United Utilities Water Plc v Environment Agency for England & Wales

These are two appeals, brought with permission granted by the judge below, against orders made by Nelson J on 13 January 2006. The claimant in the action, to whom I will refer as UU, is a statutory water and sewerage undertaker within the meaning of the Water Industry Act 1991. UU operates some 599 waste water treatment plants incorporating 70 sludge treatment facilities, and one stand-alone sludge treatment facility known as the Shell Green Processing Plant, of which more later. UU provide water and sewerage services to some 2.9 million homes and businesses in the north west of England.

UU brought these proceedings against the Environment Agency seeking declarations that they were not required to secure permits from the Agency in respect of operations carried on at six of their waste water treatment plants. These plants are at Widnes, Wigan, Bolton, Davyhulme, Blackburn and Dalston. They were chosen as test cases. There were originally seven such test cases, as directed by order of Richards J as he then was on 22 May 2005; but the Environment Agency acknowledged that no permit was required in respect of the plant at Eccles.

Whether or not permits were required depends on the interpretation and application of the Pollution Prevention and Control (England & Wales) Regulations 2000 to which I will refer as the PPC Regulations. The PPC Regulations were made in order to transpose into domestic law the Integrated Pollution Prevention and Control Directive (96/61/EEC), to which I will refer as the IPPC Directive. It is an offence under the PPC Regulations to operate any “installation” as there defined unless authorised to do so by a permit issued by the Environment Agency. UU are at pains to contend that no permits are required for their plants under the PPC Regulations, because if they are, UU’s costs will rise and that will be translated into higher prices for their customers or a diversion of resources from elsewhere within UU.

Of the six plants in question, Nelson J found that four were subject to PPC Regulations so that permits were required, but that two were not. The four where permits were required were Widnes, Bolton, Davyhulme and Wigan. It is convenient to refer to these together as the “sludge plants”. The other two, where permits were not on the judge’s findings required, were thus Blackburn and Dalston; they may be referred to as the “industrial effluent plants”. There is an appeal by UU and a cross-appeal by the Environment Agency. UU contend that all six plants are exempt from the PPC Regulations and permits are not required in respect of any of them. The Environment Agency contends the contrary: that all six are covered and all six require permits.

It is convenient to deal with the law first, starting with the PPC Regulations. Regulation 9(1) provides:

The cross-reference in Regulation 2(1)(i) to activities listed in Part I of Schedule I to the PPC Regulations is important having regard to the issues in UU’s appeal. The relevant provision in Part I of Schedule I is section 5.3(c). Section 5.3 is headed “Disposal of Waste Other Than By Incineration Or Landfill”. 5.3(c) reads:

biological treatment, not being treatment specified in any paragraph other than paragraph D8 of Annex IIA to Council Directive 75/442/EEC, which results in final compounds or mixtures which are discarded by means of any of the operations numbered D1 to D12 in that Annex (D8); or

Directive 75/442/EEC there referred to is the Waste Framework Directive (“the WFD”). The operations respectively described in 5.3(c)(i) and (ii) are those listed at D8 and D9 in Annex IIA to the WFD; hence the references in brackets to D8 and D9 at the end of those sub-paragraphs. It is important to note that the WFD distinguishes, at Article 1, between “disposal”, which means any of the operations provided for in Annex IIA, and “recovery”, which means any of the operations provided for in Annex IIB. Thus both sets of operations described in 5.3(c) are “disposal” operations. I need not set out the full lists of operations referred to in Annexes IIA and IIB, not least since the descriptions given in 5.3(c)(i) and (ii) of Part I of Schedule I to the PPC Regulations simply replicate the language of D8 and D9 of Annex IIA. However in light of one of the arguments advanced by Mr West QC for UU I should notice part of the French text of D8 and D9. Where in English we have “which results in final compounds or mixtures which are discarded…” the French has “aboutissant à des composes ou à des mélanges qui sont éliminés…”.

I should also draw attention to a distinction between the terms of D1 to D12 inclusive (which are referred to in 5.3(c)) and D13 – D15 within Annex IIA. D1 – D12 describe operations which are by way of final disposal. Thus D1 includes landfill, D11 is incineration at sea, and D12 is permanent storage. But D13 – D15 describe intermediate types of operations, which take place before final disposal by means of D1 – D12. Thus D13 is “Blending or mixing prior to submission to any of the operations numbered D1 to D12”, D14 is repackaging, and D15 is storage pending any of the D1 – D14 operations.

As regards Annex IIB (“Recovery Operations”) I need only cite item R10:

In light of the submissions made to us I should set out the terms of the third recital to the WFD:

Now I will turn to the IPPC Directive, which as I have said was sought to be transposed into domestic law by the PPC Regulations. I must first set out a number of the recitals:

Whereas different approaches to controlling emissions into the air, water or soil separately may encourage the shifting of pollution between the various environmental media rather than protecting the environment as a whole;

For clarity’s sake I should say first that the judge found that the four sludge plants were within that part of the definition of “installation” given at PPC Regulation 2(1)(i). UU appeals against that finding. The judge found that the two industrial effluent plants were not within Regulation 2(1)(ii). The Environment Agency appeals against that finding. I will first describe the facts relevant to UU’s appeal.

At Widnes and Bolton raw sludge from what is called primary treatment is de-watered by gravity belts. From Widnes, the de-watered sludge is then transported by tanker to a plant at Warrington. There it is subjected to what is called primary and secondary digestion. After that it is pumped through the Mersey Valley sludge pipe line to the Shell Green Processing Plant. At Bolton, the de-watered sludge is subjected to primary digestion. It is then pumped to Davyhulme. There is also at Bolton a contingency plan for centrifuging sludge to produce cake for use in land reclamation. At Davyhulme itself (where again there is a contingency plan for the centrifuging of sludge to form cake), raw sludge from primary treatment tanks is subjected to primary digestion, and then mixed with sludge which has been subject to primary digestion at Bolton. This combined sludge is subjected to secondary digestion, and then pumped through the Mersey Valley sludge pipe line to Shell Green. At Shell Green a decision is taken whether the sludge should be incinerated or landfilled (both “disposal” operations) or taken off to spread on farmers’ fields (a “recovery” operation).

At Wigan, raw sludge from primary treatment is de-watered by centrifuge. The resulting cake is used in land reclamation. The contingency plan at this plant is to dispose of the cake by landfill or reclamation. No sludge is pumped to Shell Green from Wigan. During the course of the hearing before us Mr West accepted that the Wigan plant was rightly subject to the permit regime because as regards the sludge that was disposed of according to the contingency plan, the operation at the plant was a treatment resulting in “final compounds or mixtures which are discarded” by way of disposal. It follows that UU’s appeal must be dismissed so far as it relates to the Wigan plant.

As regards the other three sludge plants at Widnes, Bolton and Davyhulme the facts boil down to this. The activities there carried on undoubtedly include the production of sludge for disposal. But these activities are intermediate; further processes are carried out before the sludge is, as it were, finally laid to rest.

I turn to the facts relating to the Environment Agency’s cross-appeal, which as I have said concerns the two industrial effluent plants at Blackburn and Dalston. There is an InterBrew brewery at Blackburn, and a Nestlé milk processing plant at Dalston. UU’s Blackburn plant is about 800 metres from the brewery to which it is connected by a pipeline, through which effluent from the brewery (urban waste water of high strength and biologically treatable) is piped to UU’s plant where it is pre-treated and mixed with general waste water. Thereafter it is discharged into the public waste water treatment works and blended with the main flow of urban waste water.

UU’s Dalston plant is about 700 metres from the Nestlé factory and, again, linked to it by a pipe, through which it receives the trade effluent from the factory. This effluent is industrial urban waste water of high strength and biologically treatable. It represents more than 50% of the load going through UU’s Dalston plant, where it is treated along with general domestic sewage from the local population.

I will deal with PPC Regulation 2(1)(i) and UU’s appeal first. As I have indicated this now relates only to the sludge plants at Widnes, Bolton and Davyhulme.

UU’s case in relation to those plants is that the treatments there carried out do not result in final compounds or mixtures which are discarded by way of disposal. The point taken is not simply that the sludge is transferred on to other premises (ultimately to Shell Green). It is more particularly submitted that in each case, after leaving the plant, the sludge is subjected to further biological and/or physico-chemical treatment; and it is this further treatment which “results in final compounds or mixtures” by way of disposal within the meaning of section 5.3(c) of Part I of Schedule I to the PPC Regulations. Thus it is said that the sludge from Widnes is tankered to an alternative site for such further treatment, and the Bolton sludge is subjected to further treatment at Davyhulme and then (together with sludge which has been subjected to primary digestion at Davyhulme) at Shell Green.

The issue on UU’s appeal in relation to the four (now three remaining) sludge plants has been expressed in different ways as the argument progressed. It might be articulated as a single question thus: did the operations carried out at the plants amount to treatment which resulted in “final compounds or mixtures which are discarded” by way of disposal?

It is convenient to identify certain propositions which are accepted on this appeal and are not in contention. (1) UU accept that the PPC Regulations apply to waste water treatment activities. (2) They accept also that sewage sludge is waste within the meaning of the WFD. (3) The sludge handling processes relevant in the case, which are called de-watering and digestion, are biological and/or physico-chemical treatments potentially falling within D8 or D9 of Annex IIA to the Waste Framework Directive. (4) If the operations at the sludge plant produced final compounds or mixtures which were discarded by way of disposal, UU accept that the D8 and D9 processes constituted by such operations would amount to waste disposal activities within section 5(3)(c).

This common ground is the backdrop to UU’s core submission, which is that a biological or physico-chemical treatment does not fall within section 5.3(c), nor therefore within the definition of “installation” given at PPC Regulation 2(1)(i), unless it directly produces the compounds or mixtures which are discarded and so disposed of; there must be no further treatment intervening before the compounds or mixtures are finally discarded. But the sludge from the three sludge plants underwent further treatment. Hence the answer to the question I posed at paragraph 19 is No, and those plants are not “installations” within PPC Regulation 2(1).

Inherent in this argument is the proposition that the regulatory scheme, at any rate so far as concerns the requirements relating to compulsory permits, is concerned not so much with the environmental safety of the processes or operations carried on at premises such as the sludge plants, but rather with the safety of the product to which those processes have led or contributed. This antithesis was put to Mr West by Smith LJ in the course of argument, and I understood him to accept it. Indeed he submitted that there were features of the European legislation which supported the proposition. Thus Article 3(c) of the IPPC Directive, which I have set out, refers to waste production; and the reference to 50 tonnes in section 5.3(c) (which reflects a like reference at paragraph 5.3 of Annex I to the IPPC Directive), says Mr West, seems to be without point unless the focus of the scheme is on the final waste product. I apprehend Mr West would also adopt a suggestion offered for discussion in the course of argument by Smith LJ, namely that the permit regime may be less interested in the process than in the product because where the process results in recovery rather than disposal there is no question of a permit being required.

Mr West also advanced arguments based on the language of section 5.3(c) and the French text of D8 and D9. As regards the former he submitted that if the scope of section 5.3(c) extended to intermediate operations, the adjective “final” was inapposite and redundant. As regards the latter he submitted that the participle “aboutissant” also imported finality.

It is elementary that a national measure purporting to implement a Directive must be interpreted “as far as possible, in the light of the wording and the purpose of the Directive in order to achieve the result pursued by the latter”: Marleasing [1990] ECR 1-4135. I should refer also to the decision of their Lordships’ House in Litster [1990] 1 AC 546, where Lord Oliver said this at 559:

Mr Hart’s essential case was that the position urged by Mr West implied a narrow and unreal view of the scope and purpose of the European legislation, and in particular the IPPC Directive upon which light is also cast by the WFD. He submits generally that the relevant purpose of the IPPC Directive is to prevent, or at least to minimise, environmental pollution arising out of waste treatment operations leading to disposal. He says that so much is exemplified by the third recital to the WFD, which I have already set out but repeat for convenience:

In addition I have already referred to Articles 9 and 10 of the WFD, and other provisions to which they cross-refer, as tending to show that the scope of the regime for permits is greater and more detailed for disposal than for recovery operations.

As for the terms of the IPPC Directive itself Mr Hart submits that the recitals, not least those which I have quoted, emphasise the general nature of the legislation’s purpose to diminish or extinguish environmental pollution arising out of waste treatment operations leading to disposal. There is nothing to suggest that intermediate operations are excluded and the overall intendment of the recitals suggests the opposite.

Mr Hart advanced some other submissions, including one amounting to a reduction ad absurdum, as follows. The operations at a plant might produce two compounds, which might be mixed (D13 within Annex IIA) and then sent for landfill (D1). On Mr West’s argument, the operations at the plant are outwith D8/D9 because there is a subsequent process. But it might be that the two compounds were put into landfill separately, without being mixed: perhaps next to each other. In that case they would be covered by the regime. So far as it goes I think this provides some support for a further dimension to Mr Hart’s case, to the effect that the case the other way is arbitrary: the difference between intermediate and final operations is not a principled distinction.

On the arguments as to language Mr Hart submits that the text of section 5.3(c) is well capable of accommodating his interpretation. The words “results in final compounds or mixtures” does not have to mean “results without more…”. Intermediate processes are as well included as last processes. If a purposive approach were required to meet the aims of the European legislation, that would be a modest exercise given Marleasing and IDT. The French text carries Mr West no further.

In sum Mr Hart submits that it is beyond contest that the processes at the three sludge plants include the production of sludge for disposal, and it would be a stunted and artificial reading of the PPC Regulations, and one which would be false to the underlying European provisions, to hold that the mere fact that, before final disposal, some further process is added takes the operations at the sludge plants out of the permit regime.

The judge below dealt with UU’s appeal in three paragraphs as follows:

Mr West criticises the judge’s reasoning on the ground that he appears to have thought, contrary to the fact, that it was UU’s case that for operations to fall within section 5.3(c) final disposal of the compound or mixture has to take place at the plant in question. I would accept that paragraph 73 of the judgment lends itself to that criticism. But in my judgment the judge was right on the essential point in the appeal: he rejected the submission that treatment processes at intermediate plants are excluded from the permit regime. It seems to me that the essential reasoning which informs Mr Hart’s submissions as I have described them is correct. The general purpose of the legislation is of course that of environmental protection in the course of waste disposal operations. The European materials tend to demonstrate that the reach of this purpose touches intermediate as surely as final operations.

The notion that the permit regime may be less interested in the process than in the product because where the process results in recovery rather than disposal there is no question of a permit being required, is I think refuted by the proposition that intermediate treatment may affect the quality of the product sent for disposal whether or not some of the same product goes to recovery. Given the legislative context the difference between intermediate and final operations is not a principled distinction.

For these reasons I would dismiss UU’s appeal.

As I have indicated, the cross-appeal engages the second part of the definition of “installation” in PPC Regulation 2(1) which I repeat for convenience:

The judge confessed to “grave difficulty” in construing the term “directly associated activities” (see paragraph 81 of his judgment), notwithstanding its being defined in the PPC Regulations. I think he did so because he found the expression “technical connection”, which appears in that definition, elusive and obscure. “[T]echnical connection” is not itself defined, either in the PPC Regulations or in the IPPC Directive. However the judge was quite clear that the industrial effluent plants were not “on the same [respective] site[s]” as the brewery and milk plants. He considered (paragraph 80) that the distances between them (800 metres and 700 metres) were too great.

It is convenient first to identify the arguments on “same site”. Unsurprisingly Mr West simply submits that the judge was right. Mr Hart for the Environment Agency submits that that the expression “same site” can and should be read broadly. He points to the fact that the definition of “installation”, given in Article 2(3) of the IPPC Directive, includes no requirement of “same site”. I repeat it for convenience:

I have to say I think that the draftsman of the definition of “installation” in PPC Regulation 2(1)(ii) may have misunderstood the definition in the IPPC Directive. That definition does not appear to stipulate a location where the “directly associated activities” must be carried on. Mr Hart drew attention to the absence of a “same site” requirement in the IPPC Directive definition. He submitted that in light of that circumstance we should “read down” the same site requirement in the Regulation 2(1)(ii) definition in accordance with the Marleasing, Litster, and IDT jurisprudence.

As for the application of the requirement of “directly associated activities” and in particular, within it, the question is whether the operations at the industrial effluent plants constitute a “directly associated activity which has a technical connection with the activity carried out [at the brewery and milk plants]”: see the definition of “directly associated activity” in PPC Regulation 2(1). Mr West submits that UU’s activities at the industrial effluent plants are wholly different in nature from what is done at the brewery and the milk plant. Mr Hart contends that there is a “technical connection” between the two sets of plant or premises because (a) in each case there is a direct dedicated pipeline between the one and the other, (b) the pipeline enables effluent from the brewery/milk plant to be treated by UU, and (c) such treatment is essential to the processes being carried on at the brewery and the milk plant, and the judge recognised as much at paragraph 77 of his judgment. Mr Hart submits also that the same facts establish a “direct association” between UU’s works and the brewery and milk plant.

On “directly associated activities” and “technical connection” I am inclined, with a great deal of diffidence, to entertain a marginal preference for Mr Hart’s submissions. Since for reasons I shall shortly explain I would however dismiss the Environment Agency’s appeal on the “same site” point, I prefer not to state a concluded view. That said, I decline to leave this part of the case without expressing my grave reservations about the nature and quality of this part of the legislation. These reservations underline my diffidence in reaching a conclusion. Violation of the permit provisions carries criminal sanctions. It is wholly unsatisfactory that the determination of guilt or innocence of a criminal offence might depend upon a court’s apprehension of the sense to be attributed to a phrase such as “technical connection” which, though it appears in a highly specialised context, is nowhere defined in the legislation. If there were a prosecution which depended on the point, I should not be surprised to see an argument being run on behalf of the defence to the effect that the governing legislation, in particular the phrase “technical connection”, is so vague that the prosecution is repugnant to Article 6 of the European Convention on Human Rights.

I turn to “same site”. I decline to “read down” this expression. By no stretch of the imagination are two sets of premises, a half mile and more apart and connected only by a pipeline, on the “same site”. On this point I think the judge was plainly right. I have considered what might be the effect of the fact (if it is so, and I think it is) that the draftsman of the definition of “installation” in PPC Regulation 2(1)(ii) misunderstood the definition in the IPPC Directive, which contains no “same site” requirement. It means, I apprehend, that the Directive has not been properly transposed into the domestic law of the United Kingdom: the PPC Regulation has imposed an additional requirement (“same site”) for which the European measure provides no mandate. It has not been submitted that in those circumstances we should give the IPPC Directive direct effect and thus simply ignore the “same site” requirement. Though we have not heard argument as to the jurisprudence relating to the “direct effect” doctrine, I should say that I greatly doubt whether such a submission could properly have been made. The Environment Agency is an arm of the State, and the State was of course responsible for transposing the IPPC Directive into domestic law. If it has been transposed on a basis too onerous to the State regulator, I do not consider that the State can take advantage of the mistake. The Environment Agency must, so to speak, live or die by the PPC Regulations; and as to that, I have for my part already held that the relevant premises here were not on the “same site”.

I would dismiss the cross-appeal.

I agree.

I also agree.