REACH Costs – how a micro-SME nearly came to grief.

One of our Self Help group members has had a very near miss over REACH data costs. The substances is a CMR (Carcinogen/ Mutagen/ Reprotoxin), used only as an industrial intermediate, so it has a 2010 registration deadline.

In late 2009, the member received what they thought was a standard SIEF form for expressions of interest, printed it off, signed it and faxed it back to the Lead Registrant.

The next communication from the Lead Registrant was an invoice in late January for the sum of € 25,000 (approximately £22,000).

Naturally, this was surprising, even shocking to a self-employed person (and therefore a micro-SME under the REACH guidelines). The annual amount of substance they import is approximately 20 tonnes per year, when the total EU amount, both manufactured and imported, is approximately 20,000-30,000 tonnes, so they are probably responsible for about 0.1% of the EU market.

Unless there was a way to clear up the misunderstanding, they were faced with a stark choice:

Pay up in full, which would have used up all their family savings and caused serious cashflow problems to the business in the short term; and as it was an “open invoice”, could have killed the business completely
Avoid paying the bill – which unfortunately would be to file for personal bankruptcy (whereas a limited company would have provided some protection for their personal savings).
The member checked their emails, and discovered that the document they had printed off and signed also came with a 50 page legal agreement. As our group member says “if someone sends me a 50 page legal agreement, I read it from cover to cover”.

TT Environmental Ltd’s advice was that it was unlikely that the contract could be broken, but we set about asking various REACH experts what their opinion was.

In the meantime, the member (very sensibly) contacted the Lead Registrant, a large German chemical company, to discuss their position. The Lead Registrant contacted their in-house legal team, who concluded that the contract was not legally binding.

The Lead Registrant informed our group member that they were not under any obligation to participate, but would be able to if they wanted to. The costs of data purchase will probably be reduced, as several likely purchasers have still not confirmed their status.

To say that our member was relieved is an understatement.

There are some important points from this:
If the signed form hadn’t gone to a German Lead Registrant, it would very probably have been legally binding. Germany uses a “company stamp” system (analogous to the UK’s old company seal system), whereby any signature on behalf of the company has to be stamped as well. The LR’s legal department decided that the contract was invalid because there was no company stamp.
One of our colleagues, Gill Pagliuca of Denehurst Chemical Safety, pointed out that if the member had ended up paying the registration costs, they would have had a very good case for appealing to the SIEF on grounds of fairness, as costs had been split equally between all registrants, yet the member was only responsible for a tiny proportion of the market. Unfortunately, given the 2010 deadline, they would have had to pay out the fees first, then try to get a refund later, which would not have helped their cashflow.
Gill also pointed out that SIEFS and Consortia are under considerable pressure from ECHA and the European Commission to act fairly. This pressure will certainly matter to well-established chemical manufacturers acting as LR, but TT Environmental Ltd’s opinion is that not all LRs may be as sympathetic as the LR in this instance.
Another colleague, Jonathan Dale from Exponent International, has found that many LRs and consortia are playing “hardball” with people wanting to access data. Jonathan recommends using a contract law solicitor with experience in REACH for anyone getting into similar hot water, such as Louise Howarth at Eversheds, or Peter Snaith at Dickinson Dees .
Our self-help group member recommends that if you are part of a small SIEF, state as early as possible to the Lead Registrant that you require contracts to be forwarded in the post and to require signing and sending back. Single pieces of paper should only be used for verification of details, this provides some control for members.
And finally, as our member says – if you get anything at all for REACH which requires a signature, read all the small print, and please, please remember to check for attached files.

TT Environmental Ltd, 15th February 2010