The new Sentencing Council Guideline for environmental offences is starting to bite

On 19 January 2016 Leeds Crown Court ordered Yorkshire Water to pay a £600,000 fine for a single offence under the Environmental Permitting Regulations 2010.

The offence related to a burst sewage pipe in October 2013 and resulted in the release of raw sewage into a fishing lake in Wakefield. The environmental impact was widespread with a significant fish kill (more than 800 fish were recovered) and other related environmental impacts.

The Yorkshire Water case followed hot on the heels of the Thames Water case on 5 January 2016 which saw Thames fined £1 million for two offences relating to the pollution of the Grant Union Canal.

The fine imposed by Leeds Crown Court is yet another example of the courts flexing their new powers under the Sentencing Council Guideline for Environmental Offences (the Guideline). It is also in line with the comments of the Court of Appeal in the 2015 Thames Water case in which the Court of Appeal suggested fines for very large organisations (VLOs) could be more than £100 million.

It is interesting to analyse the level of the Yorkshire Water fine and the sentencing comments in more detail. According to various reports, the environmental impact was said to be ‘significant’. The term ‘significant’ equates to category 2 environmental harm pursuant to the Guideline. At face value that would appear to be a lenient classification considering the scale of the reported fish kill. It was also reported that the Court classified Yorkshire Water’s culpability as ‘negligent’.

It has been reported that Yorkshire Water was given the maximum benefit for an early guilty plea. That would have meant a 33 per cent reduction in the level of fine. So the initial fine prior to the reduction would have been £900,000. An analysis of the Guideline demonstrates that the Court has treated Yorkshire Water as a VLO.

That is not surprising considering that its turnover in 2014/15 was reportedly just over £1 billion. If Yorkshire Water had been considered a large company pursuant to the Guideline (the bracket below a VLO) the starting point for a category 2 negligent offence would have been £140,000 with a range of £60,000-350,000 dependent on the circumstances. However, as Yorkshire Water was considered a VLO, that gave the Court the freedom to move outside the framework provided for in the Guideline.

One of the purposes of the new Guideline was meant to be the introduction of greater consistency in sentencing. However, because of the late introduction of the VLO category into the Guideline and the absence of a framework for VLOs, consistency seems to be something lacking when it comes to dealing with VLOs. We are starting to see a trend that suggests the Courts are struggling to determine the level at which fines should be pitched in the absence of a VLO framework. The Sentencing Council are due to undertake a review of the Guideline in 2016. Perhaps one of the outputs of the review will be the introduction of a VLO framework to ensure a level playing field.

In the meantime utility companies need to take every available opportunity to try and minimise the financial penalties a Court can impose. There are some very simple steps that companies can take. Always commission an immediate assessment of the environmental impact arising from an incident. An assessment will be invaluable when it comes to determining the level of environmental harm – a key consideration when looking at the level of fine. Ensure that you have a very clear environmental reporting structure and decision making process that includes the board of directors – it was something the Court of Appeal felt very strongly about in the Thames Water case and can provide very effective mitigation. Finally, align your incident response protocol with the Guideline so that you are doing all the right things from day one.

Simon Colvin is partner and national head of the environment team at Weightmans law firm