those we interviewed, energy-related work continues to be an increasing aspect of environmental practices. How have you or your firm responded to the increasing level of work? Which types of energy projects have clients been pursuing in the past year?
David B Weinstein: As the global energy market expands and becomes more complex, Greenberg Traurig has increased its participation in the field. Through the establishment of our offices in Mexico City and Warsaw, the firm continues its expansion into Latin America and Europe.
Attorneys in our global energy and infrastructure practice have extensive experience in matters involving energy exploration and development, finance, and related regulation and litigation. We have been fortunate to participate in a variety of large energy infrastructure projects and have assisted clients in navigating the fallout from catastrophic events such as spills and releases. Our practice continues to grow with projects involving the development of new energy sources, such as hydraulic fracturing and the extraction of shale oil.
Peter Briggs: We have been involved in obtaining approvals and conducting related litigation for a wide range of energy projects, in particular upstream unconventional gas projects (coal seam gas), pipelines and gas-fired power generation projects.
Renewable energy (including large-scale wind and solar) is an increasingly important focus for our practice.
Wolfgang Berger: I strongly agree that energy-related work is becoming an ever-growing aspect of environmental law practice. In the past years, the enhancement of renewable energy sources has led our clients to pursue wind- and hydro-power projects. Also, there is a strong tendency towards investing in new construction and modernising of energy infrastructure (electricity and gas pipelines), with the procedures involved being complex and demanding. In addition to all aspects of EIA, these procedures involve expropriation proceedings and real estate deals. Apart from the permitting and licensing procedures, our clients have been forced to tackle regulatory and contractual issues (eg, unbundling). Together with Oesterreichs Energie (Austrian Energy, the Austrian energy industry association) we organise conferences and workshops on certain energy law issues.
Casper Herler: The European Union Directive on the promotion of the use of energy from renewable sources has brought about a number of regulatory and public policy-related assignments especially in field of biofuels and bioliquids. Also after the Council of State adopted three decisions in principle in respect of new nuclear energy projects in 2010, nuclear energy issues have been topical in the legal sector.
In Finland, electricity production from wind, biomass and biogas is promoted through a premium feed-in-tariff. Therefore, there is a substantial amount of wind power projects under development and also foreign investors have shown interest in Finnish wind power production. Investments, permitting procedures and administrative proceedings have kept law firms busy.
The Finnish environmental protection legislation is currently under reform and the latest proposal included a special natural resource clause, which – if implemented in its proposed form – could have a major negative impact on Finnish peat production. Moreover, the clause could affect also other sectors which employ natural resources. As Finland is a significant peat producer, the industry interest groups have forcibly reacted to the environmental protection reform, which has produced work for law firms. It is anticipated that the number of appeal processes in respect of environmental permitting will substantially increase, if the proposal is accepted by the parliament.
Owen Lomas: As indicated already, energy-related work is, indeed, a growing part of our work. However, not all environmental practices will benefit significantly from the work in this area. The sector is already crowded with lawyers and environmental specialists have to compete with projects and project finance and energy M&A lawyers, many of whom see the regulatory aspects of the work in this area as part of their job. This is particularly so where the market is competitive and budgets for legal spending are very tight, meaning that bringing in specialists to advise is avoided wherever possible. To make a contribution in this field and be profitable, environmental practitioners need to demonstrate commercially relevant, in depth, regulatory knowledge and expertise and have available the services of other similarly experienced specialists in their firms – such as commercial and tax lawyers. This almost certainly implies the need to focus on certain areas – be it specific low-carbon technologies (wind, solar, nuclear etc), new technologies (fracking) or a reputation for acting for particular types of players in the sector. At Travers, for example, we have focused on solar projects for project companies and panel producers and on fracking for those looking to invest in this emerging area, while continuing to act on general energy deals.
Evolving legal practice
Who’s Who Legal: How has the practice of environmental law changed since the start of your career?
David B Weinstein: The practice of environmental law has certainly evolved since I began practising in 1986. At that time, the environmental field was less structured. Some of our most important environmental legislation had only existed for ten to fifteen years, and courts were grappling with a substantial number of new legal issues. With much uncertainty in the law, both attorneys and their clients faced significant challenges in understanding environmental issues and their impacts on business operations. Because this was such a rapidly growing field, the courts had no choice but to confront difficult issues relatively quickly. Over time, as the law was given more structure and stability by the courts, attorneys had additional precedent to provide guidance in advising their clients on environmental issues.
There is now a well-developed body of environmental law and significant doctrinal changes are more rare and often more nuanced. While a new piece of environmental legislation in the mid-80s might have created a brave new world for attorneys and courts to wrestle with and contour, today much of the litigation deals with applying existing and established law in new contexts. That said, even with established precedent, there is still significant litigation over the interpretation of many state and federal environmental laws.
Even with established jurisprudence, environmental law will likely always face new frontiers, providing attorneys with new challenges and the ability to address cutting-edge issues and shape the law for the future. One of the areas in which there will probably be an increased focus is global issues, such as greenhouse gas emissions. Courts and legislators will also be faced with the ongoing task of simplifying and streamlining the current conflicts and inconsistencies between the different levels of government regulation. Environmental law will always be evolving, though now – unlike when I began practising – it will do so more in the context of established precedent.
Peter Briggs: In my 22 years of practice, environment and planning law in Australia has evolved into a highly complex specialist area. There has been an exponential increase in the volume and complexity of environment and planning regulation and case law.
Environmental issues are now a central concern for companies, and a key issue for any project is obtaining commercially acceptable, timely and secure project approvals. Developing an integrated approach to land access and approvals is essential to ensuring a successful major project.
Wolfgang Berger: When I started my environmental law career almost 25 years ago, there were actually very few lawyers exploring the field and environmental law was only in its infancy. A completely new set of laws and regulations was set up to govern issues such as waste management, clean-up of abandoned hazardous waste sites and environmental audit and EIA. Through the years, environmental law has grown to become a separate field of study at Austrian universities, and there are more and more environmental law practitioners. Whereas in the past Austria was often considered a role model country in terms of environmental protection, it has been and is still faced with a number of infringement proceedings for insufficient or late implementation of environmental directives as well as the Aarhus Convention. The process of enhancing neighbour rights affected by permitting and licensing procedures is still under way.
As of 1 January 2014 a completely new system of administrative jurisdiction will be introduced in Austria. It will then be possible to bring even minor environmental cases to a court of law. This reorganisation of the administrative judicial systems is a real “quantum leap” in the history of Austrian administrative law. I am really looking forward to seeing how this is going to affect the environmental law practice.
Still, there is one thing that has not changed significantly since I went into environmental law. Due to the growing number of environmental practitioners, it seems that the attorneys’ hourly rates within this practice area have remained almost the same since then.
Casper Herler: Prior to the last decade environmental issues were recognised as topical in Finnish law firms, but were not seen as a material practice area supported by a specialised team of environmental lawyers.
Moreover, the smokestack industry in Finland has a strong position as the number of factories in relation to the population is at a high level comparable to other western countries. Previously it was common that in-house counsel handled various emerging environmental matters.
The entry of foreign, especially American, capital on the transactions markets during the 90s slowly brought soil contamination issues to the forefront. Later on, the influence of European Union environmental law and the increasing amount of detailed environmental regulation created a stronger need for specialised environmental law advice.
Today there are a number of environmental law teams with several environmental law specialists on the Finnish legal market concentrating on environmental liabilities, regulatory compliance issues as well as permitting issues and administrative litigation on behalf of companies. Recent new areas of practice are CSR advice, strategic planning of infrastructure projects and assistance with governmental relations. The regulatory environment of industries has become more strict and NGOs have started to be more active than before by appealing from permit and land use planning decisions. This has made companies more ready to use legal expertise from law firms in order to defend their positions in the administrative proceedings.
Owen Lomas: When the practice of environmental law emerged in the UK some 25 or so years ago, it was narrowly focused and confined to some of the larger City of London firms. Unlike in the US, where litigation was the key driver, in the UK it was the need for apportionment of environmental liabilities (most notably clean-up liability) in M&A and other transactions which accounted for the advent of the practice area. Since then, despite a number of severe ups and downs, the area of practice has taken grip in many more law firms, as well as at the Bar, and diversified into other areas, both transactionally and in terms of stand-alone regulatory advice. So, for example, some form of environmental practice is now a feature of many more firms in London, in the national firms and among the larger regional players. Despite a continuing focus on M&A-type support work, these firms now typically advise across a wide range of transactions and projects, as well as incidentally providing regulatory advice to industry and commerce from time to time. What has been much slower to develop, however, are robust and profitable, truly specialist, regulatory practices (be they within multi-disciplinary firms or as stand-alone “boutique” practices) with a client base separate from their transactional one. One or two City and national practices (amongst them Travers Smith) remain committed to this model but the economic downturn over the last five years has taken its toll on staff resources and expertise in this fragile area and, for most, made this goal difficult to realise.
In terms of subject matter, the practice of environmental law has changed dramatically. The early focus was on contaminated land and planning-related issues has widened into scrutiny of regulatory compliance generally but also to a growing focus on product (as distinct from process) based regulations involving the impact of products in use and at the end of their life cycle, as well as the raw materials used in their manufacture. Topics such as WEEE, RoHS and REACH are obvious examples. Meanwhile, the climate change agenda has spawned a plethora of new initiatives from the Climate Change Levy, Climate Change Agreements and the Carbon Reduction Commitment to the EU ETS, carbon trading and the Kyoto Flexible Mechanisms of CDM and JI.