UKELAEnvironmental Sentencing

Update14 January 2015

Mark Watson 6 Pump CourtTemple LondonEC4Y 7ARmarkwatson@6pumpcourt.co.uk

The key developments/drivers

∗R v. Sellafield [2014] EWCA Crim 49

∗R v. Southern Water [2014] EWCA Crim 120

∗SC Environmental Offences Definitive Guideline – in force 1 July 2014

∗Section of 85 of Legal Aid, Sentencing and Punishment of Offenders Act 2012 – not yet in force

Background: OrganisationsMean & Median fines 2011

Source: Sentencing Council Analysis and Research Bulletin 2013

Background: OrganisationsFine amounts 2011

Source: Sentencing Council Analysis and Research Bulletin 2013

Background: authorities

∗Magistrates’ Court Sentencing Guidelines∗MCA “Costing the Earth” 2009∗R v. Anglian Water Services Ltd [2004] 1 Cr.

App. R. (S.) 62∗R v. Thames Water Utilities Ltd [2010] 2 Cr.

App. R. (S.) 90∗R v. Kelleher [2009] 2 Cr. App. R. (S.) 25

R v. Sellafield (1)

∗ Guilty pleas - 7 offences (3 x EPR 2010, 3 x RSA 1993, 1 x CDGR 2009), 7 x £100,000 = £700,000 fine

∗ [§3] Importance of s164 CJA 2003 – taking account of financial circs “… increasing or reducing amount of fine”

∗ [§6] “ … ensuring that the message is brought home to the directors and members of the company (usually the shareholders)”

∗ [§7] great care needed to examine the accounts of “… companies with a turnover in excess of £1 billion …”

R v. Sellafield (2)

∗ Harm & culpability∗ [§24] fundamental mistake, need for “scrupulous care

for public safety …”∗ [§30] no actual harm, very small risk of some harm∗ [§31] medium culpability

∗ Financial circumstances∗ [§56, §64-65] – t/o £1.6bn, o/p £29m (1.8% profit

margin)∗ £700k fine equates to 0.04% of t/o or 2.4% of o/p∗ [§6] Compare with Tuffnells – fine £225,000 = 2.9% of

o/p

R v. Southern Water

∗ EPR offence – discharge of sewage to sea – defective pumps – persisted, intermittently for 6-7 months

∗ Fine of £200,000 upheld∗ [§15] No actual harm (but potential for serious harm)

and “a degree of unexplained culpability”∗ [§16] Turnover £0.75bn, profit £79m (profit margin

11%) - fine 0.25% of o/p (c10 x less than Sellafield/Tuffnells)

∗ [§19] warning to companies to explain offending∗ [§21] fine could have been “very substantially

greater”

Environmental Offences Definitive Guideline – July

2014

∗Tariff based ‘12 step’ approach – separate sections for organisations/individuals

∗Culpability – deliberate/reckless/negligent/low or no∗Harm – Categories 1-4∗Decide organisation category based on turnover

∗Large (>£50m t/o), Medium (£10-£50m t/o), Small (£2-£10m t/o) and Micro (<£2m t/o)

∗Plus Very Large Orgs “v. greatly exceeds £50m”???

Culpability issues

∗ Deliberate∗ (a) a senior person, acting deliberately, who equals the org? or∗ (b) deliberate failure by org. re systems?

∗ Reckless∗ (a) again, wilful blindness etc. by a senior person? or∗ (b) “reckless failure” by org. re systems?

∗ Negligent∗ Failure by org. as a whole to take reasonable care re systems?

∗ Low or no culpability∗ Little or no fault by org. as a whole e.g. accident/rogue

employee, proper measures overcome by exceptional events

Culpability – how to address

∗ Regulators:∗ Core part of investigation∗ Use of compulsory powers under s108 EA 1995?∗ Need for expert evidence?

∗ Defendants:∗ Post-Southern Water – detailed evidence of what

went wrong?∗ Witness statements and/or experts? If so,

whom?∗ Internal investigation? LPP issues?

Harm issues – Cats 1 - 4

∗ SC Consultation document [p13]: “based on the Environment Agency’s Common Incident Classification Scheme [CICS]”

∗ Does this remain the position?

∗ Disclosure/underpinning of EA CICS guidance?

∗ Has Defendant accepted EA CICS score in CAR form or post-pollution assessment?

∗ Need for Defendant to obtain its own evidence re harm/impact? Again, tactical issues re LPP.

Large orgs >£50m turnover – starting points

Deliberate Reckless Negligent Low/No Culp £-

£200,000

£400,000

£600,000

£800,000

£1,000,000

£1,200,000

£1,000,000

£550,000

£300,000

£50,000

£500,000

£250,000

£140,000

£25,000

C1 Harm

C2 Harm

C3 Harm

C4 Harm

Figures assume conviction af-ter trial

Aggravating/mitigating factors

∗ Having determined SP – then apply agg/mit factors to determine where the fine is in the range

∗ Note “relevant recent previous convictions and/or history of non-compliance are likely to result in a substantial upward adjustment” (does the converse apply?)

∗ Assessing significance/relevance of pre-cons – evidence? What is recent?

∗ Other points – effective compliance/ethics programme (compare US DOJ position – “the McNulty Memo”)

Large organisationssentencing ranges

£-

£500,000

£1,000,000

£1,500,000

£2,000,000

£2,500,000

£3,000,000

£3,500,000

Very large organisations – where to start?

∗Where turnover is £500m, is it 10 x the starting point for £50m i.e. £10m SP for a deliberate Cat 1?

∗Does Guideline allow this? See p7 – “move outside … range” (no reference to different SP – maybe implicit?)

∗How does this effect the range? Is the range ceiling £30m (i.e. 10 x £3m) for a deliberate Cat 1?

∗ If this were the analysis then:∗ Neg Cat 2 for £500m t/o VLO – SP = 10 x

£140k = £1.4m∗ Neg Cat 2 for £2bn t/o VLO – SP = 40 x £140k

= £5.6m

Further adjustment Steps 5 to 7

Step 5 - removing the economic benefit∗Has this been addressed by POCA (step 2)∗Advantages in seeking to agree figure to avoid

POCA (GP credit)∗Significant advantages for regulator in using POCA

Step 6 – is fine based on turnover proportionate to means?

∗ Low profit margin – downward variation (converse?)

∗ Detailed financial information – expert evidence?Step 7 – any other reason to vary (generally

downwards)?

Final steps

∗Step 9 – reduce for guilty plea (impact of s85 LASPO – balancing exercise)

∗Step 10 – remediation Reg 44 EPR (cost implications?)

∗Step 11 – totality – multiple offences, is the “total sentence just and proportionate to the offending behaviour”

∗Step 12 – reasons (increasingly important in CofA)

Individuals

∗ Individuals, custody starting point for the following:∗ Cat 1-2 deliberate∗ Cat 1 reckless

∗Less punitive than the draft guideline∗Also “a fine will normally be the most appropriate

disposal”∗Fines set on basis of “relevant weekly income” (see

MCSG – assumed to be £400 in absence of info – but see s162 CJA 2003 – financial circumstances order)

Likely trends

∗Obviously … larger penalties (esp. for large corporates)∗But … increased willingness to contest through to trial

(costs now more proportionate) & threats of wasted costs

∗More Newton hearings (to resolve harm, culpability, means)

∗More Crown Court cases∗Post s85 LASPO – tactical decisions as to whether to

indicate guilty plea in Magistrates’ Court∗More appeals to the Court of Appeal

South West Water (5.6.14 Truro CC)

∗3 offences re failure of STW over 2 weeks leading to discharge of sewage into river - £500m t/o £215m o/p (43% margin)

∗Negligent “cusp of Cat 2/Cat 3”∗SP £100k per offence, reduced to £50k per

offence in light of mitigating factors (pre-cons not significant)

∗Total fine £150,000

Anglian Water (19.6.14 Chelmsford CC)

∗2 offences re isolated failure of pumping station over 1-2 days leading to discharge of sewage into brook - £1.2bn t/o, £349m o/p (29% margin)

∗Low culpability but “top Cat 2/ bottom of Cat 1”

∗SP £38k per offence, reduced to £25k per offence for GP (pre-cons not regarded significant, nor t/o)

∗Total fine £50,000

South West Water (25.7.14 Exeter CC)

∗4 offences re separate failures and discharges at 3 separate sites

∗Negligent Cat 3 for each incident∗Site 1 (2 x £30k), Site 2 (£40k) and Site 3

(25k)∗Total fine £125,000∗But no significant aggravation re previous

convictions; nor any departure from range re large turnover/profit - £500m/£215m (43% margin)

Thames Water (29.8.14 Reading CC)

∗Failure of pumping station; alarms not responded to; 5 days sewage flowing into brook, 600m impact; AONB

∗Serious Cat 3 (but note obs re Cats 1 & 2); negligent

∗£1.9bn t/o, £346m o/p (18% margin)∗SP x 5 (because of increments

micro/small/medium/large) i.e. 5 x £60,000 = £300,000 SP

∗Total fine £250,000 in light of agg/mit factors

Southern Water (12.11.14 Canterbury CC)

∗Same 1st instance CC Judge as 2014 CofA case

∗Now £806m t/o, £170m o/p∗Sewage pump station failure; pollution of

brook & sea; shellfish potentially affected; bathing restricted

∗Negligent (some management failure); Cat 1 CICS, but accepted by EA that overall Cat 2 harm

∗Multiplier of 4 re t/o; SP £750k; total fine £500,000

R (Natural England) v. Philip Edward Day [2014] EWCA 2683

∗ [§1] “appellant …a man of enormous wealth” est. £300m

∗ Fines totaling £450,000 for damage to SSSI (plus costs of £457k) GP at prelim hearing (10% reduction appropriate)

∗ Gross negligence by appellant∗ Use of wealth to intimidate local community –

seriously aggravating∗ NE’s difficulty monitoring SSSIs – deterrence v.

important∗ Fine in seven figures would not have been

inappropriate∗ Note observations re time to pay/payment

pending appeal

Mutch (12.01.15 Aberdeen SC)

∗Gamekeeper convicted of “recklessly[?] killing” goshawk (covert video evidence) – section 1 Wildlife & C Act 1981

∗Sentenced to 4 months imprisonment after trial

∗Accepted in evidence that he had received no training/instruction

∗Query – no prosecution of employer (estate?) under default/due diligence provisions in s18A of 1981 Act

Contact details

Mark Watson6 Pump CourtTempleLondonEC4Y 7AR

Tel: 020 7797 8400

Email: markwatson@6pumpcourt.co.uk