Force majeure as a shield for governmental enforcement in a post-COVID-19 world: putting your company in the best position vis-a-vis force majeure clauses in agreements with governmental agencies  

In these unprecedented days, you read a lot about force majeure and “act of God” defenses to commercial contract publications. Companies affected by the current pandemic are looking to contract terms to minimize their financial losses as the pandemic forces closures and cancellations, and productivity drops off in many industries.

This post addresses a small but important subset of those contracts: “contracts” with governmental agencies, such as consent decrees or consent judgments (Orders) entered into before the pandemic that contain specific obligations or specific deadlines, as well as stipulated damages clauses if those deadlines are not met.

It is important to note that the Orders often include force majeure protections that let parties off the hook for obligations that go unfulfilled due to “acts of God” and other events beyond their control. However, lawyers must review the Orders carefully to determine what’s covered and what’s not.

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EPA announces new temporary enforcement discretion policy

In an unprecedented move, today (March 26, 2020) EPA issued a memorandum to its governmental and private sector partners about its new temporary policy regarding EPA enforcement of environmental legal obligations during the COVID-19 pandemic. The memo states the EPA will exercise its enforcement discretion for noncompliance covered by temporary policy and resulting from the COVID-19 pandemic if regulated entities take the steps applicable to their situations, as set forth in the temporary policy. For noncompliance that occurs during the period of time that this temporary policy is in effect, and that results from the COVID-19 pandemic, this policy will apply to such noncompliance in lieu of an otherwise applicable EPA enforcement response policy. This policy applies broadly across various industries. The policy states that companies should try to minimize “the effects and duration of any noncompliance” with environmental laws and should also keep records of their own noncompliance, along with identifying how COVID-19 was a factor.

It is important to note, however, that enforcement in certain sectors is unaffected by the policy, such as public water systems. EPA states, “Public water systems have a heightened responsibility to protect public health because unsafe drinking water can lead to serious illnesses and access to clean water for drinking and handwashing is critical during the COVID-19 pandemic.” EPA further states the change to the enforcement discretion policy “does not provide leniency for intentional criminal violations,” and doesn’t apply to Superfund and other hazardous and solid waste management.

The policy is retroactive to March 13, 2020.

Last call for alcohol… comments. Proposed amendments to clarify the requirements for providing alcoholic beverage Proposition 65 warnings

Following a recent settlement between the California Attorney General’s Office and a number of alcoholic beverage retailers, the Office of Environmental Health Hazard Assessment (OEHHA) is proposing to clarify the Proposition 65 warning requirements for alcoholic beverages sold on the internet, in catalogs, and via third-party providers. The most prominent item in the settlement’s methods and in OEHHA’s proposed amendments are that alcoholic beverages sold online or through a catalog must have a warning on the internet site or in the catalog, as well as a warning provided to the purchaser or delivery recipient prior to or at the same time as delivery (e.g., a warning label on a bottle or can).

The amendments would affect industry stakeholders such as retailers, manufacturers, and third-party providers. Affected businesses will likely benefit from the proposed regulatory action because the amendments provide clarifying guidance concerning the provision of Proposition 65 warnings for alcoholic beverages purchased via the internet (including mobile applications) or through catalogs. However, with the increased use of third-party providers to facilitate sales, businesses may need to change their current standards to ensure that warnings are provided to the purchaser or delivery recipient prior to or at the same time as delivery.

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Administrative agencies have broad subpoena power

A recent decision by a California court of appeal clarified the breadth of the California Water Resources Control Board’s (Board) subpoena power, which could have implications for other state agencies in California and elsewhere.  Moreover, private entities which are the subject of an administrative investigation may have a difficult time withholding financial records even if those records are not related to the alleged violations, and even if the subpoenaed entity is not directly responsible for any of the alleged violations.

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New EU Circular Economy Action Plan and Sustainable Product Policy

Five years after its first iteration, yesterday (11 March 2020), the European Commission launched its new Circular Economy Action Plan (CEAP) as part of the overall European Green Deal.

The CEAP contains many proposals.  We will explore others (including those relating to batteries, packaging, plastics, textiles, ‘safe-by-design’ chemicals, non-financial reporting and shipment of waste) in separate posts.

For now, here is a brief outline of some of the more eye-catching proposals from a ‘sustainable products’ – in particular, electronics – perspective. Continue Reading

OSHA and Cal/OSHA issue coronavirus guidance

Earlier this month, the U.S. Occupational Safety and Health Administration (OSHA) published information on novel coronavirus (COVID-19) hazard recognition, medical information, potentially applicable OSHA standards, control and prevention, and additional resources. The guidance notes that without sustained human-to-human transmission, most U.S. workers remain at low risk of exposure and infection. However, OSHA has identified commonsense practices for all workers and employers to help prevent worker exposure to COVID-19, including proper handwashing with the use of an alcohol-based rub (hand sanitizer). OSHA also cautions workers to avoid touching their eyes, nose, and mouth with unwashed hands and to avoid close contact with sick people. The guidance lists additional precautions for workers involved in health care, deathcare, laboratories, airline operations, border protection, and solid waste and wastewater management. OSHA’s guidance is available here.

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Chinese Supreme Court swims against current on liability under Bunker Convention

The PRC Supreme Court has deviated from the accumulated legal precedent regarding liability for pollution under the International Convention on Civil Liability for Bunker Oil Pollution Damage (the Bunker Convention) and held the owners of a non-leaking vessel liable for clean-up costs and pollution damage. Continue Reading

European Commission seeking feedback on proposed review of the EU Non-Financial Reporting Directive

The European Commission is seeking feedback on a proposed initiative to revise the EU Non-Financial Reporting Directive (NFRD) (EU Directive 2014/95/EU), with submissions due by 27 February 2020.

The NFRD requires certain large companies to annually disclose a range of non-financial information, including in relation to the environment, social and employee matters, human rights, and anti-corruption and bribery matters.

The demand for (and expectation of) companies to disclose substantial and accurate non-financial information is growing within the EU. Aware of this development and in accordance with its support for sustainable investment, the European Commission is proposing a review of the NFRD in 2020.

The European Commission has, in particular, identified the need to improve access to publicly available information about non-financial issues and to reduce any unnecessary burden on companies. Policy options proposed for consideration by the Commission include the continued use of non-binding guidelines, the use of standards or revising and amending the NFRD itself.

For more information on the context, objectives, policy options and potential impacts, please refer to the European Commission’s Inception Impact Assessment, available here.

Feedback must be submitted by 27 February 2020 through the European Commission’s online portal, available here.

Please refer to our separate blog posts on the corporate reporting requirements under the Streamlined Energy and Carbon Reporting regime, here; or under the Energy Savings Opportunity Scheme, here.

Washington releases draft refinery PSM rule and economic survey

The Washington State Department of Labor and Industries (L&I or Department) recently released two documents related to its development of a refinery-specific process safety management (PSM) rule. First, L&I released a revised draft of its proposed refinery-specific PSM rule language; the Department, however, will not be accepting comments on this language until formal rulemaking begins in May 2020. Second, the Department issued an economic survey for refineries, which L&I will use to develop an economic impact statement and cost-benefit analysis. The survey asks refineries to estimate the internal costs of compliance, anticipate any necessary programmatic changes, and describe current processes related to the proposed rule elements. Refineries must return the survey to the Department by February 13, 2020.

Washington is the second state to consider a refinery-specific PSM rule. California’s regulation, codified at 8 C.C.R. section 5189.1, went into effect in October 2017. Washington’s proposed language, which was first circulated in January 2018, draws heavily from California’s rule. Specifically, Washington proposes to adopt all new PSM elements implemented in California that were not required by the federal PSM or the state’s non-refinery-specific PSM rules, although the Department is not proposing language identical to that in California’s rule within each of these elements. These elements include requiring refineries to perform damage mechanism reviews, hierarchy of hazard controls analyses, management of organizational change analyses, and process safety culture assessments. As in California, Washington’s proposed language would introduce several new defined terms, including definitions of “Major Change” and “Major Incident,” and broaden the scope of existing terms in ways that will expand the potential applicability of the rule to those parts of refineries currently considered to be non-process areas.

Washington’s draft rule language is available here and the economic analysis survey is available here.

CSB proposes rule on accidental release reporting

The U.S. Chemical Safety Board (CSB or Agency) recently published a Notice of Proposed Rulemaking for its accidental reporting rule in the Federal Register (Proposed Rule). The CSB was established by the Clean Air Act Amendments of 1990, which directed the Agency, among other things, to investigate and report on any accidental release “resulting in a fatality, serious injury or substantial property damage.” The statute also required the CSB to issue a rule governing the reporting of accidental releases to the CSB under 42 U.S.C. section 7412(r)(6)(C)(iii), which the Agency has not done since it began operations in 1998. Following a lawsuit by advocacy groups, the Agency is now being required by court order to promulgate reporting requirements by February 2020. Continue Reading