UK Parent Company Liability: The Duty of Care Tests

On 4 July 2018, the Court of Appeal in England and Wales handed down its judgment in AAA & Ors. v Unilever PLC and Unilever Tea Kenya Limited [2018] EWCA Civ 1532. The Court of Appeal determined that parent companies will only owe a duty of care in respect of its subsidiaries’ activities, where it has effectively taken over the management of the subsidiary, or has provided it with relevant advice.

The case surrounds claims brought by the victims of violence in Kenya, including employees and former employees of the defendants, following an economic and humanitarian crisis that erupted after the presidential election in December 2007. The victims claimed that UTKL and Unilever failed to discharge their duties of care.

The case centred upon parent company liability, and also considered the issue of jurisdiction. The victims brought an intended group action claim in the English courts against UTKL, which is domiciled in Kenya, and its English parent, Unilever, which is domiciled in England (and the Netherlands). In order to bring a claim in England and Wales, the claimants had to demonstrate that there was “a good arguable claim against Unilever, which can then be treated as the so-called anchor defendant.

The Court of Appeal stated that parent company liability is subject to the same 3 part test under Caparo v Dickman [1990] 2 AC 605, in relation to the need to find a proximity of relationship, foreseeability and damage (reiterating the Court’s previous decision in Chandler v Cape PLC [2012] 1 WLR 3111).

Following this, Lord Justice Sales stated that parent companies may then owe a duty of care in two scenarios:

  1. where the parent has substantively taken over the management of the relevant activity in the subsidiary; and/or
  2. the parent has given relevant advice to the subsidiary about how it should manage a particular risk.

In this case, the appellants had tried to argue the second limb, that UTKL had relied upon advice given by Unilever in relation to the management of risk in respect of political unrest and violence in Kenya. The Court did not accept this however, and stated that the appellants were “nowhere near being able to show that they have a good arguable claim against Unilever on this basis. The witness evidence and the documentary evidence… shows that UTKL did not receive relevant advice from Unilever in relation to such matters. The evidence also shows clearly that UTKL understood that it was responsible itself for devising its own risk management policy and for handling the severe crisis which arose in late 2007, and that it did so”.

As such, the Court of Appeal did not consider that either of the two categories applied in this case, and Unilever did not owe the victims a duty of care.   Therefore, without a claim against the parent company, the claim against UTKL could not be heard in the English courts.

Parent company liability is often an important factor when considering bringing a claim, particularly in relation to matters arising from incidents that occur abroad. Equally, it can be considered by regulators when deciding whether to take enforcement action, and against which parties. If you require further advice on parent company liability, or a copy of the Judgment, please contact a member of our UK ESH team.

US EPA Revises RCRA Definition of Solid Waste Rule to Comport with D.C. Circuit Rulings

On May 30, 2018, US EPA issued a final rule to revise the regulations associated with the 2015 Definition of Solid Waste (DSW) Rule.  US EPA performed this rulemaking to bring the regulations in line with the D.C. Circuit’s 2017 and 2018 rulings in American Petroleum Institute v. EPA (Case No. 09-1038), which vacated and amended certain portions of the 2015 DSW Rule.

The DSW Rule defines under RCRA what materials are subject to Subtitle C regulation as discarded solid waste materials, as opposed to those materials appropriate for beneficial reuse and recycling.  The regulations at issue have been the subject of several legal challenges by both industry and environmental groups and have undergone a number of administrative modifications since the 1980s.  In 2008, US EPA published a final rule revising the definition of solid waste to include two exclusions for hazardous secondary material recycled under the control of the generator (known as the “generator-controlled” exclusion), and for hazardous secondary material transferred to a third party for recycling (known as the “transfer-based” exclusion).  The 2008 rule also codified certain factors for determining when recycling is “legitimate.”

The 2015 version of the DSW Rule modified and restructured these exemptions by replacing the transfer-based exclusion with a “verified recycler” exclusion and by incorporating stronger provisions to ensure legitimate recycling (namely, by making mandatory one of the legitimacy factors that was previously only considered, defining containment of materials, and imposing emergency preparedness and response requirements).  However, a legal challenge resulted in portions of the 2015 Rule (including the verified recycler exclusion) being vacated by the U.S. Court of Appeals for the D.C. Circuit in 2017.  In March 2018, the Court further modified its decision upon a petition for reconsideration to clarify certain aspects, but left a number of aspects to be addressed by new rulemaking.  As a consequence, the 2015 Rule has been left somewhat battered by the removal, replacement and reinstatement of key provisions governing third-party recycling, with several aspects in need of further revision to address omissions or misplaced references.

The new rulemaking addresses these outstanding issues and brings the regulations in line with the Court’s 2017 decision and 2018 decision modification in a couple of key ways.  In particular, the final rule removes the verified recycler exclusion and reinstates the transfer-based exclusion, and also reverts the fourth legitimacy requirement to the 2008 revision. Continue Reading

Deadline Nears for US EPA TSCA Nanomaterials Reporting Requirement

The August 14, 2018 deadline for reporting under US EPA’s nanomaterials reporting rule is rapidly approaching.

US EPA promulgated the rule in January 2017 under Section 8(a) of the Toxic Substances Control Act (TSCA). 82 Fed. Reg. 3641 (Jan. 12, 2017). The rule requires any person that manufactured, imported or processed a covered nanomaterial substance during the three years prior to the rule’s effective date to report certain information to US EPA within one year of the effective date.

Although the rule initially was to be effective in May 2017, US EPA extended the effective date until August 14, 2017, making the reporting deadline August 14, 2018. 82 Fed. Reg. 22088 (May 12, 2017). The extension also adjusted the beginning and end dates of the three-year period for which reporting is required.

The rule does not contain a formal definition of nanomaterials. Instead, the rule requires reporting of chemical substances that are solids at 25° Celsius and standard atmospheric pressure; that are manufactured or processed in a form where any particles (including aggregates and agglomerates) are in the size range of 1–100 nanometers (nm) in at least one dimension; and that are manufactured or processed to exhibit one or more “unique and novel properties.”

“Unique and novel properties” are defined in the rule to mean “any size-dependent properties that vary from those associated with other forms or sizes of the same chemical substance, and such properties are a reason that the chemical substance is manufactured or processed in that form or size.” In the preamble to the rule, US EPA explained that a substance is not reportable simply because it contains particles in the size range of 1–100 nm. Instead, the substance “must also demonstrate a size-dependent property different from properties at sizes greater than 100 nm and is a reason the chemical is manufactured or processed in that form or size.” The rule also contains exemptions for certain substances, including substances manufactured, imported or processed for R&D purposes, as well as substances that contain less than 1% by weight of any particles, including aggregates and agglomerates, in the size range of 1–100 nm.  Additionally, the rule exempts small businesses with sales of less than $11 million per year from the reporting requirement.

Persons who manufactured, imported or processed nanomaterial substances covered by the rule during the three-year period prior to August 14, 2017 must report the following information to US EPA by August 14, 2018 for each such substance: Continue Reading

White House Seeks Guidance on Environmental Review Standards

Government agencies may soon use a different framework for evaluating the environmental impact of their decisions. The Council on Environmental Quality (CEQ), the executive agency tasked with ensuring that federal agencies meet their obligations under the National Environmental Policy Act (NEPA), published a notice on June 20, 2018 seeking input from the public about changes to the review process.

NEPA was enacted in 1970 to encourage the “use of all practicable means and measures, including financial and technical assistance . . . to create and maintain conditions under which man and nature can exist in productive harmony[.]” Practically, NEPA requires all executive federal agencies to prepare environmental assessments and environmental impact statements outlining the potential environmental effects of proposed federal agency actions. The CEQ seeks comments to improve the NEPA process, the scope of NEPA review, and guidance on how CEQ can “improve the efficiency and effectiveness of the implementation of NEPA.”

Continue Reading

US EPA Issues Final TSCA Mercury Reporting Rule

On June 27, 2018 US EPA formally published its final rule under the amended Toxic Substances Control Act (TSCA) to require reporting by persons who manufacture, import or intentionally use mercury and certain “mercury-added products.” 83 Fed. Reg. 30054 (June 27, 2018). The final rule is effective on August 27, 2018.

US EPA was required to promulgate the rule by TSCA Section 8(b)(10), which was added by the 2016 amendments to TSCA. Among other things, that section requires that “any person who manufactures mercury or mercury-added products or otherwise intentionally uses mercury in a manufacturing process shall make periodic reports to [US EPA] … including such information as [US EPA] shall determine by rule promulgated not later than 2 years after June 22, 2016.” The information collected by the rule is to be used in the preparation of “an inventory of mercury supply, use and trade” in the US. US EPA was required by TSCA to prepare the first such mercury inventory by April 1, 2017 (which it formally announced on March 29, 2017). The Agency must prepare subsequent inventories by April 1 every three years thereafter beginning in 2020.

US EPA’s final mercury reporting rule requires persons “who manufacture (including import) mercury or mercury-added products, or otherwise intentionally use mercury in a manufacturing process” to report amounts of mercury above certain amounts that are used in these activities during a designated reporting year. The reporting requirements apply to any person who manufactures or imports 2,500 pounds or more of elemental mercury or 25,000 pounds or more of certain mercury compounds in a specific reporting year, subject to certain exemptions.   The final rule also requires such persons to “identify specific mercury compounds, mercury-added products, manufacturing processes, and how mercury is used in manufacturing processes, as applicable” as specified in the rule, along with other data outlined in the rule.

The submission deadline for the 2018 reporting year is July 1, 2019. The 2018 reporting period covers January, 2018 to December 31, 2018. The final rule states that subsequent reporting years are from January 1 to December 31 at a 3-year interval beginning in 2021, with the submission deadlines being July 1 in 3-year intervals beginning July 1, 2022. As such, any covered person who meets the reporting volume threshold during calendar year 2018 must report the required information to US EPA by July 1, 2019. Thereafter, any covered person who meets the thresholds during any calendar year during the next three years (2019, 2020 and 2021) must report the information to EPA by July 1, 2022, and so on.

Consistent with TSCA Section 8(b)(10), the final rule contains some exemptions to the reporting requirements. In general, the final rule provides that the reporting requirements do not apply to: persons who (i) do not first manufacture, import, or otherwise intentionally use mercury; (ii) who only generate, handle, or manage mercury-containing waste; (iii) who only manufacture mercury as an impurity; and (iv) who are engaged in activities involving mercury not with the purpose of obtaining an immediate or eventual commercial advantage. The final rule also provides exemptions from certain specific data elements in the rule for persons who already report comparable information under the TSCA Chemical Data Reporting rule and to the Interstate Mercury Education and Reduction Clearinghouse Mercury-added Products Database.

Uncertainty Looms as Ohio Seeks to Address Lake Erie Impairment Issues Following Criticism from District Court

Ohio has reversed course on its prior decision not to include the open waters of Lake Erie in its 2016 impaired waters listing following an April 11 ruling by Judge James G. Carr of the U.S. District Court for the Northern District of Ohio.  The decision criticized the maneuvering of US EPA and Ohio EPA to prevent review of the State’s original 2016 impaired waters listing (additional detail regarding Ohio’s impairment listing provided here).

Just prior to the Court’s deadline for summary judgment motions, US EPA had withdrawn its prior approval of Ohio’s 2016 impairment listing and requested additional data and information from Ohio EPA regarding nutrients in the open waters of Lake Erie.  By letter dated March 6, Ohio EPA demurred to US EPA’s request, noting Ohio’s plan to assess the open waters of Lake Erie for impairment as part of its 2018 impaired water listing.  Although Judge Carr’s ruling thereafter agreed with US EPA that its withdrawal of approval left the Court without jurisdiction to review the 2016 impairment listing, he criticized the Agencies’ failure to follow Clean Water Act requirements and retained jurisdiction over the matter pending US EPA’s approval or disapproval of Ohio’s 2016 impairment listing.  In response, Ohio EPA amended its 2016 impairment listing to include the open waters of Lake Erie, a move which was quickly approved by US EPA. Continue Reading

US EPA Releases Problem Formulation Documents for “First Ten” TSCA Risk Evaluations

The United States Environmental Protection Agency (US EPA) has formally released “problem formulation” documents for the risk evaluations it is conducting on the “first ten” chemical substances under the amended Toxic Substances Control Act (TSCA).  Formal notice of the problem formulation documents was published in the Federal Register on June 11, 2018.  Comments on the problem formulations must be submitted to US EPA by July 26, 2018.

US EPA has stated that goal of the problem formulation effort is to produce a “conceptual model and an analysis plan” for each risk evaluation.  The conceptual model “describes the linkages between stressors and adverse human health effects, including the stressor(s), exposure pathway(s), exposed life stage(s) and population(s), and endpoint(s) that will be addressed in the risk evaluation.”  The analysis plan “is intended to describe the approach for conducting the risk evaluation, including its design, methods and key inputs and intended outputs.” Continue Reading

Lawsuit Filed in Response to US EPA Rollback of Tailpipe Emission Standards

On May 1, 2018, 17 states, including California, as well as the District of Columbia filed a Petition for Review in the US Court of Appeals for the District of Columbia in response to US EPA’s announcement that it would be rolling back tailpipe emission standards. As we previously reported, California stated in April that it was actively considering a lawsuit to challenge the decision to revise tailpipe emissions. The other states involved in the new lawsuit include Connecticut, Delaware, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington. In total, the coalition represents approximately 140 million Americans. Continue Reading

May 2018 Update: Key Developments in UK and EU Environment, Safety and Health Law and Procedure

Electronic NewsWe are pleased to share with you the latest edition of “frESH Law Horizons: Key Developments in UK & EU Environment, Safety and Health Law and Procedure”, our monthly newsletter that provides bite-sized updates on EU and UK law, procedure and policy. This month we review more than 20 developments that may be of interest to those in the environmental, safety and health sector, including:

  • Annual Environmental, Safety and Health Conference to be held in London on 6 June 2018
  • Manufacturer is fined £1.6 million following two (unconnected) offences within a year
  • Failure to brief workers on risk assessment led to a fall and a £900,000 fine
  • European Commission issues a proposal for a Directive to protect EU whistleblowers
  • CCTV became mandatory in all abattoirs in England on 4 May 2018

For more detailed information on these developments, as well as access to the remaining summaries, make sure you download a copy from our website. You can also subscribe to ensure you receive our most recent edition every month.

US Department of Energy Geothermal Plan Offers Opportunity But Deadlines Approaching

Geothermal energy production has proven to be a reliable renewable energy source with great potential to contribute to US (and global) energy grid stability and resiliency.  Indeed, the US Department of Energy (DOE) has described geothermal energy as “a clean, efficient, and nearly inexhaustible domestic energy resource.”  Nevertheless, geothermal developers often run into excessive up front development and drilling costs that frequently create unacceptable risks for potential energy investors.  In an effort to tackle some of these ongoing roadblocks to geothermal development, the DOE has recently moved the conversation forward by–as the saying goes–putting its money where its mouth is. Continue Reading

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