The AGS Loss Prevention Working Group is looking into the business risks and legal issues associated with the emerging climate change and environmental issues affecting AGS members.  The implications of these issues are already being felt in the planning and delivery of infrastructure and capital projects and as a consequence there has been a rise in disputes.

This AGS Magazine article outlines these emerging issues and the LPWG proposes to look in more detail at particular issues in future magazine articles and AGS documents.  Its aim is to help members understand how disputes arise and how to avoid them.  The discussion below is based on a recent article written by Alex Lee, AGS Chair, for HKA’s ‘Crux insight newsletter’ which summarises the latest trends in increasing and emerging environmental disputes.  HKA Global Ltd, an AGS member organisation, conducts annual surveys of emerging areas of litigation in the construction sector.

The LPWG would welcome any comments on commercial / contractual / legal issues regarding climate change and the environment, or examples from members’ experiences, to help direct the Group to review those topics of most interest.

Disruption related to climate change – adverse weather impacts

Unpredictable weather can lead to extended project timelines, particularly for projects on exposed sites or covering large areas.  Extreme heat is now affecting UK industries where workers are exposed to the elements.  Disruption of global supply chains, which have led to claims over late deliveries on around one in 10 projects, is often caused by natural events.

Parties have been invoking force majeure clauses to avoid liability for disruption caused by unpredictable weather, but establishing if the burden was beyond a party’s reasonable control can be complex and challenging.  As extreme events become more frequent contracting parties need to focus on how contracts define responsibility under force majeure.

Unforeseen contamination is a traditional source of dispute

Pressure from project promoters to start works early and speed completion compresses the pre-construction phase, which can lead to poorly conducted environmental due diligence and site investigation.  This can lead to project delays and legal disputes when unexpected contamination is found.

This also increases the likelihood of pollution incidents which may breach statutory rules and lead to civil disputes involving damages for common law nuisance or negligence, and contract breaches.

Designers need to take account of the effects of extreme weather, for example flooding, high winds and on material selection.

Emerging contaminants are increasing

Lawsuits related to alleged exposures to ‘forever chemicals’ are increasing. These per- and polyfluoroalkyl substances (PFAS) are a diverse and large group of synthetic organic chemicals, commonly used in the construction industry.  PFAS are persistent in the environment and hard to remediate.  Site construction on brownfield sites can mobilise PFAS and introduce new pathways for exposure and receptors.  Plumes can travel further than with conventional hydrocarbon contamination.

Regulatory guidance on PFAS is evolving as awareness of PFAS-related risks increases.  The concentration levels at which these chemicals are deemed safe has been decreasing.

There may be gaps in a site’s historical records, and developers can face significant extra costs if these chemicals are unexpectedly found.  PFAS related insurance claims are increasing, with increasing disputes regarding insurance cover and retrospective liability.  Liability and contractual indemnity clauses and should be carefully reviewed to ensure that any responsibility for PFAS related risks is clearly allocated.

Carbon footprints jeopardise planning consents

Increasingly, climate change is a material consideration in planning decisions, prompting challenges to new road, air and national infrastructure.

Evolving environmental litigation – greenwashing

Greenwashing by companies and governments is seen to project an eco-conscious image not supported by meaningful reductions in environmental impact.  As demand for environmentally friendly and sustainable goods and services has grown, so has the prevalence of greenwashing, whether of company credentials, products or services.  The risk of litigation against such misrepresentation remains high.  Companies must consider the rapidly evolving regulations in this area before making statements about the sustainability of their projects.

Biodiversity impacts raise regulatory risks

High-emission industries and those that cause severe or widespread damage to the environment will be targets for litigation under current and new legislation.  New biodiversity laws are already bringing government and the construction sector into conflict with a potential rise in biodiversity-related disputes in the construction sector.

Contract clauses requiring compliance with climate change and carbon reduction targets

Contracts are increasingly containing clauses requiring compliance with climate change and carbon reduction targets.  These are being included by governments and businesses to align national economies and commercial activities with sustainability goals and shifting towards a low-carbon economy.  These clauses may require the setting of greenhouse gas emission reduction targets, the monitoring and reporting of emissions, the implementation of carbon reduction plans, and the reduction of waste production and the increase of recycling and reuse.

Organisations drafting and signing contacts containing such clauses need to consider how the requirements can actually be achieved by their suppliers, how they can be legally enforced, and how they will be interpreted by the courts.  Organisations should consider a collaborative approach with their suppliers, particularly smaller businesses, and consider early communication, training and a collaborative approach.  Both parties to such contracts must stay updated and adapt to evolving standards.

Summary

Environmental litigation is poised to expand on these and other fronts.  Heightening public and political awareness, stricter regulations, and global efforts to deliver change are increasing scrutiny of infrastructure and capital projects and consequently the corresponding risk of litigation related to sustainability.

For now, traditional pollution, emerging contaminants and project delay cases continue to dominate.  Indemnity and insurance disputes are rising, as are claims over climate-related design failures.  Balancing environmental, economic and political pressures will be difficult for legislators (and others).  Developers may find getting planning consent for major infrastructure much harder.  Ultimately, more biodiversity disputes are anticipated, along with diverse cases over corporate governance.

The need to anticipate, investigate and mitigate these and other environmental risks can only increase.

If readers have any comments on the issues discussed, or examples from their experiences, then please pass them on to the AGS at ags@ags.org.uk

Article provided by David Hutchison, AGS Honorary member