Going beyond the law to fight transboundary haze

EUGENE K B TAN Today Online 22 Sep 15;

Passed by Parliament in August last year, the Transboundary Haze Pollution Act (THPA) seeks to enhance Singapore’s ability to deal with transboundary haze. But it can and must do more if it is not to be a paper tiger.

TAPA has extra-territorial reach enabling Singapore courts to exercise power beyond Singapore’s territorial limits. It also covers acts of commission and omission, whether such conduct occurs within or outside of Singapore, which result in haze pollution in Singapore.

The serious episodes of transboundary air pollution in 1994, 1997, 2006, 2010, 2013 and the ongoing haze are a stark reminder that while strong laws and patient diplomacy are necessary, they are insufficient in dealing with the problem.

While TAPA is limited to entities with a presence in Singapore, its successful operation is not something entirely within the control of the Singapore authorities. Instead, the strong cooperation of foreign authorities is required for any successful prosecution and enforcement.

For instance, with the current haze, the evidence needed to mount any prosecution is not in Singapore but in Indonesia, where the companies and individuals are allegedly conducting such illegal activities.

Such evidence includes geospatial information such as the ownership and occupation of the land the pollution is coming from. However, a complex web of national, provincial and customary laws — laws that often compete and perhaps even conflict with one another — governs land use and land tenure in Indonesia. To compound matters, there is a lack of reliable maps. As such, for the purposes of a successful prosecution, it is not at all clear who might own a piece of land.

Furthermore, the cooperation of the Indonesian authorities is proving elusive. Despite the regular regional and bilateral unhappiness expressed towards the Indonesian government with regard to the problem, the lack of political will and entrenched intransigence on the part of the Indonesian government is severely limiting TAPA’s reach and effectiveness.

TAPA’s extraterritorial reach is double-edged because it is often regarded by another state as an infringement of said state’s national sovereignty. The dynamics of Indonesia-Singapore bilateral relations complicate the matter further.

Like most laws, TAPA is limiting in its impact because it is inherently reactive — it kicks in after the fact of transboundary air pollution. It is also necessary to craft a pre-emptive regulatory regime that will result in corporate entities taking proactive measures to positively influence the agricultural practices of smallholders, including their use of land clearing via the slash-and-burn method.

If business entities in the entire plantation supply chain can be deterred from behaving irresponsibly, we will reduce the impact of the evidential hurdle for TAPA prosecutions.

In this regard, TAPA provides a good start: It does not only cover landowners whose lands are the sources of transboundary haze pollution, but also extends to other actors, including those engaged to start the fires and those involved in the management of an offending entity. This recognises that transboundary haze pollution is often the culmination of a series of deliberate acts in a cross-border decision-making process involving different parties.

It is highly significant that TAPA also criminalises a first entity’s failure to prevent transboundary haze caused by a second entity, to which the first entity participates in the management of the second. This attempt to deal with the chain of causation is a significant extension of jurisdiction well beyond that which is found in our general criminal law and existing legislation with extraterritorial reach.

It is highly ironic should corporate entities culpable of haze pollution in Singapore have a presence, broadly conceived, in Singapore. This is an instance in which the benefits of irresponsible business conduct are privatised, while the costs are socialised.

INCREASE DETERRENCE

Going forward, the Government should consider enhancing TAPA’s deterrent effect by increasing the current maximum fine of S$2 million for an entity convicted of an offence under the Act.

To give an indication of the scale of a large commodities business: One leading agribusiness group headquartered in Singapore and listed on the Singapore Exchange had revenues of US$44.1 billion (S$61.6 billion) and equity and liabilities worth US$46.6 billion in 2013. If you consider these figures and the significant negative externalities caused by the haze, S$2 million is a mere slap on the wrist.

Furthermore, culpable key officers of the offending entity should be jailed; they should not hide behind the corporate veil.

The doctrine of limited liability is a cornerstone in our corporate law, but, ironically, this provides incentives for environmental irresponsibility. A parent company’s limited legal liability creates a potential moral hazard through the reduced economic incentive to ensure that its subsidiary exercises due care when engaging in environmentally risky activities.

Put another way: because the parent company obtains the financial rewards but is relatively insulated from direct liability, there is the incentive for the parent company to use its management and control power to make profit-maximising but irresponsible decisions for the subsidiary, including environmentally damaging ones.

In addition to the fines, TAPA could require offenders to provide financial security, such as insurance, bonds or guarantees, to enable them to cover their future potential environmental liabilities. Perhaps this “good behaviour” bond could be required of companies with palm-oil business concerns with the necessary nexus with Singapore.

The regulatory regime must motivate such entities to reduce their environmental risks and the likelihood of causing further transboundary air pollution. Of course, not all entities act, respond and are motivated solely by economic concerns. But this requirement of providing financial security — as part of a wider regulatory framework such as fines and jail terms — seeks to balance environmental protection with financial gain. The two are not mutually exclusive.

TAPA also provides for the imposition of civil liability on top of the criminal liability for haze pollution in Singapore. While welcome, this provision is more likely to be a remedy in form but not in substance.

Victims of haze pollution will find it onerous to take out an individual civil lawsuit against a company with far deeper pockets to defend itself. This asymmetric power relation is the classic “haves” versus “have-nots” in litigation. The law should facilitate the injured parties to mount a class-action suit, with the state providing the requisite legal support as part of the larger effort to protect the public interest.

Given the persistent and egregious record of transboundary air pollution that regularly harms our health and economy, an approach that relies on the coercive power of law must be complemented by a regulatory approach that is preventive in nature through nudging plantation companies to embrace responsible conduct throughout their supply chain as an integral way of doing business.

ABOUT THE AUTHOR:

Eugene K B Tan is associate professor of law at the Singapore Management University School of Law