Regulators need to have systems and protocols in place to respond decisively and effectively to the following types of scenarios.
- Making a demand on the financial provision if the event arises, e.g. in the event of insolvency or dissolution of the operator leading to abandoned closure liabilities or an incident leading to environmental pollution.
- Failure to maintain financial provision, e.g. non-renewal of insurances or guarantees.
- Failure to maintain membership of a mutual fund/pool.
- Failure to increase financial provision in line with increasing liability.
- Failure to make scheduled payments into cash deposits.
- Declining financial health of operator or parent.
- Declining value in asset.
The options available to regulators will depend on the legal systems in place in that country but, as with any other matter of environmental enforcement, there should be provision for administrative or legal sanction. There will be provision within the financial provision legal documents to take action in relation to the core protection but there may also be provision therein to address matters such as non-renewal. For example, there may be provision in a financial institution guarantee to make a demand on it if is not renewed within a specific period prior to expiry. It is key that regulators consider these various scenarios in advance of any possible event, and consider their powers and the practicalities involved so to be well placed to act in the event that enforcement is required. There may be complex legal issues involved and restrictions in terms of timing; for example, insurance policies may be complex documents and there are generally stipulations around notices to the insurer and the timing of the event and notice in respect of the policy period.