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 environmental-nature but also of a health and safety-nature, are acted upon and managed as soon as possible. The need to ensure proper corporate governance measures to fulfil an organisation's regulatory obligations is very much at the forefront of the Court's approach to sentencing. The size of the organisation and the degree of fault involved will be significant factors considered by the Court in imposing sentences for environmental and health and safety breaches. Background

Thames Water Utilities Ltd, which had pleaded guilty to an offence arising from the negligent discharge of untreated sewerage into a brook from a faulty pumping station and f lowing through an Area of Outstanding Natural Beauty between 29 August 2012 and 4 September 2012, appealed against a fine of £250,000 imposed on it by the Reading Crown Court.

The Sentencing Guidelines propose a step-by-step approach to calculation of a fine based upon 3 elements, being the degree of culpability of the offender, the extent of the harm caused and the size of the offending organisation. In applying the new Sentencing Guidelines, the Court confirmed that the starting point for range of fines in the Guidelines do not apply to VLOs.

Instead, the Court said that:-

"Fines must be large enough to...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT