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In the midst of a worldwide focus on the importance of protecting our environment, and considering that one of the Environment Agency’s (EA) priorities within its action plan ‘EA2025 – Creating a Better Place’ is “healthy air, land and water”, it is not surprising that in the spotlight recently has been the EA’s major investigations into possible unauthorised discharges at thousands of waste water treatment works.
As a result of the EA’s investigations, eye watering fines have been handed to water companies, including the record fine of £90 million handed to Southern Water in July 2021, and a total of £141 million in fines secured against water and sewerage companies between 2015 and 2022.
However, prosecutions by the EA are not necessarily set to increase across the board. Between 2012 and 2021, the number of prosecutions brought against companies by the EA reduced by 76.4%, with only eight prosecutions recorded as successful in 2022.
Whilst improvement in the awareness and practice of companies may have a part to play in this decline, and also the impact of the COVID-19 pandemic in 2020 due to the temporary closure of courts and the subsequent court backlogs in 2021 and beyond, this does not demonstrate the full picture surrounding the decline in prosecutions.
Variable monetary penalties
An alternative way in which the EA can currently impose financial penalties on companies is to use civil sanctions known as Variable Monetary Penalties (VMPs), which are imposed directly by the EA rather than by the courts. At present, the limit on such VMPs is £250,000. However, on 3 October 2022, the Environment Secretary announced proposals to increase the limit on VMPs 1000-fold to £250 million per individual breach.
The EA Chief Executive, Sir James Bevan, stated that “criminal prosecutions can be lengthy and costly”, and welcomed the proposals which will make it “easier for us to hold water companies to account for environmental crimes”. It is possible therefore, that if the proposal is approved we will see a further downward trend in prosecutions against water companies in particular, and in its place, an increase in the use of civil sanctions.
Enforcement undertakings
Instead of prosecution, the EA may also consider accepting a voluntary offer made by an offender to put right both the effects of their offending and the impact on third parties, in an effort to make sure the offence cannot happen again. The EA confirmed it will only consider accepting an enforcement undertaking where it considers:
- It is not in the public interest to prosecute.
- The offer itself addresses the cause and effect of the offending.
- The offer protects, restores or enhances the natural capital of England.
As recently as 29 March 2023, the EA has stated that it is increasingly using this method of enforcement for suitable cases to restore the environment, improve practices of the offending company and avoid longer criminal court cases. Indeed, data published by the EA in February 2023 shows that between 1 June 2022 and 31 December 2022 alone, the EA accepted 21 Enforcement Undertakings ranging from £2,000 in the case of Portland Basin Marina Limited, to £100,000 in the cases of Marussia Beverages UK Limited and Thames Water Utilities Limited, totalling just over £727,335.
However, despite the apparent increase in the use of enforcement undertakings, the EA warned that it will continue to prosecute in appropriate cases.
At the same time, the EA confirmed it had accepted an Enforcement Undertaking offer of £100,000 from Müller UK & Ireland Group LLP, following an incident of effluent discharge in excess of the permitted level of ammoniacal nitrogen into the River Tern in January 2018. Müller has since complied with the regulations and invested £2 million in improvements to environmental working practices.
Whilst an enforcement undertaking will not be appropriate in every case, it might be considered by offenders in circumstances in which, for example, they do not have reasonable prospects of success should the matter reach trial stage, and where the costs and reputational damage incurred are likely to be lower than following a prosecution.
The future
Whilst the trends demonstrate that the use of enforcement undertakings appears to be increasing, reducing the numbers of prosecutions brought by the EA, in its July 2022 Environmental Performance Assessment, the EA stated that it wanted courts to “impose much higher fines for serious and deliberate pollution incidents”, emphasising that “repeat offenders can now expect criminal prosecutions for less serious environmental incidents where once the Environment Agency would have used civil powers. We would like to see prison sentences for Chief Executives and Board members whose companies are responsible for the most serious incidents. We would also like to see company directors being struck off so they cannot simply delete illegal environmental damage from their CV and move on to their next role”.
DEFRA opened a public consultation on 4 April 2023 into a proposal to increase the limit on VMPs from £250,000 to £250 million per breach. The consultation closes on 15 May 2023 and if the proposal is subsequently adopted, this may pave the way for a very significant increase in civil sanctions imposed by the EA as an alternative to criminal prosecutions being brought in respect of environmental breaches.
However, when considering the EA’s comments in relation to criminal prosecutions, companies should not treat this as a foregone conclusion. What is clear is that the EA has a number of different enforcement tools at their disposal and continue to express a determination to secure compliance and punish companies by whatever means necessary.