Keith Davidson Specialist environmental law firm contaminated land issues Environmental liability transfer projects Chemical companies Developers Environmental support for law firms ID: 597685
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Slide1
Liability bounce-back for contaminated sites
Keith DavidsonSlide2
Specialist environmental law firm
- contaminated land issues
Environmental liability transfer projects
Chemical companies
DevelopersEnvironmental support for law firms Addleshaws, DWF, Gateleys, Mills & Reeve, Pinsents Gunnercooke, Pannone, Land Law, JMW, Ward HadawayLegal Week Green Innovation Award 2015 Business Green Leaders Awards Law Firm of the Year 2015
Environmental liability managementSlide3
Environmental liability regimes
Liability bounce-back for contaminated sites
Traditional brownfield approach
Environmental liability transfer projects
Technical Legal Contractual InsuranceGetting the best environmental deal
Slide4
Regulator not knocking on the door
Death of the contaminated land regime?
Water pollution legislation
Environmental damage regulations
Permit or lease obligations
Third party claims
Planning or transaction
triggerSlide5
Environmental liabilities for contaminated land
Regulatory actionThird party claims
Other liabilities
Planning obligationsPrivate nuisance claimsClean up costs Environmental permit obligationsClass action claimsLoss of property valueWater pollution legislationIndustrial disease claims
Impact on transactionEnvironmental damage regime
Professional indemnity claimsAccounting provisions
Part 2A contaminated land regimeLease claims
Negative publicitySlide6
Chemical Co
DeveloperNew ownerTenantCauserKnowing permitter
Planning obligations in some deals
Permit clean upSale contract IndemnityCauserKnowing permitterPlanning obligationsPermit transfer obligationsSale contract IndemnityCauser Knowing permitterEasy target Class B ownerPlanning obligationsPermit transfer obligationsLease obligationsSale contract indemnityCauser
Knowing permitterClass B occupier
Class B owner >21 yearsPermit transfer obligationsLease obligations
Who can be targeted for clean up?Slide7
Everyone retains environmental liabilitySlide8
8
…and then the lawyers get involved Slide9
Easy to become a knowing
permitterSlide10
What knowledge do you have?
Lambson
Fine Chemicals Ltd v
Merlion
Capital Housing Ltd 2008
Former Laporte
chemical site with Blue Billy contaminationLambson sold to
Merlion, leased back to demolish - £500,000 retention Director said no knowledge of contamination other than in the URS reports Fraudulent misrepresentation? Court held its BUYER BEWARE. Merlion should have reviewed the previous reports and factored this into the price Slide11
Large chemicals/ industrial companies
Seller retains legal liability after the sale if a Class A causer or
Class A knowing
permitter (via actions of the historic companies you bought)You could be targeted for clean up costs 30 +years after the sale With knowing permitter its Seller beware Slide12
Liability bounce back – polluter most at risk Slide13
The traditional approach – clean break?
Phase 2, remedial strategy plan, verification report
Regulator approval, “no further comments”
Discharge planning conditionsReliance letter or collateral warranties Slide14
What can go wrong?
Significant residual contamination 2. Offsite migration has already occurred
3. Remediation, construction mobilises it
Flooding mobilises it Changes in law or stricter requirementsBuyer quickly sells or leasesIndemnity is worthless
The liability threat remains and often INCREASESRegulatory action
Third party claimsContractual claimsSlide15
What defence have you got ?
£1m PI is for OUR protection
We haven’t been negligent
Your consultants Your lawyers Your bossWe agreed the indemnity on YOUR instructionsYou told us we didn’t needthe guarantorI’ve to explain this at the
Board meetingWhy do we still have [X] million liability Slide16
Environmental liability site?Slide17
1955 to 1980
Steetley
Chemical Works
1983 Site bought by Crest Nicholson to build 66 homes
1992 Redland buy
Steetley
(the polluter)
2000 Groundwater contamination identified
2005 Crest and Redland named as “appropriate persons”
2010 Crest and Redland share cost of clean up
2015 Part 2A and civil action - £16million +
S
t Leonards Court,
SandridgeSlide18Slide19
The ideal ELT package - layers of protectionSlide20
Environmental liability transfer projectsSlide21
When is environmental insurance needed?
Stalemate in transactions
2. Buyer or funder concerns
Seller wants a clean break Concerns over indemnitiesSite being redevelopedSlide22
Beware the pitfalls in ELT projects
Both
seller
and buyer must become
Class
A - quickly sell or lease?
Inter-group
transfers wont workPayments for remediation requires specific reduction for particular remediationSold with information? Is the SPV a large commercial organisation? Does the env report identify the significant pollutant linkage? Seller retains interestCovenant strength of buyer and guarantor Scope of indemnity cover and limitationsDoes the PLL/ CPL insurance policy wording cover the gaps?Slide23
Landlord and tenant negotiations
Yield up provision
Baseline
/ end of termIndustrial user covenantsAggravated contaminationAgreement on liabilities Slide24
Environmental liability transfer – core ingredients Slide25
Keith Davidson 07827353652
keith.davidson@elmlaw.co.ukwww.elmlaw.co.uk@Elm_Law
Any questions?