1. UKELA Environmental Sentencing Update 14 January 2015 Mark Watson 6 Pump Court Temple London EC4Y 7AR markwatson@6pumpcourt.co.uk

2. 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

3. Background: Organisations Mean & Median fines 2011 Source: Sentencing Council Analysis and Research Bulletin 2013

4. Background: Organisations Fine amounts 2011 Source: Sentencing Council Analysis and Research Bulletin 2013

5. 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

6. 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 …”

7. 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

8. 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”

9. 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”???

10. 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

11. 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?

12. 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.

13. Large orgs >£50m turnover – starting points

14. 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”)

15. Large organisations sentencing ranges

16. 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

17. 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)?

18. 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 )

19. 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)

20. 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

21. 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

22. 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

23. 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)

24. 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

25. Southern Water (12.11.14 Canterbury CC) ∗ Same 1 st 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

26. 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

27. 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

28. Contact details Mark Watson 6 Pump Court Temple London EC4Y 7AR Tel: 020 7797 8400 Email: markwatson@6pumpcourt.co.ukmarkwatson@6pumpcourt.co.uk