Corporate Governance: Large Corporations To Face Fines In Excess Of £100 Million For Environment And Safety Breaches

In its ground-breaking decision in R v Thames Water Utilities (2015), the Court of Appeal has signalled a sea-change in penalties for environmental breaches, with fines for very large commercial organisations ("VLOs") set to rise exponentially.

The Court said that penalties for environmental offences need to be placed at the same level as those applicable to fines for breaches of financial regulation. It said:-

"This may well result in a fine equal to a substantial percentage, up to 100%, of the company's pre-tax profit for the year in question ... even if this results in fines in excess of £100 million".

The case has implications reaching beyond environmental offences and, with the publication of new sentencing guidelines for health and safety offences later this year or early next, is likely to put environmental and safety compliance to the top of the Board's agenda.

How does it affect you?

The Courts have now recognised that the Council's Sentencing Guidelines have made it clear that the starting points and range of fines in the Guidelines do not apply to VLOs. VLOs should be mindful of the need to certify that prompt and effective measures are in place to ensure, not only breaches of an...