When You Need Environmental Expertise In Europe . . .

Friday, April 1, 2005 - 00:00

Editor: Please tell our readers about the origin of your law firm, Clarkslegal LLP?

Thorne: Clarks is a full service UK commercial law firm. It was established in 1913 in Reading, which is just west of London. Since then it has steadily grown into a major regional law firm, but also having a national reputation in certain areas, particularly for environmental and employment law. We have 19 partners, 44 lawyers and a total staff of 130. We recently opened an office in London and now have 15 of our lawyers in that office including environmental lawyers.Our firm's areas of specialty are corporate, commercial and technology, dispute resolution, employment, environmental projects, commercial property, and construction law.

Editor: I was struck by the fact that you provide training to corporate counsel in-house. Is that a sizeable part of your business?

Thorne: It is for our environmental practice. We focus a lot on workshops for corporate counsel on EU environmental regulation. A further unique point about our environmental practice is that we have looked to recruit lawyers who have previously worked as corporate counsel in the environmental sector. We also look to recruit lawyers with in-house regulatory experiencesuch as from the Environment Agency in the UK as well as from other parts of the public regulatory sector. Wehave an environmental team who are business orientated.We try to presenttechnical issues at our workshops in an informative and user friendly way with a business focus.

Editor: How many attorneys do you have in the environmental area?

Thorne: We have nine attorneys, making ours one of the largest environmental practices in the U.K. It is rare to have that number of lawyers dedicated to environmental work.

Editor: Whose concept was it to provide specialization in environmentallaw?

Thorne: I was responsible for the environmental focus. However, my route to leading an environmental law practice has not been conventional. I have a corporate law background as a result of six years of corporate practice in a London firm. During that time I acted for clients on mergers and acquisitions in the waste management sector. I was approached by one of the firm's clients, SITA, to work in-house as legal counsel. SITAis a large waste management company in the UK and with operations around the world.I worked for SITA for five very challenging years and subsequentlyjoined Clarks in 2001. From a rare corporate perspective I have developed an environmental practice within Clarks (Often, you will find that the environmental group in other firms is within the real estate practice.) Because of my experience and the experience of our team generally, our environmental practice is more corporately focused, allowing our team to talk to in-house counsel about environmental matters from a corporate perspective. It is the case that environmental regulation now has to be given much more attention by companies in the EU as ignorance and/or non compliance can be costly both in terms of finance and reputation. Our corporate clients have appreciated us getting to the point and being practical and finding solutions. One of our main practice areas is waste management. The changes in waste regulation throughout the EU over the last few years have been immense and more is on the way. Waste legislation now touches upon most commercial activity in the EU. Other practice areas includecontaminated land, emissions regulation, environmental permitting, insurance, chemicals, lender liability, land use planning and environmental due diligence.

Editor: Why should U.S. attorneys look to your counsel relating to such matters as UK and EU environmental regulations?

Thorne: Importantly, we have a large team solely dedicated to environmental law. Secondly, the members of the team are uniquely positioned to give environmentaladvice from a corporate perspective. Thirdly, we are part of a worldwide network of quality law firms called TAGLaw,the environmental law specialty group for which I co-chair. We have been able to coordinate the provision of environmental advice to U.S. counsel, utilizing and coordinating expertise within other TAGLaw firms in Europe. Although within Europe there is some harmonization on environmental law, there are still significant differences in implementation and enforcement policies across the EU.

Editor: Are there significant differences between the UK and EU with respect to environmental law?

Thorne: The EU has overarching legislative authority which all of the member states have to implement but there is always a variation in the way that each member state then implements the law. So it is not so much about being UK versus EU, but rather that EU legislation may be implemented in a different manner in each state.

Editor: Does EU law trump the individual country laws?

Harrison: Yes, although it is not as simple as that because the directives that come out of the EU governing bodies direct the member states to adopt domestic legislation, often leaving to the individual states how to actually implement those directives. In the UK it is often the Environment Agency that regulates environmental law whereas in France it is usually done on a regional basis. By way of example, there is an environmental liability directive that was adopted recently, and although it sets out the basics for how environmental liability should be apportioned in member states, it leaves it open to the member states to allow or not allow certain defenses and exemptions from liability under that directive. For example, in one state you will be able to have the defense that your actions were authorized by a provision of your pollution prevention and control permit. Another state may take a strict liability approach. Both states will be in conformity with the EU directives. Most of the legislation that comes out of Europe is not immediately placed on the statute book of the member states but has to be implemented by each state.

Editor: Do you find your firm is called on when acquisitions are being contemplated by U.S. companies?

Harrison: U.S. companies must understand what they are acquiring whenever they are acquiring a company's stock or assets. Often the environmental liabilities will dictate an asset purchase. If they are acquiring a company's stock, they need to understand the environmental record Ñ whether they have had prosecutions or enforcement proceedings against them or if they have potential liability. In terms of understanding the liabilities and risks, they need to understand the regulatory background, what the permits are, and what the potential environmental liabilities may be. One of the things that we have in UK law is a principle of caveat emptor, meaning that the purchaser is responsible for his purchase while in Germany there is a duty to disclose.In the UK the burden is on buyers to perform due diligence to satisfy themselves of what they are buying.

Thorne: We are finding greater demand for environmental due diligence. In the area of environmental risk, buyers should not rely on warranties from the vendor because the environmental liabilities can be tremendous. Insome cases environmental risks can be insured against. However, it is important to understand the exclusions within these policies and the potential ramifications. When looking at current legislation, it is equally important to advise U.S. counsel on "pipeline environmental" legislation - a fast moving field. It is crucial that buyers understand and appreciate what is around the corner.We can bring a wealth of experience to the due diligence process as well as leading environmental legal audits for U.S. clients with operations in Europe.

Editor: Do you see Sarbanes-Oxley bringing more U.S. companies to you for guidance on environmental matters abroad?

Thorne: Unless a company understands their existing and potential liabilities as well as compliance regimes in individual EU member states, they cannot quantify their liabilities for reporting purposes.Also, it is the case that environmental issues can have a significant impact for reputational risks. If these risks were known by potential investors, they may take a different view of the company. Although the EU has tried to harmonize legislation, the implementation of that legislation can be different at the local level, not only between states but also within a single state.

Harrison: When it comes to the Environment Agency, implementation of the legislation varies between offices as you will get a pragmatic solution from the inspectors on the ground. You have different solutions because they are each approaching the issue on the local level. If you know you have an issue on a site or an operation that requires permitting, you need to know what the local solution to that issue will be so you can calculate the costs. It's hard to do that from outside the jurisdiction which is why U.S. Counsel look to us.

Thorne:Another issue relates to public disclosure. In the U.K. under the Freedom of Information Act 2000 and the Environmental Information Regulations 2004 the public have access to environmental information pertaining to a company's activities which are held by a public body such as the Environment Agency. U.S. counsel need to know what environmental information the public can obtain.The opportunity for environmental information reaching into the public domain without being subject to a controlled disclosure process undertaken by the company can lead companies into risk management difficulties.On the other side, certain companies exercising functions of a public nature, such as utilities companies, can themselves be subject to a duty to disclose information and they need to understand their obligations in that respect.

Editor: Would you give our readers some anecdotal evidence on how you have helped companies in the U.S. - where your firm has made a difference?

Harrison: We acted on behalf of one U.S. car manufacturer, advising management on the general requirements to comply with integrated pollution prevention and control permitting, etc. that is needed for a manufacturing installation in the EU. One example is the "end of life vehicle" directive that came out of the EU which is in the process of being implemented. The car manufacturer's management came to us for advice on what they would need to do to ensure compliance with that directive. We took them through the origin of the directive, how we thought it would be implemented in the UK in terms of obligations on car manufacturers to ensure that the cars are recovered, recycled and disposed of appropriately. The directive provides an incentive for cars to be manufactured in a way that makes them readily recyclable. It stipulates that cars must be depolluted, specifying the manner in which oils and liquids are extracted before cars are crushed. In the longer term, implementation of that directive will require the set up of a collection scheme to ensure that manufacturers take responsibility for the end of life disposal or recycling of the cars they manufacturer. We are working with that manufacturer to understand what the implications are for them so they are ahead of the game.

There is also a voluntary arrangement in Europe whereby car manufacturers are going to start putting energy efficiency labels on their cars from September '05. It is legally required that retailers display the energy efficiency of ovens and refrigerators ranging from A to G. The car industry has entered into a voluntary agreement to do that from September of this year. Tracking that through, it is pretty inevitable that it will become statutory. So in terms of looking at pipeline legislation, this is another example of ways in which we can help our clients.

Editor: Why has globalization made services from a law firm like yours very necessary for legal practitioners around the world?

Harrison: It is impossible to expect in-house counsel to understand all of the local laws and regulations in every country. It is hard enough to keep track of all of the rules, regulations and case law happening in their home jurisdiction. It is therefore advisable to get direct advice from the professional advisors in the country within the jurisdiction affected.

There are two ways in which we help our clients. When you look at Sarbanes-Oxley, understanding the local environmental regimes and requirements is a protection against improper disclosure to U.S. authorities. The other way we can help is that by understanding what is in the pipeline, clients can look into the future and gain a competitive edge over their rivals. They can be proactive, and we can help them be proactive to gain that edge.

Thorne: It is also important that in-house legal departments in the area of environmental law require their advisors to have an international reach. You as in-house counsel are advising companies with global operations, and we can offer that reach through our TAGLaw network - a network of independent law firms worldwide. In the case of the end of life vehicle project, we coordinated a number of TAGLaw firms in Europe in helping to advise the client on the local legislation within the states where they do business. The global regulations are requiring businesses to take more moral responsibility for how they conduct themselves, which tends to convert into law within a short period of time. We are an important resource for in-house counsel.

Please e-mail the interviewees at sthorne@clarkslegal.com or aharrison@clarkslegal.com with questions about this interview.