Introduction

Scottish water law is currently in a state of upheaval. Recent reforms pursuant to the aims of the recent European Water Framework Directive1 put in place through the Water Environment and Water Services (Scotland) Act 2003 (hereinafter ‘WEWS’) and pursuant secondary legislation2 have paved the way for the adoption of a new statutory, licence-based regime,3inter alia for the abstraction and impoundment of Scotland’s waters. The new system will radically shake up the incumbent, largely common law approach to water exploitation that currently subsists in Scotland. The main thrust of this article is to examine the post-WEWS regime relative to water exploitation4 and analyse its likely appropriateness from a critical policy stance. Appropriate criteria against which an appropriate water allocation regime can be judged are drawn and articulated from policy markers identified in early Scottish judicial pronouncements pertaining to water use governance, comparative approaches found in other jurisdictions and international water law frameworks. In short, these policy markers have been distilled in this article into the following: encouraging beneficial uses, engendering efficiency and legality.5 The article begins with a cursory glance of the common law relative to water law use in Scotland and a review of the policy rationale that currently underpins the law in this regard.

Water Law in Scotland

Ownership Rights

The extent of property rights in water upon or below land in Scotland is vague, uncertain and like the substance itself, shifting and inconstant.6 In general, however, in relation to ownership of water, Scots law adopts the Roman law distinction between running water and standing water. According to Stair, ‘running waters are common to all men, because they have no bounds; but water standing, and capable of bounds, is appropriated’.7 Hence, as Reid notes, ‘running water, at least when left to run in its natural state, is treated as ownerless’.8 There appear two main reasons for this viewpoint—first from a philosophical standpoint, that in common with air and light, water is an essential life-affirming natural resource and hence should not be the property of any one person and second from a practical perspective, ‘because of the evident impracticality of attributing ownership of individual molecules in a fast-running stream’.9

Let us deal with both these issues in turn. First, disallowing private ownership of running waters reflects a wider public utility notion associated with water which can be traced back to Roman law formulations.10 It is trite to remark that water is a resource essential to the survival of mankind and hence should be exploited not merely at the personal whim of private individuals but rather in respect of what we might term ‘beneficial uses’ for society as a whole. The second reason for disallowing private ownership stems from the migratory or ambient nature of flowing water resources. Flowing water is a substance hard to pin down or control prior to it being reduced into possession and in this sense shares characteristics with other migratory resources such as wild animals which are not the subject of full ownership rights.11

It is submitted, however, that any debate over the extent that water is the subject of private ownership is in fact somewhat of a red herring, and the salient practical issue relates to the way in which the law affords private individuals a right to exploit the resource. It is trite to remark that a right of use can be seen as a key sub-right of ownership. Rights of use can be present, however, where the user has no ownership of the resource. In the context of water resources, although, as we have seen, private ownership of running water in situ may be absent, the common law has traditionally bestowed landowners with wide, largely unfettered rights to exploit water resources upon or beneath their land. As we shall see below, carte blanche rights of exploitation may result in undesirable consequences such as other users going without and environmental problems stemming from over-abstraction. These rights of use are discussed presently but suffice to say here that disallowing private ownership of water in its natural state in the name of wider societal concerns seems faintly ridiculous against a backdrop of extensive private exploitation rights.

Rights of Use

Overlying landowners hold riparian rights in water flowing in defined channels either below or upon their land.12 Although falling short of ownership, these rights are proprietary in nature.13 A riparian proprietor is ‘entitled to the water of his stream in its natural flow without sensible diminution or increase, and without sensible alteration in its character or quality’.14 A riparian proprietor also has a general right to make use of water that passes over his land, and he may consume it in an unfettered fashion for domestic reasons although such rights do not extend to industrial purposes.15 In respect of industrial uses, it appears that a reasonable quantity may be abstracted without objection, although there must be enough left for the uses of inferior proprietors.16 A further prescriptive right to abstract for secondary purposes may be acquired, however. Gordon has suggested that ‘although the position is not entirely clear, it would appear that the prescription in question is the long negative prescription, cutting off the right of other riparian proprietors to object to the abstraction.17 The period of prescription would then be 20 years in terms of the Prescription and Limitation (Scotland) Act 1973, s 8’.18

These riparian rights have no role to play in the case of underground water which percolates in an unknown, undefined way. Unlike the case with water in defined channels, landowners have no right to replenishment of this source. Thus, although as noted above, there is probably no ownership in situ as such in percolating waters, a landowner can extract as much water as he pleases with no need to pay regard to the rights of others who may be prejudiced by the fact that, as a result of the abstraction, the water fails to arrive beneath their land, and at least arguably, is drawn away from beneath their land.19 This unfettered right of exploitation has been termed one of ‘absolute dominium’.

The law regarding water exploitation in Scotland is broadly similar to that in England—indeed the Anglo influence over the years in this regard has been strong.20 While the system of riparian rights in Scotland is broadly similar (if not identical) to its English counterpart, a key difference between Scots and English groundwater use law lies in the fact that the motives behind one landowner’s abstraction of percolating groundwater is not germane to the founding of any case for a remedy in England. So, e.g., in Bradford v Pickles, where there was evidence of unscrupulous motives on the part of the party draining the water prior to it reaching an adjacent landowner’s well—it was suggested this was done to force the sale of the land—the court viewed this allegation as irrelevant and found no grounds of action for the defendant.21 Lord MacNaghten stated that Pickles was entitled ‘to force the [appellant] to buy him out at a price satisfactorily to himself’22 and that even though Pickles’ motives might seem ‘churlish, selfish and gasping’ and ‘shocking to a moral philosopher’,23 the House of Lords refused to curtail the right of a landowner to exploit his property in any way consistent with his absolute power of exploitation in the land. This difficult viewpoint is at least in part24 based on a traditional notion of property absolutism espoused by judges in the Victorian era under which landowners were under no general obligation to use their land in such a way as being consistent with wider community interests.25

The position is different in Scotland, however. A proprietor cannot intercept percolating water and hence cut off supply to the inferior heritor for purely spiteful reasons.26 This is because in Scotland the right to drain away the water is subject to the doctrine of aemulatio vicini under the law of nuisance.27 Thus, where a landowner conducts an otherwise lawful exercise of property rights for purely spiteful motives, then the party adversely affected by the act would have grounds to bring a legal claim.28 The rule may in practice be of little significance, however. As Rankine explains, ‘it must seldom happen that an act of enjoyment of property should be actuated solely by malice, by a desire to injure a neighbour. For that is what the rule requires. Mere caprice is not enough; and the slightest patrimonial interests, present or anticipated, will suffice to overcome the plea’.29

Rationale Behind the Law

Pragmatic judicial decision-making

The tale behind the adoption of the absolute dominium approach to groundwater exploitation is an interesting one. Murphy has contended (in relation to English jurisprudence but as noted above the relevant rules are essentially the same) that

[i]n the operative case of the rules for groundwater law, however, the truth lies in the opposite direction [from formalist theory]. The nineteenth century jurists in deciding the content of groundwater law were active, creative, and non-mechanical. They truly acted as decision-makers in a legal system that did not act autonomously of science, the market, or technology, at least in the instance of groundwater and aquifers.30

At the time of early judicial decisions, the English courts (and those in Scotland for that matter) would have been cognisant with the riparian rights doctrine that already existed in relation to water in defined streams.31 The fact that there were well-defined rules which predated any legal determination relating to groundwater suggests that historically speaking, defined streams and waterways were of far more importance in practical terms than underground water.32 Murphy explains that

[n]ot until entrepreneurs wanted to dewater the ground for mines and quarries, or mechanically pump previously unknown draft volumes for steam conversion, or cooling, or sale, or other consumptive uses, did a natural phenomenon become the human resource of groundwater. At that moment, and no sooner, did the legal system have basic decisions to make among claimants whose conflicts ranged from dumping extracted water as a nuisance to using or preserving groundwater as a thing of actual (or potential) cash value.33

If a formalist judicial approach had been taken, then British courts would probably have plumped for a riparian rights doctrine in respect of groundwater. However, after a brief flirtation by the English judiciary with an approach that protected prior uses,34 the courts made the clear decision to embrace the ‘absolute dominium’ doctrine.35 The decision not to expand the riparian regime to the sphere of underground percolating water (and thus protect the correlative rights of other landowners) can be seen as largely a pragmatic one. From a practical point of view, the refusal to allocate recognised riparian rights to underground percolating water stemmed primarily from the lack of scientific and technical knowledge of underground water. As noted in the landmark case of Chasemore v Richards, any determination that there had been interference with underground water was impractical and inefficient because it ‘would require the evidence of scientific men’.36 This fact does not in itself justify an absolute rule. It might of course have been possible to limit uses to those that could be deemed reasonable or beneficial without necessarily needing to enquire into whether or not it interfered with the water of others. We shall return to such ideas later in this article.

So, rejection of the correlative rights doctrine that existed in respect of water in defined channels was not taken as part of a formalist approach on the basis of some established doctrine but rather that there ‘was a keen awareness that no tradition existed, that no precedent bound, and that what could be found in the law books was persuasive only, rather than any part of an established common law rule’.37 These judges simply thought it ‘impracticable’ to adopt a rule for groundwater similar to the one for riparians owning land along the banks of surface streams. Groundwater to them was too unknowable and ‘occult’ in its hydrological aspects.38 Clearly, determining the directional flow and volumes of groundwater was at that time impossible to ascertain—rather, the resource was deemed so secret, uncontrollable and ever-changing that it could not be subject to the regulation of law or specific rules as was the case with surface streams.39

Pro-development agenda

In addition to the lack of technical knowledge concerning underground percolating water, the absolute use rule was preferred in that it was most consistent with an emerging industrial society’s need to exploit natural resources. As the court in a seminal early US decision suggested (which followed the traditional absolute dominium rule), to hold otherwise would result in ‘material detriment to the common wealth, with drainage and agriculture, mining, the construction of highways and railroads, with sanitary regulations, building and the general progress of improvement in works of embellishment and utility’.40 According to this view, given that underground water was so secret in its nature, parties could not be held responsible if their actions, e.g., drew water away from the land of another.41 To render parties liable in such circumstances might severely curtail their industrial activities.42

Summary

From the above, we can see that the current common law approach to groundwater abstraction in Scotland is rooted to some extent in creating efficient rules.43 The notion of efficiency stems from the fact that rights to exploit under an absolute dominium regime are certain, and thus transactional costs in terms of disputes arising therefrom are kept to a minimum. While the current rules may be also be seen as practical and consistent with promoting industrial water uses, conspicuous by its absence is any attempt to countenance the encouragement and protection of wider, beneficial uses in society, such as the needs of other water users. In a time of drought, then users of groundwater who are that bit slower off the mark would simply do without.44 In this sense, the riparian approach in respect of water in defined channels which bestows rights concerning correlative users is preferable. It is, however, no panacea. While the riparian rights approach serves to protect the interests of other overlying landowners at least against industrial uses, in times of scarcity, downstream users would simply go without if extensive domestic uses exhausted the stream. Moreover, the rights of downstream users are vulnerable to prescriptive rights which might sanction industrial uses.

In addition, the riparian doctrine does little to countenance wider social interests such as limiting overall levels of abstraction in the name of environmental concerns. In many other jurisdictions (e.g. most US States), courts and policy-makers have moved away from relatively unfettered absolutist approaches to water exploitation to more tightly controlled regimes that limit private abstractions in the name of wider, societal needs.45

Before casting an eye over current Scottish water shortage problems, it is worth noting that there has been a marked attempt in many other jurisdictions to deal with water governance issues across different types of water resource in a ‘joined up’ fashion that is lacking in Scotland. It is well established that percolating groundwater and surface water are in hydrological terms inextricably linked—e.g., water may diffuse (and hence becoming percolating) from an underground channel or percolating water may flow into or become part of a defined stream.46 It has been argued therefore that ‘[t]o anyone at all familiar with elementary hydrology principles it must seem astounding that the law should divide water into surface water and ground water and treat each independently’.47 The approach inherent in Scotland that compartmentalises water and sets out different legal rules for water lying in different states in essence means that one party’s abstraction of the same water but at different stages in its hydrological cycle may incur different legal consequences. Furthermore, despite the fact that there is a general legal presumption in the UK that all underground water is in fact percolating (and not moving in a defined underground stream)48 even in today’s technologically advanced society, from a hydrological point of view it may still in some instances be impossible to determine whether or not water at any given point of abstraction is in fact percolating or falling within a defined sub-surface channel.

It has also been recognised that given the cause and effect relationship between percolating water and water in defined channels, to ensure an efficient and a sustainable approach to water allocation and use, governance regimes need to approach water resources with consistency across the board.49 There is little to be gained, e.g., in concentrating on conservation in respect of water in surface channels and protecting correlative rights therein when no efforts are made to tackle excess abstraction of groundwaters which may themselves feed surface streams and diminish surface water flows. In Scottish context, a regime that countenances riparian rights and hence limitations on riparian owners’ rights of use in relation to water in defined channels on the one hand but recognises an unfettered absolute dominium approach in relation to groundwater on the other, fails to approach water governance in such ‘joined up’ terms.

Current Water Problems in Scotland

Scotland is a nation generally perceived to be blessed with (or perhaps blighted by) a surfeit of water, and indeed concerns over flooding and arguments over the rights of proprietors to eject water onto adjacent lands have historically been far more common than disputes relating to water shortages.50 This is perhaps not surprising. As the Scottish Environmental Protection Agency (SEPA) has noted

[i]f Scotland’s available water resources are measured against a UK or European basis, Scotland is not short of water. Exploitable water resources are equivalent to 16,000 m3 per person per year in comparison with 2,090 m3 for the UK, 3,490 m3 for France and 2,156 m3 for Germany...51

Despite the perception of Scotland as a perennially wet realm, localised incidents of water shortages and other identified environmental problems stemming from over-abstraction have, however, in recent times resulted in calls from commentators for abstractions to be controlled.52 While a somewhat unfettered right of abstraction may not always be problematic, it has begun to cause well-documented problems in certain geographical areas of Scotland. SEPA, e.g., has reported a number of concerns, including that increasing abstraction of water from groundwater aquifers in Dumfries had lowered the water table both threatening a valuable drinking water resource and resulting in the drying out of connecting rivers; there are approximately 1,000 hydroenergy ‘off-takes’ in Scotland that transfer water out of catchments to generating stations, many of which in fact remove all the water during low river flows; the combination of recent dry summers and increased irrigation has led to pressure on small east coast water burns; and over-abstraction of water for drinking from lochs or reservoirs may have significant impacts upon river ecology downstream. Examples include rapid changes from high to low flows in the River Leven downstream of the Loch Lomond barrage which leads to the stranding of migratory salmon fish and their spawning beds.53

As noted above, in respect of surface waters (and underground waters) in defined channels, riparian rights allow landowners to draw water freely for private use and primary purposes—which would normally be of limited concern. Rights to undertake extensive commercial abstractions may also be acquired by prescription to which downstream riparians would not be able to object, regardless of their impact. As Hendry has noted, ‘many such abstractors exist (particularly breweries, distilleries, fish farmers and agricultural users) and problems (in particular, localised over-abstraction) are recognised but not at present addressed’.54 Such concerns may be addressed by the post-WEWS regime in Scotland, to which this article now turns.

WEWS and the European Water Directive

Introduction

Unlike the case in England and Wales, where for some time the common law has been overlain with a comprehensive licensing framework,55 aside from a smattering of case-specific, statutory exceptions,56 the traditional common law position has been historically perceived as generally sufficient for regulating water use in Scotland.57 The reforms brought about by WEWS inter alia, for the first time, provide for the development of a comprehensive statutory licensing regime for water use in Scotland.58 The main driver for reform has clearly been the requirement to bring Scottish water governance in line with policy aims set out in the European Water Framework Directive.59 The directive entered into force on 22 December 2000 and represents an attempt to establish a harmonised water framework throughout Member States and is the consequence of a realisation that the pre-directive, European water measures were too fragmented and while commonly targeted specific problems ignored an overall strategic approach to water resources across Europe.60 The basic purpose of the directive is set out in Article 1:

The purpose of this Directive is to establish a framework for the protection of inland surface waters, transitional waters, coastal waters and groundwater which:

  1. prevents further deterioration and protects and enhances the status of aquatic ecosystems and, with regard to their water needs, terrestrial ecosystems and wetlands directly depending on the aquatic ecosystems;

  2. promotes sustainable water use based on a long-term protection of available water sources;

  3. aims at enhanced protection and improvement of the aquatic environment, inter alia, through specific measures for the progressive reduction of discharges, emissions and losses of priority substances and the cessation or phasing out of discharges, emissions and losses of the priority hazardous substances;

  4. ensures the progressive reduction of pollution of groundwater and prevents its further pollution and

  5. contributes to mitigating the effects of floods and droughts.

To achieve the aims set out above, Member States are placed under an obligation to ensure that in general their water resources attain certain characteristics deemed in accordance with the directive’s goals. Under Article 4 of the directive, therefore, Member States are required to achieve what has been labelled in ecological terms ‘good groundwater status’ and ‘good surface water status’ by 2015. Waters will be classified by Member States in to one of five classes: ‘high’, ‘good’, ‘fair’, ‘poor’ and ‘bad’. The status will be determined by the worst of three separate assessments of biological, chemical and hydromorphological status.61 For the first time, the status of surface water will be assessed in terms of ecological quality as well as chemical quality, and the quality and quantity of both groundwater and surface water will be considered together.62 Clearly, therefore, the overarching aim of the directive, and hence abstraction regimes that are manifest thereunder, is to ensure the sustainability of the resource in what can be seen as a welfare-maximising measure. Such an aim has at its heart the notion that water is too precious to be left to the vagaries of carte blanche private exploitation. Hence, the post-WEWS system may entail substantial inroads into current private property rights held in water.63

To lay the groundwork for achieving the aims of the directive, Article 11 requires Member States to establish

[c]ontrols over the abstraction of fresh surface water and groundwater and impoundment of fresh surface water, including a register or registers of water abstractions and a requirement of prior authorisation for abstractions and impoundments...Member States can exempt from these controls, abstractions or impoundments which have no significant impact on water status.

The current abstraction regimes in Scotland in relation to both groundwater and surface water clearly do not live up to the requirements set out in Article 11 of the directive. First, given the largely unlicensed nature of water governance in Scotland, information on the extent of water resources in situ and abstractions thereof is patchy. Additionally, as noted above, there may be localised instances of over-abstraction heralding deleterious environmental and other consequences which presently are not controlled at all and hence, under the terms of the directive, will require to be licensed. Provisions compatible with the terms of the directive were thus to be put in place under powers set out in WEWS. The salient measure of the Act in this respect is section 20—essentially an enabling provision that allows Ministers to establish a regulatory framework to control, inter alia, abstractions of groundwater and from surface streams and impoundments of surface water. The detail of the licensing provisions was recently fleshed out by ministerial regulations64 that were crafted on the back of a number of draft orders65 and discussion papers which preceded the Act.66

Basis for the Regime

The abstraction licensing regime is part of a wide-ranging strategy based on what has been termed a ‘river basin management planning process’. This process is a requirement of Article 13 of the directive and will provide for the regulation of water-related activities which hold environmental consequences within a ‘river basin district’ in accordance with the aims of the planning process. River basin management planning ‘will...[thus] provide a reference point for all forms of planning that affect the water environment’.67 Importantly, ‘joined up’ thinking in terms of the water environment and the impact thereon of a myriad of different water uses are central to the planning process: ‘[a] key feature of the system will be a spatial analysis of all human impacts on the water environment that recognises the interconnections between all the elements in the water cycle – rivers, lochs, estuaries, coastal waters and water under the ground’.68 So, in this way, unlike the present common law regime, decisions over water usage rights will attempt to take into account the interrelationship between groundwater and surface streams and the impact of various water activities over both water resources and other water activities.69

It should in fact be noted that in establishing river basin management plans (RBMPs), Scotland is at a disadvantage compared to England and Wales70 as unlike its southern counterpart there has previously been no statutory framework in place to facilitate such a strategic approach north of the border. In terms of water governance, Scotland is hence facing more radical surgery than England, and thus the new system may entail additional regulatory costs which will require to be borne by society and, in particular, water users—an issue that may make operation of the post-WEWS regime more difficult.

The New Licensing Regime

Deemed ‘controlled activities’71 under the post-WEWS regime, abstraction and impoundment of waters72 may be subject to one of a number of different levels of regulatory requirement, including

  1. Water use licences.

  2. Simple registration.

  3. General binding rules (hereinafter GBRs).73

As a general duty parties may not carry out controlled activities without the necessary authorisation74 and all such water users must take ‘all reasonable steps to secure efficient and sustainable water use’.75

GBRs

Despite an earlier intention expressed by the Scottish Executive for a comprehensive registration of all controlled activities, this idea has been shelved in the 2005 regulations.76 This development may at first blush seem surprising, particularly in the context of the current dearth of information regarding current water use activities and the need to retain awareness thereto in case of changing environmental or social concerns. The move to dispense with comprehensive registration of controlled activities may be seen as a response to concerns voiced from industry about the onerous nature of complying with the regime.77 In any case, the bottom tier of regulation is hence now adherence to a relevant set of GBRs, with no need to register the activity in question. GBRs are sets of publicised mandatory rules that users must comply with in respect of controlled activities which hold only a small risk to the environment and no cumulative environmental impacts.78 Anyone carrying out this sort of activity would be bound to act in accordance with the GBR. It is estimated that around a third of all controlled activities will now be subject to the requirement of adherence to GBRs.79 In terms of abstractions, adherence to GBRs shall apply to those that amount to less than 10 m3 per day.80 For impoundments, existing passive weirs less than 1 m high that do not affect fish passage shall be subject adherence to a GBR.81

Registration

Registration (coupled perhaps with the imposition of standard conditions) will be required in respect of controlled activities with relatively simple and well-understood impacts but which may hold cumulative impacts.82 It has been estimated that registration of activity will be a requirement of some 80,000 water users (the bulk being septic tank dischargers).83 In terms of water abstraction, registration will be a requirement for those activities that abstract between 10 and 50 m3 per day.84

Licences

Full licences will only be required in respect of controlled activities that have potentially damaging environmental consequences.85 It is anticipated that around 15,000 current water users will be required to apply for licences in respect of their activities, including any abstractions over 50 m3 per day.86 Licences will be imposed subject to any conditions that SEPA ‘considers necessary or expedient for the purposes of protection of the water environment’.87 For impoundments, licences shall be required in respect of the construction of all passive weirs over 1 m high and those which affect fish passage, raised lochs over 1 m high and in respect of the construction of all new impoundments.88

While a significant portion of licences will be subject to simple standard conditions, depending on local environmental factors, some authorisations will be more complex and subject to site-specific requirements. Thus, a desire to combine standardisation of approach in regulation with local requirements is evidenced here.89 In relation to abstraction and impoundments, a list of non-exhaustive licence conditions (all of which might hold financial consequences for abstractors)90 had previously been identified by the Scottish Executive and include

  1. Requirements to follow best practice and utilise best technology.

  2. Reporting requirements.

  3. Conservation measures to facilitate long-term exploitation of the resource.

  4. Code of practice compliance.

  5. Restricting licences to certain identified users.

  6. Restricting the duration of a licence where that is deemed necessary to protect the environment.91

Despite the prescriptive nature of the rules governing the different tiers of authorisation set out above, some flexibility is built into the regime. SEPA shall have the right to stipulate, e.g., that activities which might normally be subject to registration may require to be licensed (and vice versa).92 Married to this discretion, on determining applications, SEPA will be bound to carry out a risk assessment in respect of the activity proposed to assess the appropriate steps to be taken to ensure efficient and sustainable water use.93

Additionally, the new regulations make provision for recognition of management agreements, wherein a number of users of the same body of water agree to coordinate their activities to better protect the water environment as well as their own interests.94 As the Scottish Executive has noted, ‘[m]anagement agreements may set out how several water users have agreed to ensure that they are not all abstracting simultaneously (thus enabling one water user to abstract more at times that the others are not abstracting and so leading to more efficient allocation of available capacity); or how operators will contribute to the construction of winter storage facilities that could then support summer abstractions’.95

The payment regime

Under Article 9 of the directive, Member States are required to ‘take account of the principle’ of recovery of the costs of water services. Schedule 5 of the 2005 regulations bestows powers upon SEPA to impose various different charges upon water users subject to the new regime. Charges may be imposed in respect of applications for authorisations as well as for the granting, variation or revocation of authorisations. In particular, a subsistence charging scheme will become operational in April 2006 to recover annual WEWS costs. It should be noted, however, that activities under GBRs shall be subject to no charge. For registrations, it is anticipated that an application charge will be levied but that there will be no ongoing subsistence fees. On the other hand, full licences shall be subject to both an application charge in addition to ongoing subsistence charges.96 While, at the time of writing, the final detail of the Scottish regime has not yet been fleshed out, there is an identified need to investigate the extent that charging might not merely cover the administration costs of the regulator but also might place a value on water itself and hence encourage more efficient uses in society. Indeed, the directive requires this approach to be in place by 2015.97 While this development may help bring about conservation of the resource, it may be further be seen as an attack on current private property rights in water and undermine commitment to the regime.

Analysis of the Post-WEWS Regime

Introductory Remarks

While the preceding section of the article has focused on the ‘nuts and bolts’ of the new regime in Scotland and the rationale behind its imposition, we now turn to an evaluation of the post-WEWS regime for water governance in Scotland in the light of a set of relevant criteria. The criteria that the regime can be judged against have already been drawn out in the discussion of the common law above and moreover are manifest in approaches found in international law and practice as noted below. Although the following criteria will doubtless not be exhaustive, it is submitted that they are relevant policy markers of an optimum water governance system by which the new regime for water allocation in Scotland may be judged. It should be noted that the criteria identified are germane at three levels: the overarching question of the type of regime that should be selected to control water use; the detailed substantive rules which sit therein; and also the procedural rules which seek to ensure administration, monitoring and compliance thereto.98

It should also be borne in mind that it may be difficult to ascertain a ‘one size fits all’ regime that may be relevant for all water governance systems across the globe.99 This is because an additional factor which feeds into the identified criteria is that of climatic or ecological appropriateness. These factors may dictate the appropriate balance that requires to be struck between competing aims. This issue is picked up below. With this firmly in mind, it is submitted that an optimum water use regime should strive to meet the following policy goals:

  1. Efficiency.100

  2. Encouragement and protection of beneficial uses in society.

  3. Legality.101

While the above criteria may appear sparse, it is submitted that all other markers of an optimum regime will feed into one or more of those listed above. So, e.g., as will be elaborated below, an appropriate regime would clearly be one that could ensure compliance thereto and provide for the effective resolution of disputes. The ability or otherwise of a regime to meet these objectives would play an important role in ensuring both efficiency and also engendering the protection of beneficial uses. In a like fashion, the need for a regime to exhibit clarity may be a factor that might impact upon its general efficiency.

Moreover, the policy aims of a water governance regime are not fully compatible in the sense that they cannot all be sought to a maximum extent in every case, all of the time. For example, there may be an undeniable tension between the quest for efficiency (at least in terms of some meanings of the word as we will discuss below) and the need to ensure beneficial exploitation, which would encompass the prohibition of environmentally damaging uses. Thus, part of the analysis is to examine whether the balance in this regard has been struck in the right way for Scotland. Of course in so doing, it should be borne in mind that compliance with the European directive must be seen as the overarching aim of both WEWS and the empowering legislation that follows in its footsteps. In this regard, Scottish policy-makers’ hands may be tied to some extent.

Efficiency

Efficiency can be sought in a number of ways, including the formation of a water market to facilitate trades between market actors and the use of economic carrots and sticks to encourage most efficient use. Equally, a regime will seek to avoid inefficiency in other ways, such as ensuring low transaction costs, facilitating dispute avoidance, providing effective dispute resolution programmes and eliminating unnecessary regulation. In this context, efficiency is fundamentally concerned with reducing costs for industry participants and facilitating the most economically efficient (or profitable) uses in society. As noted below, it is also argued that the establishment of efficiencies in this sense may contribute to a reduction in waste, conservation and allocation of water to the most beneficial uses. The extent that such wider ‘efficiencies’ can be achieved, however, is a moot point and is debated below. We begin by discussing the general idea behind water markets.

Water markets

Rationale

The creation of a water ‘market’ would in theory create incentives for conservation of water resources by offering water rights’ holders the chance to sell their excess rights to others. One of the perceived advantages of a licence-based regime is that it may facilitate the trading of licences in such a fashion. From a basic economic standpoint, it is argued in simple terms that if the profits to one party outweigh the cost of purchasing property rights from another (at a price higher than the potential benefits to the first party) then discounting transactional costs, it may be economically efficient for the trading of the property right to take place.

The post-WEWS regime in Scotland will facilitate such trading.102 An initial question that can be asked relates to whether current rights to take water at common law in Scotland could already be traded in such a way. If one takes the example of groundwater in Scotland, it might be argued that a landowner is quite entitled to sell a personal right to others to come onto his land and draw water away103 and thus exploit the water resource in a more efficient manner than he could himself. Moreover, a servitude right to take water may be capable of being created which, being a real right, would survive a change of ownership. The right of aquaehaustus is a recognised servitude under Scots law and covers the taking of water from some source such as a well or a stream.104

The key point about licence trading, however, is that a right granted under licence is both quantifiable and exclusive in a manner that absolute rights to abstract groundwater or riparian rights to take surface water under the common law may not be.105 An abstraction licence confers upon the owner a right to abstract a defined entitlement which importantly is protected against the actions of others—thus, a monetary value can more easily be attached to the value of the licence. The same cannot be said for rights to water under the common law which although (in respect of groundwater) as we have seen are often labelled ‘absolute’, may in practice be worthless if rendered obsolete by the actions of others that serve to draw the water away (leaving the aggrieved user with no remedy at law). Having said this, it is possible that some situations may arise where given a lack of prevailing knowledge concerning quantities of underlying groundwater, a licence may be granted in respect of a volume of water of which pumping is not sustainable, but as the regime develops and knowledge bases expand, such problems should be alleviated.106

As well as promoting the most efficient use of the resource across private users, it has also been proposed that trading may also help facilitate overall conservation of the resource. For example, as Gregory has noted in respect of water trading in the USA

[a] developed water market reduces water scarcity by increasing the value some place upon water. In other words, some water users may not be placing an appropriate value on the water that they use because they either receive it for free, pay a subsidized rate for it, or currently use more than they need. If those wasteful users could sell quantities of excess water, then they would realize that wasted water is equivalent to wasted money. Then, they have the economic incentive to seek and employ less wasteful uses for their water. In some instances, water users might decide that the value they would reap from selling all of their water may surpass the value of their intended use for the water. In such cases, the water had been inefficiently allocated prior to the water market; now it could be devoted to a use that society economically valued more.107

A pro-market stance like that taken by Gregory may posit that limitations on the ability to trade water rights in the name of protecting the environment and other regulatory tools will increase trading costs, prohibit otherwise efficient trades and thus hinder the efficiency of water allocation. An extreme pro-market stance holds that regulation is not necessary at all and that operation of the market will itself lead to efficiencies, and ultimately conservation of the resource as users will conserve water use and sell the excess to other market participants.108

It has been argued, however, that facilitating efficiency as between different market actors should not necessarily be seen as an overarching aim in respect of a substance such as water which can be considered a ‘public good’109 and thus cannot be left unfettered to the vagaries of the market. This argument stems from the fact alluded to in the beginning of this section that the notion of efficiency may hold different connotations. There is an implicit assumption here that what might be efficient in fiscal terms for a limited number of market actors may not necessarily promote the uses that are the least wasteful in environmental terms and/or most beneficial in economic and other senses for society as a whole.110 Leaving aside that argument for the moment, while pro-market contentions might be based on a ‘perfect market’ theory, it shall be illustrated below that in practice such an argument is flawed in respect of water.

Potential obstacles to trading

While water trading may be a theoretical boon, at least in some senses, in practice it may be no easy task to reap any benefits therefrom. Despite moves towards the embracement of markets for water in jurisdictions such as Chile,111 the USA,112 Australia113 and England, it has been noted that actual markets in free-flowing water are in fact extremely rare and tend, in practice, to function between similar users in close proximity to one another.114 A review of experience in England suggests that the nature of water as both an ambient and a public resource dictates that transactional costs may be prohibitive in allowing any water market to function effectively. Moreover, market actors may currently be hamstrung by regulatory requirements that dampen enthusiasm for trading.

While trading to date in England and Wales has been relatively rare, policy-makers south of the border have for some time been keen to see trading extended because they agree with the well-worn view that it will encourage the more efficient and thus sustainable use of the resource:

[i]n principle, abstraction licence trading should be promoted as an effective means of achieving the optimal distribution of water resources within and between different sectors of use and thus contributing to sustainable development.115

Under the previous legislation operational in England and Wales,116 the trading of licences was curtailed somewhat by the fact that generally speaking a licence holder had to be the occupier of the land upon which the water was drawn from.117 The Water Act 2003 has amended this position to stipulate that a mere right of access to the land (which could be negotiated with the landowner) would be sufficient for a licence to be granted.118 On a prima facia basis, therefore, if trading is to be encouraged in Scotland, then a similar method ought to be adopted. In fact, under the 2005 regulations, in so far as any trade would take place, given that the licence is granted to a ‘responsible person’, trades will be allowed in so far as SEPA is satisfied that all pre-existing licence conditions could still be met and the acquirer meets the responsible person criteria.119

The scope of trading south of the border has again been stifled by the fact that hitherto licences were only granted in respect of abstractions where the land upon which the water was to be used was specified.120 This meant that would-be purchasers of licences were required to seek variation of a licence prior to purchase, entailing additional transactional costs and thus rendering trades less attractive. By way of reforms set out in the Water Act 2003, this problem has been alleviated to some extent because the licence now merely requires to state the general purpose for which the water is to be used and thus lends itself more flexibility to prospective trades.121 As has been noted, it is anticipated that a trade may be made in Scotland with minimal regulatory interference in so far as existing licence conditions can still be made. In what circumstances a change in use may impact upon such a determination is discussed further below.

While not trying to pour cold water on policy-makers’ aspirations in this regard, the Environment Agency122 reacted cautiously to the government’s proposals to further encourage the trading of water licences in England and Wales. A number of additional potential obstacles (beyond those tackled in the Water Act 2003) were identified which may also be of import in Scotland including the geographical and bounded nature of water resources would mean that trades would normally be confined to defined catchment units or units linked by some sort of transfer mechanism.123 Such problems may be compounded by the fact that the transport of water is generally expensive, and this factor may make an otherwise efficient trade prohibitive.124

As noted above, what might be an efficient trade on a local basis as between two market actors may not be efficient from a wider or national perspective, at least in the sense of protecting more beneficial and sustainable uses in society. To this end, the acceptance of water licence transfers by regulators would have to take into account the fact that certain water uses generate wastewater which can cause environmental problems. Moreover, it should be noted that as recognised by correlative rights systems—like that incumbent in California125—a water regime may benefit from favouring overlying uses as these activities may at least partially replenish the aquifer from which the water is drawn, unlike the case where the water is to be used on non-overlying land. So, in the context of the Scottish system, if a trade is to take place where the water is to be used for a different purpose, then SEPA will need to ensure that these potential problems are evaluated prior to authorising the trade. Furthermore, it should be noted that the possible redistribution of abstraction points from groundwater or surface streams—even if the water use is to be the same—would require examination as the environmental impacts of abstraction may in fact be site specific.126

Even if a trade is ultimately accepted by the regulator, undeniably the greater the regulatory involvement in the trade, the higher the transactional costs will be for the parties concerned. This fact may prejudice the ability to make an economically efficient trade, particularly given that additionally there will be general contracting costs for trading parties to bear. The inherent tension between two different aims of such a water governance regime first noted at the beginning of this section is evident here. While the ability to trade without high levels of interaction with the regulator will be key to any successful developing market in water licences designed to encourage the most economically efficient use of the resource (at least in terms of optimum uses within market actors), interaction with the regulator in some shape or another may be required to ensure the absence of negative environmental consequences and/or promote more efficient uses for society in general.

Markets in optimum conditions do not always work

Leaving aside specific difficulties with water markets such as transactional costs and the need to countenance more holistic views of efficiency in recognition of the public nature of water, there are other flaws that can be identified with a purely market-based system of property allocation in general. First, in relation to identifying the respective efficiencies of competing uses, it may be difficult to predict what the perceived costs and benefits of these different activities are. The value of water exploitation to competing users may in many cases be speculative and predicated on no more than assumptions, expectations and perhaps mere hopes. Moreover, experience may suggest that it is not always the most efficient uses that will prevail in the market place. Rather it may be the case that the party with the most resources is simply able to wield its monetary clout over others in the market place even where its use is not strictly speaking the most efficient. A case in point in this regard is that relating to Los Angeles water abstraction in which since the 1940s, vast amounts of water have been abstracted by the Department of Water and Power from the Mono Lake causing over-abstraction and severe environmental consequences.127

Finally, the pro-trading argument labours under the somewhat dubious assumption that market actors always behave in a rationally economic sense and seek to ‘maximise’ efficiency continually. Coase recognised that even in seemingly optimum market conditions, markets do fail and that it appears that market actors at times simply ‘satisfice’ rather than maximise their economic interests.128 Dellapenna draws on a stark illustration to this effect:

[w]hen we find that even in such a classic setting as among Bedouin horse dealers, markets simply fail to reach the most economically efficient outcome we must begin to question when markets can be expected to achieve the most socially desirable outcome, even if we define ‘most socially desirable’ in the narrowest economic terms.129

Trading and time limited/revocable licences

There seems no general intention for licences to be time limited in Scotland. Licences may, however, be subject to time limits, varied, suspended or revoked in particular circumstances.130 While a right to vary, revoke or time limit may be a useful one for regulators to hold up their sleeves, it is interesting that, for England and Wales, it has been argued that a major factor that will dampen enthusiasm for the trading of licences lies in the fact that under the Water Act 2003, all new abstraction licences will be time limited.131 Carty has argued that

[i]t is unlikely that a potential new entrant into the market will want to purchase a licence that is going to be revoked despite the presumption of renewal where environmental sustainability is not in question, there is continued justification of need, and water is being used in an efficient manner. Such uncertainties may deter a trade which may involve substantial investment.132

In general, property rights are more easily traded if they are certain and determinable. If trading is to be encouraged to ensure efficient uses—at least in a narrow sense—then placing future possible constraints on the property right to be traded will discourage transfers. It is this author’s view that the pro-market argument is not convincing in any case for the reasons outlined above. It has been suggested that markets are perhaps not the best vehicle for ensuring efficient uses of water in the wider public sense and moreover, other transactional costs—aside from regulation—may dampen enthusiasm for trading in any case. Therefore, limiting regulation, taking liberal views on allowing trades, granting licences in perpetuity on a non-revocable basis (and thus increasing the potential environmental dangers that might arise therefrom) in the name of ensuring efficiency may not be a laudable aim for the reform of Scottish water laws. In general, based on the analysis presented in the preceding section, it is the view of this author that the Scottish Executive should be wary of placing too much emphasis upon creating optimum market conditions.

Other efficiency tools

Aside from operation of a water market, there are other tools that can be used to encourage efficiency. While traditional common law doctrines have dictated otherwise, given scarcity concerns, water should arguably no longer be perceived as a ‘free’ good. Economic incentives through, e.g., fees or taxes might be introduced to encourage the more efficient use of the resource.133 This kind of efficiency drive has been markedly lacking in the incumbent common law regimes regarding water in Scotland. As noted above, the post-WEWS regime, however, is based on the general principle that the ‘user pays’ and thus abstractors subject to the regulatory regime will require to bear at least the costs of operation of that regime. It has already been noted that future costs may be even higher in the future in that a key objective of the framework directive is to place a value on water itself and make use of economic instruments to curtail overuse and waste. Therefore, in geographical areas where water is scarce or in respect of uses that are more profitable to abstractors, such a policy, in simple terms, would dictate that it would cost more to abstract water than in other areas where water is more abundant or in respect of less profitable uses. Any such moves would clearly be politically sensitive but represent useful tools in ensuring appropriate and sustainable water use.

Dispute avoidance and low transactional costs

Aside from promoting water markets to engender efficient use and providing cost incentives, regime efficiency may be promoted simply by the presence of well-defined, clear property rights in water. The more certainty inherent in a legal right and the less ambiguity inherent therein, arguably the more efficient the system of property allocation is. This is because if the right to the resource is ambiguous, disagreements over priority of use can lead to costly litigation between disputants. Recalling our earlier analysis, the absolute dominium common law approach to groundwater does provide for certainty of legal right. By contrast, dubiety over the extent of rights of use is a factor which has blighted ‘reasonable use’ and ‘correlative rights’ regimes in USA.134 Arguably, property rights should give rise to as little ambiguity as possible, so that they in effect become self-enforcing.135 Mattei has noted that

[c]onfusion and doubt in the rules of property create incentives to litigate, because each conflicting individual hopes that he or she will end up being favoured by the judicial decision. Clear-cut property rights, to the contrary, reduce litigation because parties will already know who will lose and who will win so that they will avoid spending money on a litigation the outcome of which is already clear ex ante.136

Keen readers will perhaps note that it can be argued that providing certainty of right should also encourage investment and thus additionally may help encourage optimum water uses for society. This issue will be discussed under ‘beneficial uses’ below.

The determination of water allocation rights by SEPA may give rise to fewer disputes arising therefrom than if, e.g., a US-fashioned reasonable use or correlative rights approach had been taken. So, while the regime’s transactional costs may be higher at the outset137 than a wholly unfettered absolute dominium approach,138 it is preferable in a dispute avoidance sense over other US law approaches and also perhaps the current common law riparian rights system in Scotland where determinations over reasonable uses and questions regarding what amounts to primary and industrial uses have exercised the courts’ minds from time to time.139 It has been noted above, however, that licences and other consents granted to abstract/impound may be subject to variation or revocation after review by SEPA which may give rise to post-licence challenges brought to SEPA by parties affected by a licensee’s activities. So, the spectre of possible transaction costs under the Scottish regime in this sense is a real one.140

Furthermore, disputes might still arise under WEWS in respect of disagreements between competing abstractors seeking to exploit a water body where given ecological, biological and hydromorphological conditions, abstractions are likely to be limited—at least in the sense that parties may have to stagger their abstractions.141 Given that litigation can be seen as an inefficient mechanism for the resolution of competing users’ interests, central to the regime should be the encouragement of consensual forms of conflict resolution between disputants. Although lip service is paid in this regard by the Scottish Executive in their encouragement of management agreements,142 whereby if water is scarce parties are encouraged to enter into a contractual arrangement inter se to divide the resource, it may be that some more explicit encouragement of negotiation or perhaps mediation might be beneficial.143

Furthermore, the post-WEWS regime in Scotland is also largely silent on the issue of disputes that might arise between those carrying out licensed and non-licensed activities. So, e.g., a licence may be granted by SEPA to party A, whose abstraction activities curtail the unregulated, non-mechanical activities of the neighbouring party B and, moreover which is contrary to that parties’ riparian rights to a continuing flow of stream of the same quality and quantity. Given that the regime itself does not attempt to remove existing private property rights that currently exist in water resources in Scotland, it is plausible that now and again licensed activities might run contrary to the vested rights of other proprietors. How the regime might deal with issues such as these is at the moment unclear. The post-WEWS regime also leaves uncertain the issue of whether or not an abstraction, either licensed or regulated in some other fashion, which draws water away from beneath the land of another resulting in subsidence, and perhaps damage to buildings will result in a remedy for the aggrieved party. The common law is inherently uncertain in this regard.144 Such uncertainty again adds to potential transactional costs involved for market participants in terms of possible litigation.

Encouragement and Facilitation of Beneficial Uses

If scarcity becomes more of a pressing issue in respect of water resources, so ensuring that beneficial uses are recognised and protected by a legal regime becomes an important feature.145 Such a policy consideration drove a marked shift by policy-makers from riparian rights to appropriative regimes in western US states characterised by arid climes.146 As noted, the current common law system in Scotland generally leaves determination of water uses in the hands of private individuals, except in so far that in relation to water in flowing stream, secondary (industrial) uses must leave the water undiminished in both quantity and quality.147 While the post-WEWS regime does not alter the issue of ownership per se, it will seek to ensure that uses that are detrimental at least as set out in the terms of the European water directive148 are curtailed.

Administrative v judicial decision-making

The post-WEWS regime is one in which determination of beneficial uses, in the form of permitting activities, is to be vested in SEPA as the regulating body responsible for the administration of the regime.149 Although it will be shown that there are particular problems associated with administrative decision-making, it has been argued that the administrative determination of what is a reasonable or beneficial use in respect of water has certain advantages over determination of the same by a court as would occur, e.g., under the US reasonable use doctrine.150 Notwithstanding that the criteria for establishing what a reasonable/beneficial use entails may be similar in respect of both judicial and administrative determinations, the process is very different. While judicial determinations will take place in relation to disputes between parties which have already occurred, administrative decisions are taken ex lege at the time of allocation of the right.151 Leaving aside, for the moment, the issue of whether this lends itself to more informed decisions about beneficial uses, it should also be noted that the regulated system has the advantage over court-adjudicated, reasonable use regimes in that the decision is taken prior to the (often heavy) financial investment attendant to water exploitation rather than leaving such activities shrouded in uncertainty and subject to possible litigation brought by competing users after investment has begun. Thus a regulatory-based regime may provide the certainty which may encourage would-be abstractors to carry out potentially beneficial uses.152

In general, it might be said that courts are not best placed to take technical decisions surrounding optimum water uses.153 Following on from this, a feature of a regulatory regime akin to the one instigated under WEWS is that a more strategic and holistic approach to determining reasonable/beneficial uses can be taken than would be the case with court determination of such issues. Take the following view:

[u]nder traditional common law...[approaches], a...determination of whether a particular use is reasonable has always been essentially relational, focusing on the relative social utility of the particular competing uses before the court. While generalized [public] interests...could always theoretically be included in...the judicially weighing of one use against another, such inclusion rarely occurred except perhaps in the form of unarticulated intuitions. The administrative agency is, on the other hand, composed of experts who devote their professional life...to studying such questions. This knowledge...will shape the weighing process in a manner which is at once more abstract and more responsive to the total reality surrounding the use of water drawn from a particular source.154

Another factor that supports administrative decision-making is that unlike its judicial counterpart, an administrative agency is not hidebound by the strictures of judicial precedent, which may limit the ability of the judge to deviate from old, outmoded policy considerations. Having said this, administrative agencies are, however, constraints by the parameters set by the powers conferred upon them by law.

In terms of overall strategic approach, the proposed licensing regime for Scotland seems, at least if one takes a positivist view, to be on a sound footing. As noted above, the River Basin District Management (RBDM) approach, which will underpin the regulatory regime in Scotland, seeks to take an integrated approach gauging a range of water uses and water bodies and determining the relationships which subsist between them. This integrated approach is one which is nigh universally recognised at international level as an intrinsic feature of an optimum water allocation regime.155 This approach allows co-ordinated decisions to be taken which should provide integrated solutions to water policy questions.156

Having said this, regulators may find making the correct decisions no easy task. In this respect, it needs to be remembered that given the hitherto lack of a national catchment-based system of water governance in Scotland157 and associated attempts to tackle different water uses and their impacts inter se in an integrated fashion, Scotland’s starting point in this respect is perhaps behind many other Member States in implementing the terms of the European Water Directive.158 This may be particularly true in respect of groundwater where the quantity lying beneath land cannot perhaps be gauged with any real certainty in Scotland. With such matters in mind, one factor that may be instrumental in assisting the determination of the best possible decisions for water allocation in Scotland is the active participation of stakeholders. Before examining this issue, first the issue of how such ‘ownership’ of stakeholders may lead to more effective regulation and compliance is discussed.

Active participation of stakeholders

As will be noted below, the issue of engendering the ownership of local stakeholders has been seen as essential to ensuring their acceptance of the regime, which would thus aid compliance and hence promote beneficial uses. Of course in respect of compliance, SEPA will be empowered to force licence conditions against non-compliant parties and take remedial action where necessary.159 The enforcement of rules can be costly, however, and regulatory regimes that are able to create incentives for compliance rather than merely ask individuals to behave against their fundamental (financial) interests are more likely to be successful in an efficient sense.160 A way to foster an incentive for parties to conform is to ensure that the regime is engendered by their ‘ownership’ of it.

The issue of participation in this respect is a fundamental one recognised at international level. In fact the directive itself calls for the active involvement of the public in the implementation of regulatory regimes pursuant to its policy aims.161 This emphasis placed upon active involvement and the engenderment of local ownership is also a feature of many international water frameworks. The Bonn recommendations, e.g., prescribe that ‘water governance arrangements should monitor the performance of public institutions...and invite civil society to play an active role in these processes’.162

The regime brought in under WEWS and its pursuant regulations was underpinned by extensive and rigorous consultation processes. As far as ongoing macro-level policy decisions relative to the regime are concerned, the Scottish Executive was empowered to formulate the new regulations rather than SEPA although the Minister was required to consult with SEPA and other interested parties as deemed appropriate.163 In this vein, draft regulations promulgated by the Scottish Executive in April 2004 were subject to consultation prior to enactment.164 As Allen has suggested, however, ‘the need for ‘active involvement’ of the public in the implementation of the [European Water Directive] implies something more than simple consultation and information provision’.165 In this sense, a Water Forum has been set up comprised of interested parties, stakeholders and experts to help engender such active involvement and the River Basin District shall provide for a River Basin District Advisory Group to feed into the RBDM process.166 Continued active participation of stakeholders will be essential in ensuring the secure future of the post-WEWS regime.

Aside from engendering the ‘ownership’ of stakeholders in the new regime to ensure their compliance and commitment thereto, as noted above, the active participation of stakeholders is also important in ensuring that policy decisions can be taken in the most informed way possible. To this end, a feature of most international models of water governance is an approach to water allocation underpinned by policies coordinated on the ‘lowest, most appropriate, administrative tier’.167 In Scotland, decision-making regarding water uses will be taken on a centralised level. There is to be only one River Basin District covering all of Scotland, although it shall be based on the environmental objectives of individual river basins. Furthermore, as noted above, licences may be issued pursuant to local conditions and needs. While the single RBD may provide for consistency in approach across Scotland as a whole, this ‘one size fits all’ strategy may in practice be too far removed from local conditions for an optimum approach to water allocation to be achieved, as recognised under international law. The Scottish Executive has recognised that ‘it is much easier to engage the interests of members of the public and community groups in localised rather than strategic issues’,168 and therefore decision-making organisations should be as local as possible without compromising the overarching strategic aims of the regime. International approaches to water governance recognise the fine balancing act that must be struck between the two aims of establishing a unified approach and taking account of local conditions.169 The sub-river basin management programmes which will be compulsory under WEWS and the local area advisory groups that will feed into the river basin planning strategy may go some way to providing a bridge between local stakeholders and the centralised allocation body. Whether the right balance in this regard can be struck in Scotland remains to be seen.

Furthermore, Hayek has recognised that for a system of property allocation to operate effectively, it must be predicated on all salient information pertaining to the regime. Thus, decisions taken by a regulator such as SEPA in the quest for the holy grail of ‘beneficial’ uses (or at least, for the time being, non-detrimental uses) must be based on the widest range of relevant views possible. This is a problem generally in that typically such information is highly dispersed.170 This is particularly true of a regime as complex as one which seeks to engender equitable and efficient allocation of water resources across a wide range of users. In this sense, Morriss, Yandle and Anderson suggest that

[j]ust determining the technical characteristics of water, biology, climatic conditions, and riparian use for one major body of water is a high-cost task...technical knowledge is constantly changing, and major breakthroughs often occur in the heat of the task...coming up with an optimum solution becomes even more daunting when the planner has to identify and include the social dimensions of the problem.171

Decentralised decision-making is thus required to assimilate the disperse strands of knowledge that exist within a community which can be brought to bear on the problem. To this end, the participation of local stakeholders is an essential feature of such an optimum regime which would hope to tackle a policy area as complex as water resource management. As noted, Scotland’s attempts to foster such active participation may for the time being be limited at best. It is hoped that the future establishment of local area advisory groups in this regard will ensure that such meaningful local participation takes place.

Dispute resolution and the protection of beneficial uses

As is the case with allocation of rights, it seems that disputes arising between regulated abstractions will also (at least initially) be handled administratively through SEPA. Moreover, appeals against decisions taken by SEPA in respect of such activities as the granting, variation, revocation or suspension of authorisations may be made to Scottish Ministers.172 In practice, a hearing is likely to be heard before an ‘appointed person’ bound to report on the issue to the Scottish Ministers along with a recommendation as to how the issue should be determined.173 What the above entails then is effectively a transfer of function from the courts to administrative fora in respect of both the initial allocation of rights and the determination of disputes.

It may seem sensible for administrative fora to resolve disputes arising from the regimes they operate. Problems in ensuring that dispute determination is not tarnished by the political activities of certain stakeholders may arise, however. In particular, a specialised administrative body like SEPA may be more susceptible to the influence of groups of stakeholders than general courts because its specialised nature provides an efficiency incentive for lobbying efforts.174 Thus, political pressure exerted by particular stakeholders may be brought to bear over SEPA’s dispute resolution processes. The process of dispute resolution may, therefore, in practice favour the more powerful stakeholders over other less influential groups. Similarly, it might be argued that Scottish Ministers’ resolution procedures may be subject to political pressures by influential stakeholders in their role in the resolution of disputes arising between SEPA and abstractors. This phenomenon is not so likely to occur in relation to dispute resolution in general courts where cases arising in specific legal areas (e.g. water rights disputes) would represent a small fraction of the judge’s overall docket. It therefore follows that stakeholders would have less of an incentive to invest resources in lobbying activities.175 It should be noted that industry sectors that will feel the brunt of the post-WEWS regulations such as the distilleries, farming and energy sectors, have been thus far particularly vocal in promoting their interests in the consultations pre-WEWS.176 They are likely to be similarly so vocal in respect of disputes relative to water allocation and use as the regime develops. The ability of SEPA and the Scottish Executive to stand firm in the face of the lobbying of these interest groups may be paramount in ensuring that beneficial uses remain at the heart of the water regime for Scotland.177 It is worth noting that this undue influence by powerful stakeholders may in fact go beyond dispute resolution processes. There may be a danger that influential interest groups may in fact be able to exert ‘regulatory capture’ over various aspects of the post-WEWS regime which may have the effect of diminishing the drive to embrace the most sustainable practices in favour of furthering their own interests.178

Concluding Remarks

From the above, it is clear that efficiency and promoting beneficial uses are inextricably linked. While free market economists might argue that the two aims are not incompatible and that market-based approaches to water governance can give rise to both efficiencies and the most beneficial uses, it has been suggested in this article that as a public good water cannot be left to the vagaries of the market and that regulatory measures are required to ensure that beneficial uses are protected. This position is one which has been enshrined in the domestic law (at least in so far as ownership is concerned) for centuries. Moreover, even if it is accepted that markets will function at all in the context of water, what may be economically efficient in terms of the monetary value of an abstraction to would-be users on a local level, may not correlate with the most efficient use in a wider economic sense. Nor shall such local efficiencies necessarily ensure equitable and sustainable uses on the wider national level. The Scottish Executive’s approach seems appropriate therefore in keeping the spectre of regulation up its sleeve in respect, e.g., of revoking or varying licences and limiting transfers of licences in the name of protecting beneficial uses.

Notions of efficiency may be blighted by the regulatory costs in setting up and operating the new system, which in general shall be borne by industry. The potential regulatory costs involved and likely monetary burdens with regard to different industry sector’s compliance with the regime are likely to be significant. Given the projected impact of the reforms (and discounting the European directive’s regulatory requirements for the time being), a simple question that might be asked is: Do the benefits that may be reaped by the regime outweigh the costs? A factor that shall weigh heavily in any determination of this cost-benefit analysis will be the extent that under the new regime, it is possible to identify beneficial uses of water and, in particular, identify abstractions and impoundments that hold deleterious consequences for the environment. This is a key question and not one that it always easily resolved. The RBDM approach inherent in the new regime is one underpinned by international law and practice and may help engender the integrated solutions to water governance problems that are required. If the regime in Scotland is to grapple effectively with these issues, it was noted that the active participation of stakeholders may need to be further encouraged to assist in the cross-pollination of ideas between state and others in society and the directing of all available knowledge in arriving at water allocation decisions.179 On the other side of the coin, it has been noted that issues of clarity and certainty of rights to water brought about by the post-WEWS regime may bring their own efficiencies. This is because clarity of right in effect renders it self-enforcing and hence may engender dispute avoidance and a saving of parties’ and the state’s costs in this regard.

It was suggested earlier that climatic and ecological factors might influence a state’s choice of water regime. In this sense, licence-based regimes (broadly of the sort that WEWS would institute) have been deemed more appropriate in arid climates where definitive state-made choices require to be taken with regard to competing uses of what is undeniably a scarce resource. While most Eastern US states180 have rejected the traditional absolute dominium approach, they have not, in the main, turned to licence-based regimes. Rather such states have plumped for reasonable use or correlative rights regimes. Scotland is not an arid nation, and it might be posited that, despite localised drought problems in a smattering of geographical areas, the general abundance of water might lead one to the conclusion that a comprehensive licensing regime (with its attendant costs), predicated on state-made choices regarding water allocation, is simply not needed. In short, therefore, it could be argued that the post-WEWS regime is a hammer cracking a nut. This, of course, is a symptom of the pan-European approach of the directive in prescribing a harmonised approach to the ensuring of certain minimum ecological and biological features of water resources across Member States. The directive presumes that the same general measures governing abstractions and impoundments may be considered equally as appropriate in rain-soaked Scotland as, e.g., in the arid climes of southern Italy.

Scotland is more analogous to Eastern US states in the sense that although water resources are generally plentiful, it is argued that absolute rights to abstract should be curtailed to prevent waste, inequity and localised environmental and drought problems. A move to a US Eastern-state-styled reasonable use regime is clearly a less drastic step—in terms of state regulation—than a licence-based system and one, in which, at least the up-front regulatory costs entailed would be far lower for society and in particular, affected industry sectors. Common law-based, reasonable use and correlative rights regimes carry their own problems, however. Correlative rights regimes may entail transactional costs of their own in the sense that they may be blighted by inter-abstractor disputes which can proceed to protracted, expensive court adjudication, or alternatively are characterised by acquiescence, where because of the costs of litigation, the legal rights of less empowered parties are thus de facto unenforceable.181 Reasonable use doctrines do not protect secondary users in times of scarcity and may be limiting in that interpretations of what is ‘reasonable’ have normally been confined to uses upon overlying land.182 Furthermore, the lack of certainty inherent in these rights may prohibit what may be costly (but nonetheless value-laden) investment in water exploitation and limit trading.

In any case, the terms of the directive in essence call for the establishment of a licence-based regime to control abstractions and impoundments where this is necessary to achieve ‘good’ status, and thus policy-makers in Scotland are yoked to this approach. Despite concerns about the imposition of a licence-based system, the key issue about the post-WEWS regime in Scotland in this regard is that as noted above full licences will only be required in a minority of cases, where after risk assessment, conditions are imposed upon abstractors to avoid environmental harm. For the majority of abstractions and impoundments, full licences will not be required and thus minimum regulatory controls and associated costs will face the bulk of abstractors. The current common law provisions will continue to apply in the majority of cases. While reflecting a light regulatory touch, this approach might also be seen as an opportunity missed, in that traditional common law approaches, particularly in relation to groundwater, may not be the most efficient or equitable under any circumstances.

With the licence regime operating alongside common law rights, this does leave open the largely unanswered question of the interaction between regulated and unregulated activities and in particular what legal remedies might result when a licensed abstraction impinges upon the common law rights of unregulated users. Such uncertainties inevitably give rise to efficiency concerns. Moreover, other aspects of water governance are not clarified by the regime. The issue of subsidence in respect of the abstraction of groundwater is not tackled by the regime, and these ambiguities again may be counter-productive in ensuring that the licensing framework can achieve its goals. In this sense therefore, this policy gap represents an opportunity missed.183

The new licence-based system is clearly at an embryonic stage of its development and how SEPA and the Scottish Executive will tackle the concerns identified above in meeting key policy aims in practice will begin to be seen as the licensing system enters its adolescence. On balance, however, the post-WEWS regime can be considered a positive step in the right direction in fulfilling, in so far as each can be fulfilled, appropriate policy goals to help chart a sustainable future for Scotland’s water.

1

Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000, establishing a framework for Community action in the field of water, OJL 327, 22 December 2000, p 00001.

2

Water Environment (Controlled Activities) (Scotland) Regulations 2005, SSI 2005, No. 348 (hereinafter 2005 regulations).

3

And other regulatory tools.

4

The article does not discuss pollution issues relative to water use.

5

Given space constraints, the question of the legality of the new regime, primarily in terms of the state’s human rights obligations under the European Convention on Human Rights, is not tackled in this article. This issue is tackled extensively by the author elsewhere—see B. Clark, ‘Water Law in Scotland, The Water Environment and Water Services (Scotland) Act 2003 and the European Convention on Human Rights’, 10 Edinburgh Law Review 60 (2006).

6

See, for example, the views of J. Rankine, Law of Landownership (W Green, Edinburgh, 1906, 4th edn) 511.

7

Stair Inst II, I, 5. See also Erskine Inst II, I, 5 and Bankton Inst I, 3, 2.

8

K. Reid, The Law of Property in Scotland (Butterworths, Edinburgh, 1996) para 274.

9

Ibid.

10

See Gaius’s Institutes 2.2. It needs to be noted here that there is some Scottish authority which suggests that at least water which is percolating beneath the ground (not flowing in a defined channel) is the subject of ownership in situ—see, e.g., Rankine, supra n 4, at 513. This viewpoint seems misconceived, however. For a further discussion of this issue, see B. Clark, ‘Migratory Things on Land: Property Rights and a Law of Capture’, Vol 6.3 (2002) EJCL, paras 4.14 and 4.15.

11

See Stair Memorial Encyclopaedia, Vol II, paras 540–546.

12

If the defined channel is below ground, then the person seeking to rely on riparian rights must prove this; the presumption being that all water below ground is percolating—see the Irish case of Black v Ballymena Township Commissioners [1886] 17 LR Ir 459 at 474–475, per Chatterton VC.

13

As Whitty has acknowledged, ‘[i]n terms of comparative law, the Scottish doctrine is very similar if not identical to the English doctrine of riparian rights...The history of the Scottish doctrine of common interest however is very different from the history of the English doctrine of riparian rights. The latter emerged only in the second quarter of the nineteenth century when it replaced the previous orthodoxy, often called the doctrine of prior appropriation. By contrast the Scots law developed directly from the jus commune beginning in the early seventeenth century at latest and at no time received the English doctrine of prior appropriation’, N. Whitty, ‘Water Law Regimes’ in K. Reid and R. Zimmerman (eds), A History of Private Law in Scotland, Vol 1 (OUP, Oxford, 2000) 451. For an illuminating discussion of the English doctrine of riparian rights, see J. Getzler, A History of Water Rights at Common Law (OUP, Oxford, 2004), Chapter 3.

14

Young & Co v Bankier Distillery Co [1893] 20 R (HL) 76 at 78.

15

K. Reid, supra n 8, paras 287–288. The rights may be limited under the common law – e.g., by common interest, servitude, nuisance or public rights of navigation and additionally, in various ways by statutory intervention, including under the Flood Prevention (Scotland) Act 1961, Water (Scotland) Act 1980 and the Civic Government (Scotland) Act 1982. The abstraction regime is set to be radically shaken up by the Water Services and Water Rights (Scotland) Act 2003 to which the analysis of this article proceeds below.

16

Marquess of Breadalbane v W Highland Ry [1885] 22 R 307, per Lord Ordinary (Welwood) at 310; Milton v Glen-Moray Glenlivet Distillery Co Ltd [1898] 1 F 135.

17

Earl of Kintore v Pirie & Sons Ltd [1903] 5 F 818; see also Rigby and Beardmore v Downie [1872] 10 M568.

18

W. Gordon, Scottish Land Law (W Green/SULI, 1999, 2nd edn) paras 7–32. Once the prescriptive right has been established, downstream riparians would not be able to object to the abstraction on the grounds of exhaustion of the source.

19

Chasemore v Richards [1859] 7 H.L.C. 349; Milton v Glen-Moray Glenlivet Distillery Co Ltd [1898] 1 F 135, 6 SLT 5, 206; Acton v Blundel [1843] 12 M & W 324; Bradford v Pickles [1895] AC 587 HL. There is in fact a subtle distinction between drawing water from someone’s land and stopping it from getting there. For the purpose of this article, the distinction is in effect one without a difference but for a discussion of this issue, see Clark, supra n 10.

20

Whitty has noted that ‘[t]he development of the Scots law of water rights broadly follows the familiar three-stage pattern found in areas throughout Scots law: a first medieval reception of English (Glanvillian) law, followed by a reception of Roman law as developed in the European jus commune, followed by a second reception of English law beginning in the late eighteenth century’. It is of little surprise, therefore, that there are a number of marked similarities between Scottish and English water law, although at times variances in approaches can be seen—Whitty, supra n 13, 420.

21

Bradford v Pickles, supra n 19.

22

Ibid at 600.

23

Ibid at 601.

24

It is also rooted in the view that English law does not recognise the doctrine of abuse of rights. On abuse of right, see U. Mattei, Basic Principles of Property Law: A Comparative and Economic Introduction (Greenwood Press, Connecticut/London, 2000) 149.

25

Although the specific common law rule relative to groundwater by implication remains, such a general absolutist view of property is no longer prevalent in English law; witness the stream of positive law that has been enacted in the last century which has restricted land use in relation to such matters as planning and the environment. For a review of the shift away from traditional absolutism to the imposition of property obligationalism, see K. Gray and S.F. Gray, Elements of Land Law (Butterworths, London, 2001, 3rd edn), Chapter 10.

26

Reid, supra n 8, para 338; compare with Bradford v Pickles supra n 19. It may further be the case that water cannot be drawn away where this causes a collapse of support to adjacent land—see Bald v Alloa Colliery [1854] 16 D 870.

27

See Stair Memorial Encyclopaedia, Vol 14, paras 2034 and 2035; Lord Kames, Principles of Equity (Kincaid & Bell, Edinburgh, 1800, 4th edn) 42; J. Rankine, supra n 6, 381.

28

See, e.g., Bell, Principles, 964, 965.

29

Glassford v Astley 1808 M. Appx; J. Rankine, supra n 6, 383.

30

E.F. Murphy, ‘The Recurring State Judicial Task of Choosing Rules for Groundwater: How Occult Still?’, Nebraska Law Review 120, 121 (1987).

31

This view prevailed after a battle with a ‘prior appropriation rule’ that predated it. Scotland never embraced the prior appropriation approach, as it was influenced directly from the jus communes—see generally, Whitty, supra n 13.

32

L. Goodeve, The Modern Law of Real Property (Sweet & Maxwell, London, 1883, 1st edn) 5; J. Gould, The Law of Water (Callaghan, Chicago, 1883, 1st edn) s 46, 105–03, s 265–267, 465–468.

33

Murphy, supra n 30, 121.

34

See Balston v Bensted [1808] 1 Camp 463.

35

In Acton v Blundell supra n 19. This term is misleading, however, and given that underground percolating water is probably best considered res nullius until reduced into possession, a more accurate albeit less eloquent term may be an ‘absolute right to use’.

36

Chasemore v Richards, supra n 19, 147.

37

Murphy, supra n 30, 128. Although it should be recalled that the court in Acton v Blundell did note that under Roman formulations, the law did not impose liability where a landowner intercepted groundwater that flowed below his neighbour’s land.

38

Murphy, supra n 30, 128.

39

Chatfield v Wilson [1856] 28 Vt. 49 at 54.

40

Frazier v Brown [1861] 12 Ohio St. 294 at 311.

41

This idea echoes the rational behind the development of the ‘law of capture’ in respect of oil and gas development in the late nineteenth century USA—see generally, Hemmingway, The Law of Oil and Gas (West Publishing, St. Paul, 1991, 3rd edn).

42

It should be noted though that the absolute dominium approach may not always be seen as one supporting industrial uses. In Chasemore, supra n 19, e.g., the case involved the determination of water rights between two competing industrial users. While the court’s determination of an absolute dominium rule benefited the abstractor, it was, of course, not of benefit to the industrial user whose legitimate commercial activities were hampered when his water was drawn away from beneath his feet.

43

‘Efficiency’ in terms of a legal regime is a somewhat nebulous concept, and its different denotations are discussed further below.

44

A parallel can be drawn here with the infamous oil boom and bust in the US nineteenth century—see Hardwicke, ‘The Rule of Capture and its Implications as Applied to Oil and Gas’, 13 Texas Law Review 391 (1935).

45

Including ‘reasonable use’, ‘correlative rights’ and ‘prior appropriation’ regimes. For a discussion of alternative regimes, see, e.g., G. Sherk, ‘Eastern Water Law’, 1 Natural Resources and Environment 47 (1986); D. Tarlock, Law of Water Rights and Resources (Clark Boardman Callaghan, 2001).

46

The relationship between surface water and groundwater flows is classically set out in Darcy’s Law—see the entry ‘Henri-Phillibert-Gaspard Darcy’ in Encyclopaedia Britannica, III Micropaeida (Encyclopaedia Britannica Inc, Chicago, 1974).

47

J.L. Sax, Water Law: Cases and Commentaries (Pruett Press, Boulder, 1965) 238.

48

A party seeking to rely on the fact that underground water moves in a defined stream is bound to prove this.

49

See generally, R.A. Dowling, Groundwater: Our Hidden Asset (UK Groundwater Forum, Wallingford, 1998).

50

N. Whitty, supra n 13, 468.

52

Including SEPA—see e.g., SEPA: ‘State of the Environment, Water Quality Report’: Part 1 (1996), available at http://www.sepa.org.uk/publications/state_of/1996waterquality/report/text/watertext.htm.

53

Ibid.

54

S. Hendry, ‘Enabling the Framework – the Water Environment and Water Services’ (Scotland) Act 2003, 14 Water Law 16, 20 (2003).

55

In England and Wales, subject to certain exceptions, no party may abstract water from any source except in pursuance of a relevant licence granted by the water authority (the Environment Agency) [Water Act 1963 s 23; Water Resources Act 1991, s 24(1)] and in relation to groundwater, in general a party may not begin or cause any other party to begin to construct a well, or borehole, or work by which the water may be abstracted from the strata [1963 Act, s 23(2)(b)].

56

There are a few notable exceptions including water for public supply is abstracted under The Water Act 1908, s 17; water for hydroelectricity is abstracted under the Electricity Act 1989, schedule 5; and limited controls powers exist under the Natural Heritage (Scotland) Act 1991 to control abstraction for irrigation and in cases of drought.

57

At least by implication. Case-law dealing with water rights has been few and far between in Scotland, and there is relatively little academic discussion of such issues.

58

Water provision being a devolved rather than ‘reserved’ issue under the Scotland Act 1998.

59

Directive 2000/60/EC.

60

See A. Farmer, ‘The EC Water Framework Directive: An Introduction’, 12 Water Law 1 (2001).

61

Annex V of the Act sets out various parameters which will determine how the ecological status of a given water body can be identified.

62

The directive will also, inter alia, introduce a new, integrated approach to the control of pollution at source through the setting of emission limit values and of environmental quality standards for water.

63

There will be only limited exceptions to the requirement to meet good status in accordance with the timetable set out in the directive (by 2015), e.g., bodies of water which have been ‘heavily modified’ by human activity (e.g. those that have been artificially constructed or restricted). Further exceptions (wherein Members States may be given additional time to meet ‘good status’ detailed in Article 4) may be possible on a variety of other grounds that include technical problems, natural conditions and cost implications. Such exceptions may be important in that they may allow water regulation in Scotland room to manoeuvre, particularly in the light of industry concerns and potential human rights issues.

64

Water Environment (Controlled Activities) (Scotland) Regulations 2005, SSI 2005 No. 348 (which enter into force on 1 April 2006) (hereinafter 2005 regulations).

65

Scottish Executive Environment Group, Controlled Activities Regulations: A Consultation, Consultation Paper, April 2004 (Paper 2004/8). See also Scottish Executive Environment Group, Controlled Environment Activities Regulations: Revised Proposals for General Binding Rules, March 2005 (Paper 2005/4); Scottish Executive Environment Group, (Controlled Activities) (Scotland) Regulations 2004: Draft Regulations: Analysis of Responses to the Scottish Executive, 11 March 2005, available at http://www.Scotland.gov.uk/library5/environment/twecar-07.asp.

66

Cited infra.

67

Scottish Executive Environment Group, The Future of Scotland’s Waters – Proposals for Legislation, February 2002 (Paper 2002/4), para 1.2. Under s 3(1) of WEWS, the ‘water environment’ extends to ‘all surface water ground water and wetlands’. Section 3(5) defines wetlands as ‘an area of ground the ecological, chemical and hydrological characteristics of which are attributable to frequent inundation or saturation by water and which is directly dependent, with regard to its water need on a body of groundwater or a body of surface water’.

68

The Future of Scotland’s Waters, supra n 67, para 1.2.

69

For a general discussion and critique of the river basin concept, see L. Teclaff, ‘The River Basin Concept and Climate Change’, 8 Pace Environmental Law Review 355 (1991). SEPA has recently published a River Basin Management Planning Strategy to aid the development of river basin planning in Scotland and tackle such strategic issues as consultation arrangements, the integration of river basin planning with other regulatory requirements affecting the water environment and establishing effective and efficient administrative arrangements—see SEPA, River Basin Planning Strategy for the Scotland River Basin District, available at http://www.sepa.org.uk/wfd/rbmp/strategy.htm.

70

The Environment Act 1995, s 4(2) gave the (English) Environment Agency powers to establish strategic water resource planning management.

71

WEWS, s 20 as amended by 2005 regulations, regulation 3.

72

Under WEWS, s 20(6) (as amended), an abstraction is ‘the doing of anything whereby any water is removed or diverted by mechanical means, pipe or any engineering structure or works from any part of the water environment, whether temporarily or permanently, including anything whereby the water is so removed or diverted for the purpose of being transferred to another part of the water environment and includes (a) the construction or extension of any well, borehole, water intake or other work by which water may be abstracted, and (b) the installation or modification of any machinery or apparatus by which additional quantities of water may be abstracted by means of a well, borehole, water intake or other work’. Section 20(6) defines an impoundment in relation to surface water as ‘(a) any dam, weir or other works by which water may be impounded, (b) any works diverting the flow of water in connection with the construction or alteration of any dam, weir or other works falling within paragraph (a)’.

73

2005 regulations, regulations 7–9.

74

2005 regulations, regulation 5.

75

2005 regulations, regulation 6.

76

This policy change was first mooted in the Scottish Executive Environment Group, Controlled Environment Activities Regulations: Revised Proposals for General Binding Rules, supra n 65.

77

It should be noted, however, that the Scottish Executive has expressed an intention to develop Private Water Supply Regulations under which local authorities would require to draw up a register of small abstractions (Scottish Executive, The Water Environment (Controlled Activities) (Scotland) Regulations 2005: Policy Statement and Regulatory Impact Assessment), May 2005, Paper 2005/10, 6.

78

2005 regulations, regulation 7. A list of controlled activities and appropriate GBRs are set out in 2005 regulations, schedule 3.

79

Scottish Executive, Policy Statement and Regulatory Impact Assessment, 2005, supra n 77, 7.

80

Ibid at 9.

81

Ibid at 10.

82

2005 regulations, regulation 8.

83

Scottish Executive, Policy Statement and Regulatory Impact Assessment, 2005, supra n 77, 9.

84

Ibid at 9.

85

2005 regulations, regulation 9.

86

Scottish Executive, Policy Statement and Regulatory Impact Assessment, 2005, supra n 77, 9.

87

2005 regulations, regulation 9(2).

88

Scottish Executive, Policy Statement and Regulatory Impact Assessment, 2005, supra n 77, 10.

89

Ibid at 9.

90

That may be augmented by specific local licence conditions.

91

Controlled Activities Regulations, supra n 65, para 3.15.

92

2005 regulations, regulation 11.

93

2005 regulations, regulation 15.

94

2005 regulations, regulation 9(5)(b).

95

Scottish Executive, Policy Statement and Regulatory Impact Assessment, 2005, supra n 77, 13.

96

Ibid at 18–19. Additionally, transitional application charges apply for the period from 1 July 2005 to 31 March 2006 in respect of the transfer of current unregulated activities to authorisations under the new regime—see SEPA, Consultation on Water Environment (Controlled Activities) Fees and Charges (Scotland) (Transitional) Scheme, 2005.

97

Although such an approach can be ignored if it does not compromise the general aims of the directive.

98

Wouters suggests that ‘in essence there are four key points that must be addressed [by a water governance regime]...: (i) legal entitlement (what is the scope of the resource and who is entitled to use it?); (ii) framework for allocation (where all needs cannot be met, who is entitled to what quantity or quality of the resource?); (iii) institutional mechanisms including governance issues (who is responsible for overseeing the implementation or overseeing the implementation of the laws?), and (iv) compliance verification, dispute avoidance and resolution (how are rights and obligations enforced?)’—P. Wouters, ‘Water Law: Achieving Equitable and Sustainable Use of Water Resources (Guest Editor’s Note)’. Paper presented at the Dundee Water Law and Policy Seminar (July 2000), available at http://www.dundee.ac.uk/law/iwlri/Documents/Research/IWLRI%20Team/Wouters/iwra.pdf.

99

Caponera, e.g., rejects the notion of a universally applicable regime because such a model would ‘depends not only on its historical, cultural, religious, geo-physical and legal factors, but also on the political will to undertake...needed administrative or institutional reform’—D.A. Caponera, Principles of Water Law and Administration (A.A. Balkema, Rotterdam/Brookfield, 1993) 175.

100

Which may be manifest in various ways as explained below.

101

As noted at the beginning of this article, the issue of legality is not tackled here.

102

Section 22 of the 2005 regulations will allow transfer of licence authorisations where SEPA is satisfied any transferee is a responsible person and will ensure compliance with the terms of the authorisation and any conditions to that effect. Given that registration under regulation 8 is activity specific, activities subject to this tier of authorisation should be able to be traded without any regulatory intervention.

103

Although as a personal right, it would not survive a change in ownership.

104

See Gordon, supra n 18, para 7–83.

105

Although if a licence is for a limited period of time or may be revoked without compensation, then trading becomes less attractive. This point is discussed below.

106

This situation also raises the possibility of conflict between different licensees. Moreover, the costs of generating this knowledge—passed on to all users—may counterbalance any efficiency gains.

107

A. Gregory, ‘Groundwater and its Future: Competing Interests and Burgeoning Markets’, 11 Stanford Environmental Law Journal 229, 249 (1992).

108

See, e.g., Morriss, Yandle and Anderson, ‘Principles for Water’, 15 Tulane Environmental Law Journal 335, 336 (2002).

109

In strict terms, a ‘public good’ is one that is both public and indivisible in that it cannot be shared amongst the public in the sense that some may have access to it while others are denied such access and it is rather shared freely (although not necessarily equally) between the group—see T.L. Anderson and P. Snyder, Water Markets: Priming the Invisible Pump 113–114 (1997). While water resources are not strictly public goods in this sense, nonetheless given the resource’s importance to human and other life, and its migratory characteristics, it can be considered as such—J. Dellapena, ‘The Importance of Getting Names Right: The Myth of Markets for Water’, 25 William and Mary Environmental Law and Policy Review 317, 329 (2000); J.L. Fortuna, ‘Water Rights, Public Resources and Private Commodities: Examining the Current and Future Law Governing the Allocation of Georgia Water’, 38 Georgia Law Review 1009, 1015–1016 (2004).

110

See, e.g., C. Landry, ‘Buy that Fish a Drink: The United States’ Approach to Environmental Protection in an Era of Water Marketing’, 12 Water Law 240 (2001).

111

See, for example, C. Bauer, ‘Slippery Property Rights: Multiple Water Uses and the Neoliberal Model in Chile 1981–1995’, 38 Natural Resources Journal 109 (1998).

112

Reference can be made to the discussion of trading in western US states in N.K. Johnson and C.T. DuMars, ‘A Survey of the Evolution of Western Water Law in Response to Changing Economic and Public Interest Demands’, 29 Natural Resources Journal 347 (1989).

113

See L. Godden, ‘Water Law Reform in Australia and South Africa: Sustainability, Efficiency and Social Justice’, 17 Journal of Environmental Law 181 (2005).

114

Dellapenna, supra n 109, 324.

115

DETR, Economic Instruments in Relation to Water Abstraction: A Consultation Paper (April 2000), available at http://www.defra.gov.uk/environment/consult/ecowater/pdf/ecowater.pdf.

116

Section 35, Water Resources Act 1991 (hereinafter WRA).

117

The Environment Agency listed a number of ways that trades could take place under the English system: (prior to the coming into force of the Water Act 2003) 1, outright disposal of the land on which abstraction takes place; 2, renting or leasing the land; 3, relinquishing the licence while continuing in possession of the land, then granting occupational access to the land to another who may then apply for the licence; 4, by varying the licence to cover a small quantity then granting rights of access to the land to another; 5, selling the whole or part of the abstracted water to other users; and 6, first entering into an agreement to relinquish a licence for payment and then applying for a new licence on other land in the vicinity of the original licence—see DEFRA, Tuning Water Taking – Government Decisions Following Water Consultation of the Economic Instruments in Relation to Water Abstraction (June 2001), Appendix 2.

118

The bulk of the Water Act 2003 has now come into force although certain provisions will be phased in up to 2008. Even the new relaxed approach here may hold significant transactional costs. For example, witness the experience in other contexts with ‘ransom strips’—wherein a previous owner may have retained ownership of a small strip of the land concerned to either profit from or control its future development—see P. Finch, ‘Ransom Strips and Public Rights of Way’, 14 Rights of Way Law Review 1 (1999).

119

2005 regulations, regulation 9. In respect of those activities subject to registration, the trading of authorisations will not require any regulatory intervention whatsoever; registration being granted in respect of authorised activities (2005 regulations, regulation 9).

120

Section 46(4) WRA.

121

Which amended s 46(4) WRA. This approach is not without its drawbacks, however. In particular, there is a need to countenance the fact that the environmental impacts of abstraction may be site specific.

122

The current regulator for water abstractions in England and Wales.

123

The Environment Agency response to Tuning Water Taking, supra n 106, para 4.1.

124

Ibid. It was noted above that water markets where they do arise tend to be manifested across small localities rather than on a national scale.

125

Katz v Walkinshaw 74 P 766, 772 (Cal 1902).

126

The Environment Agency response to Tuning Water Taking, supra n 117.

127

For a discussion, see C. Arnold, ‘Working Out an Environmental Ethic: Anniversary Lessons from Mono Lake’, 4 Wyoming Law Review 1 (2004).

128

R.H. Coase, ‘The Problem of Social Cost’, 3 Journal of Law and Economics 1 (1960).

129

Dellapenna, supra n 109, 372.

130

2005 regulations, regulations 19–21 (variation); regulation 26 (suspension and revocation). There is also a general obligation placed upon SEPA to ‘periodically review’ authorisations— regulation 18.

131

Normally twelve years.

132

P. Carty, ‘Water Trading in England and Wales – Can We Buy that Fish a Drink’, 12 Water Law 338, 347 (2001).

133

Dellapenna, supra n 109, 336.

134

See, e.g., E. Behrens and M. Dore, ‘Rights of Landowners to Percolating Groundwater in Texas’, 32 South Texas Law Review 185 (1991); T. Henderson, J. Trauberman and T. Gallagher, Groundwater Strategies For State Action 2 (Environmental Law Institute, Washington, 1984) 31; Moses, ‘Basic Groundwater Problems’, 14 Rocky Mountain Mineral Law Institute 501 (1969); K. Norris, ‘The Stagnation of Texas Ground Water Law: A Political v Environmental Stalemate’, 22 St. Mary’s Law Journal 493 (1990); P. Kletzing, ‘Imported Groundwater Banking: The Kern Water Bank—A Case Study’, 19 Pacific Law Journal 1225 (1988).

135

R.C. Ellickson, Order Without Law (Harvard University Press, Cambridge, MA, 1991). Having said that there in an inherent tension between providing certainty, so that people can organise their affairs with some confidence about the legal consequences of their actions and retaining enough flexibility to provide fairness in particular circumstances for deserving parties—L. Tee, ‘Introduction’ in Land Law Issues, Debates, Policy (Willan, Colompton, 2002) 2.

136

U. Mattei, supra n 24, 65.

137

In terms of administrative fees.

138

As noted above, the absolute dominium approach benefits from being subject to low transactional costs.

139

There are a few cases in this respect discussed in W. Gordon, supra n 18, paras 7.29 and 7.40.

140

Appeals in relation to such decisions taken by SEPA as well as determinations pertaining to the granting or otherwise of particular authorisations by SEPA and any conditions attached thereto may be made to Scottish Ministers—see 2005 regulations, regulations 46–49.

141

Controlled Activities Regulations, supra n 65, paras 1.17 and 1.20.

142

2005 regulations, regulation 9.

143

Although this is not to suggest that negotiation or mediation should be compulsory. Such a move would, in effect, deny parties the right to assert their legal rights. Nonetheless, a culture of voluntary ex ante dispute resolution could be fostered. The presence of a third party neutral or ‘mediator’ has been seen as a useful catalyst to the resolution disputes in a range of conflict areas—see, e.g., R. Mays and B. Clark, Alternative Dispute Resolution in Scotland (Scottish Office, CRU, 1999). It is also worth noting here that evidence from US licence-based regimes suggests their ‘use it or lose it’ characteristic encourages overuse of the resource, because abstractors are reluctant to hold back on exploitation of the resource and perhaps lose their licence after a challenge from other would-be abstractors [see, e.g., S. Harrison, ‘The Historical Development of Nevada Water Law’, 5 University of Denver Water Law Review (2001) 148, 182]. For England and Wales, the Water Act 2003 reduces the period of inactivity which would trigger possible revocation of the licence from seven to four years. The 2005 regulations are silent on this issue, but it will be interesting to see what position SEPA takes in this regard when the licensing regime is up and running.

144

See Bald v Alloa Colliery [1854] 16 D 870 and compare with Popplewell v Hodgkinson [1869] Exch LR 248.

145

The perennially ‘wet’ nature of Scotland may render such concerns as encouraging and protecting beneficial uses in society of less importance than in more arid nations. This issue is discussed in more detail at the end of this article.

146

Such as Nevada, Kansas, Idaho and New Mexico. Nevada is the driest state in the USA with annual rainfall on average a mere 9 inches, with some part of the state receiving only four or less—Nevada Division of Water Planning, Nevada Water Facts, available at http://www.state.nv.us/cnr/ndwp/wat-fact/precip.htm.

147

Save that an unrestricted right to take water for such uses may develop by prescription.

148

Under Article 4.

149

Given the general surplus of water resources in Scotland, the focus of the regime is rather one which seeks to prohibit unsustainable activities in respect of particular water bodies rather than the advancement of the most beneficial uses as such. Given shifts over time in either increased water scarcity or increased demand for water, the regime’s emphasis could be shifted to one more explicitly ensuring beneficial uses.

150

Dellapenna, supra n 109, 367–368.

151

For a US example, see the Regulated Riparian Model Water Code (J.W. Dellapenna, ed., 1997) at 6R–2–01 to 6R–2–08.

152

Such issues where discussed above under ‘efficiency’.

153

An issue perhaps mirrored in commercial law, where courts are not keen to intervene in business matters.

154

Dellapenna, supra n 109, 368. Moreover, unlike regulatory regimes, in respect of the development of policy, a common law system often shifts in a fragmented and piecemeal fashion, as it is reliant on parties bringing cases to the courts (and largely on parties’ pleadings) for new principles to be developed. A useful discussion of this phenomenon in the USA can be found in Morriss, Yandle and Anderson, supra n 97, 355–356.

155

See, e.g., L. Teclaff, ‘Evolution of the River Basin Concept in National and International Water Law’, 36 Natural Resources Journal 359 (1996).

156

For examples of such international approaches, see International Law Association, Report of the Forty-Seventh Conference 242 (1956) (held in Dobrovnik); Report of the Fifty-Second Conference Held at Helsinki, 1966, at 484, International Law Association (1966), reprinted in ILA, Helsinki Rules on the uses of the waters of international rivers (1967).

157

Although some voluntary catchment planning schemes and a ‘shadow River Basin Management Plan’ have previously been put in place—see S. Hendry, ‘Enabling the Framework – The Water Environment and Water Services (Scotland) Act 2003’, 14 Water Law 16 (2003).

158

As has been noted, England and Wales, e.g., have for some time operated a licence-based approach to water usage.

159

2005 regulations, regulations 27–31.

160

R.E. Meiners et al, ‘Burning Rivers, Common Law, and Institutional Choice for Water Quality’ in R.E. Meiners and A.P. Morriss (eds), The Common Law and the Environment (Rowman & Littlefield, 2000) 69–83.

161

Article 14.

162

Water – Key to Sustainable Development: Recommendations for Action, International Conference on Freshwater, Bonn, December 2001, at action no. 12. The report can be ordered from http://www.iwapublishing.com/template.cfm?name=iwapwst.

163

WEWS s 21(1).

164

The Consultation period ended in 9 July 2004.

165

A. Allan, ‘A Comparison Between the Water Law Reforms in South Africa an Scotland: Can a Generic National Water Law Model be Developed from these Examples?’, 43 Natural Resources Journal 419, 484 (2003).

166

WEWS s 17(1). Arrangements in this regard have recently been fleshed out by SEPA by the establishment of a national advisory group comprising SEPA and a number of other stakeholders and regulators such as Scottish Natural Heritage, Scottish Water, local authorities, port authorities, NGO’s and industry representatives. In addition, eight area advisory groups, comprised of local stakeholders and water users, shall feed into the river basin planning process—see SEPA, supra n 69, paras 2.1–2.8.

167

See, e.g., the Bonn Recommendations, supra n. 162; Stockholm Statement, supra n 162.

168

Scottish Executive Environment Group, The Future of Scotland’s Waters – Proposals for Legislation February 2002 (Paper 2002/4), para 1.25.

169

See, e.g., principle 1 of the Stockholm Statement supra n 162.

170

F.A. Hayek, ‘The Use of Knowledge in Society’, 35 American Economic Review 519 (1945).

171

Morriss, Yandle and Anderson, supra n 108, 339.

172

2005 regulations, regulations 46–49.

173

2005 regulations, schedule 9, regulations 10–18. Some disputes may be resolved by written submission however—see schedule 9, regulations 20–25.

174

H. Bruff, ‘Specialized Courts in Administrative Law’, 43 Administrative Law Review 329 (1991).

175

Morriss, Yandle and Anderson, supra n 108, 360.

176

Although the Scottish whisky industry later pledged to work together with SEPA in respect of their obligations under the water directive, see http://www.sepa.org.uk/news/releases/2001/sepapr2901.html.

177

An ancillary point that might be made here is that given that regulation powers will remain with the Scottish Executive rather than SEPA, the possibility of political expediencies taking precedence over more environmentally sound policy may act to undermine confidence in the regime—See A. Allen, supra n 165.

178

A comparable example may be the regulatory capture of the US patents system by the legal profession—see, e.g., B. Kahin, ‘The Paradox of Private Legislation: Business, Economic and Political Effects of Patents on Information Processes’ in Is Software Patentability Necessary Conference (European Parliament, 2002), available at http://www.greens-efa.org/pdf/documents/SoftwarePatenting/TextKahin.pdf.

179

Although the problem of regulatory ‘capture’ in this regard of dispute resolution processes and other aspects of the post-WEWS regime was noted.

180

With the notable exception of Texas.

181

Kletzing, supra n 134.

182

Murphy, supra n 30. Although with a de novo regime, different interpretations of ‘reasonable uses’ could be determined.

183

Moreover, human rights issues engendered by this issue may lead to challenges against the regulator and lead to the undermining of the regime, see B. Clark, supra n 5.

I am grateful to Tom Guthrie, University of Glasgow, and the anonymous referee for comments on earlier drafts of this work.