Strategic environmental action: the art of lawfare
The nature of competition between corporate entities means that they compete for resources. Natural resources are no exception for corporates who rely on them and they compete with each other to be in the optimal position to extract minerals, harness wind or solar energy, or abstract water for irrigation or industrial purposes.
These activities typically require securing material environmental authorisations in terms of multiple applicable environmental laws. Embedded within this licensing regime, and in recognition of the Constitutional law principle of just administrative action, competitors that are considered to be “interested and affected parties” due to their geographic proximity to the proposed activities, or otherwise have an interest, may participate and comment on the relevant licence application.
If such competitors are of the view that their concerns are not adequately dealt with, they may appeal any subsequent decision that may be granted in a competitor’s favour, depending on the piece of legislation involved and whether an appeal mechanism is provided for.
For water use licences, section 148(2)(b) of the National Water Act, 1998 (“NWA”) provides that such an appeal suspends the operation of the water use licence (“WUL”) that has been received by a competitor. For environmental authorisations, section 43(7) of the National Environmental Management Act, 1998 (“NEMA”) provides that such an appeal suspends the operation of an environmental authorisation that has been received by a competitor.
The difficulty this presents to the applicant party is that they cannot commence development until the appeal has been resolved. While there are specified timeframes within which an appeal is to be processed in terms of NEMA, it is often the case that such timeframes are not met. In the context of the NWA, there are no regulated timeframes within which an appeal is to be processed by the Water Tribunal, which means that applicants are left exposed to the capacity of the Water Tribunal and the speed at which they are able to hear and process appeals.
This has the potential to give rise to material consequences where an applicant is seeking to operate within broader procurement related timeframes by which it is required to reach financial close and to commence development. An example of this is in the renewable energy sector, where preferred bidders are required to reach financial close by a specified date to avoid forfeiting their projects or incurring penalties. Potential lenders to the project would be unwilling or unable to lend into a structure until all material authorisations are in place, including material environmental authorisations.
A material environmental authorisation would not be considered to be secured by lenders until all appeals or judicial proceedings have been resolved. Competitors would be alive to this and may seek to make use of their administrative law rights to oppose and appeal environmental authorisations for projects to jeopardise the ability of projects to reach financial close, thereby eliminating competition. In the agricultural context, seasons dictate when certain crops are to be grown and irrigated and an appeal and suspension of a WUL, until resolved by a Water Tribunal, has the potential to give rise to lost opportunity costs, the timing of which may be material to an agri-business. In markets where competition for supply contracts for agricultural produce is lucrative and competitive, ensuring a competitor misses a season while its appeal is resolved has the potential to eliminate competition.
Section 32 of NEMA provides for broad standing for third parties to seek appropriate relief to enforce environmental laws, even in circumstances where there may be no personal interest, such as if you are acting in the interests of the environment. In the water law context, there is Water Tribunal precedent that confirms that there is standing to appeal against the granting of a WUL provided only that you submitted an objection to the granting of a WUL during a public participation process.
While there is an ability for an applicant to approach the Minister of the Department of Water and Sanitation in terms of section 148(2)(b) of the NWA to request that the suspension of the WUL be lifted, there is no guarantee this will be granted and the minister may be hesitant to lift such a suspension while the matter is subject to dispute.
At present, there is no similar ability to request that an environmental authorisation not be suspended in terms of NEMA and the suspension will endure until the related appeal is finalised. However, the National Environmental Management Laws Amendment Bill (“NEMLA IV”) was recently approved by the National Assembly and National Council of Provinces and has been submitted to the president for assent. In this regard, an amendment to NEMA will allow parties to also appeal against and suspend air emission licences granted in terms of the National Environmental Management: Air Quality Act, 2004. However, amendments proposed in NEMLA IV will allow parties to motivate to the relevant authorities to have the related suspension of environmental authorisations and air emission licences wholly or partially lifted.
Unlike judicial proceedings in a court where parties are exposed to cost orders should they bring unsubstantiated proceedings on frivolous or vexatious grounds, there are no similar mechanisms or other statutory disincentives in the above mentioned water and environmental law proceedings. Further, in judicial review proceedings, there is scope to ask for an interim interdict to suspend the authorisation pending the outcome of the review. This gives rise to risk though from a cost perspective as, if development is held up, the unsuccessful applicant for review might incur a damages order for costs associated with the delay in the development.
It is imperative that parties be afforded the right to participate in the administrative law and related appeal process without fear of retribution or financial implications for doing so. The NWA currently provides a statutory check and balance mechanism allowing applicants to motivate to the minister to have the suspension of their water use licences lifted and pending amendments to NEMA appear to be on the cards that will provide a similar mechanism. These mechanisms have the ability to ensure that reliance on the right to appeal is not being abused for competitive-advantage related reasons only, under the guise of acting in the interests of the environment. In this way, acts of “lawfare” are capable of being screened out early on in a manner that does not suspend material authorisations on weak grounds of appeal, thus avoiding the impacts that such suspensive activities may have on a competitive market and, ultimately, the efficiency of the economy.
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