Are Water Companies still at the forefront of rising fines or on the wane?

14 Nov 2018

Even though penalties have increased significantly since the introduction of the Environmental Sentencing Guidelines in 2014, eight of the biggest fines were imposed on water companies by the courts between the period of 2014 to 2016 amounting to over £5 million.  Earlier this year the Chair of the Environment Agency, Emma Boyd, called for tougher penalties for businesses found guilty of serious water pollution. She stated that fines should be “ramped up” and companies consistently taken to court for breaching regulations. In addition, fines should be proportionate to the turnover of the company and for the courts to apply these consistently. Anything less is no deterrent.

In April 2017 Thames Water received an ”eye watering” fine of £20 million, which although admittedly related to  13 separate offences compared to the fine imposed on Severn Trent Water in April 2018 of £350,000, serves to illustrate that despite the introduction of the Sentencing Guidelines for environmental offences, there remains a lack of consistency in penalties being imposed by the courts. Whilst the level of fine differs enormously, in both of these cases the companies were heavily criticised by the court for failing to have robust systems and procedures in place to reduce and identify the risk of pollution. 

Earlier this year (April 2018), Severn Trent Water was involved in an incident resulting in the serious pollution of the River Amber. The pollution was caused by the release of hazardous chemicals namely sodium hydroxide from Severn Trent’s Ogston Water Treatments Works and resulting in an estimated 30,000 dead fish and 5km of damaged ecology along the River Amber. The release arose from a leak within a chamber at the treatment works that led to the contents becoming contaminated with sodium hydroxide, which was then washed through the road gully into the River Amber via an outfall pit. The court heard that the pollution had a significant negative impact on the fish and invertebrate populations within the River Amber and monitoring had shown that a full recovery is not expected until the summer of2019. In passing sentence, His Honour Judge Smith found that,“It beggars belief that a company of the size and expertise of Severn Trent Water had no policy whatsoever in respect of potential incidents arising in connection with their dosing chamber, either at this treatment works or indeed at any others throughout the UK. To have no policy whatsoever when dangerous chemicals could have leaked out in any number of ways is highly negligent. The size and success of Severn Trent makes it even more astonishing.”

Yet despite these remarks, and taking into account the turnover of the company, the Judge only imposed a fine of £350,000.  In mitigation Severn Trent expressed regret and apologised for the incident. The company said it had co-operated fully with the investigation and contributed £228,000 to the Derbyshire Wildlife Trust. Along with  the payment made by Severn Trent Water to the Derby Wildlife Trust this was not an insignificant sum of money to be paid out and these level of fines. even if not in the millions. should still be a cause of concern for directors and shareholders.  However, with the number of serious pollution incidents having remained stable at about 60 a year during the past decade it does appear that fines being imposed are not having the deterrent effect that the government anticipated and in some cases the level of fines being imposed are reducing.    In July 2018 a water company was ordered by the court to pay out a mere £33,600 in costs and fines following three separate pollution incidents, including an incident involving  pollution by untreated sewage effluent  which bypassed the local sewage treatment works.

Formal samples were taken from the burn and an ecological survey revealed a thick sewage fungus affecting the watercourse for 100m downstream of the outfall, which had starved the water of oxygen and resulted in the death of freshwater shrimp and midge larvae.

With the Environment Agency calling for tougher sentences and the Secretary of State for the Environment calling for a review into the financial structures of the water companies, now would be a good time for the water companies to examine their systems with the aim of reducing risks and ensuring robust and adequate systems are in place, if they want to avoid being faced with a fine that may result in a seven figure loss.

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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