The record fine of £1m recently handed down to Thames Water Utilities Limited is further evidence (if any were needed) that the Courts are willing impose extremely tough penalties on very large organisations found to have breached environmental regulations.

Background

Thames Water has an environmental permit to discharge treated sewage from Tring Sewage Treatment Works into the Wendover Arm of the Grand Union Canal. The permit contains conditions designed to prevent any negative impact upon the canal itself or activities which take place upon it, such as boating and fishing.  However, inlet screens designed to remove the majority of the sewage debris before discharge into the canal repeatedly failed, allowing effluent to enter the canal on nine occasions between July 2012 and April 2013.

The Environment Agency was alerted to pollution in the canal by the Canal and Rivers Trust and members of the public. Samples taken from the canal detected high levels of iron and aluminium, and a high chemical oxygen level.  The Agency attended the site on several occasions and on one occasion worked with Thames Water to arrange for aeration to be installed at the outfall into the canal to increase levels of oxygen in the water.

Prosecution and Fine

In May 2015, before Watford Magistrates Court, Thames Water pleaded guilty to two counts under the Environmental Permitting (England and Wales) Regulations 2010and their case was committed to St Albans Crown Court for sentencing.

In mitigation, Thames Water pointed to the following:

  1.  It had spent £30,000 on replacing the faulty inlets screens;
  2. It had cooperated with the Environment Agency in its investigations;
  3. It had taken steps to avoid similar incidents in the future and there had been a significant improvement in its recent environmental performance; and
  4. There was no financial motivation or gain for the offences.

Nevertheless, on 4 January 2016, HHJ Bright QC ordered Thames Water to pay a fine of £1 million, costs of £18,113.08 and a victim surcharge of £120, and stated:

The time has now come for the courts to make clear that very large organisations such as [Thames Water] really must 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.

Thames Water’s fine is reportedly the highest ever for a water company in a prosecution brought by the Environment Agency.

Analysis

Since January 2014, there has been a steady stream of cases where very large fines have been imposed—and, where appealed, upheld—on very large companies for breaches of U.K. environmental regulations.  This approach has been bolstered by the Sentencing Council’s Environmental Offences Definitive Guideline.  Last year, we reported on a separate case where the Court of Appeal upheld a fine of £250,000 in relation to discharge by Thames Water of untreated sewage into a National Trust nature reserve.  In that case, Mr Justice Mitting stated that the court would have had no hesitation in upholding a very substantially higher fine and that dictum seems to have informed the approach of the sentencing judge in the present case.

So what could water companies do when faced with the prospect of a seven digit fine for breaching environmental regulations? In reality, by the time the decision has been taken to prosecute, it is too late.

It is noteworthy that in both the present case and the 2015 fine, sewage was unlawfully discharged over a period of months and external organisations and members of the public were the first to notice that pollution had occurred. Investment in more proactive detection methods (such as better telemetry and routine inspections and sampling) would not only reduce the length of time over which a breach occurs, but would represent a clear commitment by companies to prevent pollution rather than tackle it once it has started.

Such steps would no doubt be initially expensive. Nevertheless, one of the key messages from the last two years is that, ultimately, the costs that would be incurred by a very large organisation as part of a comprehensive root and branch improvement of environmental performance would be significantly less than the cost of the fines that will mount up unless such reform is undertaken.