The right to appeal environmental compliance assessment reports: R (Suez Recycling and Recovery UK Ltd) v. Environment Agency

Background

Suez’s operations at the Byker Reclamation Plant (the Plant), are regulated by the EA by way of an environmental permit (the Permit), a condition of which obligates Suez to ensure that odour emissions from the Plant are controlled. CARs are utilised by EA officers to assess an entity’s compliance with such a permit, and in the event of non-compliance, adverse scores may be recorded. If these scores reach a certain threshold, this can then breach the permit condition(s).

In 2020, two separate CARs were issued by the EA in respect of the Plant, the first on 5 August (CAR 1), and the second on 12 August (CAR 2). These CARs culminated in a compliance score which breached Suez’s environmental permit, with financial consequences. Suez’s annual subsistence payment, a charge which is leveraged on permitted entities and linked to the level of regulatory interventions required of the EA in the relevant year, was increased by 50%.

In 2020, Suez commenced a claim for judicial review, challenging CAR 1 and CAR 2 on the basis of both their lawfulness and their merits. Permission was refused due to the EA’s stance that Suez was first obligated to exhaust the alternative remedy available to it, by way of the EA’s internal complaints’ procedure. This procedure concluded with both CAR 1 and CAR 2 being upheld, and Suez subsequently commenced the Claim.

Regulatory framework

Underpinning the EA’s regulation of permitted entities such as Suez is the Regulators’ Code, a statutory code of practice issued pursuant to s. 22 of the Legislative and Regulatory Reform Act 2006 (the 2006 Act). The Claim centred around the edition of the Regulator’s Code published in April 2014 (the 2014 Code), in particular, those provisions governing “regulatory decisions”. Regulatory bodies such as the EA have a statutory duty under the 2006 Act to have regard to the 2014 Code (or the relevant edition) but may depart from it where material evidence renders a specific provision either inapplicable or outweighed by another. In making such a departure, the regulatory body must record the decision and its reasons for reaching it.

The EA’s position

The EA stated that the correct interpretation of “regulatory decision” under s. 2.3 of the 2014 Code was “a decision, in the exercise of a regulatory function, which is adverse to a regulated person by imposing on them a mandatory obligation.” Since the CARs issued to Suez in 2020 had not imposed a mandatory obligation, the routes to appeal available to Suez were restricted and excluded any appeal against CAR 1 and CAR 2 as regulatory decisions.

Issues

In the judgment, Fordham J considered six issues, the first of which was whether the EA had complied with its duty under the 2006 Act in relation to the 2014 Code in considering the provision of a right of appeal against an adverse score on a CAR (Agreed Issue 1). Alongside the statutory framework of the 2006 Act and 2014 Code, the EA had also had regard to the (unpublished) November 2019 Appeal Instruction (the 2019 Instruction), which included a consideration of “what is a regulatory decision”, and the publicly available January 2020 Waste Policy (the 2020 Policy), which included a section entitled “appeal a regulatory decision”. 

Issue (1) was sufficient for the success of the Claim, but remaining issues concerning the common law procedural fairness of the EA’s decisions, the lawfulness of the assessments which had informed the CARs, and the reasonableness of the EA’s internal review decision were also considered.

Judgment

The Claim was allowed on Issue (1), with the remaining five agreed issues rejected by Fordham J. The officers’ decision-making in relation to CAR 1 and CAR 2 was recognised as having been in accordance with pandemic-specific guidance, and therefore the enquiries conducted at the site sufficient. The final decision made on the EA’s internal review of Suez’s complaint was held not to be either vitiated by unreasonableness or procedurally unfair.

In respect of Issue (1), it was held that in restricting the definition of “regulatory decision” under the 2014 code solely to decisions imposing mandatory obligations, the EA had made a material error of law. The Court found that the EA had made a “material misdirection” as to the objective meaning of regulatory decisions under the 2014 Code. Fordham J concluded that the legally correct meaning was a more straightforward concept than that posited by the EA: “a regulatory decision being a decision, in the exercise of a regulatory function, which is adverse to a regulated person”. On this interpretation, CAR 1 and CAR 2 constituted regulatory decisions and were thus grounds for an appeal. The EA’s decision not to acknowledge Suez’s right to or allow such an appeal was therefore a departure from the 2014 Code, and under the 2006 Act, needed to be considered and documented accordingly. The EA had not done so.

Implications

The decision of Fordham J in the Claim does not provide regulated entities with a carte blanche to obligate regulatory bodies to allow appeals of all regulatory decisions: a regulator remains entitled not to allow a merits-based appeal against a regulatory decision under s. 2.3 of the 2014 Code. However, in order to uphold its statutory duty a regulated entity must actively recognise that it is departing from the 2014 Code and keep a record of the appropriate, material reasons for such a departure.

With thanks to Rebecca Bell (trainee solicitor) for her contributions.