Environmental Law News

Posted on: 12 March 2021

Environmental Law News Update

In this latest Environmental Law News Update, Charles Morgan and Christopher Badger consider the Supreme Court decision on parent company liability in Okpabi v Royal Dutch Shell plc, another case concerning the scope of the Environment Agency’s liabilities in common law negligence and environmental announcements in the 2021 Budget.

Wood spotted despite interference from trees

Zealous attention to detail can sometimes lead to obfuscation of the real point. One manifestation of this is the deployment at interlocutory hearings of vast quantities of paperwork, to ensure that there is no aspect of the case upon which the court is less than fully informed. This approach seems to have beset the case of Okpabi v Royal Dutch Shell plc [2021] UKSC 3 and provoked adverse comment from the judiciary. We noted the Court of Appeal decision almost exactly three years ago, observing the somewhat perplexing combination of criticism by that court of the amount of material deployed coupled with the deepest of dives into its content as part of the decision-making process. We also noted the uncomfortable notion of a majority decision that no arguable case was demonstrated, when a third member of the very same court thought that there was.

In the Supreme Court, Lord Hamblen delivered the single judgment with which the other Justices agreed. Whilst itself involving a review of the evidence deployed, this was firmly directed at demonstrating the futility of such an exercise in the context of an application where the test was simply the arguability of the claim, which was to be determined principally by reference to the pleadings rather than a review of the inevitably incomplete available evidence.

So much of the judgment is devoted to this hatchet job that the substantive decision is almost buried. It appears at paragraphs [153] – [159] and in effect concludes that Sales LJ, the minority judge in the Court of Appeal, got it right after all and the claimants’ pleadings did indeed disclose an arguable case in negligence against Royal Dutch Shell as the parent company of a Nigerian subsidiary whose activities are alleged to have caused gross pollution of the Niger Delta.

Another contributor to the length and depth of hearings is a similarly deep dive into case law, founded on the belief that demonstration of a knowledge of the most obscure and unreported first instance applications of the relevant principles is more likely to impress the court and win the day than confining oneself to the application to the facts of the principles of the latest definitive Supreme Court judgment. In the present context, that definitive case should in future be not Okpabi but Lungowe v Vedanta Resources plc [2020] AC 1045. Indeed Lord Hamblen at [2] observed that “It might reasonably have been expected that the guidance provided by that decision would resolve this appeal without the need for a hearing”. At [25] he summarised that guidance as being that there is no distinct category of liability in negligence founded upon the relationship between parents and subsidiaries, and that whether a duty of care arises:

“… depends on the extent to which, and the way in which, the parent availed itself of the opportunity to take over, intervene in, control, supervise or advise the management of the relevant operations (including land use) of the subsidiary.”

per Lord Briggs in Vedanta at [49].

So the touchstone is “management”. The chances of this being the last word on the subject are, however, similar to those of the survival of a snowball in Hell – as witness the fact of the decision in Okpabi itself. A real, distinct, future development may be the manner in which this guidance should be applied in the context not of parent/subsidiary but of sole owner + director/limited company. Both these structures rely on the integrity of the concept of separate legal personality in an inherently similar way. The similarities and differences between them in the operation of the law of negligence seem rather unclear.

Flood of trouble for the Environment Agency

Culverts are the bane of the lives of both those that have to maintain them and all those who suffer from their lack of maintenance. They have their own special jurisprudence, to which Anchor Hanover Group v Arcadis Consulting (UK) Ltd and others [2021] EWHC 543 (TCC) is the latest addition. To stop them blocking, they have to have screens at their entrances. Those screens then risk becoming a major cause of blockage in themselves. Thus the counter-intuitive but sound guidance from the Environment Agency (the Fourth Defendant in the proceedings) that “The goal of a trash screen should not be to trap as much debris as possible. In fact the screen should trap as little as possible whilst still acting to prevent blockage of the culvert.”

The essential course of the litigation is probably already becoming apparent. A development required the deviation of a watercourse, in part through a culvert. The planning permission required prior approval by the local planning authority of the culvert design. The approval of the Environment Agency was also required under S109 of the Water Resources Act 1991. The Environment Agency, after some discussion and with some reservations, approved the use of a 75 mm screen and advised the local planning authority accordingly, who also gave their approval. The screen in fact trapped too much debris and was “blinded” and property was flooded. Those injured sued the design consultants involved, the local highway authority (also the owner of the screen) and the Environment Agency. The Agency sought summary judgment on the basis that it did not even arguably owe the alleged duty of care in the course of performing its statutory functions and exercising statutory powers, likening itself to a planning authority in that respect.

The claimants argued that the Environment Agency had, at least arguably, gone beyond the mere exercise of statutory powers or discharge of statutory duties and had assumed responsibility for the design of the culvert – assertions which could not be summarily dismissed and should be investigated at a trial.

O’Farrell J. held that no duty of care could arise merely from the consideration and determination of an application for approval. However it was indeed arguable that the Agency had on the pleaded facts become involved in the actual design of the culvert in a manner capable of giving rise to a duty of care. In addition, the Environment Agency had taken it upon itself to clear the culvert on one occasion. The possibility could not be (entirely) excluded of that amounting to an assumption of responsibility. The case should therefore proceed to trial.

As if the Environment Agency did not have enough on its plate already, what with want of resources, complaints of dereliction of its enforcement duties in several sectors and the imminent approach of its super-regulator (?nemesis?) the Office for Environmental Protection. It is now regularly facing attempts to establish private civil liability for its shortcomings (see e.g. Pigot v Environment Agency [2021] EWCA Civ 213, King v Environment Agency [2018] Env LR 19, Hall v Environment Agency [2018] 1 WLR 1433, R (Mott) v Environment Agency [2018] 1 WLR 1022). Not all are successful, but not all have failed. It will be interesting to see the ultimate fate of this one.

Budget 2021

Chancellor Rishi Sunak delivered his Budget statement last week. Key environmental announcements included:

i) The remit for the Monetary Policy Committee was updated to reflect the Government’s current economic objectives, which include:

“maintaining a resilient, effectively regulated and competitive financial system that supports the real economy through the provision of productive finance and critical financial services, while protecting consumers, safeguarding taxpayer interests and supporting the transition to a net zero economy.”

The words in italics reflect the amended wording from March 2020.

ii) Both the Aggregates Levy and Carbon Price Support were frozen. Additional proposals for expanding the UK Emissions Trading Scheme will be set out over the course of 2021.

iii) The Government is to offer its first ever sovereign green bond this summer, with a further issuance later in 2021. Additionally there will be a green retail savings product through National Savings & Investment (“NS&I”) in the summer of 2021. A new Carbon Markets Working Group is to be set up under the leadership of Dame Clara Furse, former Chief Executive of the London Stock Exchange, with the intention of establishing London.

iv) Green energy innovation schemes, from the £1 billion Net Zero Innovation Portfolio, which include the launch of a £20 million programme to support the development of offshore wind, a £68 million competition to implement energy storage prototypes or technology demonstrators and a £4 million competition for  biomass feedstocks programme. Support is being offered to offshore wind schemes in Teesside and Humberside.

v) £4.8 million will be provided to support a hydrogen hub at Holyhead. £27 million will be provided to the Aberdeen Energy Transition Zone; and

vi) A UK Infrastructure Bank, with £12 billion of equity and debt capital to finance local authority and private sector infrastructure projects across the UK.

Given that it can reasonably be anticipated that the UK needs to invest heavily in infrastructure projects in order to boost its economy post Covid, greater investment in hydrogen must be a priority for a number of organisations. Hydrogen has been identified as a key part of the green economy for years. At the start of this year, the energy networks published their ‘Hydrogen Network Plan’ (see here) which includes being ready by 2023 to blend 20% hydrogen into the gas network and delivering a network of refuelling facilities for zero emission heavy goods vehicles. The sums so far in the Budget are relatively small but watch this space.

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