Law Times

Law Times • November 23, 2009 NEW An online resource tool 1.800.263.3269 Bestcase earlug.indd 1 3/26/08 11:52:01 AM Focus On ENVIRONMENTAL LAW Fines and prosecutions to increase F Environmental enforcement bill raises concerns for companies BY DARYL-LYNN CARLSON For Law Times ederal legislation that will im- pose higher fi nes and increased accountability for environmental off enders has corporate lawyers calling on their fi rm's environmental practitio- ners to help clients understand the new law and ramifi cations that can extend even to shareholders. Introduced by federal Environment Minister Jim Prentice, the Environmen- tal Enforcement Act, or Bill C-16, in- creases fi nes for environmental off enders and enhances the government's ability to investigate and prosecute cases. Its scope is broad, aff ecting nine other federal statutes ranging from the Cana- dian Environmental Protection Act to the Migratory Birds Convention Act. It also mandates a public registry of cor- porate off enders that will allow for public disclosure of off enders for fi ve years. Joanna Rosengarten, who practises environmental law at McCarthy Tétrault LLP, says the legislation is signifi cant. She points out that maximum fi nes for large corporations will be as high as $6 million, and the ministry has also created an administrative penalties re- gime for less serious violations. Th ose penalties, introduced under a separate piece of legislation called the Environmental Violations Administra- tive Monetary Penalties Act, include fi ne maximums ranging from $5,000 for an individual to $25,000 for corporations. Rosengarten says the administrative approach aims to cover less serious of- fences that would otherwise be expen- sive to investigate and prosecute. "Th e idea is to issue a monetary pen- alty to the company and for the com- pany to pay it. Th ere is no due diligence defence," she says. "Th ere is a review procedure, but the administrative penalties regime will nonetheless provide some deterrence for lesser off ences." For larger companies and more se- rious off ences, the act changes the nine other laws to provide sentenc- ing guidance for the courts, such as the requirement that judges consider cer- tain aggravating factors. "For example, in situations where a company may have intended to com- mit an off ence, gained some monetary benefi t from committing an off ence 'It's trying to increase public awareness and thereby deter the commission of environmental offences,' says Joanna Rosengarten. or where there is a previous compliance [issue], the court will look at these cir- cumstances as aggravating factors and impose a higher set of fi nes," Rosengar- ten explains. "So the courts sometimes already did that, but the bill just enshrines it in leg- islation and guides them how they are required to look at these factors." Rosengarten also says the bill's re- quirement that companies notify their shareholders of an off ence and fi ne cou- pled with the government's creation of a public registry listing enforcement ac- tions are notable. "It's trying to increase public awareness and thereby deter the commission of en- vironmental off ences. Corporations will not want to notify all of their shareholders that they've committed an off ence." Th e purpose, she suggests, was large- ly aimed at sending a message. "With all of the factors in this new legislation, including increased fi nes, public awareness, and the introduction of administrative penalties, the intent was to lead corporations to be more diligent in ensuring they don't commit environmental off ences," she says. Nevertheless, Daniel Kirby, co-chair of the environmental law group at Os- ler Hoskin & Harcourt LLP, says that Visit us online! canadianlawyermag.com & lawtimesnews.com Fresh content delivered weekly. Canadian Lawyer | Law Times | 4Students | InHouse www.lawtimesnews.com HouseAd-Online.indd 1 11/19/09 5:51:26 PM for clients, the shareholder notifi cation requirement could be confusing if not somewhat unfair. He notes, for example, that there's no distinction in the legislation between the types of corporations the sharehold- er notice provisions might aff ect. A paper entitled "New Disclosure Obligations Under Federal Environ- mental Legislation," which he co- authored with Andrew MacDougall, a partner in the fi rm's business law de- partment, and Jennifer Fairfax, an asso- ciate in the litigation department, sug- gested the provision was questionable and somewhat redundant. "Th e shareholder notice provisions un- der the amended acts are of dubious value to shareholders of public companies," the authors wrote. "In Canada, public issuers are already subject to continuous disclo- sure requirements which address envi- ronmental matters. Public issuers, which include not just public corporations but also other entities with publicly traded se- curities such as income trusts, real estate investment trusts, and limited partner- ships," are already required under provin- cial securities rules to prepare and fi le an annual disclosure about "material" devel- opments that include anything related to environmental issues. Th at fact that the legislation doesn't diff erentiate between types of corpora- tions is another concern. "What happens if you have a corporate partnership or other entities that aren't corporations or if you have a parent-sub- sidiary relationship, and it's a subsidiary that's been charged?" Kirby asks. "So notifying the shareholders would have meaning in a public company but it creates a two-tier system for subsidiaries." Th e requirement that judges mandate and oversee the notifi cation of shareholders is also "kind of a new era," Kirby adds. "Th e judge doesn't have the discre- tion to determine whether or not you have to notify shareholders but they do have the discretion of how you notify shareholders." "So it could be a posting on the [company] web site and not in the fi - nancial disclosure, which I would think would be preferable." At the same time, he argues that dis- closure of events that don't have any fi s- cal ramifi cations for the company's over- all fi nancial statements seems irrelevant. "Corporations that are potentially li- able under the federal statute should be already aware that these ramifi cations occur upon conviction," he says. Ultimately, Kirby and his Osler col- leagues wonder if the additional disclo- sure requirements may be confusing if there is no meaningful fi nancial conse- quence to the company. "A requirement for public corpora- tions to disclose information regarding all convictions, even trivial ones, under the amended acts may, in fact, be det- rimental if, by obscuring material dis- closures with unnecessary disclosures of immaterial information, it results in information overload," they wrote. Says Kirby, "I think lawyers are still dealing with the full ramifi cations of what this means for companies other than those that are publicly traded." LT Implementing the bill o implement the bill, the government plans to boost its staff of enforce- ment offi cers to 320 from 215. As a result, it allocated $22 million in last year's budget and $21 million in this year's budget to pay for the increases. The bill will apply to the following nine federal laws: T • Antarctic Environmental Protection Act • Canada National Marine Conservation Areas Act • Canada National Parks Act • Canada Wildlife Act • Canadian Environmental Protection Act • Migratory Birds Convention Act • Saguenay-St. Lawrence Marine Park Act • International River Improvements Act • Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act PAGE 9

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