Contaminated land and liability policy stuck in the mire

Twelve months after it abandoned plans to set up registers of contaminative land uses, the Government has issued a consultation paper setting out its revised thinking on contaminated land and liability policy.1 While tinkering at the edges of current law, the paper shows little sign that the Government has found ways of tackling the difficulties of remediating contaminated land within the present legal framework, or of raising funds for clean-up work.

For a body that has been in existence for 12 months, the inter-departmental group of officials set up to review contaminated land policy has come up with precious few firm ideas. No doubt the riposte would be that the Government should not be criticised for showing a willingness to listen by issuing a consultation paper, but it must surely by now be familiar with everybody's views after consulting twice on the aborted registers, and after taking further evidence during its review.

Labour's policy
In a little noticed pre-emptive strike on 4 March, the Labour Party set out its policy on contaminated land and liability for the first time. And while a six-paragraph statement may not have answered all the questions in this particularly complex area of law and policy, at least it seeks to be decisive where the Government is getting nowhere fast.

Business will be pleased to hear that Labour is of the view that "industry argues, rightly, that it would be unjust to impose costs retrospectively for activities which were thought to be environmentally benign when they were carried out. Labour would therefore introduce a strict liability regime, with a defence where damage could not have been foreseen. Liability would be confined to direct polluters and parent companies, not to investors or current occupiers of land." The precise nature of the foreseeability test which Labour has in mind, and the extent to which parent companies would be chased, are obviously among the unanswered questions here.

The sting in the tail for business comes in relation to past pollution where a responsible party cannot be traced. To ensure that the costs of remediation in such cases would not fall on the public purse, Labour would create a "Clean Up Fund", to be administered by the Environment Agency, "out of money raised by pollution charges on current polluters."

Finally, the Agency would draw up a national register of contaminated sites, identify those in urgent need of clean-up, and ensure that this was carried out to agreed standards. The issue of property blight - which sank the Government's registers - was not addressed.

Labour's policy lacks clarity in some key areas. But it has at least outlined how priorities for a national clean-up programme would be set, and how remediation of sites for which a responsible or sufficiently wealthy party could not be found would be paid for. The Government's paper is silent on the former issue, while on the latter officials are expressing concern that existing sources of public money - the Derelict Land Grant scheme and others which were not designed to deal with contaminated land in any event - are under pressure, but can only point hopefully to the landfill levy (ENDS Report 229, pp 29-30 ) as a possible alternative source of cash.

The paper has another serious shortcoming. At no point does it examine the practical problems which regulatory bodies routinely encounter in seeking to apply their current legal powers - indeed, officials concede that the review committee did not ask them for their views on this point.

NRA's Catch 22
A forthcoming report from the National Rivers Authority (NRA) will set out the problem starkly (see box ). The NRA has powers to clean up a site which is causing or threatening to cause water pollution, and to recover its costs from the responsible party. But the Department of the Environment has denied it the funds needed to initiate clean-up measures, and so no remediation work can be done and the law cannot be tested in court. That is not to say that the NRA has failed to strong-arm some landowners to undertake "voluntary" clean-up projects; but it does mean that many more are not getting done.

The paper commits another circularity. After claiming, without much evidence, that £500 million per year is being spent in England and Wales on dealing with contamination, it says that "there is no evidence that expenditure at broadly that level would not, if well targeted, be of the right order to address the problem." The problem is that nobody knows how big "the problem" is - although the NRA's report certainly suggests that large numbers of polluting sites are not being tackled.

Most of the key issues raised by the paper surfaced in the Government's recent response to the European Commission's Green Paper on paying for environmental damage (ENDS Report 225, pp 19-22 ). Among the main points are:

  • Objectives: The Government's policy has long been based on the "suitable for use" approach, in which contamination is dealt with as sites come up for redevelopment and the clean-up standard is varied according to the intended end-use, but with remediation being required - at least in principle - where a site is causing health or environmental hazards. This will continue. Regulators' powers: Various regulatory bodies have powers to require the clean-up of contaminated sites or to carry out the work themselves and seek to recover their costs. These powers vary in detail, and the paper floats the idea that they might be harmonised in order to reduce uncertainty.

    However, one searches in vain for an indication of what the basis of harmonisation might be. On the one hand, the paper says, the various statutes vary to an extent that "may" not be justified; but on the other, uniformity may not be desirable because they have evolved to fit particular circumstances.

  • Statutory and common law: A central question in the liability debate has been whether liability principles should evolve with the application of the common law or be defined by statute. Resolution of this issue has now become a game of pass the parcel between the Government and the courts.

    In 1990, the House of Commons Environment Committee urged the Government to consider the creation of a statutory liability framework. The Government declined, suggesting that current principles be tested first in the courts. This has now been done in the case of Cambridge Water Company v Eastern Counties Leather, with the House of Lords ruling in December that the latter should not be held liable for polluting the water company's borehole because the damage was not reasonably foreseeable at the time (ENDS Report 227, pp 43-44 ).

    The consultation paper takes the position that "a cautious approach should be adopted towards any statutory changes to common law" - while pointing out that the implications of the Cambridge Water case are still being considered. Given what has gone before, and the importance of that case, this is hardly a satisfactory position from which to consult.

    The paper is rather firmer in responding to suggestions from business for specific statutory defences against liability. "A strong case would be needed", it says, "for the introduction of any defence that would weaken the ability of regulators to secure remediation, or which would pass costs to the taxpayer."

    The Government does concede that there "may be a case" for defences relating to past contamination - the "most deserving" being the "no-one could reasonably have foreseen" and "what a court would have thought at the time" approaches. However, it again hedges its bets by observing that both would "present problems in trying to reconstruct what level of ignorance of hazards on the part of operators would have been justified at the time or what view a previous court might have taken."

  • Who pays? The general principle espoused by the Government is that liability for contaminated land should rest initially with the polluter - but where he has transferred his regulatory obligations to others, then they should be liable. In practice this will often mean the current owner.

    The paper adds that, where such a transfer has occurred, "regulators should not be delayed or defeated by the need to disentangle a complex web of corporate or contractual relationships. Nor should they be inhibited from taking urgent action simply because of the need to investigate the history of a particular contamination episode or the relevant legal relations or by first ensuring that they will be able to recover their costs." This is an important statement - but it is precisely these kinds of difficulties which have deterred the NRA from acting at several polluting sites, and it is quite unclear whether the Government intends to act to remove these barriers.

    Funds could also be raised from other parties, the paper suggests. Regulators "should - in so far as appropriate - be able to pursue lenders, financial institutions, etc, for recovery of costs in cleaning up contamination." On the other hand, "it would be inequitable and damage markets if regulators were able to pursue the financial sector to an extent disproportionate to their responsibility". But then again, "any limitations on liability should be practical, and not open to abuse; and they would have to be weighed against the effect on public finances." The key terms in this section - "appropriate", "disproportionate" and "practical" - are left undefined, leaving its implications as clear as mud.

    The paper goes on to acknowledge that there will still be a problem with "orphan sites" - those where the polluter cannot be traced, and no other liable party has the resources to pay for clean-up. For these sites it "may" be necessary for the public sector to take responsibility - bringing us back to square one.

    The paper does make one important proposal - that there "may be a case" for extending a provision in the Environmental Protection Act 1990 enabling waste regulation authorities to consider "hardship" when deciding how far to pursue recovery of clean-up costs. This appears to be directed at householders who have unwittingly bought contaminated property.

  • Information: The governing principle in land transactions is "caveat emptor" - buyer beware. The Government has been reluctant to alter this, and remains so for major commercial transactions. But it has conceded for the first time that it imposes a serious burden on small businesses and households.

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