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Print articleThe Evolution of the Business of South African Environmental Law
July, 2013 - Andrew Gilder (Senior Associate, ENS) and Busani Dhladhla (Associate, ENS)
In 1989 the eminent South African jurist (the late) Prof.Dennis Cowen expressed the view that, by the end of the 1980s, South African environmental law was “a subject struggling to be born”. Nearly a quarter of century later South African environmental law is thriving as a “subject” in a manner that Prof. Cowen is unlikely ever to have anticipated. In addition, the business of environmental law has, in recent years, witnessed a rapid evolution. This article considers the reasons for and implications of this change for the future trajectory of environmental legal practice.
Various environmental statutes existed prior to the promulgation of the 1996 Constitution. However, the incorporation of the “environmental right” into the Bill of Rights (section 24 of the Constitution), which includes the injunction on government to legislate for environmental protection and sustainable development, led to the (then) Department of Environmental Affairs and Tourism’s law reform process which, in turn, resulted in the current suite of environmental statutesdealing the full range of environmental considerations from air to water, biodiversity, protected areas, the coastal zone and waste management. While these statutes are the environmental lawyer’s basic toolkit, the context for their practical application has, over time, seen a significant shift. There are three aspects to this contextual shiftthat are of relevance for present purposes: firstly, the nature of the shift; secondly the results / indicators of the shift; and, thirdly, the reasons underpinning the shift.
The nature of the contextual shift can be thought of as three-fold and arising from:
· increasingly complexity of environmental legal matters and awareness of the myriad linkages between these and other legal considerations;
· a significant increase in the importance accorded to environmental / sustainability issues in the commercial and industrial realms and a concomitant elevation in the actual and perceived financial valueof these issues; and,
· heightened compliance and enforcement actions by the Department of Environmental Affairs.
Among the indicators of the contextual shift is the increasing number of legal practitioners finding employment within the environmental departments at larger, “full-service” law firms. The term “full-service” is used here to denote larger law firms offering a number of specialist practice areas, usually centred around commercial legal disciples such as mergers and acquisitions and commercial litigation. The knock-on effect of swelling environmental practices at the larger firms is the lessening prevalence of boutique environmental law firms. The background to this statement is the market’s traditional view of environmental law as ancillary to more mainstream commercial legal disciplines and, consequently, as being unable to attract the work and fee volumes required for environmental practices to thrive at full-service firms. In South Africa, this perception led to the rise of a number of boutique environmental law firms premised inter alia on a business model that offered only environmental legal services. The term “boutique” is used here to denote a law firm, usually relatively small in terms of number of practitioners, offering services in a nichearea of law.
The immediate reason for the rise of environmental legal departments at larger firms is that such departments are experiencing an increase in demand for their servicesand require experienced practitionersto respond to this need. Given the previous eminence of boutique firms in the environmental legal sector, an obvious source of such experience has been the staff complements of the smaller firms. Among the advantages of the larger firms is their attractiveness as employers from, both, a salary and benefits perspective.
The flip-side of the “large law firm as employer” dynamic is the heightened set of production demands placed on the individual practitioner and the need to access the work required to satisfy theseproduction demands. To some degree the nature of large law firms ameliorates this dynamic in that such firms tend to attract large volumes of multi-disciplinary work by virtue of their full-service offering. Effectively, this means that a large corporate instructing the commercial department of a large law firm is also likely to use that firm’s other expertise, including environmental, when the need arises. This is often a function of the convenience provided by the large law firm as a “one-stop-shop” for legal services but is also due to the approach adopted by such firms to securing and building client relationshipsthrough a system of cross-referrals between departments / disciplines
The factors contributing to the increase in demand for the services of the larger law firms’ environmental departments are the real reasons for the evolution in the business of environmental law, and these factors are myriad and complexly related to one another. The following is a select set of examples of such factors and their dynamic inter-relation and is not meant as an exhaustive discussion of this issue:
· Increased compliance and enforcement: South African environmental law was considered for some years (and certainly for a good portion of the period between 1998 and 2008) to be comprehensive and well-articulated but lacking the enforcement that would provide real legal “teeth”. The intersection of a series of factors has seen a sea-change in this notion. The primary factor is the establishment of the DEA’s Compliance and Enforcement Directorate (Green Scorpions - mandated to ensure compliance with specific environmental laws)the operations of which have raised the stakes in environmental enforcement. The Green Scorpions release an annual report to record their progress in enforcement, including by way of high-profile litigation and the application of increasingly large fines and associated sanctions which can have marked financial implications (such as issuing orders to rehabilitate instances of environmental degradation). However, the work of the Green Scorpions is only part of the legislative picture. Criminal convictions are set to become a feature of environmental compliance. A recent example is the case of York Timbers (Mpumalanga) which received a fine of R 180 000, several years of interest payments and a further fine of R 450 000 for contravention of the regulations for environmental impact assessment (EIA Regulations). The fine was levied in the form of a confiscation order pursuant to the Prevention of Organised Crime Act (POCA). While York Timbers is the first entity to be fined under POCA for a contravention of the EIA Regulations the matter is not the first example of a criminal sanction being applied to the transgression of environmental law.The largest criminal penalty imposed, to date, for environmental offences is the R 4 million fine imposed by the Ermelo Regional Court, in October 2012, upon Golfview Mining (Pty) Ltd, which was convicted of various contraventions of the National Environmental Management Act (NEMA) and the National Water Act. The Golfviewconviction follows the April 2012 conviction and sentencing of Anker Coal and Mineral Holdings (Pty) Ltd (Anker Coal) and its director for infringements of environmental and mining legislation. The unique significance of the Anker Coal case is that it is the first time that a provision of NEMA (which has been on the statue-book since 1998) was used tohold a company director criminally liable for the actions of the company when under his control.
· Central to the boutique environmental law firm model is the notion that environmental legal issues are separable from the set of legal considerations that arise, for example, in the development of infrastructure projects. Part of the abovementioned evolution of environmental legal practice stems from the mainstreaming of environmental and sustainability issues in industrial and business strategy and implementation. Consequently, while the isolation of environmental legal considerations is certainly possible this is not, necessarily, the most efficient way of dealing with the full range of legal questions that may arise in a particular context. Experience has shown that in many circumstances, environmental legal issues are rarely isolated and that they are usually intertwined with other areas of law such as property law, mining law, tax law and project finance law. The advantage of the full service law firm in these circumstances is well illustrated by the fact that virtually all of the legal work required to prepare project bids for government’s Renewable Energy Independent Power Producer Programme(REIPPP) was undertaken by large law firms which house all of the expertise required to prepare a REIPPP project bid. In essence, the REIPPP accords equality of importance to the environmental and more traditionallegal considerations required for projects to achieve “financial closure” as valid bids to the REIPPP. It is also noteworthy that multi-disciplinary teams of practitioners from the full-service law firms advise both sides of the REIPPP equation as the Department of Energy employs these teams to assessREIPPPP bids.
· International trends in project financing have also contributed to a shift in the requirements imposed by lenders. For example, application of the Equator Principles by some banks to projects valued over R 100 million means that certain infrastructural investments are now being scrutinised through an environmental lens. In addition, seventy-two South African companies have voluntarily committed to the United Nations Global Compact (UNGC). The UNGC is a strategic policy initiative for businesses committed to aligning their strategies and operations with ten universally accepted principles in the areas of human rights, labour, environmental protection and anticorruption.
In a sense South African environmental law has come of age and has taken its place as an essential element of commercial and industrial investments and decision-making. What does this portend for the future business of environmental law? Similar shifts in other jurisdictions have seen the focus of purely environmental practices broadening to take account for evolving realities and new business areas. An example of new business is the set of burgeoning markets for environmental commodities, including carbon, water and biodiversity offsets. While these commodities are derived in the environmental arena, commercial arrangements associated with them can involve a complex web of legal issues, including contractual, compliance, financial, stakeholder and sustainability considerations and the need for the application of a concomitant range of legal expertise to their transaction.
Changes in the environmental legal business model are reflected in the renaming of practices to include concepts such as “sustainability”, “environmental markets” and “natural resource management” –making the old query “what’s in a name?” especially apposite. The new nomenclature reflects emerging awareness that the natural environment does not exist, and cannot be dealt with, in isolation from the need for human development. Modern sustainable development law seeks practically to achieve this “connectedness” and these linkages are reflected in the evolving business of environmental law.
Various environmental statutes existed prior to the promulgation of the 1996 Constitution. However, the incorporation of the “environmental right” into the Bill of Rights (section 24 of the Constitution), which includes the injunction on government to legislate for environmental protection and sustainable development, led to the (then) Department of Environmental Affairs and Tourism’s law reform process which, in turn, resulted in the current suite of environmental statutesdealing the full range of environmental considerations from air to water, biodiversity, protected areas, the coastal zone and waste management. While these statutes are the environmental lawyer’s basic toolkit, the context for their practical application has, over time, seen a significant shift. There are three aspects to this contextual shiftthat are of relevance for present purposes: firstly, the nature of the shift; secondly the results / indicators of the shift; and, thirdly, the reasons underpinning the shift.
The nature of the contextual shift can be thought of as three-fold and arising from:
· increasingly complexity of environmental legal matters and awareness of the myriad linkages between these and other legal considerations;
· a significant increase in the importance accorded to environmental / sustainability issues in the commercial and industrial realms and a concomitant elevation in the actual and perceived financial valueof these issues; and,
· heightened compliance and enforcement actions by the Department of Environmental Affairs.
Among the indicators of the contextual shift is the increasing number of legal practitioners finding employment within the environmental departments at larger, “full-service” law firms. The term “full-service” is used here to denote larger law firms offering a number of specialist practice areas, usually centred around commercial legal disciples such as mergers and acquisitions and commercial litigation. The knock-on effect of swelling environmental practices at the larger firms is the lessening prevalence of boutique environmental law firms. The background to this statement is the market’s traditional view of environmental law as ancillary to more mainstream commercial legal disciplines and, consequently, as being unable to attract the work and fee volumes required for environmental practices to thrive at full-service firms. In South Africa, this perception led to the rise of a number of boutique environmental law firms premised inter alia on a business model that offered only environmental legal services. The term “boutique” is used here to denote a law firm, usually relatively small in terms of number of practitioners, offering services in a nichearea of law.
The immediate reason for the rise of environmental legal departments at larger firms is that such departments are experiencing an increase in demand for their servicesand require experienced practitionersto respond to this need. Given the previous eminence of boutique firms in the environmental legal sector, an obvious source of such experience has been the staff complements of the smaller firms. Among the advantages of the larger firms is their attractiveness as employers from, both, a salary and benefits perspective.
The flip-side of the “large law firm as employer” dynamic is the heightened set of production demands placed on the individual practitioner and the need to access the work required to satisfy theseproduction demands. To some degree the nature of large law firms ameliorates this dynamic in that such firms tend to attract large volumes of multi-disciplinary work by virtue of their full-service offering. Effectively, this means that a large corporate instructing the commercial department of a large law firm is also likely to use that firm’s other expertise, including environmental, when the need arises. This is often a function of the convenience provided by the large law firm as a “one-stop-shop” for legal services but is also due to the approach adopted by such firms to securing and building client relationshipsthrough a system of cross-referrals between departments / disciplines
The factors contributing to the increase in demand for the services of the larger law firms’ environmental departments are the real reasons for the evolution in the business of environmental law, and these factors are myriad and complexly related to one another. The following is a select set of examples of such factors and their dynamic inter-relation and is not meant as an exhaustive discussion of this issue:
· Increased compliance and enforcement: South African environmental law was considered for some years (and certainly for a good portion of the period between 1998 and 2008) to be comprehensive and well-articulated but lacking the enforcement that would provide real legal “teeth”. The intersection of a series of factors has seen a sea-change in this notion. The primary factor is the establishment of the DEA’s Compliance and Enforcement Directorate (Green Scorpions - mandated to ensure compliance with specific environmental laws)the operations of which have raised the stakes in environmental enforcement. The Green Scorpions release an annual report to record their progress in enforcement, including by way of high-profile litigation and the application of increasingly large fines and associated sanctions which can have marked financial implications (such as issuing orders to rehabilitate instances of environmental degradation). However, the work of the Green Scorpions is only part of the legislative picture. Criminal convictions are set to become a feature of environmental compliance. A recent example is the case of York Timbers (Mpumalanga) which received a fine of R 180 000, several years of interest payments and a further fine of R 450 000 for contravention of the regulations for environmental impact assessment (EIA Regulations). The fine was levied in the form of a confiscation order pursuant to the Prevention of Organised Crime Act (POCA). While York Timbers is the first entity to be fined under POCA for a contravention of the EIA Regulations the matter is not the first example of a criminal sanction being applied to the transgression of environmental law.The largest criminal penalty imposed, to date, for environmental offences is the R 4 million fine imposed by the Ermelo Regional Court, in October 2012, upon Golfview Mining (Pty) Ltd, which was convicted of various contraventions of the National Environmental Management Act (NEMA) and the National Water Act. The Golfviewconviction follows the April 2012 conviction and sentencing of Anker Coal and Mineral Holdings (Pty) Ltd (Anker Coal) and its director for infringements of environmental and mining legislation. The unique significance of the Anker Coal case is that it is the first time that a provision of NEMA (which has been on the statue-book since 1998) was used tohold a company director criminally liable for the actions of the company when under his control.
· Central to the boutique environmental law firm model is the notion that environmental legal issues are separable from the set of legal considerations that arise, for example, in the development of infrastructure projects. Part of the abovementioned evolution of environmental legal practice stems from the mainstreaming of environmental and sustainability issues in industrial and business strategy and implementation. Consequently, while the isolation of environmental legal considerations is certainly possible this is not, necessarily, the most efficient way of dealing with the full range of legal questions that may arise in a particular context. Experience has shown that in many circumstances, environmental legal issues are rarely isolated and that they are usually intertwined with other areas of law such as property law, mining law, tax law and project finance law. The advantage of the full service law firm in these circumstances is well illustrated by the fact that virtually all of the legal work required to prepare project bids for government’s Renewable Energy Independent Power Producer Programme(REIPPP) was undertaken by large law firms which house all of the expertise required to prepare a REIPPP project bid. In essence, the REIPPP accords equality of importance to the environmental and more traditionallegal considerations required for projects to achieve “financial closure” as valid bids to the REIPPP. It is also noteworthy that multi-disciplinary teams of practitioners from the full-service law firms advise both sides of the REIPPP equation as the Department of Energy employs these teams to assessREIPPPP bids.
· International trends in project financing have also contributed to a shift in the requirements imposed by lenders. For example, application of the Equator Principles by some banks to projects valued over R 100 million means that certain infrastructural investments are now being scrutinised through an environmental lens. In addition, seventy-two South African companies have voluntarily committed to the United Nations Global Compact (UNGC). The UNGC is a strategic policy initiative for businesses committed to aligning their strategies and operations with ten universally accepted principles in the areas of human rights, labour, environmental protection and anticorruption.
In a sense South African environmental law has come of age and has taken its place as an essential element of commercial and industrial investments and decision-making. What does this portend for the future business of environmental law? Similar shifts in other jurisdictions have seen the focus of purely environmental practices broadening to take account for evolving realities and new business areas. An example of new business is the set of burgeoning markets for environmental commodities, including carbon, water and biodiversity offsets. While these commodities are derived in the environmental arena, commercial arrangements associated with them can involve a complex web of legal issues, including contractual, compliance, financial, stakeholder and sustainability considerations and the need for the application of a concomitant range of legal expertise to their transaction.
Changes in the environmental legal business model are reflected in the renaming of practices to include concepts such as “sustainability”, “environmental markets” and “natural resource management” –making the old query “what’s in a name?” especially apposite. The new nomenclature reflects emerging awareness that the natural environment does not exist, and cannot be dealt with, in isolation from the need for human development. Modern sustainable development law seeks practically to achieve this “connectedness” and these linkages are reflected in the evolving business of environmental law.
