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No limit to fines for companies flouting environmental laws

Large companies who break environmental laws can expect to pay substantial fines akin to those paid by the financial sector, following a legal judgment.

It follows a case before the Court of Appeal in which Thames Water was challenging a fine of £250,000 for the discharge of untreated sewage into a nature reserve.

It is understood that this is the first case to employ new sentencing guidelines for environmental offences which were introduced after concern that some operators find it cheaper to break the law than follow industry regulations.

Mr Justice Mitting, who delivered the main judgement, said: “When great [environmental] harm… has been caused by deliberate action or inaction, the need to impose a just and proportionate penalty will necessitate a focus on the whole of the financial circumstances of the company.”

He said this could result in fines “up to 100%” of the company’s pre-tax net profit for the year, even if that was in excess of £100m.

“Fines of such magnitude are imposed in the financial services market for breach of regulations,” he said. “The imposition of such a fine is a necessary and proper consequence of the importance to be attached to environmental protection.”

Mitting warned that repeat offenders of environmental crime would see “substantial increases” in the cost of fines levied.

He said that sentencing “very large” organisations involved complex issues and that was clear from the judgment.

“It is for that reason that special provision is made for such cases [which] must therefore be tried either by a High Court Judge or by another judge only where either the presiding judge has released the case or the resident judge has allocated the case to that judge. It is essential that the terms of this direction are strictly observed”.

It had been suggested in court that an organisation should be treated as being “very large” if its turnover exceeds £150m per year on a three-yearly average.

But the judgment said: “We do not think there is any advantage to be gained by such a definition. In the case of most organisations, it will be obvious that it either is or is not very large. Doubtful cases must be resolved as and when they arise”.

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