Why is Suez v Environment Agency of interest?

A compliance assessment report (CAR) records the EA’s findings of site inspections, audits and monitoring activities. CARs publicly record findings of compliance or non-compliance. They include scores which determine the level of annual subsistence fees waste firms must pay the EA and can prompt enforcement action. Currently the EA makes the final decision as to whether a compliance assessment report is accurate and waste operators have no right of appeal.

Section 2.3 of the Regulators Code 2014 (the Code) states that regulators should provide an impartial and clearly explained route to appeal against regulatory decisions. Suez brought judicial review proceedings [1] in respect of two disputed CARs on the basis that the lack of an appeal process in respect of CAR decisions was a breach of the EA’s duty under section 2.3. The EA argued that the section 2.3 duty didn’t come into play, saying a CAR score is “simply a feature of the agency’s monitoring practices”, not a regulatory function.

The case has been followed by the industry as a whole, with waste operators and trade body Environmental Services Association supporting Suez’s position. The outcome is relevant, not only for waste operators, but also for other permit holders under the Environmental Permitting Regulations.

Suez v EA: What did the High Court decide?

On 28 November 2023, the High Court found for Suez, deciding that the EA had made a material error of law in not viewing the CAR score as a regulatory decision.

The Court gave guidance on the various elements of a “regulatory decision”, explaining:

• There must be a decision, as opposed to an action, advice, guidance, or a communication that a regulator is proposing to take a decision.
• The decision must be taken in the exercise of a regulatory function.
• The decision must be adverse to the permit holder.

The judgment confirms that, whilst the Code does not require regulators to provide a merits appeal route in every instance of a regulatory decision, where a regulator chooses to depart from the Code, it must make a conscious decision to do so, and must record that decision, with reasons.

What are the implications?

The EA now needs to reconsider SUEZ’s challenge to the particular CARs which were the subject of the proceedings, in light of the court’s ruling. Other waste operators and other environmental permit holders may now also demand a review of disputed CARs.

It remains to be seen how the EA will proceed. It could adopt a new appeal procedure entailing a full merits re-evaluation of the findings and conclusions of CARs. Alternatively, it could retain the current complaints system, but would be required to record, and justify with reasons, any departures from the Code.

In terms of practical advice, regulators across the waste sector and beyond should critically assess whether their processes associated with “regulatory decisions” would stand up to scrutiny in view of this judgment. Those subject to regulation should consider whether complaints/appeal processes related to decisions imposed on them are transparent and lawful.

Compliance assessment reports and environmental compliance: How we can assist

Walker Morris is a leading adviser to the waste, energy and infrastructure industry. Working in close collaboration with our Infrastructure & Energy colleagues, our Regulatory & Compliance team and Environment specialists are experienced in all aspects of the environmental permitting regime.

As well as assisting clients with regulatory/site investigations, analysing and disputing CARs, and complying with or challenging other regulatory processes and procedures, we can work with businesses at every stage of a project to create, implement and deliver an effective strategy to avoid and remediate any environmental and/or other regulatory breaches.

With former regulators on the team, we pride ourselves on providing upfront, strategic advice and transactional assistance, to minimise the risk of environmental issues impacting development projects.

Where allegations of environmental breaches do arise, we can support clients with sensitive and effective crisis management advice, as well as negotiating with regulators to avoid or minimise penalties, convictions and commercial/reputational consequences.

Please contact Rachel for tailored advice, assistance or training on any matter associated with any compliance assessment report, environmental permits or regulatory and environmental issues generally.

[1] R (Suez Recycling and Recovery UK Ltd) v Environment Agency [2023] EWHC 3012 (Admin)