Howard Price, Principal Policy Officer, Chartered Institute of Environmental Health (representing local authority officers responsible for the regulation of contaminated land):
On 31 May 2012, Part 2 of the Localism Act 2011 (the Act) dealing with EU financial sanctions came into force. The provisions give the Secretary of State a discretionary power to require local authorities to contribute to any EU financial sanction imposed under Article 260(2) of the Treaty of the Functioning of the European Union when the acts of the authority have caused or contributed to the infraction of EU law for which the financial sanction is made. They have been described by some politicians as “unfair, unworkable, dangerous and unconstitutional”.
In this post, Howard Price of the Chartered Institute of Environmental Health looks at how the new law, which the government has said provides an incentive for local authorities to help avoid financial sanctions in the first place, will be applied to local authorities. For a more detailed overview of this area, see Article, Blame someone else: central government can now pass on EU fines to local authorities.
So how does the new law apply to local authorities and how will the power be exercised?
The ministers’ discretionary powers to require local authorities to pay all, or some of, any sanction imposed on the UK are set out in sections 48 to 57 of the Act. Section 49 includes a duty on the Secretary of State to consult upon, and issue, a policy statement to which a minister and any independent advisory panel must have regard when exercising their functions under Part 2 of the Act. For more information, see Legal update, DCLG publishes policy statement and its response to the consultation on the proposed policy statement. According to the policy statement issued on 13 July 2012, it is intended that the discretionary power will be exercised where a local authority has “demonstrably caused or contributed to” the imposition of a financial sanction. Note that while the policy statement states that “the use of Part 2 provisions would be fair, reasonable and proportionate” and an independent advisory panel will make recommendations on their use in each case to the minister. It does not repeat Defra’s assurance to the Commons Environmental Audit Committee that Part 2 of the Act will only be used in “exceptional circumstances”.
The policy statement also makes clear that when the European Commission issues a letter of formal notice of an infraction, ministers will liaise with any local authority which is directly involved and seek to head off any proceedings before these are commenced. Once proceedings have commenced and the authority has been consulted, ministers wishing to exercise the new power must formally designate the particular authority (or authorities) they consider responsible by way of a designation order under section 52, which contains details of the alleged acts or omissions that have contributed to the infraction. Once the European Court has imposed a financial sanction on the UK and an authority has been specified as liable in a designation order, the minister has to establish an independent advisory panel. The panel’s role is to confirm the responsible parties, decide on their relative responsibilities for the infraction, decide how much each was at fault and decide what each should pay before serving a final notice confirming the sanction.
Can financial sanctions be imposed on authorities retrospectively and how large might those sanctions be?
It is unclear, despite undertakings given by the Planning Minister during the Bill’s debate in Parliament that no authority would be liable for any sanction before these penalty provisions were enacted, whether authorities may be retrospectively liable for an infraction. According to the policy statement, EU financial sanctions can only be recouped if they were imposed on or after 31 May 2012. This appears to allow a minister to recoup a sanction imposed after that date in respect of facts that existed before then and which are subsequently ruled an infraction although this is confused by:
- Page 4 of the policy statement which states that only actions, or inactions, by authorities which occur following designation would be taken into account when passing on a financial sanction.
- Further guidance on the role of the advisory panels, which states that panels when submitting a report to a minister will specifically take into account “any periodic penalties already accrued”.
However, the policy statement makes clear that financial sanctions could be significant. The minimum lump sum is €8.992 million but there has been speculative discussion about possible infraction proceedings for air pollution of £300 million with daily penalties being incurred on top of this amount.
Resources of local authorities
The government argues that it is right for accountability to be transferred to local authorities given that the Act transfers responsibility from central to local government. However, the funds to meet the additional responsibilities are not being devolved to local authorities (and in fact are being withdrawn). It seems unfair to delegate fines without also delegating the funds, resources and powers to take steps to avoid them. Therefore, the government may need to consider what steps it can taken to grant local authorities greater legal powers and funding to ensure compliance with EU requirements. One token step, acknowledged in the policy statement, is that as local authorities may be held culpable for a failure to comply with EU law they should be involved in the making of the law in the first place. Paragraph 31 of the policy statement contains the government’s commitment to involve local authorities in EU negotiations before new measures are agreed and ahead of transposition of those new measures into domestic law.
Fairness in ministers’ decisions
The policy statement states that the key principles to be applied by ministers will be:
- Working in partnership to avoid any EU sanctions in the first instance.
- Transparency and no surprises so that authorities are given the time and opportunity to put things right before being asked to pay.
- A fair, reasonable and proportionate response. Authorities will not be held responsible for breaches of EU law that were not within their power to avoid and will only be fined if they have demonstrably caused or contributed to the infraction in respect of which the sanction was imposed.
- The ability of the authority to pay with authorities having the opportunity to make further representations once the fair and reasonable apportionment of responsibility for the financial sanction has been decided.
Note, however that there is no prerequisite of fairness in the making and implementing of original policy so that, for example, in the case of infraction proceedings for air pollution, it seems unfair to impose financial sanctions on local authorities when they have no legal duty and too few effective powers to deal with exceeded limits. (An authority’s only legal duty is to produce an action plan in pursuit of central government objectives.)
Given the possibility for disputes over whether the decision that a particular authority is liable for an infraction is fair, how compliance is judged in the first place and how costs will be apportioned, it appears there will be plenty of scope for a local authority to challenge the minister by way of judicial review. However, the government’s commitment to early involvement will hopefully provide local authorities with a lever to extract promises of sufficient resources at the time any EU obligation is being negotiated but wise authorities will also continue to call for more resources to fulfil existing obligations.