Market outlook: ECHA new chief aims to smooth ‘natural friction’ with firms, warns of financial woes

ECHA
The new ECHA boss is concerned about fees

The newly appointed executive director at the European Chemicals Agency (ECHA) aims to have an “open and honest” relationship with chemical firms, but warned the “natural friction” between the two is unavoidable.

Bjorn Hansen, like his predecessor, warned that as fees from substances registrations collected by ECHA start diminishing post-2018, the EU will need to consider very carefully how it wants to fund its chemical regulator – or risk weakening the Helsinki-based agency. Dane Hansen started his tenure as ECHA’s executive director on 3 January, succeeding Geert Dancet, who had been the public face of the agency from its inception in 2007.

The new ECHA chief will avoid, for now, the criticisms his predecessor made of chemical executives at every opportunity as part of his crusade against what he saw as a lack of proactive engagement with the EU’s regulatory framework, the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH).

According to Hansen, however, there will always be a “natural friction” between a regulator and those companies it regulates, but he added that his experience in the private and public sectors gives him an understanding of companies’ anxieties about a piece of regulation like REACH.

“Fundamentally, there is a natural friction between those who have obligations under a piece of legislation and those who are there to control if those obligations are met. But that doesn’t mean you cannot have an open and honest relationship [with chemical companies] and I think that’s definitely what Geert
[Dancet] had with the industry, and I want to continue it,” said Hansen.

“In terms of that relationship, it is also clear that the chemical industry comprises a variety of companies, and some of them are more proactive than others. I can bring to the table certain expertise that gives me a good understanding of the behaviours of chemical companies. And understanding one another can lead to a constructive dialogue, rather than a disruptive one.”

Dancet’s calm, serious aura allowed him to make public appearances asking chemical companies to “stop complaining and get on with registrations”, as he did before dozens of chemical executives at the annual meeting in Florence organised by EU trade group the European Chemical Industry Council (Cefic) in 2016. Hansen, however, is keeping his cool.

Moreover, he concedes the industry is worried about the May 2018 deadline, which trade groups have warned will hurt small and medium enterprises (SMEs) the most due to the high costs of registrations. The final  deadline for the implementation of REACH concerns substances produced in amounts between 1 and 100 tonnes, and therefore SMEs are likely to be the most affected. Hansen may be less forthright than Dancet, but in his own diplomatic way he dismissed the fears about the May deadline, comparing them to those in 2010 and 2013, the other two big registrations deadlines within REACH. A recurrent complaint from ECHA is that dossiers filed by chemical companies – the actual document a company files detailing the properties of a substance – are often incomplete and, therefore, non-compliant.

OLIVE BRANCH OFFERED

By filing poor dossiers, companies delay the process, because they must be sent back to the submitter for improvements. However, Hansen has extended an olive branch on this – but also sounded a warning. “Many factors play a role in a company’s decisions. I can even understand that a company has a problem in meeting their legislative obligations. I can have sympathy for that and I’ll do my bit within the legislation to assist that company in fulfilling their legislative obligations,” he said. “However, if ultimately they don’t do it, there comes the other bit – which I am responsible for. It would consist in telling the company (for example) ‘Sorry, despite all your efforts, and despite my understanding for your problems, you are not compliant and within 18 months you must fulfil your legislative obligations’.” While some sources in the industry have spoken of a potential extension of the May deadline, Hansen said that is unlikely as it would require legislative changes for which time is running out. He said at the time of the two previous deadlines there was also talk of extensions, which never occurred. “The issues at stake are the same issues that were at stake in 2010 and 2013 in terms of how the industry could manage. In my view, the large majority of the industry will manage. And I have to say I am very impressed with what I have seen so far in terms of efforts put into meeting the previous two deadlines,” he said.

ECHA’S FINANCIAL CHALLENGE

However, ECHA itself has its own challenges, which could well show structural weakness: a regulator policing one of the EU’s most publicised policies that may run out of funds to fulfil its remit. Before leaving his post, Dancet was explicit about potential financial problems at the agency, citing an increasing workload in an environment where the source of most of ECHA’s income, the registration fees, may dry up post-2018. Once again, Hansen said it in a more diplomatic way, but said it nonetheless, and issued a forecast that may grate on chemical companies’ ears: either the EU increases the direct subsidy to ECHA, or income will need to come from increased registration fees. Hansen said legislation created 15 years ago from scratch to regulate the chemical industry in a new way is clearly showing signs of becoming outdated, for example the ECHA funding formula.

“Planning done 15 years ago does not reflect the current reality, which didn’t turn out to be as expected. To meet the objectives set in REACH we need more time, and therefore funding. For instance, the fees set 15 years ago are still set with the idea that at this point we would be further ahead than we are now,” said Hansen. “There are several reasons for the current situation. For example, they may have been too optimistic 15 years ago on what they expected from the agency. At times, ECHA has not managed to do it all, or the industry has not been as compliant as was predicted 15 years ago. Or a combination thereof. Whatever the case, we have to have a reflection on how we fund ECHA after the fee income from the last registration deadline is used up.” He said he is seeing political willingness in the EU capital Brussels to sort out ECHA’s financial troubles, and added that the “bigger political discussions” the 28-country bloc is facing – namely Brexit and the hole in the budget the UK’s departure will leave – may make this the right time to talk money. “Ultimately, we as ECHA and the policymakers in Brussels need to articulate the priority they put on the work of ECHA and understand that the fee income is reducing. Therefore, there would only be two options going forward: increase the subsidy if EU policy-makers want ECHA’s work to continue and be completed, or find a way to increase the income from fees.” The UK’s departure from the EU, apart from creating a hole in the budget, has also created the challenge of disentangling the UK chemical industry from ECHA and REACH, something the country’s chemical firms firmly oppose.

However, staying within the chemical  legislative framework would oblige UK companies to remain under the jurisdiction of the EU-wide courts that settle disputes, but leaving the jurisdiction of all EU-wide courts post-Brexit is a priority for the current UK government. While the UK and the EU have just started to negotiate the terms of a trade relationship to come post-2019, when the country will officially leave the bloc, Hansen would not venture into forecasting what final relationship the two will have. “What I can say is that, practically, we can find a way of working with the UK, in whichever way is decided in terms of the post-Brexit trade agreement or relationship between the EU and the UK. From a chemical safety perspective, we’d like a close relationship,” he said.

“It is clear that [the jurisdiction of the European Court of Justice in the UK] is a very important element of doing an identical REACH for the UK post-departure. That’s one of the elements, but that doesn’t mean that whatever the UK and the EU decide, ECHA could not find the mode to work with the UK.”