Utility companies and their shareholders are not liable for certain environmental liabilities—including site clean-up costs—of their predecessor entities, the House of Lords has ruled.
In R (on the application of National Grid Gas plc (formerly Transco plc)) v Environment Agency, the law lords allowed an appeal by National Grid Gas (NGG)—formerly Transco—against a High Court decision that it should contribute towards the cost of cleaning up sites contaminated by former gas companies.
The Environment Agency’s claim that NGG was an “appropriate person” for the purposes of Pt 2A of the Environmental Protection Act 1990 (EPA 1990), and should therefore pay towards the remediation of a former public gasworks site, was rejected by the court.
CMS Cameron McKenna partner Paul Sheridan says the House of Lords has effectively ruled that when passing Pt 2A in 1995, the then Parliament did not intend that this retrospective liability would overreach the intent of the Parliament at the time of the British Gas and other privatisations.
“This will no doubt give rise to considerable academic and constitutional debate,” he adds.
In the ruling Lord Scott said: “I find it extraordinary and unacceptable that a public authority, a part of government, should seek to impose a liability on a private company, and thereby to reduce the value of the investment held by its shareholders, that falsifies the basis on which the original investors, the subscribers, were invited by government to subscribe for shares.”
