When it rains it pours: Thames Water hit with record fine
Thames Water Utilities Limited were handed a fine of £20.3 million on 22 March 2017 at Aylesbury Crown Court, after pleading guilty to pumping many millions of litres of untreated sewage into the River Thames and its tributaries.
The fine is the highest on record to have been imposed on a water utility company for environmental offences and reinforces the courts’ willingness to think in the multi-millions when punishing ‘very large’ organisations.
In sentencing, His Honour Judge Sheridan, widely known for his, at times, outspoken and acerbic comments, commented that this was a record-breaking fine for record-breaking offending.
A prosecution for six separate offences occurring between 2012-2014 at Thames Water’s sites in Buckinghamshire, Oxfordshire and Berkshire was brought by the Environment Agency. The environmental damage, that was said to have been avoidable, included visible sewage along 14 km of the river, and the death of birds and fish.
Akin to health and safety offences, environmental offences are sentenced in accordance with published sentencing guidelines. In applying the Sentencing Council’s Environmental Offences Definitive Guideline, Judge Sheridan utilised the organisation’s turnover as the initial benchmark for setting the fine, as well as what he saw as its level of culpability and the degree of harm caused.
Thames Water had a turnover in excess of £2 billion, so he chose not to determine the fine by reference to the upper range provided for “large organisations” (annual turnover of £50 million and over) in the Guideline, i.e. up to £3 million. Instead, he applied the Guideline’s discretionary indication that, where the organisation’s turnover greatly exceeds the £50 million threshold, he could classify the organisation as a “very large” organisation and permit him to move outside of the limited range to impose a more proportionate fine.
Thames Water had previously been convicted of pollution offences at six other sites between 2012 and 2014, and received a £1 million fine in December 2016 in relation to pollution of the Grand Union Canal. This and other previous offending was one catalyst for imposing a much more significant fine, as was Thames Water’s disclosed daily profit of £2 million.
Judge Sheridan opined that the scale of the problem must have been apparent throughout the management of the organisation, and described the situation as shocking and disgraceful.
North of £2 million
Prior to this case, the largest fine which had been handed down to a utility company was a £2 million fine imposed on Southern Water in December 2016, after the failure of a pumping station caused prolonged discharges of untreated sewage along the Kent coastline.
The huge fine imposed on Thames Water demonstrates that the courts are now content to increase fines to levels previously considered unimaginable for large, and particularly very large, organisations.
However, it also reinforces the concern when the Guideline was first introduced that, with no firm guidance as to what constitutes a “very large” organisation or how to calculate the level of fine appropriate to such an entity, there is a real risk of inconsistency and unfairness in the sentencing of any organisation with a turnover in excess of say £100 million.
In other cases, the Court of Appeal has rejected suggestions that:
- Annual turnover above £150 million must mean an organisation is very large.
- A mechanistic, multiplier approach should be applied to fines for very large organisations.
- Annual turnover approaching £400 million and above must necessarily result in sentencing judges going outside the Guideline range for large organisations.
There have also been cases in which turnover around £250 million has prompted judges to do just that. And, to add further uncertainty to the mix, there have been cases in which judges have explicitly determined organisations to be very large but have used the Guideline’s ‘step back’ principle to justify fines within the ranges provided for large organisations.
Hazy sentencing patterns and norms are beginning to develop in this regard, but it will be some time before a clearer framework emerges.
This case is another example of one in which reports from the media, and indeed many legal commentators, were skewed more towards the headline grabbing comments made by an outspoken judge, than the underlying factual detail.
It is also a good example of the all too often side effect of very drawn out investigation and decision making by the authorities, in that the Thames Water organisation, including its management and practices, being sentenced in March this year was very different from the one responsible for the damaging events of four years ago.