Thames Water Utilities Limited has been fined £1 million (in respect of two related offences) arising from pollution of a canal in Hertfordshire during 2012 and 2013. This appears to be part of a consistent trend towards higher fines for environment offences following the principles and the tariff-based approach of the sentencing guideline introduced in July 2014. This is thought to be the first fine to reach the £1 million mark under this sentencing regime.

The case

  • The Environment Agency (EA) brought the case against Thames Water in relation to repeated discharges of polluting matter from a sewage treatment works into the Grand Union Canal in Hertfordshire between July 2012 and April 2013.
  • In May 2015, Thames Water pleaded guilty in Watford Magistrates’ Court to two offences under the Environmental Permitting (England and Wales) Regulations 2010.

The sentence

  • On 4 January 2016, St Albans Crown Court ordered Thames Water to pay a fine of £1 million, plus £18,113.08 costs (and a victim surcharge of £120).
  • In his sentencing comments HHJ Bright QC reportedly warned that the time had “now come” for very large organisations to “bring about the reforms and improvements for which they say they are striving because if they do not the sentences passed upon them for environmental offences will be sufficiently severe to have a significant impact on their finances.”*

Very large organisations

In our earlier article on environment sentencing we described in more detail the implications of the Sentencing Guideline for Environmental Offences (the “Guideline”). A key initial step in determining the quantum of a fine for a corporate defendant is to first determine the size of the company and this is done by reference to turnover. Unfortunately the Guideline refers only to companies which fit into categories ranging from micro to large but in any sensible dialogue many corporate defendants would be described as at least “very large” if not more. 

In this particular instance, there was no issue because Thames Water has previously been in court for water pollution offences and in one of these instances the Court of Appeal confirmed that it was a very large organisation.

Level of fine

Under the Guideline, a “large” organisation (meaning any with a turnover or equivalent of £50 million or above) can expect fines ranging anywhere from as low as £7,000 to as much as £3 million per offence, depending on level of harm and culpability. 

As Thames Water has been determined previously to be a very large organisation within the meaning of the Guideline (i.e. generally outside of the large company fine ranges), a fine of £1 million for two offences is perhaps towards the mid to lower end of the expected scale. However, in this case, the EA conceded that Thames Water had fully co-operated with its investigation and had since invested £30,000 in replacing equipment involved in the illegal discharges. Thames Water also pleaded guilty (and we imagine did this fairly quickly) in the lower courts which may have resulted in an up to one third discount of the fine that would have been imposed. From the reports of the case it does not appear that the EA pursued a Proceeds of Crime Act application against Thames Water.

Comment

It is relatively clear from this and other recent sentencing decisions that the lower courts share the Court of Appeal’s view that fines for environment offences generally have been too lenient. From the judge’s reported commentary in this case and in other recent cases we are seeing, the lower courts are taking on board the message that the level of fine should be high enough so that boards of companies and their shareholders will take notice. It remains to be seen how much further the courts will go in practice. At least in theory the Court of Appeal has stated that a fine could be equivalent to “100% of a company’s pre-tax net profits”.