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Uncertainty surrounding the United Kingdom's contaminated land legislation is leading many risk managers to wait for final rules outlining their responsibilities before tackling the cleanup of contaminated land.
But companies that totally ignore their potential cleanup liability do so at their peril, some lawyers warn. When the complex legislation is finalized, possibly before the end of the year, it will create significant cleanup expense for polluters, and those expenses could increase with time, they say.
Even without the new rules, though, the increasing development of Britain's former industrial land -- or so called brownfield sites -- has made awareness of potential liability for contamination an issue in real estate transactions and is encouraging interest in growth in the environmental impairment liability insurance market (see related story).
The Environment Act, which set up the Environment Agency and establishes a "polluter pays" liability system, was passed in 1995, though regulations forcing polluters to pay for contaminated land remediation have yet to be finalized.
"At the moment, because the regulations have not come into force, companies are deliberately not doing anything" about their historic contamination, said Graeme Lee, director of risk management for London based Waste Management International P.L.C.
The "lack of clarity" over liability for contaminated land has resulted in a "great deal of inertia" among companies, said Mr. Lee. If companies "discover contaminated land, they will be under an obligation to clear it up" under the proposed legislation, he noted.
Companies are "frightened that they might prejudice their future position and are waiting for the legislation (to be finalized) to see what they are going to be required to do," said Mr. Lee, chairman of the Assn. of Insurance & Risk Managers' environmental task group.
Risk managers and lawyers fear that the final legislation on contaminated land will be overly complex, lead to litigation and require massive funding both by local authorities, which are required to identify contaminated sites within their jurisdiction, and also by companies, which will be forced to clean up the sites.
"The guidance notes are so complex a lot of companies and lawyers reckon (the legislation) to be unworkable," said Peter Kerridge, a member of AIRMIC's environmental task force. Mr. Kerridge is the risk manager of a chemical manufacturer.
But while Mr. Kerridge predicted that most large companies will be able to cope with the "Draconian" legislation, "small companies won't," he warned.
Stephen Tromans, a partner with London law firm Symonds & Symonds, pointed out that while "bigger companies are aware" of their potential liability for contaminated land, "smaller and medium-sized companies are not so aware."
Companies should "be getting legal advice and managing the risk," said Mr. Tromans.
Whether compliance with the legislation itself proves workable for companies will depend, in Mr. Tromans' view, on whether the liability is adequately funded.
The contaminated-land legislation, which now consists of 32 pages of primary legislation and three volumes of draft guidance notes, is overly complex, according to Valerie Fogleman, a partner and head of the environmental liability group of London law firm Barlow Lyde & Gilbert.
As a result, Ms. Fogleman predicts that implementation of the legislation in its current draft form will result in considerable litigation, particularly as plans are to suspend any remediation order during any litigation, meaning even if a party loses a case, it can avoid adhering to the regulation until it loses its case.
Until the environmental legislation is finalized, many companies are "putting their heads in the sand and waiting," said Ms. Fogleman.
Not all U.K. companies have been ignoring their environmental liability exposures.
"We have been carrying out environmental assessments on any land we sell or buy for the past six years," said Simon Boyle, a lawyer with London-based electronics group General Electric Co. P.L.C.
Mr. Boyle pointed out that while GEC was "in the minority conducting environmental surveys six years ago, it is now becoming standard practice."