Case law >> Scottish liquidators can abandon CAR licences

Scottish law expert Ian Cowan examines the recent Court of Session decision on allowing liquidators to abandon environmental licences

In England and Wales, company liquidators can disclaim an environmental licence held by the firm as “onerous property” under section 178 of the Insolvency Act 1986.

In Scotland that provision has no effect, as the Court of Session observed in Nimmo & Friar, Petitioners [2013] CSOH 124, and there is no precedent for disowning such a licence.

In the case, the liquidators of Scottish Coal asked whether they could abandon opencast mines and licences under the Water Environment (Controlled Activities) (Scotland) Regulations 2011 (CAR). The Scottish Environment Protection Agency (Sepa) argued that they could not.

The CAR gives Sepa control over what the person holding a licence must do before accepting its surrender. If that person becomes insolvent, this obligation falls to the insolvency practitioner.

For this reason the judge, Lord Hodge, would have decided that the petitioners should apply to surrender the licences in the normal way. However, the CAR is delegated legislation, so the Scotland Act 1998 required him to read its provisions as narrowly as required to be within the competence of the Scottish parliament.

The corporate insolvency regime is a matter reserved to Westminster, and Lord Hodge concluded that the liquidators could abandon the sites and CAR licences, using powers under the Insolvency Act.

This sets a worrying precedent for sites where a CAR licence requires post-closure remediation, so the decision has been appealed to the Inner House. Otherwise Sepa will wish to ensure that the Regulatory Reform Bill going through the Scottish parliament closes this loophole.

Ian Cowan