The Sentencing Guidelines for Environmental Offences have now been published and will be in use in Courts in England and Wales from 1 July 2014. They are likely to lead to larger fines for corporate offenders with fine ranges going up to £3 million plus the ability to move above this range where necessary for ‘very large organisations’. Offenders are now likely to see greater in depth scrutiny of their behaviour and their accounts by the Courts.
The Guidelines cover a wide variety of offences governed by the Environmental Protection Act 1990 and the Environmental Permitting (England and Wales) Regulations 2010. Examples of such offences include waste permit breaches, noise and odour nuisance and fly-tipping.
The Guidelines separate offences committed by organisations and those committed by individuals. Corporates will be categorised in terms of size:
- Large – turnover or equivalent of £50 million and over;
- Medium – turnover or equivalent between £10 million and £50 million;
- Small – turnover or equivalent between £2 million and £10 million; and
- Micro – not more than £2 million.
In addition, the Guidelines state that for ‘very large organisations’, where a “...defendant company’s turnover or equivalent very greatly exceeds the threshold for large companies…”, the Courts may find it necessary to move outside of the suggested range to achieve a proportionate sentence.
Companies will be expected to provide comprehensive accounts for the last 3 years. In the absence of this, the Court is entitled to draw reasonable inferences as to the offender’s means. Normally, only information in relation to that company will be relevant unless it can be demonstrated that the resources of a linked organisation are available and can be properly taken into account. The Court will pay particular attention to turnover; profit before tax; directors’ remuneration, loan accounts and pension provision; and assets as disclosed by the balance sheet.
There will be a focus on the organisation’s annual turnover or equivalent as a starting point for a fine. The Court will then refer to other financial factors to ensure that the proposed fine is proportionate. Consideration of accounts is likely to include consideration of director bonuses and the basis for their payment. In the past, accounts were only generally looked at in detail where organisations pleaded poverty.
The Guidelines state that any financial order(s) must be “…sufficiently substantial to have a real economic impact which will bring home to both management and shareholders the need to improve regulatory compliance.”
As we have already seen from a number of Court of Appeal cases recently, companies can now expect much greater in depth scrutiny of their behaviour and their accounts before and at any sentencing hearing, particularly where they have a previous record. The Courts will expect the company to explain 1) the cause of its offending behaviour; 2) the current offence; and 3) its proposals for protecting the public from further offending.
The Guidelines will not apply to any other regulatory offences, such as health and safety offences, although the Response to the Consultation does note that the Sentencing Council intends to publish a consultation on health and Safety offences later this year.