Environmental fines: the only way is up

In the recent case the Court of Appeal confirmed that £100m fines are appropriate for the most significant environmental offences by the largest…

In the recent case of R v Thames Water Utilities Ltd [2015] EWCA Crim 960, the Court of Appeal has confirmed that £100m fines are appropriate for the most significant environmental offences by the largest companies.

The knock-on effect will mean all courts making full use of their extended sentencing powers pursuant to the Sentencing Council Guideline for Environmental Offences, meaning an increase in the level of fines for all companies from the smallest to the largest.

The clear message from the court is that environmental offences should not be treated any differently from other regulatory offences. If banks can receive fines in excess of £100 million, then operators who commit environmental offences should be similarly liable.

A summary of the key points to emerge from the case is set out below. You may wish to analyse these points in the context of your own business and identify changes and improvements that you can make to your environmental management and compliance systems, as well as to your incident response protocols.

Key points

  • Do not ignore warning signs where equipment is failing or employees have raised concerns – if you do and an environmental incident follows, the courts will take a very dim view of any inaction. Keep clear records of discussions concerning such failures and the steps needed to deal with them, the reasons for the decisions taken and the related timescales

  • Where you have operations close to sensitive sites (e.g. SSSIs), you need to ensure you take additional steps to prevent any environmental harm to those sites
     
  • Immediately undertake your own assessment of the environmental impact caused by an incident. Having your own evidence could be vital in reaching agreement with the environmental regulators concerning the correct level of harm
     
  • If you are a Very Large Organisation (turnover well in excess of £50m) you need to pay particular attention to the judgment and ensure you have a system that allows the board of directors and the shareholders to be engaged in ensuring environmental compliance by your company
     
  • Do not make the same mistake twice. Ensure you undertake thorough debriefs following an incident to prevent a repeat elsewhere in your business. A failure to do so will often be punished by the courts
     
  • If your company has committed prior environmental offences, ensure you have very accurate records of these offences and all the connected mitigating facts and circumstances, particularly relating to learning from the incident and the steps taken to prevent a recurrence
     
  • The courts and the environmental regulators will undertake a much more detailed financial analysis of a company’s accounts (and even groups in certain cases), in order to set a fine at a substantial percentage, up to 100%, of pre-tax net profit for the year in question
     
  • Larger companies will be expected to meet higher environmental performance standards.

If you are interested in finding out more about this or any other environmental issue, please contact Simon Colvin, a partner in our Regulatory Services Unit, on 0161 233 7356 or email simon.colvin@weightmans.com.

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