Introduction
In October 2020, the EU Commission published its "Evaluation report – Directive 2008/99/EC of the European Parliament and of the Council of 19 November 2008 on the Protection of the Environment through Criminal Law". The Commission found that the Directive did not have much effect in practice. The number of environmental crime cases that were successfully investigated and convicted remained - according to the Commission - at a very low level, the sanction levels imposed were often too low to be dissuasive and cross-border cooperation was insufficient. Therefore, on 15 December 2021, the Commission adopted a legislative proposal (the "Proposed Directive") to replace the existing directive.
The regulations contained therein on the liability of companies, including sanctions based on the total worldwide turnover, constitute a considerable tightening compared to previous regulations. Companies should meet these requirements by reviewing their compliance management system and adapting it to the current challenges or by establishing an effective compliance management system with up-to-date components for environmental compliance.
Content of the Proposed Directive
The Proposed Directive extends Article 3 of the existing Directive 2008/99/EC by nine new criminal offences to a total of 18 environmental offences. New offences include, for example, criminal liability for
- placement on the market of non-compliant products which cause substantial damage to the environment,
- serious breaches of EU chemicals legislation,
- serious circumvention of requirements to do an environmental impact assessment,
- illegal ship recycling, illegal water abstraction,
- illegal trade in timber,
- serious breaches of rules on introduction and spread of invasive alien species and
- illegal handling of fluorinated greenhouse gases.
The objective of defining sanction types and levels for environmental crimes is addressed for natural persons in Article 5 and for legal persons in Articles 6 and 7 of the Proposed Directive.
- Article 5 sets thresholds of maximum penalties for natural persons that must be implemented as a minimum in the Member States. Depending on the offence, these amount to a maximum term of imprisonment of at least ten, six or four years.
- Articles 6 and 7 of the Proposed Directive provide for liability and sanctions against legal persons. Legal persons are to be held liable for offences if persons in leading positions commit listed environmental offences for the benefit of the company. Lack of supervision by management personnel shall also constitute liability of the legal persons.
Beyond the currently applicable directive, Article 7 para. 2 defines concrete sanctions such as
- the obligation to reinstate the environment,
- exclusion from entitlement to public benefits,
- withdrawal of permits and authorizations,
- obligation to install due diligence schemes for enhancing compliance with environmental standards or
- temporary or permanent disqualification from the practice of business activities or temporary or permanent closure of establishments.
With regard to fines to be imposed, Article 7 para. 4 and 5 provide that offences shall be punishable by fines, the maximum limit of which shall not be less than 5% or respectively 3% of the total worldwide turnover of the undertaking in the business year preceding the fining decision.
Impact on Companies
Especially the liability and the strict company-related sanctions bear considerable risks for companies. The tightening of sanctions means the threat of fines, the maximum limit of which can be at least 5% or 3% of the total worldwide turnover of the legal person in the business year preceding the conviction. Sanctions such as a temporary or permanent disqualification from the practice of business activities, the withdrawal of permits and authorizations or the temporary or permanent closure of establishments, as well as the irreparable reputational damage that accompanies a conviction, could affect companies even more severely.
In addition, there are further liability risks under tort law due to civil (follow-up) lawsuits. Currently, there is a lively discussion about the consequences of environmental offences under civil law and how existing norms should be interpreted or further developed. In the case of the above-mentioned environmental offences, claims pursuant to Section 823 para. 2 of the German Civil Code ("BGB") in conjunction with the laws to be implemented or adapted in the German Criminal Code ("StGB") in order to implement the directive are conceivable. The prerequisite would be that the relevant norms are to be regarded as so-called "protective laws" ("Schutzgesetze") within the meaning of section 823 para. 2 BGB. To what extent environmental criminal laws can be classified as protective laws has not yet been answered uniformly. Against this, it is argued that the traditional location of environmental offences in the 29th section of the StGB suggests that environmental damage could in principle also have an effect on the health of every individual and that the wording of the provisions is at least partly intended to protect individuals with regard to health or material goods. Until this question is clarified through case law, there is still legal uncertainty. In this respect, there are also serious liability risks for companies from this direction.
Risk Mitigation
This Proposed Directive shows - especially in combination with the increased requirements in the context of ESG compliance - the relevance of an effective compliance management system for adherence to environmental regulations.
For companies, it is crucial to avoid the considerable risks of criminal liability as well as civil claims and the associated reputational damages in advance. A continuous assessment and revision of the compliance management system based on the current and future requirements of environmental compliance is indispensable in this regard. Ultimately, this is also in the management's interest in order to avoid personal liability risks.
Authored by Christian Ritz, Sebastian Gräler, Nicole Böck and Carla Wiedeck
