In a key REACH compliance case recently, courts ruled against Belgium, making it the first EU Member State to be condemned by the European Court of Justice for noncompliance with REACH (Judgment of May 5, 2011 in Case 265/10 Commission vs. Belgium). In so doing, the European courts have shown some teeth in enforcing the chemical legislation that is changing the face of manufacturing and global supply.
Overview of REACH and compliance penalties
REACH – which stands for the Registration, Evaluation, Authorization and Restriction of Chemicals – is a landmark regulation with an epicenter in Europe but ripple effects felt worldwide. The big-picture goal of REACH is the safe use of chemicals. “Safe” means compatible with human and animal life, and with the environment.
Penalties for non-compliance across Europe vary enormously. The graph below shows the wide discrepancies between how Member States moderate and (in theory) penalize REACH compliance.
Belgium found guilty
The May 5, 2011 decision in the REACH Regulation case makes Belgium the first EU Member State to be condemned by the European Court of Justice for REACH breach. The case was related to infringement proceedings brought against Belgium by the European Commission for lack of compliance with REACH Article 126.
REACH Article 126 obligates EU Member States to adopt the necessary measures to ensure proper enforcement of REACH. Specifically, EU Member States had to notify the Commission of their enforcement systems by December 1, 2008.
Belgium failed to comply with that obligation, apparently, because two regions, Wallonia and Brussels, had not yet adopted measures to comply with Article 126. If they had no enforcement systems, the argument ran, then how could they be expected to report on what their enforcement systems were?
The court did not forgive the breach based on that logic and ruled against Belgium.
Belgium guilty: what does it mean?
This ruling is cause for concern for businesses and a call to action. Some companies – particularly outside of the EU – have been waiting to see how court decisions would shake out before launching their REACH compliance efforts in earnest. This ruling indicates low tolerance for REACH breach.
There further reason to anticipate legal crackdown. Brussels-based Peter Kugel, Partner at Kugel Legal, a firm that specializes in EU law & litigation, explains:
“The EU Courts have just recently justified their request for an increase of 12 additional judges at the General Court (the former Court of First Instance) by arguing, among other things, that a tsunami of REACH litigations must be expected (arguably because of the establishment of ECHA and its Board of Appeal).”
This presumption of impending litigation is expected to inspire companies who have not yet implemented chemical management programs to begin implementing REACH compliance programs at the very least. REACH compliance groundwork is never wasted.
How to prepare
REACH compliance groundwork is infrastructure that sets up:
- communication with suppliers about chemicals in products,
- regulatory checks, and
- reporting or document distribution channels.
This bundled methodology for REACH compliance is a key framework for Manufacturing and Supply Chain 2.0, which infers both current and next-generation protocols in global Industry. The REACH compliance framework can be applied to almost all environmental management compliance mandates that a company will face in the coming five years. Already, chemical legislation overhaul is rearing its head in the United States (see TSCA Revamp 2011) as well as in China (see China REACH) and elsewhere.
Preparing compliance process framework will only prepare a business for what’s coming next, and quickly. In the new global business world, chemical tracking in increments for environmental management is the way of the future. Material disclosure is here, the era of non-disclosure is over.
REACH penalties, to Belgium and beyond
It’s unlikely that Belgium will face penalties for the breach of Article 126. To apply penalties, the Commission would have to instigate a second infringement procedure against Belgium (the second infringement case would be for, most likely, failure to comply with the Court’s first judgment, which would constitute a breach of Article 260(1) of the Treaty on the Functioning of the European Union). Only then would the Court have the discretionary power to impose financial penalties, and that would be if the Court found that the infringement of REACH Article 126 had not been resolved. The Commission is unlikely to pursue this because it’s widely believed that Belgium has corrected its error in the time lapsed since the initial charge was filed.
However, the present judgment against Belgium has an important symbolic value. The judgment sends a message in three key ways in terms of:
- the European Commission’s alleged willingness to show its teeth against Member States that fail to ensure an effective application of REACH
- the difficulties of ensuring compliance with EU law in the context of a Member State’s (e.g., Belgium) complex internal federal situation
- support for the countless businesses who invested heavily into REACH compliance, even while they witness that some competitors did not
“Quite a number of diligent business operators made the choice to invest heavily in REACH compliance while seeing that some of their competitors allegedly ‘got away’ with it to date (for whichever reason),” says Kugel. “Indeed, I have heard some of my clients complain about this. Such companies can now at least be assured to some extent that the Commission is in principle ready to do its part within the margins of its powers.”
Forecast and analysis
It remains to be seen whether the Commission will be so candid in more politically and legally sensitive issues. More sensitive issues are many, but most notably include:
- calculation of the 1% value of SVHCs contained in articles as defined in REACH Article 7
- interpretation of “intermediates” within the meaning of REACH
- actions for annulment against Commission decisions on authorizations or restrictions
- actions for annulment against decisions by ECHA
Some say the judgment against Belgium reveals how unfair REACH enforcement can be. Because enforcement is left to the Member States, REACH finds that the range of sanctions for breaches by business operators are not equal in the 27 Member States (again, see above graph). Almost needless to say, the potential differences may ultimately have a negative effect on the level of EU harmonization that was sought by adopting the tremendous “legal package” that is REACH.
Is there a bright side? Yes, insiders agree. “REACH regulation represents innovation in European law,” says Russell McCann, 15-year environmental management veteran and CEO of Actio Corporation. “REACH is groundbreaking in many ways, one way is that REACH administration requires European Member States to work together with a common policy-related mission in order to lay groundwork for REACH compliance activity.”
Kugel agrees. “To the best of my knowledge,” he says, “it is the first time that EU Member States actively discuss and coordinate their enforcement policies and priorities in relation to one specific EU legislative act, such as the REACH Regulation, in a structured and concerted manner, i.e., within the framework of the so called ‘Forum of the European Chemicals Agency’.”
The “Forum” referenced by Kugel appears to be a positive contribution to the creation of some kind of level playing field. It exists to mitigate the freedom and subsequently deviant approaches to policy implementation that is left to EU Member States with regard to REACH enforcement.
“Time will tell,” says Kugel. Indeed.
The takeaway from the May 5 verdict against Belgium is that for the first time we see EU courts step onto the field – and the results give us reason to believe they’ll be treating REACH as more than just a game.
K.M. Hurley is an award-winning writer, environmental regulations advisor, and Director at Actio, a 15-year-old company that produces market-leading environmental management software that enables businesses to manage material disclosure and REACH compliance.