WEEE over-collection occurring on a “massive scale”, court told

In a vital test case for the industry, the Department of Business, Enterprise and Regulatory Reform is facing claims that there are serious “systemic” flaws in the regulatory regime allowing some recycling operators to profit at the expense of others.

REPIC Ltd, a not-for-profit producer compliance scheme (PCS) formed by leading electrical and electonic goods producers, says there are simply not enough derelict fridges and computers to go round and, as a result, it is being unfairly threatened with Government enforcement action.

To escape that threat, the company says it is being forced to pay “ransom” money to other PCS's it says are engaged in large-scale “over-collection” of redundant goods, in return for “evidence notes” proving to the Government that it's clean up obligations have been met.

Price cap

REPIC is now asking top judge, Mr Justice Wyn Williams, to intervene in the dispute and hopefully order the Government to introduce a price regulatory scheme – or “price cap” – that the company says would instantaneously solve the problem.

Richard Gordon QC, for REPIC, told London's High Court that his clients' legal challenge was in no way motivated by a desire to “make a profit”.

He said the company's aim was to make the Department of Business take effective regulatory action to “remedy a real injustice that REPIC and others in a similar position are suffering due to excessive over-collection of Waste Electrical and Electronic Equipment (WEEE).”

The QC added that REPIC was not seeking to “re-write the past” but only to put right the “invidious position” the company and others had found themselves in during the first two years of the WEEE scheme.

Describing the cash demanded by over-collectors for evidence notes as “ransom payments”, the barrister said the regulatory regime created a “clear incentive” for some PCSs to “charge high prices, otherwise, we ask forensically, why would they over-collect?”.

Mr Gordon accepted that “ransom” was “a rather emotive word”, but told the judge that some over-collecting PCSs agreed that they were charging “cost plus 20%” for issuing evidence notes.

Asking the judge to “remedy an injustice”, the QC added: “It is the potential for profit at the expense of under-collectors which lies at the heart of this challenge.

“They (the Department of Business) have got to remedy the problems that have beset REPIC over the past two years.”

Price cap 

Urging the judge that there was a “simple means” of levelling the playing field and doing away with unfairness, Mr Gordon said a price regulatory scheme – or “price cap” – would instantly solve the problem and involve only a minor change to the rules.

The QC added: “At the root of this claim is a very simple problem, but one that has caused and is continuing to cause serious prejudice to REPIC.”

He said the “enforcement authorities” – the Department for Business, the Environment Agency and the Scottish Environment Protection Agency – all agreed that “significant over-collection” of WEEE by PCSs amounted to a breach of the regulations.

This, however, is disputed by some PCSs – including Electrolink Recycling Ltd and Wercs Ltd, trading as City Compliance Scheme (CCS) – who say that collection of more waste than the minimum required is lawful and “perfectly compatible” with the regulations.

Accusing Electrolink and CCS of “deliberately pursuing a policy of over-collecting WEEE to a significant degree”, Mr Gordon said the “direct and logical consequence” of that is that other PCSs, including REPIC, “are unable, despite their best efforts, to access sufficient WEEE to meet their own collection obligations”.

Enforcement

The Environment Agency, and its Scottish counterpart, had failed, said the QC, to take enforcement action against over-collecting PCSs but, at the same time, had threatened REPIC and other under-collectors with sanctions if they fail to meet their quotas.

He added: “As the enforcement authorities are well aware, the only way in which REPIC is able to meet its obligations is by purchasing evidence notes from over-collecting PCSs such as Electrolink.
“At the same time, the regulators acknowledge that trading of surplus evidence should only operate at the margins and is not intended to provide a means for selling a large surplus.

“There is good reason for this: The WEEE regulations contain no mechanism to regulate the price at which surplus evidence is sold.

“It follows that over-collecting PCSs have the clearest incentive to sell surplus evidence at excessive prices.

“Conversely, under-collecting PCSs have little choice but to buy the evidence notes from them in order to comply with their obligations.

“This is what REPIC was compelled to do in respect of the 2007 compliance period.

“Unless the enforcement authorities take effective action, it is what they will be compelled to do again this year, unless REPIC refuses to comply.”

The Environment Agency, said Mr Gordon, has refused to extend the compliance deadline until after the court has ruled on the case and “this has placed and continues to place REPIC in an impossible position.”

And he told the judge: “It is plainly not how the WEEE regulations should operate.”

Bedding down

Mr Gordon told the court the enforcement authorities have said they are “continuing to keep possible enforcement action against both over- and under-collectors under review, but that they have not taken any action yet because they consider it appropriate to allow a 'bedding down' period for the regulations”.

But he told the judge: “This response is entirely inadequate: “Over-collection by PCSs, such as Electrolink and CCS, inevitably means that other PCSs such as REPIC are unable to collect sufficient WEEE to meet their obligations.

“The absence of a price regulation mechanism in the WEEE regulations means that there is, to put the matter at its lowest, a significant risk that PCSs such as REPIC will be required to purchase evidence notes from over-collectors at excessive prices, resulting in unequal treatment as between schemes.

“Not only do Electrolink and CCS confirm that they are continuing to engage in over-collection on a massive scale but, importantly, they continue to assert that such over-collection is lawful.

“The enforcement authorities have refused to provide REPIC with any assurance that they will not take enforcement action against it.”

Mr Gordon concluded: “It is submitted that the vice indentified in the WEEE regulations compelled early and effective regulation by the regulators. This has not happened and the result is continuing and serious prejudice to REPIC.

“The absence of any enforcement action against over-collecting PCSs is irrational and/or infringes the principle of equal treatment, and/or infringes the WEEE directive.

“The absence of any mechanism in the WEEE regulations to prevent excessive pricing infringes the WEEE directive such that the regulations are unlawful”.

The hearing of REPIC'S judicial review challenge continues and is expected to last three or more days. Given the complexity and importance of the case, Mr Justice Wyn Williams will almost certainly reserve his decision until a later date.