Member Article

The Environment Agency has been found in breach of the Regulators’ Code by failing to provide a proper appeal mechanism for challenging Compliance Assessment Reports. It must now decide how to provide permit holders with a new appeal mechanism.

What are Compliance Assessment Reports?

The Environment Agency (EA) uses Compliance Assessment Reports (CARs) to assess compliance with environmental permits by recording the findings of site inspections, audits and monitoring activities, and reviews of monitoring and other data/reports. It is required to publish CARs in its public register.

A CAR records any non-compliance identified during an assessment and assigns a compliance score. At the end of the compliance year, the total compliance score affects the site’s compliance band and the subsistence fee that the permit holder will have to pay for its permit the following year. An adverse CAR can also identify action that the permit holder must take to bring their site back into compliance, affect commercial reputation, trigger breach of a contract, and form part of a ‘history of non-compliance’ for the EA to consider in deciding whether to take enforcement action.

The recipient of a CAR has 28 days to comment on or challenge its contents. That is done by way of a complaint to the EA. This involves an ‘independent internal review’ of the CAR by a different team within the EA, but not a full merits re-evaluation of the CAR.

Judicial review of Environment Agency’s complaints procedure

In September 2021, waste company SUEZ applied for judicial review of the EA’s decisions to issue two adverse CARs, to reject SUEZ’s complaint challenging the CARs, and to refuse to provide a full merits re-evaluation of the CARs. The CARs recorded breaches of the odour conditions in the environmental permit for SUEZ’s Byker reclamation plant.

The breaches attracted a compliance score that resulted in a 50% increase in the subsistence fee that SUEZ would have to pay for its environmental permit in 2021.

SUEZ claimed that the EA had breached its duties in the Regulators’ Code (Code), as issued in 2014 under the Legislative and Regulatory Reform Act 2006, by failing to provide ‘an impartial and clearly explained route to appeal against a regulatory decision or a failure to act in accordance with this Code’. SUEZ also argued that:

• the EA was required to provide a right of appeal against CAR decisions containing adverse compliance scores as a matter of common law procedural fairness;
• the EA’s complaints procedure was procedurally unfair;
• the EA’s assessments that informed the CARs were unlawful;
• the CARs failed to follow the EA’s guidance on the environmental impact and severity of the alleged permit breaches; and
• the EA’s decision to reject SUEZ’s complaint and to uphold the CARs was unreasonable.

Full merits re-evaluation required

The Administrative Court issued its judgment on 28 November 2023. Although it rejected most of SUEZ’s claims, it agreed that the EA had breached the Code by failing to provide a proper route of appeal for challenging CARs by way of a full merits re-evaluation of them. The ‘supervisory review’ provided by the EA’s complaints procedure was inadequate.

The EA tried to argue that a CAR was not a ‘regulatory decision’ against which the Code required a right of appeal to be provided. It based this view on its own interpretation of a ‘regulatory decision’, which it considered was a decision that imposed a ‘mandatory obligation’ on a regulated person. The court disagreed. A CAR could identify non-compliance, identify action as being required, affect the actions of third parties, affect commercial reputation, trigger breach of a contract, form part of a ‘history of non-compliance’ which the EA could consider in deciding whether to take enforcement action, and trigger an increase in the annual subsistence fee for a permit. It was clearly a ‘regulatory decision’.

The Legislative and Regulatory Reform Act 2006 required the EA to ‘have regard to’ the Code. The EA was therefore not under an absolute obligation to follow the Code, but if it wished to depart from the Code, it was required to provide a written reasoned justification for doing so. It had not done so.

Although the court refused to quash the CARs’ factual conclusions, it did quash the EA’s decision to reject SUEZ’s complaint and uphold the CARs.

What next?

The EA now needs to reconsider SUEZ’s challenge to the CARs, but in the light of the court’s ruling on the lawfulness of the EA’s complaints procedure as a mechanism for challenging CARs, it also needs to reconsider the procedure it should use. It seems that it has two options for that. First, it could adopt a new appeal procedure entailing a full merits re-evaluation of the findings and conclusions of CARs. Second, it could decide to retain the current complaints system if it can identify and articulate reasons for departing from the Code. The second option would obviously not be viewed positively by permit holders, but the first option would likely be more time-consuming.

Given that the court rejected SUEZ’s argument that the Code requires an appeal to a decision-maker independent of the EA, it seems unlikely that we will see appeals against CARs going to independent tribunals or adjudicators for determination.

Although the facts of this case involved CARs relating to a waste facility, the court’s decision is relevant to CARs for all permitted sites. It is therefore worth reconsidering your options if you have received an adverse CAR that you disagree with and wish to challenge.

R (on the application of Suez Recycling and Recovery UK Ltd) v Environment Agency [2023] EWHC 3012 (Admin)

 

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