Environmental Permitting Regulations: Agency could levy uncapped liability Variable Monetary Penalties

Until now the Environment Agency has principally had recourse to criminal action when enforcing the Environmental Permitting Regulations (EPR). It is anticipated that new guidance and policy will be released on 11 December 2023 enabling the Environment Agency to use Variable Monetary Penalties (VMPs), which are civil actions with potential for unlimited fines.

In this blog, we walk through what this means for the Permitting Regime and implications for commercial lawyers acting for affected clients. 

What is a VMP? 

They were established by the Regulatory Enforcement Sanction Act (2008) (RESA) to provide new tools to Regulators. Amongst a range of penalties the RESA introduced Fixed Monetary Penalties (FMPs) and VMPs. Fixed penalties provided for capped fines against the offender, in the order of £100, while variable penalties were intended for more significant offences where it is not in the public interest to proceed to a prosecution. 

Originally intended to be used across all regulations, VMPs were not applied to EPR offences in 2010. The new guidance and policy will change this.

Currently 80-90% of Environment Agency regulatory action is brought through the EPR. FMPs can be used in some cases, but largely they aren’t proportionate to the breach. Also, there is no provision for cost recovery making them a less attractive form of deterrent. So, currently the only recourse available is prosecution. The use of VMPs are intended to fill the apparent ‘justice gap’ that this creates. 

The RESA imposed a £250K penalty cap, which Liz Truss lifted at least partly in response to the rise in public awareness of the uncontrolled sewage releases by water utilities. The intention being to allow the penalty to be proportionate to the organisation and the breach.

Proportionality of the penalty

While the penalty cap has been raised to be unlimited, it is expected that any penalty would be proportional to the scale of the offender and the impact of the breach. 

Considerations in the size of the penalty will reflect the Court penalty calculation are anticipated to include:

• The severity of the offence (using incident categorisation methodology);
• The level of culpability of the person or business (was it accidental, negligent, reckless or deliberate)
• Public interest
• Linked to size of turnover
• A VMP can recover remedial costs.

Process

These are the expected stages within a VMP

• Notice of Intent
• Final Notice – outlining the penalty
• First Tier Tribunal – Appeal

A counter offer can be made by the offender to the VMP Notice, to mitigate the misdemeanour, is called Enforcement Undertaking Offer. This will be reviewed by the EA and accepted or rejected with will be reviewed by the EA and accepted or rejected

What does the EA expect to be the result

It’s expected that a far wider range of offences will be actioned through VMPs than currently through criminal action. They will also be applicable to the core EPR.

One of the most challenging areas is identifying which actions should be addressed through VMPs and which through prosecutions. The likely distinguishing factor is likely to be intent. A deliberate act is more likely to result in prosecution.

Summary

This new introduction increased the Environment Agency’s options to resolve a breach of a consent under one of their most used regulations, the Environmental Permitting Regulations. As this includes activities such as waste management, a focus of the Government’s 25 year Environment Policy, it would be reasonable to expect a rise in potential liability associated with these activities. 

This makes understanding the environmental permitting associated with  a property a central part of any environmental search. Our in depth commercial Review reports that help conveyancers to identify potential permit related risks associated with a property. 

For more information on our expert consultants approach, email us at info@groundsure.com or call on 01257 257755. 

References:

https://www.iema.net/watch-again/title-environmental-permitting-regulations-changes-to-variable-monetary-penalties-all-you-need-to-know