By Paul Davies, Michael Green and Alice Gunn
Powerday plc was issued a record fine in April this year for offences relating to operations involving over 17,000 tonnes of waste deposited and stored illegally. Powerday – one of the biggest waste-management companies in the South-East of England – pleaded guilty and was subsequently fined £1 million, in addition to £243,955 in costs by the court.
This case is demonstrable of the courts’ increasing willingness to issue significant fines for environmental offences. Whilst notable, the Powerday case (and fine) is no longer uncommon – Yorkshire Water faced a similar fine for sewage pollution offences this year while Thames Water was found guilty in January this year of two counts of breaching environmental regulations, resulting in a £1 million fine plus additional costs.
Historically, fines relating to environmental offences were much lower than the record fines imposed this year. For example, Northumbrian Water was fined only £30,000 for two sewage pollution incidents in 2014, while Severn Trent Water was fined £25,000 plus costs for a similar offence. In addition, South West Water was fined £150,000 plus costs for offences at a sewage treatment works which resulted in sewage effluent discharging into a river. The offences in 2014 are similar in nature, and committed by similar companies, to those fined this year. However the fines are substantially lower.
So What Has Changed?
The Sentencing Council of England and Wales published new and tougher guidelines for the sentencing of environmental offences, including breaches of environmental permits, on 1 July 2014. To determine the size of the fine, the guidelines require the court to consider the offender’s turnover to make sure that the financial burden of the fine affects both management and shareholders. This also ensures that there is no financial benefit derived from an environmental offence. The guidelines encourage large organisations to reform and improve environmental compliance of their treatment and waste facilities by enabling fines which substantially, and negatively, impact the company’s bottom line.
The courts have heeded to these guidelines following Judge Bright QC, the judge presiding over the case against Thames Water (referenced above), who recognised that “…the time has now come for the courts to make clear that very large organisations… really must bring about the reforms and improvements for which they say they are striving.” Judge Bright QC warned that “…if they do not, the sentences passed upon them for environmental offences will be sufficiently severe to have a significant impact on their finances.”
However, the fines also have implications for alternatives to prosecution for environmental offences. Under the Regulatory Enforcement and Sanctions Act, the Environment Agency can impose civil sanctions for certain offences. Such sanctions include variable monetary penalties (whereby the quantum of the penalty is set by the Environment Agency on a case-by-case basis) and enforcement undertakings (legally-binding voluntary agreements offered by those who may have committed an offence). The rising fines imposed for environmental offences will likely increase the variable monetary penalties issued and the Environment Agency’s negotiating starting-point for obligations included in enforcement undertakings. In the published guidance, the maximum criminal fine a magistrate’s court could impose for the relevant offence is used as a starting-point for calculating a variable monetary penalty.
As fines for serious environmental offences escalate, companies will need to carefully consider the financial and reputational impact of environmental non-compliance.
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