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The Court of Appeal has recently indicated that companies could be fined up 100% of their pre-tax net profits for environmental offending.
In August 2014 Thames Water Utilities Limited were convicted in the Reading Crown Court after untreated sewage flowed into a brook in an area of outstanding natural beauty in the South Downs. The incident occurred when sewage rags blocked pumps at a sewage pumping station.
The incident occurred in 2012, but it did not come to court until July 2014, after the Sentencing Council’s guidelines on environmental offences came into force. These guidelines prescribe ranges of fines based on the turnover of the offender, and there are fine bands for micro, small, medium and large companies. Fines are also set according to the degree of actual or potential harm caused by the offending, and the blameworthiness of the offender.
Thames Water initially pleaded guilty to the offence and was fined £250,000 plus costs. The sentencing Judge took into account Thames Water’s turnover of £1.9bn and its profits of £346m, the fact that there had been 16 previous similar incidents at the same treatments works, and it failed to respond to the warning alarms. Thames Water appealed the size of the fine to the Court of Appeal.
The appeal was heard in February 2015, and the decision was handed down on 3 June 2015. The Court of Appeal upheld the fine, but said that the fine was lenient, and it would have upheld a much larger sum. The Court expressed a view that in the past, fines have not been large enough to bring home ‘the appropriate message to directors and shareholders’ of big companies.
Where a company has a turnover of significantly more than £50 million the Court may depart from the guidelines and impose a bigger fine which is proportionate to the size of the company. For deliberate offending, causing environmental harm, the Court of Appeal said that fines could amount to hundreds of millions of pounds.
The Court of Appeal also said that while previous convictions are relevant to the size of the fine, there is a distinction between those caused by negligence or recklessness causing harm, and those with no or low fault and low environmental impact.
This case sets a benchmark for the sentencing of environmental cases, and sends a very clear message to judges about the level of fines for environmental offences.
Some environmental offences can now be dealt with by a civil sanction, which avoids a prosecution altogether. Instead, offenders make amends for the offence, for example by making a donation to charity, undertaking environmental improvements, or compensating people affected by the offence.
It is very important to seek legal advice as soon as possible if you think you may be investigated for environmental offending.
For any concerns over environmental matters, please call Craig Burman on 01274 377283