To date there has been no single coherent system regulating the safety of chemicals in the EU. This is surprising given the systematic and overarching character of EU legislation in other related fields, such as waste, where a framework directive has for a long time provided the basis for a comprehensive system of regulation. This has been rectified by the introduction of Regulation (EC) No. 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH Regulation). The REACH Regulation completely overhauls the regulation of chemicals in the EU.

Against this background, this article examines:

The need for a system regulating the safety of chemicals should be self-evident. To be effective, such a system depends on the availability and quality of information about potentially harmful effects of the chemicals. The information needs to be available not only at the original manufacturer and importer level, but also at each stage of the chain, up to and including the end user. (Manufacturers, importers and downstream users are collectively referred to below as the "actors" in the supply chain.)

Such a comprehensive system should not automatically be seen as an unwelcome burden on industry or consumers. If soundly designed and implemented, it should deliver benefits in two main areas:

The previous system has for many years been seen as inadequate in terms of its primary goal to protect human health and the environment and the parallel goal of allowing and promoting competition and innovation.

The previous system comprises:

It is the piecemeal development of the law which lies behind the acknowledged shortcomings of the previous system.

The most fundamental flaw of the previous system is the different requirements for existing substances (substances placed on the market before 18 September 1981) and new substances (substances placed on the market after 18 September 1981):

This previous system has been widely criticised for the following:

The basis for the last criticism is that by allowing different requirements to apply to existing and new substances, manufacturers had an incentive to persist with the existing substances to avoid the added burden of notification and associated costs in relation to new substances.

To respond to criticisms of the previous system, the Commission published its proposals in the White Paper on the Strategy for a Future Substances Policy in 2001. This lead to the adoption by the Commission of a proposal for a regulation concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) on 29 October 2003.

Following prolonged negotiations and several amendments, the REACH Regulation was adopted on 18 December 2006, and published in the Official Journal on 30 December 2006. It entered into force on 1 June 2007 (see below, Timetable for implementation).

The stated aim of REACH is to "ensure a high level of protection of human health and the environment…while enhancing competitiveness and innovation". This will be achieved by evaluating substances before they are approved for use. Unlike the previous system, REACH shifts the burden of responsibility for evaluation onto actors in the supply chain and away from public authorities. It does so on a "no data, no market" principle, meaning that the market for a substance is denied to manufacturers and other actors unless that substance has been assessed and registered.

Regulation under REACH is ambitious and presents a substantial challenge in terms of:

Many substances and supply chain participants will therefore be involved in the process for the first time. The main challenge for participants is one of money and time, based on the amount of business-critical work which must be done to comply with REACH within the timetable.

REACH takes the form of an EU regulation (rather than a directive to member states) and is therefore directly applicable to member states without the need for legislation implementing it into domestic law. Because of this, it is expected there will be little scope for extended time for compliance arising from delayed national implementation.

REACH will be administered at EU level by the European Chemicals Agency (Agency), supported by competent authorities in member states. The Agency was established to manage and, where necessary, carry out the technical, scientific and administrative aspects of REACH to ensure consistency at Community level. Based in Helsinki, the Agency came into existence when the Regulation entered into force on 1 June 2007. It is expected to be ready to accept online submissions of pre-registrations and registration dossiers when the pre-registration window opens on 1 June 2008.

With the establishment of the Agency, there is a correspondingly reduced role for the competent authorities at national level. However, member states are required to set up a penalty regime which is "effective, proportionate and dissuasive". They must also review national laws and amend domestic legislation which implemented directives that have been repealed by REACH.

The focus of the registration requirement is to obtain information on substances for which there is currently no notified safety data. Substances which have already been notified under the previous system will therefore be considered registered for the purposes of REACH (though detailed information must subsequently be submitted if production exceeds the relevant tonnage threshold). A registration number will be assigned to these substances by 1 December 2008.

Substances for which no safety data has been provided (because the substance is an existing substance for which notification was not required under the previous system or if it is brand new to the market) must be registered under REACH. Due to the high number of substances requiring registration, the process will be phased-in over the next 11 years.

There is a six month window for "pre-registration" between June and December 2008. Following pre-registration, registration will occur incrementally and according to tonnage. Substances produced or imported over 1,000 tonnes per year as well as other highly toxic substances must be registered by 1 December 2010. Those in the 100 to 1000 tonne range must be registered by 1 June 2013, and those between one and 100 tonnes by 1 June 2018.

One of the novel features of REACH is that it is not confined to the manufacturers and importers. Downstream users (actors) are also involved in providing information and must comply with the risk reduction measures contained in the information supplied to them. The definition of downstream user includes any natural or legal person within the community who uses a substance, either on its own or in a preparation, in the course of its industrial or professional activities. This does not include a distributor or a consumer.

Downstream users' obligations include the following:

Transparent availability of information is fundamental to REACH and its intended benefits to human health and the environment. Information is shared between different actors in the supply chain under REACH, and most of this information will be made available on the internet. This raises concerns in relation to confidentiality and liability.

There are a number of protections incorporated in REACH. Most importantly, an applicant can request that identified information not be made available on the internet. Such submissions must include a justification as to why publication could be harmful for his or any other concerned party's commercial interests. Examples given of information which may be deemed to be confidential on this basis include:

This may be of particular concern to a downstream user who has a novel use for a substance. In that case, rather than reporting the use back up to the registrant, provision is made for the user to register the use directly with the Agency and request that it is kept confidential.

As noted above (see Registration), REACH expressly allows for joint submission of data where there is more than one potential registrant. This co-operation is desirable in terms of its practicality but can raise competition law concerns if it would lead to significant exchange of commercially sensitive information. This is an increasingly common concern in relation to environmental and safety legislation requiring public disclosure of information, which potentially allows production levels and methods to be assessed and compared.

In principle, an action carried out under EU legislation (such as REACH) should not of itself be held to breach EU competition law. Following this principle, data sharing and formation of SIEFs under REACH should be exempt from the general EU prohibition on anti-competitive practices (Article 81, EC Treaty). However, the regulation makes it clear that actors under REACH do not have blanket approval for any kind of information sharing. The sharing must be limited to technical data and information on the intrinsic properties of substances. It should not include information concerning:

Issues of reliance also arise. A person disclosing data will want to be absolutely certain that they are free to disclose it and that others are relying on it at their own risk.

Even if an actor in the supply chain does not share information with others (and so an issue of deliberate anti-competitive practice does not arise), there may still be a concern that applying for registration will disclose too much of a company's plans. This is similar to the concern faced by those applying for a patent in relation to technology. But in that case, the trade-off for publishing the application is a monopoly under the patent if granted. Under REACH, there is no unique benefit offered as a trade-off for disclosure.

This issue is in part addressed through confidentiality provisions discussed above, but remains a significant concern as REACH is implemented.

It is too early to evaluate the impact of REACH on the exposure of actors in the supply chain to product liability claims. In principle, the heightened scrutiny which substances receive at the registration stage should reduce the prospects of a substance causing harm. That assumes however that the basic philosophy underlying REACH proves to be sound; that evaluation by industry of all substances (under REACH) will be more effective than evaluation by a regulator of selected substances (under the previous system).

If an exceptional situation does arise under REACH and a registered or authorised substance causes harm despite assessment, then the litigation landscape under the new system will look very different. Under the previous system, the manufacturer held all of the key data and research in relation to safety evaluation and the claimant faced the challenge of extracting that information from public sources or by the legal process of discovery from the manufacturer. Under the new system, a much more substantial body of information should be available as of right to a claimant from the public record.

This may have a particular effect on actors in the supply chain who seek to rely on a "state of scientific knowledge" defence. Under REACH, a claimant will be in a much stronger position to attack the quality of the dossier of materials that the actor in the supply chain relied on. It may also be possible for the claimant to identify factors which the actor missed in its dossier, but which other registrants can be shown to have taken account of. Failure to update may also be alleged. Conversely, a registrant may struggle to establish that it relied on materials which were not included in its dossier under REACH.

This is a key difference between the Toxic Substance Control Act (TSCA) system in the US and REACH. Under the TSCA, the reduced burden of assessment on industry and relatively industry-friendly confidentiality provisions mean that there is far greater scope for a product to be put to market without full and extensive public disclosure of information. It remains to be seen whether some US manufacturers will prefer not to export a product in the EU, rather than disclose and share a dossier which includes information which to date has remained confidential in the US.

REACH presents contracting issues for all levels of the supply chain. The starting point in any negotiated supply contract is that the supplier is responsible for ensuring that the product complies with all applicable laws and requirements, including REACH.

However, the introduction of registration and information requirements further down the supply chain complicates the contractual allocation of responsibility for REACH compliance. A supplier must make it clear when and to what extent it is relying on information provided by the buyer in relation to the intended use to which the supplied substance will be put. The contract should deal expressly with the situation where the intended use is not one which is recorded in the registration for the product in question. It must be clear whether the buyer is providing information to the supplier for the supplier to include in the registration and address in the technical dossier, or whether the buyer is making its own registration in respect of that use.

Where the supplier does accept liability for REACH compliance, difficult issues arise concerning how far the supplier can unconditionally commit to achieving and maintaining the registration. REACH has an extended timescale. Agency practice will change over time and REACH envisages a continuous process of change and improvement as new information comes to light and is reported back up the supply chain and within the members of SIEFs. An attempt can be made to address these issues by limiting the contract to a short term, or by negotiating appropriate break rights tied to the continued applicability of the REACH registration. However, anything which potentially affects the duration of the contract will have commercial implications and may come at a price, so it may not be realistic to seek this.

It is also essential to have a clear understanding of what a force majeure clause does or does not deliver. How confident is either party that loss of REACH registration is an event beyond the reasonable control of the party seeking to rely on the clause? The obvious answer is to expressly address the issue, but again it may be unrealistic for a party to insist on this.

There are also some transitional issues to consider, including the following:

By way of comparison, this process of supply chain rationalisation has been a key consequence of the introduction of Directive 2002/96/EC on waste electrical and electronic equipment (WEEE Directive) and Directive 2002/95/EC on the restriction of the use of certain hazardous substances in electrical and electronic equipment (RoHS Directive). Buyers have been terminating supply from suppliers that cannot meet the applicable requirements and manufacturing standards, or will not contractually commit to doing so.

Additionally, it has become important in terms of corporate governance for company management to demonstrate that they have taken into account risks arising out of supply chain vulnerability. Regulatory risk is an element of this. A company will need to show that it has considered what would happen if a key substance is taken off the market for regulatory reasons.

Many companies dealing with issues of compliance under REACH will have international businesses which extend beyond the EU. A typical large company may have a manufacturing operation in China or elsewhere in Asia, and may be a major exporter of substances both into the EU and the US.

For a company in this situation, it may be simplistic to consider ensuring that those substances which are supplied into the EU are registered under and meet the requirements of REACH, without also considering whether the same substances meet applicable requirements in the US and other jurisdictions. If no global evaluation is made, the company may find that it has effectively segmented its own production and distribution lines, with all of the inefficiencies which that entails.

Similar issues arise under other EU legislation, such as the WEEE and RoHS Directives. A company must decide whether to try and exploit different standards (taking advantage of less demanding standards elsewhere and only meeting higher standards where it has to) or whether to unify its product lines around the highest applicable standards.

These issues will be reduced if major jurisdictions apply comparable standards and requirements to those under REACH. There are current indications that a number of countries, such as China and South Korea, are considering adopting REACH as a regulatory model. The prospect of international harmonisation is further improved by the co-ordination of REACH with a number of international bodies and conventions including the Organisation for Economic Co-operation and Development (OECD). REACH uses OECD standards, which are applicable in OECD member countries, including the US, as the basis of certain testing requirements. The compliance of dossiers with REACH and the OECD programme is synergised and there will be mutual reinforcement between the two systems.

These issues also potentially apply to exporters to the EU. It has been suggested that REACH currently provides the highest standard worldwide. The US system in particular has been described as lacking in effectiveness. Its presumption towards allowing manufacture contrasts with the precautionary principle applied under REACH. REACH also presents particular challenges to a US exporter to the EU, as confidentiality protections are much more favourable to industry under TSCA. Information disclosed under REACH will potentially become available in the US where it had previously been protected from disclosure.

This is, however, a situation that is subject to change. In particular, China may introduce its own more demanding system which favours its own rapidly-developing and flexible domestic manufacturers and at the same time presents a barrier to market entry for foreign multinationals seeking to import into China.