Maltese Environmental Law and Environmental Responsibility behind the Corporate Veil
Over the last decade or so, and particularly post Malta’s EU membership, Maltese Environmental law has undergone a quantum leap from a largely unregulated area of law (1) to a substantially comprehensive and surely more sophisticated network of primary and subsidiary legislation. Sophisticated as it were, environmental law in Malta does not particularly burden officers of Maltese limited liability companies with specific environmental responsibility, meaning that it is general legal principles regulating companies and their officers that will apply to officers that commit environmental wrongs in the carrying out of their respective posts within the company structure.
In fact, Malta’s advancement in the environmental law sector did not change the general commercial, criminal and civil law rules regulating responsibility of officers of limited liability companies so as to extend this specifically to environmental wrongdoing. The advancement did serve however to increase the instances when such officers can be found and held to be ‘responsible’ or ‘liable’ for such wrongdoing under general principles. This is the new reality that company officers face – the same traditional legal rules continue to regulate their liability and responsibility yet, a multitude of new situations have emerged when such officers may be in breach of such rules.
Sources of Responsibility for Environmental Wrong
Until recently, the Environmental Protection Act (2) (EPA) had been Malta’s pinnacle law on the protection of the environment.(3) The Act was not much more than a statement of principles,(4) also serving as an enabling act, to the extent that environmental law proper was and still is dispersed in a multitude of legal notices.(5) Over the months of November and December of 2010, the Environment & Development Planning Act (EDPA), Chapter 504 of the Laws of Malta, was brought into force, with some provisions still to be brought into force over 2011. The EDPA mashes the EPA and the old Development and Planning Act into one new law in an attempt to reconcile the occasional tension between “development planning” and “environmental protection”. Insofar as the EDPA is concerned, the approach remains identical to that followed in the EPA, namely, the EDPA now serves as the skeleton that holds together the network of subsidiary legislation that makes up the body of Maltese environmental law. This body of law has been promulgated through a vast number of legal notices over a span of around ten years and with regard to very specific subjects, such as waste, noise, pollution and ambient.
The EDPA itself does not deal specifically with limited liability companies and does not create any special regime for company officers. It does mention bodies corporate in a general context, in the sense that it empowers the Minister responsible for the environment to pass regulations that may, among other things, provide that environmental wrongdoing, or better, violations of the EDPA or regulations made there under, will amount to an offence and in such cases “where the person guilty of the offence is a director, secretary or manager of a body corporate for the economic benefit of whom the offence was committed, such body corporate shall be liable in solidum with the offender for the payment of the said civil debt”.(6)The Minister has not passed regulations under this article. Other than this one provision, the EDPA does not treat officers of limited liability companies in any special way. Similarly, the legal notices dealing with Maltese environmental do not create any particular regime regulating environmental responsibility of company officers but rather, as with EDPA, allow for the applicability of general principles.
Consequences of Environmental Wrongdoing
Recourse to such general principles means that one will have to determine who committed the wrongful act and who, according to law, is responsible for the consequences ensuing from the wrongdoing: the company or the natural persons, officers of the company, who act on its behalf? The wrongful act will have civil repercussions and may also have criminal consequences for the wrongdoing.
If the environmental wrongdoing giving rise to a criminal offence is deemed not to be a corporate wrongdoing but to have been committed by the director or officers independently from the company, that is to say not in the carrying out of their duties or in the performance of their job description, then such natural persons would be liable for their wrongdoing personally in accordance with general principles of law. Indeed, where the environmental wrongdoing committed by the officer also amounts to a breach of duty towards the Company, that wrongful act or omission can also result in such officer’s personal liability for civil damages towards the Company.
If it is established that the environmental wrongdoing giving rise to a criminal offence is corporate wrongdoing, in other words, has been committed by a body corporate, the criminal sanction levied for that offence will be attributed to the person who, at the time of the commission of the offence, was a director, manager, secretary or other similar officer of the company, or was purporting to act in any such capacity, unless that person manages to prove in court that the offence was committed without his/her knowledge and that s/he exercised all due diligence to prevent the commission of the offence.(7) Criminal and/or administrative sanctions which follow will, thus, not always attach to the body corporate itself but rather to its officers.
Corporate wrongdoing has civil law repercussions, and general principles will again apply. In cases of “corporate wrongdoing”, fault is attributed to the company and it is the latter that is responsible and not its officers. Civil liability cannot be attributed to company officers personally simply on account of the post they hold as company officers, assuming the officers are acting within the parameters of their “job description” since in such cases officers act in a representative capacity, as mandatories for the company. If they act outside the scope of their competence, it will be the officer who will be liable, and not the company(8), for the wrongdoing and for the ensuing damages. Additionally, under general principles, there may be situations where it is the company that would be liable for damages if is proven that it employed an incompetent person, culpa in elegendo,(9) or if it failed to assign or oversee tasks competently, culpa in vigilando.
In some jurisdictions, we have recently seen a shift away from such general principles of law where officers’ responsibility is wholly dependent on fault. Certain forward-looking jurisdictions have created regimes regulating officers’ responsibility that are based on vicarious if not strict liability for corporate environmental damage, as opposed to more traditional forms of liability based on fault. There is growing evidence that this trend in environmental liability is on the increase and that the focus of environmental liability in the law is being shifted from the corporate person onto its officers or both. In certain jurisdictions, the law is drafted in such a way so as to implicate individuals directly associated with the company, such as company directors, corporate officers or managers, and (under US federal law) shareholders.
Although, Maltese environmental law has not yet followed this trend of no-fault liability and continues to treat officers’ responsibility under general principles, one can safely say this traditionalist approach is set to change particularly in the light of the EDPA that introduces the new rule discussed above whereby in certain circumstances, the Company and the officer actually committing the wrongdoing are liable “in solidum”. Regimes under Maltese law where company officers are held strictly liable for corporate wrongdoing, and where criminal liability arises where one fails to take appropriate action that would avoid environmental harm, are not likely unless forming part of pan-EU legislation. Until that time, general principles will continue to apply in Malta and company officers should keep tabs on the various environmental law obligations imposed on the companies they represent. Meanwhile, one eagerly awaits any Maltese law proposition that may extend corporate officers’ liability for environmental harm along the same lines as has occurred under US, UK, Australian and other continental European legislations.
Dr. Jotham Scerri Diacono is recognised as a leading environmental lawyer in Malta with experience on environmental and regulatory issues effecting a wide range of industry sectors including pharmaceutical plants, marinas, environmental claims, privatisations, climate change and energy, planning issues, ports and marine generally.
Bar Admission, 1994, Superior Courts of Malta; Member of the Malta Chamber of Advocates; Member of the Malta Maritime Law Association; Honorary Member of the Association of Fellows and Legal Scholars of the Centre for International Legal Studies; Member of the International Bar Association; Member Chartered Institute of Arbitrators, UK; Visiting Lecturer at the University of Malta (Faculty of Laws) on Climate Change and Environmental Law generally; Member of the Maritime Legislative Advisory Council. Committee Member of the Executive Council of the Malta Energy Efficiency & Renewable Energies Association (MEEREA). Dr. Scerri-Diacono can be contacted at firstname.lastname@example.org.
Dr. Annalise Caruana practises in the Banking & Finance department of the firm assisting in a number of project financings. She also assists in studies relating to Environmental Law, including energy related projects and also has a background in Shipping Law. Her most recent experience relates to the study and analysis of transposition into Maltese Law of the Renewable Energy Directive.
Annalise qualified in 2009, Doctor of Laws from the University of Malta. In 2010, she was awarded a Masters Degree in International Law, with distinction, from the University of Edinburgh. One of her major areas of study at the Edinburgh law school was that of International Environmental Law which covered various aspects from basic general principles of International Environmental Law to more practical applications of such principles through the study of international jurisprudence on the subject. Whilst at the Edinburgh law school, Annalise had the privilege of assisting with research relating to Human Rights and the Environment which led to her LLM dissertation on empowering individuals in international environmental law. She was admitted to the Bar, Superior Courts of Malta in 2011. Dr. Caruana can be contacted on email@example.com.
(1) The first major piece of legislation took the form of the “Environment Protection Act”, Act V of 1991, today repealed. Prior to this, Maltese law was very sporadic in so far as environmental law was concerned with rules and regulations being found in legislation concerning ‘antiquities’, in one case dealing with the protection of old trees; in Police Codes where environmental concern crossed with order, general cleanliness and sanitation; and elsewhere, such as the ‘Clean Air Act’ that concerned black smoke from bakeries and industries.
(2) Act XX of 2001, Chapter 435 of the Laws of Malta.
(3) The EPA substitutes a similarly-named Act, originally enacted in 1991, Chapter 348 of the Laws of Malta.
(4) Principles that are, however, not “directly enforceable in any court” although they remain “fundamental to the Government” and should be employed in the “interpretation” of the law (vide Section 5 of the EPA).
(5) Amounting to well over a hundred.
(6) Vide Section 61 of the EDPA.
(7) Interpretation Act, Chapter 249, Section13.
(8) S.1038, Civil Code.
(9) S.1037, Civil Code.