Environmental Liability

Damages for failure to comply with applicable environmental standards are capped at $10,000.00 for each violation, and in the case of a continuing violation $5,000.00 for each day that the violation is not remedied.  The intentional or reckless release of any pollutant or hazardous substance is a criminal offence which carries a penalty of $100,000 and imprisonment for two years.

In addition to the above power of imposing sanctions, the EMA has significant powers to halt activities and projects or prevent potential violations which may result in a violation of any environmental requirement and may even result in assessments for compensation by the Environmental Commission.

Avoiding the Uncertainty of Time

Procuring a CEC can become a protracted process whether or not the EMA requests an EIA.  If no EIA is required, inadequately presented applications may result in repeated requests for further information which will extend the timeframe for a determination since the 30 working day timeframe for a response is counted from the date of submission of a duly completed application.

Depending on the requirements of the TOR, the applicant will need to hire one or several environmental consultants.  The ability of the consultants to deliver an EIA within set timeframes and up to the EMA’s standards should be carefully considered in selecting an appropriate environmental consultant/firm. Failure by these environmental consultants to deliver the required information to the EMA can result in delays in acquiring approval since the EMA has 80 days from receipt of the complete EIA Report within which to respond.

Maximizing one’s ability to achieve a determination on a CEC application requires significant preparation and collaboration on the part of the applicant with the EMA. As far as possible, an application that is prepared in a problem solving manner and with co-operation with the EMA, may avoid an extended time loop of requests for information.

Other approval agencies

Obtaining a CEC does not mean that approval from other statutory authorities will automatically follow.  The EMA Act provides that no authority can issue a permit or approval for an activity for which a CEC is required prior to the grant of such CEC. However, this does not obviate the need for approval from other regulatory authorities for any given undertaking, as approval from the relevant agencies remains a necessary pre-requisite to start up of operations.

Investor Awareness

A lender, a bank or a financial institution that either directly provides financing to a borrower company in Trinidad and Tobago or invests in the commercial paper (bonds, notes and the like) that a Trinidad and Tobago company may issue, may wish to know whether the environmental infrastructure and standard in Trinidad and Tobago is comparable to international standards.

Generally, in addition to obtaining a CEC (as described above), there are provisions which require the issuing of permits with respect to water, air and noise pollution, the release and handling of hazardous substances and the release and treatment of waste disposal. The first point of concern for a foreign lender is that the local laws may not reflect the general international environmental standards, although there are standards such as contained in the Noise Pollutions Control Rules, Water Pollution Rules, Air Pollution rules (not yet in force), Waste Management Rules (not yet in force).

To the extent that a foreign lender’s internal policy may be to provide financing upon conditions which may include a borrower’s agreement to adhere to international environmental standards, this may be resisted since it may be a higher standard than what may strictly apply in Trinidad & Tobago. Bearing this in mind, to balance potentially two differing points of view, one may consider the hybrid of requiring the adherence to local standards and, if it is a new development, compliance with the terms of any CEC that may be granted. This may or may not be a deal breaker.

Environmental liability on your investment

As noted above, failure to adhere to an environmental requirement, which includes applying for the various permits and certificates and adhering to the conditions upon which such permits/ certificates are granted, carries substantial fines.

A lender may need to be aware that the doctrine of lender liability does not exist as a specifically identifiable legal doctrine in Trinidad and Tobago, and as such no legislation or local case law to date specifically treats with lender liability. It is important to note in this regard, that our legal system is based on an adoption of the English legal system and thus the common law in Trinidad and Tobago is influenced by the English common law where the doctrine of lender liability does in fact exist.

To that extent, it is possible that a foreign lender may find itself liable for a local borrowing company’s environmental liability where the lender acts as:

(i)             a lead bank in a syndicated loan facility;

(ii)           a shadow director of the borrower; or

(iii)          a financier of the polluter or the company in breach of the applicable environmental standards.

Environmental liability can be attached to the lender under the doctrine of “direct lender liability” where a lender becomes responsible for the environmental liabilities of its client.

The issue of “direct lender liability” may arise where a lender becomes an occupier of contaminated land through the exercise of its remedies against the borrower, for example, by becoming a mortgagee in possession or foreclosing its mortgage over the land.  It may also arise where the lender can be considered to be in a position where it exerts control over a borrower, for example, where it can be said that the lender has some control on the policy making (or finds himself in a position with powers akin to that of a director) or if the lender acts in a fiduciary capacity, including management involvement in the day-to-day operations of industrial or commercial facilities, which causes environmental harm, the lender may incur liability to clean up the contaminated land and to compensate 3^rd parties for any loss suffered as result of the environmental harm.

The limits and standard of such liability can be gleaned from  the House of Lords decision in the Cambridge Water Company Ltd v Eastern Counties Leather Plc [1994] 1 All ER 53  which stated that liability in relation to historical activities is now less likely under common law principles. The House of Lords acknowledged that it would be unjust to impose retrospective liability for historical contamination at common law. However, where the damage is not historical and liability would not be retrospective, the ruling of the case affirmed that the courts will impose strict liability where reasonably foreseeable damage is caused.

Locally the EMA Act, provides at section 71:

Where a violation of any environmental requirement has been committed by a person (other than an individual), any individual who at the time of the violation was a director, manager, supervisor, partner or other similar officer or responsible individual, or who was  purporting to act in such capacity, may be found individually liable for that violation if, having regard to the nature of his functions in that capacity, the resources within his control or discretion, and his reasonable ability to prevent the violation-

(a)       the violation was committed with his direct consent or connivance; or

(b)      he, with knowledge, did not exercise reasonable diligence to prevent the commission of the violation.

Section 70(2) of EMA Act further provides that it is an offence for any person who knowingly or recklessly allows or undertakes any activity in designated sensitive areas, or with respect to designated sensitive species, which may have an adverse effect on the area or species so designated, which carries the fine of $100,000.00 and imprisonment for two years.

Therefore, assuming that a lender exercises some degree of control over the borrower and its decisions and policy making, for example by appointing a director on the borrower’s board, the lender may be found to be liable for the violation that was committed.