No smoke without fire: Singapore’s new haze law poses a risk to agribusiness

A new law introduced by the Singapore government to combat the deteriorating air quality in the city-state and surrounding areas is a risk to agribusinesses, according to Wilson Ang, partner and Stuart Neely, associate at Norton Rose Fulbright law firm. Here they explain the law’s introduction and its potential impact.

In June 2013, illegal fires in Sumatra, Indonesia caused record-breaking levels of haze in the Southeast Asian region — namely, Brunei, Indonesia, Malaysia, Singapore and Southern Thailand. Transboundary haze, caused by the burning of forests and peat lands mainly in Kalimantan and Sumatra, has been a recurring problem since 1985. The issue has intensified in recent years with the increase in large-scale burning of land to prepare for the planting of commercial crops.

One of the worst haze outbreaks occurred in 1997, when the Pollutant Standards Index (PSI) recorded pollution levels at 226 PSI, far above the normal range of 0-50 PSI. The haze caused substantial economic losses and had a significant impact on public health and biodiversity. The situation motivated The Association of Southeast Asian Nations (ASEAN) to develop a more decisive regional response – the ASEAN Agreement on Transboundary Haze.

The Singapore Government responded to this by passing its own Transboundary Haze Pollution Act. The Act adds to the rapidly lengthening list of laws around the world that promote or enforce socially responsible business practices, a trend which has been gathering pace since the UN Human Rights Council unanimously endorsed the UN Guiding Principles on Business and Human Rights in 2011.

Singapore’s Act is targeted at any entity suspected of actions that result in haze in Singapore. It is intended to transcend national boundaries and applies to both local and foreign entities.

This is a significant risk to agribusinesses and their investors, as any entity found guilty of causing or contributing to haze in Singapore can be fined S$100,000 ($80,000; €60,000) for each day they fail to take action, capped at a total of S$2 million.

An entity can be criminally liable if it, or if an entity it manages, either engages in conduct or condones conduct which contributes to the haze pollution in Singapore. Companies in industries like aviation and tourism can also take action if they can prove that the resulting haze had caused serious economic impact to their businesses. There are defenses however, for example, if the haze pollution is caused solely by a grave natural disaster or an act of war.

Singapore’s actions highlight the increasing pressure on investors and financial institutions to take into consideration social and human rights issues, such as haze pollution, when making investment decisions. This is a wide-ranging law that will have extraterritorial effect in all surrounding countries in the Southeast Asian region.

The Act has been lauded by environmentalists as a bold step in combating the haze pollution problem, however some doubts remain over its effectiveness. Agribusinesses protest, for example, the accuracy of data from NASA’s Landsat 8 satellite that shows land leased to industrial oil palm and acacia plantations accounts for 21 percent of the fires while small to medium-sized plantations accounts for the remaining 79 percent.

Nonetheless with the Act lightening the evidential burden for the prosecution, proving innocence will be increasingly challenging for agribusinesses.

The need for cooperation from foreign governments could be a significant hurdle, however, and in practice, transnational cooperation and coordination for prosecutions could face difficulties in execution.

In addition to specific legislation, there are wider human rights considerations for agribusinesses and investors. The Human Rights Council has adopted four resolutions – most recently in June 2014 – which recognise the link between climate change and human rights. In this case that could be the impact of the haze on the right to health, particularly for those with respiratory conditions. Equally, the UN Guiding Principles affirm that businesses have a responsibility to comply with applicable laws and respect human rights.

A growing number of companies are taking proactive steps to meet their responsibilities by identifying and mitigating their human rights impacts. However, as the level of international and domestic law continues to grow in this sector, agribusinesses are increasingly aware of the need to continue to monitor the impact of their activity, not only in the countries they operate in, but those inadvertently affected too.

As for transboundary haze, Singapore has sent a clear message to agribusinesses in the region that it will certainly be proactive in doing all it can to put out the fires that cause it.