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Many would be aware of the “chain of responsibility” amendments made to the Environmental Protection Act 1994 (Qld) (EP Act ) with effect from April this year.
The Queensland Government has now released for public comment a draft Guideline regarding the issue of an environmental protection order (EPO) to a “related person” of a company under the EP Act.
Submissions on the draft Guideline can be made until 5pm on Friday 25 November 2016.
The draft Guideline seeks to clarify the powers of the Department of Environment and Heritage Protection (DEHP) to issue an EPO to a related person and introduces new concepts such as culpability, which are not found in the EP Act. The draft Guideline should provide some comfort to those who would otherwise be at risk of falling within the broad statutory definition of “related person”.
Whilst the Minister for the Environment and Heritage Protection refers to the proposed Guideline as a ‘binding instruction’, once finalised and approved by regulation, DEHP need only have regard to the Guideline when deciding whether to issue an EPO to a related person. It is not required to follow the Guideline and may therefore act contrary to the principles set out in it. In our view, to the extent that limits are to be placed on the circumstances in which the DEHP will issue an EPO, this should be done by way of legislative amendment and not a statutory guideline.
The draft Guideline is detailed and contains several case studies. This update discusses the key principles of the draft Guideline and explores the implications for financial institutions, creditors, shareholders and suppliers.
An EPO is a statutory enforcement tool which can require a person to undertake specific actions within specific timeframes, such as cleaning up or rehabilitating land, giving a bank guarantee or other security.
The “chain of responsibility” amendments made to the EP Act broadened DEHP’s powers to issue an EPO to:
Under the EP Act, a “related person” of a company means:
A “relevant activity” means an environmentally relevant activity (ERA) under the EP Act that was, or is being, carried out by the company under an environmental authority (EA), or that was, or is being, carried out by the company and has caused, is causing, or is likely to cause, environmental harm.
The draft Guideline contains a set of key principles that will be used to guide DEHP’s decision-making in relation to the issue of an EPO to a related person. These principles include that:
Under the EP Act, DEHP may decide that a person has a “relevant connection” with a company if it is satisfied that:
Note that a person need only satisfy one of the above criteria in order to have a “relevant connection”.
DEHP may consider a number of factors when deciding whether a person has a relevant connection with a company, including:
The draft Guideline clarifies which of these matters relate to the above “significant financial benefit criteria” and/or “position to influence criteria” and the evidence that DEHP may collect and consider (Appendix 4).
The draft Guideline states that the significance of any financial benefit will be considered within the context of the specific circumstance of each case and may be considered in relation to:
Specific examples are provided, including for:
The draft Guideline states that person will be in a position to influence if the person is capable of influencing the decisions or actions of the company in relation to its compliance with the EP Act whether in an official (e.g. appointed company director) or unofficial capacity (e.g. someone acting as a shadow director).
Again, specific examples are provided, including for:
In deciding whether to issue an EPO to a related person of a company, DEHP may consider whether the related person took all reasonable steps having regard to the extent to which the person was in a position to influence the company’s conduct to ensure it complied with its obligations under the EP Act and made adequate provision to fund the rehabilitation and restoration of the land because of environmental harm from a relevant activity.
The draft Guideline states that if it is determined that a related person was not culpable for a matter, or was culpable but took all reasonable steps in the circumstances, DEHP will not issue the person with an EPO.
There are a number of other factors DEHP may consider when determining whether a related person took all reasonable steps in the circumstances, including:
For liquidators, administrators and receivers, the draft Guideline states that the reasonable steps expected, will be considered in light of the external administrator’s requirements and powers under the Corporations Act 2001 (Cth) or the terms of the external administrator’s appointment. The draft Guideline acknowledges that external administrators are required to act in the interests of all creditors as a whole, not merely for the benefit of one creditor or stakeholder. External administrators who exercise their powers and control in a manner which is permitted or required by the Corporations Act 2001 (Cth), the terms of their appointment or general law, will not automatically be considered to have failed to take all reasonable steps. Consideration will be given to an external administrator’s powers and their obligations under the EP Act when determining potential reasonable steps.
EPOs issued to two or more related persons may provide that the related persons are jointly and severally liable for compliance with the EPO, including for the costs of compliance. In this respect, the draft Guideline states that DEHP will consider the relationship between the related persons when deciding to hold those persons jointly and severally liable but that any apportionment of compliance costs is a matter to be determined between those parties by private agreement.
The chain of responsibility amendments have been controversial, in part because the broad definitions of “related person” and “relevant connection” have the potential to capture anyone who contracts with, leases land to, invests in, or is otherwise in a position to influence the conduct of a company carrying out an environmentally relevant activity under the EP Act.
As stated above, the draft Guideline does assist to clarify the intended scope of the new laws and will provide some comfort to some financial institutions, shareholders and third party suppliers in certain types of arrangements. The draft Guideline makes it clear that at least some level of culpability will be required before a related person will be pursued.
Nonetheless, DEHP is only required to have regard to the Guideline. It remains important for all persons and entities with a relationship with an EA holder or operator company to carefully consider both the EP Act and Guideline in relation to:
Where concerns arise about being captured by the chain of responsibility provisions, it will be prudent to update relevant agreements or other documentation to require companies to comply with their obligations under the EP Act and make adequate provision for the environmental rehabilitation and restoration of land. Depending on the circumstances, more proactive measures, such as due diligence, compliance audits and regular inspections to ensure compliance with the EP Act, may also be warranted.
Implications for cryptocurrency trading, smart contracts and AI
Decree No. 228 of 2019 (Decree 228/2019) came into effect on 27 August 2019, which simplifies and revokes previous decrees of the Ministry of Employment (MoE) to widen the type of job titles allowed for foreign professionals to work in Indonesia.
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