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Sector must face up to six-figure fines

The widely reported fine imposed on Powerday by a judge at Harrow Crown Court last month will have come as a shock to many in the waste management industry.

The company was fined a total of £1m for six offences involving the deposit and storage of waste, and was ordered to pay more than £240,000 towards the Environment Agency’s (EA) investigation and prosecution costs.

The £1m figure comprised two fines of £350,000, another of £200,000 and the last of £100,000, which are all significant amounts in their own right. More surprisingly, however, the fines were imposed following guilty pleas by the company, which also apologised to the court for the historic failures which had given rise to the offences.

The fines imposed on Powerday are the highest to date for waste offences. But sentences for environmental offences in other sectors have provided an indication of the courts’ new approach to sentencing following the coming into force of the Sentencing Council’s Definitive Guideline for environmental offences in July 2014.

In January this year, Thames Water was fined £1m at St Albans Crown Court for two water pollution offences involving the discharge of sewage into the Grand Union canal. But in that case, Thames Water was ordered to pay only £18,000 towards the EA’s investigation and prosecution costs.

More recently, in March, the same company was fined £380,000 for allowing untreated sewage to enter a protected watercourse in the Chilterns, while in June 2015 it unsuccessfully appealed against a £250,000 fine imposed for discharging sewage into a brook running through National Trust land in the North Wessex Downs Area of Outstanding Natural Beauty.

Although the fines imposed on Powerday and Thames Water for their individual offences are comparable, the big difference is the companies’ sizes. Thames Water is a ‘very large organisation’ for the purposes of the sentencing guidelines, with a turnover and profit in 2014 of £1.9bn and £346m, respectively.

In contrast, Powerday’s financial statements filed at Companies House for the year ended 31 July 2015 reveal that turnover from its core waste recycling activities amounted to around £39.6m and its profit was just over £6m, which makes it a ‘medium-sized organisation’. The fines imposed on Powerday will therefore have a disproportionate financial effect compared with those imposed on Thames Water.

Given the relative sizes of the two businesses, the sentence imposed on Powerday does seem unduly harsh, particularly because it pleaded guilty. This begs the question why a waste management company should be given fines amounting to more than 15% of its annual profit, whereas a water company should be given fines amounting to less than 1% of its annual profit.

Are waste management businesses being treated differently by the courts compared with defendants in other sectors? If so, why is that the case?

The Sentencing Council has recently consulted on new guidelines for a reduction in sentence for a guilty plea. If introduced, this would apply to all criminal offences, including environmental ones. The consultation proposed a reduction of a third for a guilty plea at the first stage of proceedings, reducing to a maximum of a fifth for a guilty plea at a later stage in the proceedings and a maximum of a tenth for a guilty plea on the first day of trial.

If adopted, these guidelines would give those facing prosecution a reasonable indication of the likely outcome based on a guilty plea or a not guilty plea. With the sentences imposed even for guilty pleas being potentially so high, those facing prosecution may in future choose to contest more cases, or at least to fight harder at the sentencing stage if they plead guilty.

Another option for those facing prosecution for environmental permitting offences is to try to negotiate an enforcement undertaking with the EA. But such undertakings are not currently available for offences under Section 33 of the Environmental Protection Act 1990, which is how many waste management offences are prosecuted.

Sentencing for waste management offences can still be something of a lottery but, with the passage of time, it should be possible to forecast with greater accuracy how a court is likely to respond in any given situation. However, it seems likely that six-figure fines for waste offences will become a more regular occurrence.

Angus Evers is Environmental law specialist and a convenor of the UK Environmental Law Association’s waste working party

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