Commission defeated on chemicals appraisal

Until recently, challenging the decisions of the EU chemicals regulators may have seemed a waste of time, as the EU courts have sided rather easily with the regulators. In October 2015, EU General Court found in favour of eighteen chemicals companies that were seeking partial annulment of the European Commission's classification for "coal-tar pitch, high temperature" (CTPHT). The case T-689/13 Bilbaina de Alquitranes et al. v Commission is now under appeal, but it has already been seen as a sign of a possible turning point in the EU chemicals litigation.

Background to the case

Before manufacturers or importers place chemicals on the market, potential risks to human health and the environment of substances or mixtures must be identified, inter alia, to appropriately classify and label chemicals. The aim is to protect consumers and workers that may come into contact with substances.

In the context of a regulatory process, any of the EU Member States (in addition to manufacturers, importers and downstream users) may propose to harmonise the classification and labelling of a substance. The harmonized classification is based on Regulation (EC) No 1272/2008 on the classification, labelling, and packaging of substances and mixtures, and it can be proposed with respect to very harmful (such as carcinogenic, reproductive toxic and mutagenic) substances in the aim of making the harmonised classification compulsory in the entire EU.

The classification may have far-reaching effects on the commercial use of certain substances, which makes getting the right classification relevant for both manufacturers and downstream users of chemicals.

The appeal

The appeal case concerns the correct classification of CTPHT. It is a so-called substance of unknown or variable composition, complex reaction products or biological materials ("UVCB substance"), as it cannot be fully identified by its chemical composition. The substance is mainly used in the aluminium and steel industries.

In September 2010, the Netherlands submitted a dossier to the European Chemicals Agency (ECHA) and proposed a harmonised classification for CTPHT, for reasons, inter alia, of acute and chronic aquatic toxicity.

ECHA's Risk Assessment Committee (RAC), which is responsible for assessing the proposed hazard classes in light of the available evidence, found that CTPHT was to be classified as acutely and chronically aquatic toxic. It based its findings on data generated on one of two possible alternative methods for assessing the effects of CTPHT (that is, the summation method). . Based on this opinion, and in accordance with the Dutch proposal, the European Commission classified in October 2013 the substance, inter alia, as acutely and chronically toxic.

A total of 18 undertakings, comprising nine manufacturers of, and nine downstream users for, CHPHT, appealed the European Commission's decision, inter alia, on grounds of a manifest error of assessment. More specifically, according to the applicants, the European Commission committed a manifest error of assessment in classifying the substance as acutely and chronically aquatic toxic by application of a summation method.

According to the summation method, which is applied to mixtures, each individual component is classified, where possible, and the weighted content of the components classified in the same category are added together. Where the sum exceeds 25%, the mixture is classified in that category.

The applicants considered the applied method wrong, as it assumes that all polycyclic aromatic hydrocarbons (PAHs) present in CTPHT dissolve in water and are therefore available to aquatic organisms and a potential source of pollution. The applicants, in reliance of several studies, submitted that the PAH constituents in of CTPHT have low water-solubility and CTPHT itself has an extremely low water solubility.

According to the applicants, given such inherent properties, it could not be assumed that the PAH constituents were freely available to aquatic organisms and thus the aquatic toxicity of CTPHT could not be assessed on the basis of its various PAH constituents.

Court found manifest error of assessment

The Court agreed with the applicants and found that the European Commission had made a manifest error of assessment. By way of a preliminary point, the Court, referring to settled case-law, noted that where EU authorities exercise broad discretion, including in particular the assessment of highly complex scientific and technical facts, the review by EU courts is limited. In the context of such limited review, the EU courts cannot substitute the authorities' assessment of scientific or technical facts. The discretion applies to the nature and scope of measures taken, and also, to some extent, to the finding of facts.

However, notwithstanding such discretion, the EU authority must be able to establish, before the EU courts, that in adopting the contested act it actually exercised its discretion, which presupposes the taking into consideration of all relevant factors and circumstances of the situation, which the act was intended to regulate.

The Court found that the European Commission had failed to comply with the obligation to take into consideration all relevant factors and circumstances when it classified CTPHT as acutely and chronically aquatic toxic on the basis of the PAH constituents. This was based on the unsubstantiated assumption that all PAH constituents present in CTPHT dissolve in water phase and are thus available to aquatic organisms.

In fact, according to the Court, the European Commission and ECHA could only demonstrate that the water solubility of 16 PAH constituents, considered in isolation but together accounting for less than 10 per cent of the substance, had been taken into account during the classification procedure of CTPHT.

The Court's decision should be understood as indicating that notwithstanding the precautionary principle and the objective to ensure a high level of protection of human health and the environment, a substance - not merely its constituents - must satisfy the classification criteria. The European Commission had failed this, and therefore the decision insofar as it related to classification on aquatic toxicity grounds was annulled.

Consequences

Even though the CTPHT has been recommended to be added to the authorisation list of substances, which sees the use of a substance become subject to a specific authorisation, the case has been seen to have far-reaching impact on EU chemicals litigation. It has now been clearly ruled -- for the first time -- that the European Commission committed a manifest error of assessment.

Indeed, until now the EU Courts have been charged with supporting authorities on grounds of broad discretion, the precautionary principle and the very complex legislative framework. Not surprising then that the General Court's annulment judgment has been appealed by the European Commission, on grounds, inter alia, that the Court had failed its duty to state reasons, exceeded the limits of its review of legality and distorted evidence.

Even though the appeal to the European Court of Justice remains pending for some time to come, the judgment still sends a clear signal that it may not be, after all, a lost case to challenge the decisions of EU chemicals regulators.