EU Member States to Bolster Environmental Crime Laws

The EU Parliament and Council Directive on the protection of the environment through criminal law (2024/1203) (the “Environmental Crime Directive”) came into force in late May 2024. As a result, EU Member States are now obliged to expand the reach of their national criminal laws to more effectively detect, investigate, prosecute, and adjudicate environmental criminal offences. 

The Environmental Crime Directive builds on its predecessor, Directive 2008/99/EC, by more than doubling the number of criminal offenses to twenty. New criminal offenses include, for example, the manufacture, import, discharge, or marketing of various types of substances that are likely to cause the death of, or serious injury to, any person, or substantial damage to the quality of air, soil, water, ecosystem, animals, or plants. 

Other conduct is to be treated as a crime, not because of its actual or potential risk to humans or the environment, but because it contravenes specialized environmental laws that presently lack criminal sanctions, such as:

• Regulation (EU) 2023/1115 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation;
• Regulation (EU) 2024/590 on substances that deplete the ozone layer;
• Regulation (EU) 2024/573 on fluorinated greenhouse gases; or
• the laws adopted pursuant to Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora. 

The Environmental Crime Directive also permits EU Member States with broad authority to provide additional criminal sanctions for any other laws with the objective of environmental protection. This could include criminal sanctions for environmental diligence and disclosure activities under EU Corporate Sustainability Due Diligence Directive as approved on May 24, 2024 (such sanctions are already in place in a few jurisdictions).

As an instrument that does not, in principle, have direct effect, the Environmental Crime Directive will need to be transposed into national EU Member State laws before it can create obligations or rights for companies and individuals. EU Member State legislators now have two years to do so within the framework and minimum requirements set out in the Environmental Crime Directive.

To this end, it mandates, for the most serious crimes, the introduction of maximum terms of imprisonment of at least 10 years for individuals, and of monetary penalties for corporate perpetrators, where the maximum financial penalty is not less than 5% of the corporate perpetrator’s total worldwide turnover or EUR 40 million, whichever is greater. Accessory liability penalties may include orders to restore or compensate for the damage done, the exclusion from public funding and tender procedures, as well as the withdrawal of licenses, concessions, and permits. To improve the effectiveness of national enforcement action, investigators will be equipped with enhanced powers more akin to those traditionally employed to combat organized crime.

While it may take some time before the Environmental Crime Directive can be fully implemented across the EU, a number of countries, including Belgium, France, and Germany, have already adopted laws that replicate at least part of the Environmental Crime Directive’s requirements.

UK Post-Brexit

Meanwhile, since Brexit, the UK has taken a less stringent approach to environmental regulation in comparison with the EU. Most analogous legislation is either less comprehensive, still in its consultation phase, or, in some cases, non-existent. This legislation includes the ‘Ecocide Bill’ proposed to Parliament in November 2023, but now not expected to survive the impending general election on July 4, 2024.

However, there have been some developments in the UK regime in 2024. These include:

• The consultation on the introduction of a UK carbon border adjustment mechanism (“UK CBAM”) closed on June 13, 2024. The UK CBAM, to be implemented in 2027, will target the risk of carbon leakage associated with the UK’s action on industrial decarbonization, in line with its Net Zero Strategy. It places a carbon price on some emission-intensive industrial goods imported into the UK. Criminal offenses are being considered for a person who is knowingly involved in the fraudulent evasion of the UK CBAM. A similar CBAM regime has already been launched in the EU (see prior alert).
• The Digital Markets, Competition, and Consumers Bill (“DMCC”) received Royal Assent on May 24, 2024, extending regulators’ powers to enforce consumer protection law. Although not expressly defined or referred to, the DMCC includes provisions relating to “greenwashing” claims. The maximum financial penalty for non-compliance is either GBP 300,000 or 10% of an entity’s global turnover, whichever is greater. Individuals can also be fined up to GBP 30,000. The DMCC will apply to all businesses, irrespective of size or industry, and whether domestic or trading with UK consumers from overseas.

Europe’s efforts to protect the environment through criminal law and similar initiatives significantly increase compliance risks for companies who could be exposed to these new rules. Such exposure can arise not only if they operate in Continental Europe, but also if their conduct has an effect on local ecosystems, or if extraterritorial harm benefits a local operator. Considering the interconnectedness of natural habitats that are agnostic to national borders, these laws may well reach further than their origin suggests. Much like the measures the EU adopted to regulate digital ecosystems, the Environmental Crime Directive can be expected to have a “Brussels Effect” far beyond Europe’s geographic borders. 

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. David Foster, an O'Melveny partner licensed to practice law in England & Wales; Christian Peeters, an O'Melveny partner licensed to practice law in Brussels-Capital Region and Germany, Rechtsanwalt; Eric Rothenberg, an O'Melveny of counsel licensed to practice law in New York and Missouri; and John Rousakis, an O'Melveny partner licensed to practice law in New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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