Date: Jun 14, 2019
Marcus Navin-Jones, a Brussels-based law partner at Keller and Heckman, discusses two key EU General Court decisions on REACH authorization and the questions raised for companies concerned about the time and cost implications.
When it rains it pours. Apparently the same is true for decisions on REACH authorization. The start of this year saw a small wave of important decisions which began, arguably, in February when the European Commission rejected an application for authorization for the first time.
Since then, the EU General Court has handed down two important judgments on REACH authorization. The first came in March (Case T-837/16) in the Swedish/lead chromates case. The second came in April (Case T-108/17) in the ClientEarth/DEHP case.
'Applicants for REACH authorization should pay attention to these decisions'
Applicants for REACH authorization should pay attention to these decisions. They contain valuable lessons on how to compile robust applications for authorization. But they also raise bigger more fundamental questions.
Swedish/lead Chromates Case
Applicants for REACH authorization continue to pore over the court judgment in the Swedish/lead chromates case. The Commission had granted a REACH only representative (OR) of a Canadian-based company REACH authorization for certain uses of two lead chromates.
Sweden – with support from Denmark, Finland and the European Parliament – legally contested the Commission decision, arguing that the Commission had erred in law in granting the REACH authorizations. The court ultimately agreed with Sweden, annulled the Commission decision, and therefore essentially cancelled any permission for the OR to use the Annex XIV substances.
The Commission has since stated that it would appeal certain, but not all, aspects of the judgment – and the appeal case will no doubt shed further light and clarity on the REACH authorization provisions.
There are also important lessons for applicants for REACH authorization to learn from the court judgment in the ClientEarth/DEHP case. In that case, the Commission had granted three waste recycling companies REACH authorization for two uses relating to recycled PVC materials and DEHP. In August 2016, ClientEarth requested that the Commission conduct an internal review of its decision to grant REACH authorizations, which the Commission subsequently rejected.
ClientEarth then brought a legal action against the Commission, arguing that the Commission was wrong to reject its request for an internal review. More importantly, ClientEarth also argued that the Commission was wrong to grant the waste recycling companies REACH authorization in the first place. The court rejected ClientEarth’s arguments as unfounded or inadmissible, and ultimately dismissed ClientEarth’s case. The Commission’s decision to grant REACH authorization was therefore ultimately upheld and maintained by the court.
Outcome and Reaction
The outcome of these two cases was therefore very different.
To put it crudely: in the Swedish case, the court essentially concluded that the REACH authorization was illegal – and that the Commission had wrongly granted it.
In contrast, in the ClientEarth case, the court concluded, in essence, that the Commission had lawfully rejected the request for an internal review and that there were no legal grounds to question the Commission decision granting REACH authorization.
The reaction to these judgments from industry has been varied. As the judgment in the Swedish/lead chromates case arguably makes it more difficult for applicants to obtain REACH authorization, applicants have generally had more concerns regarding that judgment.
'There are valuable lessons to be learned from the court judgment in the ClientEarth/DEHP case'
But there are also valuable lessons to be learned from the court judgment in the ClientEarth/DEHP case – and applicants should take time to understand the core points underlying both these judgments.
One of the principal findings of the court in both judgments is that before granting a REACH authorization, the Commission is legally required to conduct its own examination of the facts and circumstances surrounding the application for REACH authorization. The Commission cannot simply defer to an Echa committee Opinion and refuse, or omit, to carry out its own full and complete examination.
It cannot merely rubber stamp or echo the view of an Echa committee. The Commission must "on its own motion" proactively establish what the facts and circumstances surrounding an application are, and establish whether the relevant legal conditions are satisfied.
This is an important point. It suggests that when the Commission assesses whether an application should be granted, its examination must be more autonomous, and more independent from Echa, than has been the case in the past.
It also suggests that the Commission’s examination needs to go deeper and be more thorough than perhaps was previously the case.
Some question whether this seemingly new approach will mean that, in the future, the Commission might be more inclined to contradict or ignore Echa committee opinions. The Commission might, for example, reject applications for authorization in the future, even after the Echa committees have concluded that the legal conditions have been met.
But, interestingly, the court has also clarified, particularly in the Swedish case, that although the Commission must conduct its own independent and thorough examination of the facts and circumstances, the Commission must – at the same time – take into account Echa committee opinions, and is able to derogate or disagree with an Echa scientific opinion only under certain conditions.
The court stated that, for example, where the Commission disagrees or derogates from an Echa committee opinion, the Commission must "give specific reasons for its assessment" and that the Commission’s justification must "be of a scientific level at least equivalent to that of the opinion in question".
Concerns for Reach Applicants
There is, therefore, some legal debate on whether the judgments, particularly in the Swedish case, ultimately tie the Commission’s hands more tightly to an Echa committee opinion, and force the Commission to follow and adopt the same or a similar view of an Echa committee – or whether, alternatively, the Commission’s independent and thorough examination will ultimately lead more divergences of opinion between the Commission and Echa.
But, regardless of this debate, the judgments are raising concerns for REACH applicants who have justified worries in investing significant time and money in compiling applications without at least having some idea of what the Commission – not Echa – will insist on seeing in an application, and without having at least some idea of if and when the Commission – not Echa – is likely to reject an application.
Whether the Commission could meet applicants in a pre-submission meeting as Echa generally does, or take other action to clarify the remit, scope and depth of their future examination would be of interest.
'Confirmation from the Commission that the judgment will have no impact on the costs charged to applicants, now or in the future, would also be helpful'
Confirmation from the Commission that the judgment will have no impact on the costs charged to applicants, now or in the future, would also be helpful.
Another core finding from the court, which the ClientEarth case in particular highlights, is that the Commission cannot ignore or rectify deficiencies and flaws in applications for authorization and then, despite these flaws, grant authorisations to applicants but shorten review periods, or narrow or change the authorised conditions of use.
One of the reasons for adopting REACH was to reverse the burden of proof. REACH authorization, more than perhaps any other part of REACH including registration, seeks to achieve this objective.
In the Swedish case, the court stated unequivocally that an applicant was fully responsible for demonstrating that an alternative was not available to it and that the burden of proof "belongs to the applicant for authorization". Where there are still "uncertainties" that an alternative is available to an applicant, the court concluded that it is the applicant who is essentially at fault and "the authorization cannot be granted".
This again is a significant point. Industry has been calling upon EU authorities to address the significant, and arguably excessive, costs and time companies must invest in order to obtain a REACH authorization.
Fears About Time and Costs
The judgments, particularly in the Swedish case, do nothing to alleviate the fears about the time and cost needed to get REACH authorization – and arguably significantly exacerbates the problem.
This is rightly of most concern to SME companies who need REACH authorization, but who simply do not have the time or financial resources that are apparently now needed to get it.
How does an applicant SME eradicate any possible uncertainties, in Echa’s or the Commission’s mind, that there is no alternative available to the SME – if EU member states, global chemical conglomerates, trade associations, NGOs and other stakeholders argue that an alternative is available to the SME – but, in reality, it is not?
At the same time, in principle there should be equal treatment between REACH applicants, and therefore SMEs should not, per se, be treated differently under the REACH authorization provisions than applicants.
How industry reacts to this underlying problem is still unclear. SMEs could, for example, try to push other companies in their supply chain to compile REACH authorisations – but those SMEs would then still presumably need to share in the costs and may have less control over them.
'Companies may be ultimately forced to conclude that REACH authorization costs, coupled with market forces, are simply too much to bear'
Or, companies may be ultimately forced to conclude that REACH authorization costs, coupled with market forces, are simply too much to bear – and take the more drastic and irrevocable decision to close business altogether – as was the case for one of the applicants in the ClientEarth case.
To a certain degree, the judgment in the ClientEarth case, handed down in April, has already been overtaken by events in reality.
Only one of the original three recycling companies has persisted in pursuing REACH authorization. The Waste Framework Regulation has been updated. The adequate control route now appears well able to support the grant of a REACH authorization vis-à-vis repro-toxicity aspects. And the basis for the Annex XIV inclusion looks set to be updated to include the endocrine-disrupting properties justification.
But the judgment in the ClientEarth case has far-reaching implications, particularly for recyclers. Where a recycler believes that an Annex XIV substance is merely an unintended ingredient in a mixture (similar to an impurity in a substance) which is merely present in a recycled material – but not considered, by the recycler, as "used" – the court has now essentially held that there is still "use" of that Annex XIV substance where it has a function in a mixture (such as reducing the amount of plasticisers within it).
This opens up other questions for recyclers. For example, when (if ever) is the presence of an Annex XIV substance in a recovered or recycled product so low that it cannot be regarded as having a function within it? And when (if ever) do the performance characteristics of an Annex XIV substance deteriorate so much over time that the Annex XIV substance cannot be regarded as having a function any longer?
The ClientEarth judgment also highlighted another important issue – namely how REACH applicants for authorization should define "use". How broadly applicants should define "use" is of critical importance – in many ways the starting point – for applicants, dictating not merely whether REACH authorization is needed at all, but also how many REACH authorisations are needed in any one particular area.
In the ClientEarth judgment, the court agreed that the concept of "use" was indeed important, particularly in assessing whether the legal conditions for granting an authorization were satisfied including, therefore, in assessing alternatives and their availability.
One of the perhaps uncomfortable truths that the ClientEarth judgment exposed was the apparent conflict between the drive towards creating a circular economy and the desire, from some quarters, for a completely toxic-free environment.
Will the drive towards banning the sale and use of Annex XIV substances impede any or all recovery and recycling, or perhaps mean significant amounts of Annex XIV substances ultimately end up in a limited and concentrated number of products?
Should recyclers really be considered as "using" unwanted ingredients in their products? And should recycling be more considered vis-à-vis, for example, Article 58(2) REACH carve-outs?
The circular economy cannot be adequately created if practical – but also legal – solutions are not found. Applicants for REACH authorization – but also regulators – will therefore need to consider the full impact of these judgments, and what lessons can be learned.
The views in this article are those of the expert author and are not necessarily shared by Chemical Watch.
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This article was first published on ChemicalWatch.com on June 14, 2019.