In R (on the Prosecution of the Environment Agency) v Thames Water Utilities Limited [2015] EWCA (Crim) 960, Thames Water appealed against a sentence by way of a fine of £250,000 for an offence contrary to Regulation 38 Environmental Permitting Regulations 2010. The case was a pollution offence arising from escape of sewage from Thames Water’s pumping station on National Trust land at Chase Brook within the North Wessex Downs Area of Outstanding Natural Beauty.

Thames Water operated a pumping station to move sewage through its system. Both pumps failed and sewage overflowed for a period of time well in excess of the standard period set to respond to such incidents. Numerous warnings were ignored.

However, in dismissing Thames Water’s appeal, the real interest in the case is: (i) it is the third very clear indication from the Court of Appeal, and from the Lord Chief Justice in particular, that the tariff for such offences, and similar regulatory offences, has very substantially increased; (ii) in the case of very large organisation, fines may be appropriate in a range not previously seen, such as in excess of £100M; (iii) the sentencing of very large companies should be undertaken by senior Circuit Judges and High Court judges because of the complex issues which they raise; (iv) evidence of a responsible approach and active improvement by the boards of such large companies will provide substantial mitigation.

The first such indication was when the Lord Chief Justice dismissed an appeal against sentence in the sellafield/network rail appeals (R v Sellafield/Network Rail [2014] EWCA (Crim) 49 Env LR 19). Sellafield had a turnover of £1.6 billion and an annual profit of £29 million, had been fined £700,000 for offences relating to the disposal of radioactive waste. Network rail, with turnover of £6.2 billion, had been fined £500,000 following a collision at an unmanned level crossing which resulted in very serious injuries to a child. The direction of travel was set: the court held that the fine imposed on a company of Network Rail’s size represented a very generous discount for the mitigation advanced, and a materially greater fine could not have been criticised.

So, it was no real surprise that shortly after, the Lord Chief Justice dismissed an appeal against sentence for offences contrary to regulations 12(1), 38(1)(a) and 39(1) Environmental Permitting Regulations 2010 in R (on the prosecution of the Environment Agency) v Southern Water Services Ltd [2014] 2 Cr App R (S) 29.   That case concerned discharge of sewage effluent without compliance with conditions on an environmental permit. The court held that there was no basis for interfering with the £200,000 fine imposed by the judge. Indeed, again, the court would not have interfered with a fine very substantially greater than that imposed upon this company in the circumstances of the case. 

Hence, this case and similar sentencing appeals in 2014 repeat a well known message, namely that financial penalties should be of a level to bring home the message to the board and shareholders of corporate bodies that their duties in respect of the environment must be properly discharged (see F Howe and Son Engineering v HSE [1999] 2 Cr App R (s) 37 per Scott Baker J – “A fine needs to be large enough to bring that message home where the defendant is a company not only to those who manage it but also to its shareholders.”) . The difference between 1999 and today is that the message is to be measured in millions, not some low tens of thousands. That is a message which any large organization might like to consider now rather than when it has to explain its role in an unfortunate event.

Written by Richard Kimblin, member of No5 Chambers Regulatory and Licensing Group.