What do you need to know about Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS)?

11 minute read
22 August 2022

What are Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS) and why are they of concern? Here we take a look at the controls relating to PFAS and whether they differ at EU level, some of the issues you should be aware of when dealing with PFAS during a transaction and whether environmental insurance for PFAS can be useful.

This article, written in collaboration with Duncan Spencer, environmental insurance broker at EDIA Limited, was first published by Lexis®PSL.

What are PFAS and why are they of concern?

Perfluoroalkyl and Polyfluoroalkyl Substances are a group of manufactured chemicals that are widely used in everyday products, such as non-stick cookware, clothes, carpets and upholstery to make them resistant to stains.

PFAS are made up of carbon and fluorine atoms, the bond between which is extremely strong meaning that PFAS do not degrade in the environment. In fact, scientists have been unable to estimate a half-life for PFAS (the time taken for 50% of the chemical to disappear), which led to PFAS being given the nickname 'forever chemicals'.

PFAS can be released into the environment at almost any stage of a product's lifecycle. They can come off packaging or products into the food that is being prepared, they can be washed off products by rainwater into the environment and they can simply come off products during their use. PFAS are also directly sprayed into the environment in foams for fighting fire.

PFAS outlive the products that they are used on, as well as the people that buy those products. PFAS have been found in marine animals, seabirds and predators all over the world, as well as in air, water, sediment, plants and wildlife. In addition to the environmental damage caused by PFAS, PFAS have also been linked to a wide range of serious health concerns.

What controls exist relating to PFAS at UK and EU level?

The majority of PFAS are industrial and consumer chemicals and are regulated under the Registration, Evaluation, Authorisation and restriction of Chemicals Regulation (REACH).

Until 1 January 2021, REACH registration allowed an EU-based manufacturer or importer to supply their substance to the European Economic Area (EEA) including the UK. The UK has retained REACH in national legislation (UK REACH) following withdrawal from the EU. It will take several years for UK registration to be completed, although PFAS is expected to be priority for the Department for Environment, Food and Rural Affairs' consideration in 2023. In the meantime, the European Chemicals Agency (ECHA) public registration database is the only readily accessible source of information about potential production and use of chemicals in the UK although this does not include companies who manufacture or import PFAS below 1 tonne per year.

Manufacturing sites in the UK are required to have environmental permits pursuant to the Environmental Permitting (England and Wales) Regulations 2016 which specify which PFAS are being manufactured and how many EU REACH registrations for PFAS the company has but there is otherwise limited regulation. The Environment Agency (EA) released a Chief Scientist's Group Report titled, 'Poly-and Perfluoroalkyl substances (PFAS): sources, pathways and environmental data', in August 2021. This highlighted PFAS as a complex and challenging issue and revealed the ongoing monitoring of PFAS in the UK. Action groups in the UK have called on the UK government to ban use of all PFAS in food packaging and for the UK government to make a commitment to phase PFAS out of all non-essential uses within the upcoming UK Chemicals Strategy.

Do the controls in the EU differ?

Certain EU Member States have proposed various restrictions on PFAS derivatives in the EU/EEA, which are under consideration by ECHA. Similarly, certain European States (the Netherlands, Germany, Norway, Denmark and Sweden) are currently preparing a proposal to restrict a wide range of PFAS uses, which is expected to be submitted to ECHA in January 2023.

As noted above, PFAS are regulated by REACH and a number of other PFASs are on the REACH Candidate List of substances of very high concern based upon their persistence, mobility and toxicity, which were considered to pose a threat to human health and wildlife. There are a very large number of PFASs (several thousand) and ECHA is focused on the PFAS groups of highest urgency, with risks being managed on a holistic group-by-group approach

The European Commission has stated that the EU's chemicals strategy places PFAS policy 'front and centre' and that it is committed 'to phasing out all PFASs, allowing their use only where they are proven to be irreplaceable and essential to society'.

The Drinking Water Directive has set a limit for all PFAS and the European Food Safety Authority has set a safety threshold for the main perfluoroalkyl substances that accumulate in the body.

What issues should practitioners be aware of when encountering the presence of PFAS during the course of a transaction?

PFAS issues are undoubtedly becoming more common in transactions in the UK, having been a relatively low-key issue in the UK market up until the past two to three years.

The increased profile that PFAS now has, means that those organisations acquiring affected sites are increasingly keen to insulate themselves from associated potential environmental liabilities, even where they are experienced in the management of more usual soil and groundwater contamination and the development of brownfield sites.

We are seeing the re-emergence of detailed environmental indemnity provisions in real estate sale and purchase agreements. We are not yet where we were in the early 2000s in terms of complex indemnities, but the profile that PFAS has, means that detailed and full indemnities are making a comeback.

Can environmental insurance be useful where PFAS are encountered?

PFAS can be a challenge for an environmental insurance perspective, and that is unlikely to change in near future.

Currently, in the UK market, there is no blanket PFAS exclusion. However, for activities where the presence of PFAS can reasonably be anticipated, for example where there has been fire-fighting, water treatment, chemical use etc practitioners should expect that PFAS will be excluded for new policies.

Where PFAS remediation is planned, it has been possible to transfer certain liabilities for PFAS to insurance products. Examples of the application of such products include:

  • the risk that remediation/development may exacerbate the situation (ie making it worse)
  • where remediation has been completed and the concern is that the works may not have been adequate (ie a 're-opener'—for example where future regulations identify a lower acceptability threshold of PFAS present in groundwater)

The key to this has been obtaining a second opinion (from reputable and experienced consultants) on technical and remediation matters for the insurance underwriter. As things stand, PFAS raises alarm bells for insurers and so careful management is critical.

If you have any questions about PFAS, please get in touch with Ben Stansfield or Emma Cartledge-Taylor.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.