Regulatory update: sentencing very large commercial organisations – the trend

water

As the UK’s largest water and wastewater company with an annual turnover of around £20 billion, Thames Water Utilities Limited (Thames Water) is considered to be a very large commercial organization for the purposes of sentencing in accordance with the Definitive Guidelines for both environmental and health and safety cases. On the 26th July 2019, Mr. Justice William Davis handed down a judgment dismissing an appeal by Thames Water against a £2 million fine for a breach of environmental regulations.

The case of Thames Water Utilities Ltd v Regina [2019] EWCA Crim 1344 reaffirms the continued steep rise in the level of fines imposed on corporate defendants. Indeed, it goes further and indicates that fines for very large organisations who commit environmental or health and safety offences are likely to be in the £millions as opposed to tens or even hundreds of thousands, particularly for repeat offenders.

Facts

In August 2015, the failure of the only operative pump at a sewage pumping station in the Cotswolds area caused the discharge of 82,000 litres of untreated sewage. The discharge resulted in the serious pollution of a local brook.  

The Environmental Agency were made aware of the incident and during the course of their investigations, it became apparent that there had been various issues with the pumps and sensors at the station in the preceding 12 months which had been insufficiently dealt with or not at all.

Thames Water were prosecuted and pleaded guilty at the first opportunity to an offence contrary to Regulation 38(1)(a) of the Environmental Permitting (England and Wales) Regulations 2016 whereby it accepted causing a discharge in contravention of Regulation 12(1)(b) of the 2016 Regulations.

The judge at Oxford Crown Court found that Thames Water, which had a number of previous convictions for environmental offences, had been reckless; the judge imposed a fine of £2 million. In doing so, he drew a parallel with similar offences committed by the appellant in 2012 for which a fine of £250,000 had been imposed at Reading Crown Court.

Thames Water appealed and submitted that the judge had (1) failed to engage in the step-by-step exercise required by the sentencing guidelines and had failed to explain how he reached the figure of £2 million; (2) the level of fine before credit for plea was manifestly excessive and (3) taking the Reading case as a benchmark, there was no proper basis to increase the fine in the instant case by eightfold.

The judgment

The appeal was dismissed. The Court accepted that the judge had not engaged in the step by step approach required by the sentencing guidelines and had not set out precisely how he arrived at the figure of £2million. Nevertheless,  

The judgment sets out the principles laid down in the 2015 case of R v Thames Water Utilities Limited [2015] EWCA Crim 960 which noted that there were a number of factors a sentencing judge should consider in such cases. Those factors include the financial circumstances of the offender, previous convictions and the need to ensure that the fine is punitive and also large enough to bring home the message to the directors and shareholders and ensure that the organisation takes effective measures to reform themselves and fulfil their environmental obligations.

The Court concluded that had the sentencing judge taken the step by step approach required by the guideline, as opposed, to his own less structured approach he would inevitably have reached the same conclusion. It could not, therefore be said that the fine was manifestly excessive or wrong in principle.

In terms of the parallels drawn with the Reading case in pursuit of ground three of the current appeal, the Court reaffirmed the view of the previous appellate Court in concluding that the £250,000 fine was too lenient and had the Court of Appeal been able to increase that fine, they would have done so. 

Conclusion

It is clear from this judgment that the courts are not only embracing but essentially promoting sentences that are demonstrably significant in order to meet the objectives of the sentencing guidelines.

Whilst this case may focus on a very large organisation in the context of environmental offences, the same lesson ought to be taken by all such organisations and those who advise them with regards to their regulatory obligations. They must act immediately in order to rectify their current or previous offending behavior; failure to do so will be likely to result in eye-watering fines of £millions.

The Regulatory team at Markel Law have considerable experience in assisting both organisations and individuals facing investigation and prosecution for environmental/health and safety offences.

Should you require any advice or assistance please do not hesitate to contact the team at Markel Law on 0161 827 1800.