1 UKELA May 22 nd 2013 ENVIRONMENTAL DAMAGE COMPENSATION INSURER’S PERSPECTIVE.
UKELA Environmental Sentencing Update 14 January 2015 Mark Watson 6 Pump Court Temple London EC4Y...
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Transcript of UKELA Environmental Sentencing Update 14 January 2015 Mark Watson 6 Pump Court Temple London EC4Y...
UKELAEnvironmental Sentencing
Update14 January 2015
Mark Watson 6 Pump CourtTemple LondonEC4Y [email protected]
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: [email protected]