In fining Thames Water 20.3m for a catalogue of environmental offences, Judge Francis Sheridan smashed the previous record fine by more than 10 times. In doing so, he undoubtedly loosened the judicial shackles when sentencing our largest organisations, warning that "it should not be cheaper to offend than to take appropriate precautions". With sentencing in health and safety cases subject to an almost identical guideline, what happens now?

Proportional fines

The Courts apply Definitive Guidelines for sentencing both environmental and health and safety cases (the "Guidelines"). The Guidelines require Courts to classify organisations principally by reference to turnover. Having done so, there are identifiable starting points and financial ranges for Judges to apply when sentencing.

A large organisation is one with a turnover exceeding 50m. But had the Judge treated Thames Water as simply "large", the Guideline range available was a mere 100,000-650,000.

However, the Guidelines also recognise that there will be "very large organisations" ("VLOs"), where turnover "very greatly exceeds" 50m. In those cases, the Guidelines state that, "it may be necessary to move outside the suggested [sentencing] range in order to achieve a proportionate sentence". And move outside Judge Sheridan did.

The case was significant in many ways; the Environment Agency described it as the biggest freshwater pollution case it had ever dealt with. The sewage release was unprecedented with 1.4 billion litres of sewage entering the watercourses causing lasting damage.

"Wicked" actions

The Judge described the offending as "wicked" and referenced a "history of non-compliance". Clearly influenced by Thames Water's daily profits of 2m, the Judge determined that 20.3m was the appropriate penalty, "to get the message across to shareholders that the environment is to be treasured and protected, and not poisoned".

Of course Thames Water had been involved in an earlier appeal case, which was a stark warning of what is to come. In that case, the Court of Appeal said "...starting with turnover but having regard to all the financial circumstances, including profitability...the objectives of punishment, deterrence and the removal of gain must be achieved...this may well result in a fine equal to a substantial percentage, up to 100%, of the company's pre-tax net profit... even if this results in fines of 100m".

The Guidelines were introduced to bring proportionality to the sentencing process, particularly in the case of VLOs. This case demonstrates the Courts' willingness to use their new found muscle. There is no specific threshold upon which a business becomes a VLO. Certainly organisations with turnover exceeding 1bn will be a VLO but beyond that, there is little clarity.

Simply being "very large" does not automatically equate to a sentence being imposed beyond the ranges set out for "large" organisations. The Guidelines are clear; this is at the Courts' discretion when it is necessary to achieve a proportionate sentence.

Ofcom fined BT 42m for late line installations just a few days later showing that the Courts still have some way to go to keep pace with the penalties imposed by non-judicial regulators.

Fines have tended to be within the Guidelines' ranges so far but this case provides a clear signal that the Courts are becoming more comfortable with their new found sentencing might and are ready to exercise their discretion, where appropriate, in the case of VLOs.

"Tasked with achieving proportionality, the judge determined that 20.3m was the appropriate penalty `to get the message across to shareholders that the environment is to be treasured and protected, and not poisoned'