Spending Money Like Water

In fining Thames Water £20.3m for a catalogue of environmental offences, Judge Francis Sheridan smashed the previous record fine by more than 10 times. In doing so, he undoubtedly loosened the judicial shackles when sentencing our largest organisations, warning that "it should not be cheaper to offend than to take appropriate precautions". With sentencing in health and safety cases subject to an almost identical guideline, what happens now?

Proportional fines

The Courts apply Definitive Guidelines for sentencing both environmental and health and safety cases (the "Guidelines"). The Guidelines require Courts to classify organisations principally by reference to turnover. Having done so, there are identifiable starting points and financial ranges for Judges to apply when sentencing.

A large organisation is one with a turnover exceeding £50m. But had the Judge treated Thames Water as simply "large", the Guideline range available was a mere £100,000-£650,000.

However, the Guidelines also recognise that there will be "very large organisations" ("VLOs"), where turnover "very greatly exceeds" £50m. In those cases, the Guidelines state that, "it may be necessary to move outside the suggested [sentencing] range in order to achieve a proportionate sentence". And move outside Judge Sheridan did.

The case was significant in many ways; the Environment Agency described it as the biggest freshwater pollution case it had ever dealt with. The sewage release was unprecedented with 1.4 billion litres of sewage entering the watercourses causing lasting damage.

"Wicked" actions

The Judge described the offending as "wicked" and referenced a "history of non-compliance". Clearly influenced by Thames Water's daily profits of £2m, the Judge determined that £20.3m was the appropriate penalty, "to get the message across to shareholders that the environment is to be treasured and protected, and not poisoned".

Of course Thames Water had been involved in an earlier appeal case, which was a stark warning of what is to come. In that case, the Court of Appeal said "...starting with turnover but having regard to all the financial circumstances, including profitability...the...