Financial sanctions under environmental law
Administrative fines and increased fees for exploitation of the environment are increasingly included in environmental regulations as sanctions.
Lawmakers in Poland more and more often provide for administrative financial sanctions for environmental violations because they are more convenient to enforce than criminal sanctions, which require proof of fault on the part of a specific perpetrator. Moreover, criminal liability may be imposed solely on individuals.
Imposing administrative liability does not present these difficulties. It is sufficient to prove the objective occurrence of a violation of law. Moreover, such liability may be imposed on legal persons and other organisational units, relieving the authorities of the burden of identifying a specific person guilty of committing the violation.
It should also be borne in mind that the Tax Ordinance applies as relevant to fees for exploitation of the environment and administrative fines, vesting the province marshal or province environmental inspector with the enforcement rights of tax authorities. This results in application of strict liability principles in these cases very similar to those applied under tax law, including the rules for limitations periods and calculation of default interest.
A significant proportion of administrative sanctions are defined in terms of a range from minimum to maximum penalties. But often the amounts of fines or increased fees are calculated using complicated algorithms set forth in the regulations. This makes it difficult to gauge the seriousness of the potential sanctions and thus difficult to assess the relevant risk.
The issue of fines and increased fees under environmental law is highly significant in practice. In most transactional structures, the assumption of certain liabilities cannot be avoided. While this is clear in the case of share deals, in which there is only a change in shareholders, the reference to the Tax Ordinance means that under other transaction forms the investor will also assume liability for payment of fees and penalties. In the case of a merger, the acquirer or newly created company enters into all of the rights and obligations of each of the merging companies. If the transaction involves an enterprise or an organised part of an enterprise, the acquirer of such assets will, as a rule, become jointly and severally liable with the seller for these items.
Finally, it should be borne in mind that the countermeasures available in the case of fines and increased fees are very limited. One solution is deferral of payment of a fine, but this is of very limited use in practice. Disputing the justification for imposition of the sanctions themselves is difficult and for the most part limited to formal defects. Liability can rarely be avoided by raising other circumstances such as a lack of fault in failure to comply with statutory obligations.
Dominik Wałkowski and Izabela Zielińska-Barłożek, Mergers & Acquisition Practice and Environmental Law Practice, Wardyński & Partners
See also D. Wałkowski & I. Zielińska-Barłożek, “Financial Sanctions,” in P. Ciećwierz & I. Zielińska-Barłożek (ed.), Legal Risks in M&A Transactions, Warsaw 2013, pp. 371 and following (in Polish).