Posted By Charles Robinson
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New producer and end-user obligations under amendments to WEEE Directive
6.6.2003
Little more than three months after the EU Directive on Waste Electrical and Electronic Equipment ("WEEE") was finally adopted on 27 January 2003, the Commission has published a proposal to amend a key provision on the financing of the collection, treatment, recovery and recycling of WEEE from business and other non-household users. The effect of the proposed amendment will be to shift responsibility for electrical and electronic equipment that is or was put on the market before 13 August 2005 (the date when the relevant provisions of the Directive take effect) from its producers to the producers of replacement equipment or, if the equipment is not being replaced, to the end user.
The purpose of the WEEE Directive is to establish a system of "producer responsibility" for specified categories of electrical and electronic equipment so that producers of such equipment (including importers into the EU) take responsibility for its environmentally sound management when it reaches the end of its useful life and becomes waste. This, in turn, is intended to create incentives for producers to design products that are more eco-friendly in terms of the recoverability of their components and materials. For qualifying products put on the market after 13 August 2005, therefore, the Directive requires that producers be made responsible for the costs of dealing with their own products when they become waste.
One of the controversial areas of the Directive, however, has been the question of where financial responsibility should lie in respect of products put on the market before 13 August 2005, known as "historic WEEE".
Obligations under the Directive vary somewhat according to whether the WEEE in question is "WEEE from private households" (which, somewhat paradoxically, includes WEEE from commercial, industrial, institutional and other sources which is similar in nature and quantity to that from private households) and "WEEE from users other than private households". For historic WEEE from private households, the Directive specifies that all producers existing on the market when the costs arise should contribute proportionately, and suggests that this may be calculated by reference to their respective share of the market by type of equipment at that time. In respect of WEEE from users other than private households, however, the adopted Directive is more vague. Article 9 simply states that the financing "shall be provided for by producers". It is not clear whether this refers, individually, to the actual producer of a piece of equipment or, collectively, to producers in general when the costs arise.
Before the Directive was adopted, concerns had been voiced that existing producers might be subject to significant retrospective liabilities in respect of equipment they had supplied in the past and that reference would have to be made to such liabilities in those companies' accounts. In particular, fears were expressed that companies whose market share of particular types of electrical and electronic equipment had contracted significantly might find themselves facing costs on a scale that would endanger their financial viability. Due to these concerns, a Joint Declaration was agreed by the EU institutions, and published at the same time as the adopted Directive, stating their intention to review the financial implications of Article 9 and to amend it if necessary. The Commission Proposal published at the end of April 2003 is in response to this.
Whilst critics of the existing provisions of Article 9 may welcome the speed with which an alternative has been proposed (Member States must transpose the WEEE Directive into national legislation by 13 August 2004, and the amending Directive is intended to have the same deadline), the substance of the proposed alternative could generate as many problems as it solves. In particular, those who will be affected by the change may query its fairness and practicability.
Producers of Replacement Equipment
Businesses producing electrical and electronic equipment now and in the future that is supplied as a replacement for historic WEEE will be required to take individual financial responsibility for the historic WEEE of other producers, potentially including existing competitors. There is a certain arbitrariness in this form of take-back. Whereas the take-back service which retailers are required to provide in relation to WEEE from private households is limited to collection, the take-back envisaged in the Commission's Proposal covers the full range of waste management obligations under the Directive, from collection and treatment through to recovery/recycling and disposal.
In addition, it is not clear how the take-back obligation is intended to work where the new equipment is being bought through a retailer or other distributor rather than directly from the producer. Where the producer is supplying the user directly, it will need to establish whether there is any historic WEEE to be taken, and may be able to factor this into the contract price. Both the current and the proposed revised versions of Article 9 allow for producers and users (other than private households) to conclude agreements stipulating the financing methods. However, this is likely to be more difficult where sales take place through a third party.
The obligation is also likely to raise some difficult questions of interpretation on to certain types of producer. One issue is that the take-back requirement will only apply if the new equipment is equivalent to or fulfils the same function as the WEEE. In many cases, this will be straightforward, but in others there is the potential for difficulty. What, for example, if a relatively low tech piece of equipment is being replaced by something more high tech, which covers the same functions but also provides new functions?
Another issue is the distinction between WEEE from private households and WEEE from users other than private households. This will be relevant to products with household and non-household uses. For example, if a business wants to replace one computer that was put on the market before 13 August 2005, it is arguable that one old computer will be "WEEE from private households", meaning that the costs of carrying out the Directive's obligations will be borne proportionately by current producers of computers. If, however, the same business decides to replace 100 computers, the old computers are likely to be "WEEE from users other than private households", because the quantity of computers is far above what could be expected from a private household. Costs associated with these 100 computers would, therefore, have to be borne by the producer of the new computers (unless the producer and the purchaser come to a different arrangement). Establishing where exactly to draw the line in such circumstances may be difficult.
A further issue, which Member States are likely to have to address when implementing the WEEE Directive, is whether it is possible or desirable to accommodate an individual take-back obligation within a collective compliance scheme. The UK government has indicated that it generally expects producer responsibility obligations will be met financially, through some form of compliance scheme, rather than by producers setting up their own collection and recovery facilities. Other than for producers choosing to go it alone, it seems that costs would probably be apportioned on a market share basis for products put on the market after 13 August 2005, rather than according to the actual costs associated with particular products. On this basis, it might be simpler – and more cost effective – to treat historic WEEE in the same way.
End Users
The other category of person affected by the Commission's Proposal is the end user (other than a private household), since they will have to bear the costs of dealing with the WEEE if the take-back obligation does not apply. The Government's first consultation paper on the implementation of the WEEE Directive refers to this "business to business" WEEE (rather than the lengthy term of "WEEE from users other than private households") but this is perhaps a dangerous simplification. In fact, the definition of WEEE from users other than private households will cover schools, hospitals, local authorities, the voluntary sector and all other non-household users, in addition to business users.
As discussed above, such parties will need to ensure that when they conclude contracts for the supply of new electrical and electronic equipment, they are clear as to whether any WEEE being replaced is to be taken by the producer and, if so, who is to pay.
In terms of existing waste law, it will presumably be necessary for the Government to place a legal obligation on non-household users to separate their WEEE from their general waste and to deal with it in accordance with the Directive. In order to comply with existing Duty of Care legislation, it seems likely that the end user will have to take reasonable steps to ensure that any take-back obligation is carried out in accordance with the law – e.g. that the WEEE is collected by a licensed waste carrier and then treated, recovered, recycled and/or disposed of at appropriately licensed waste management sites.
Another issue for implementation will be the question of who is to pay if the end user cannot. This may be relevant where a business has become insolvent and is being wound up.
The Commission's Proposal sets out the case for changing the existing position and argues in favour of the proposed amendment on the grounds that although it is desirable to apply the polluter pays principle, it is debateable whether it is the producer or the user that is the polluter; that, in any event, under the current system, the polluter does not pay; and that it is "impossible to correct this situation without creating a retroactive liability". Curiously, the Commission makes no reference to the merits or otherwise of the system adopted in respect of historic WEEE from private households – namely that it is financed collectively by all existing producers, as referred to above – and does not explain why the allocation of costs should depend on whether equipment is being replaced, nor why they should be borne by an individual producer (other than the equipment's actual producer) rather than apportioned on a collective basis.
For further information contact Paul Sheridan, Partner and Head of Environment Law Group, on +44 (0) 20 7367 2186 or
paul.sheridan@cmck.com or Jenny McKenzie, Solicitor in the Environment Law Group, on DDI +44 (0)20 7367 3082 or
jenny.mckenzie@cmck.com.
A note providing an overview of the WEEE Directive as a whole, its background and early indications of the UK approach to implementation is available on request from the contacts set out above.