Breaches of Environmental and Health and Safety Law: the Fines

The Criminal Court of Appeal has recently indicated that, when a large company is a defendant, it will impose a commensurately large fine for breaches of environmental, and health and safety law.

The trend for large fines has been set following the two recent appeals of R v Sellafield Limited and R v Network Rail Limited. Both companies were appealing against large fines imposed on them for breaches of health and safety, and environmental legislation.

The Courts have taken the view that large companies must expect large fines, and this is the only way to ensure compliance with the legislation. It has been suggested that particular attention will be paid to those companies with a turnover in excess of £1 billion.

The Criminal Justice Act 2003 is the core piece of legislation and requires the courts to consider a number of factors: 

• the seriousness of the offence committed;
• the culpability of the offender; and
• the harm caused or which might foreseeably be caused.

In addition, companies need to be mindful that the considerations for the most suitable sentencing sanctions have been set by Parliament.  These comprise a number of other considerations:

• the punishment of offenders;
• the reduction of crime (including reduction by deterrent);
• the reform and rehabilitation of offenders;
• the protection of the public; and
• the making of reparation by offenders to persons affected by their offences.

And, critically, for large companies, the Court must further consider:

• the financial position of the offender.

It appears from the view taken by the Court of these considerations, in the Sellafield and Network Rail cases, that the Court will carefully consider the characteristics of a company.  This may then be given more weighting than the comparative culpability of the company, and this appears to be the message sent by Parliament.  

In the two recent cases the defendants were appealing against the fines imposed on them:

• In R v Sellafield the company was fined £700,000 for offences which arose out of the disposal of radioactive waste; and
• In R v Network Rail the company was fined £500,000 for offences arising out of injuries to a child at an unmanned level crossing.

In Sellafield it was held that the offence committed resulted in no actual harm and the risk of harm in the future was low. However, the Court found that the company’s internal management and monitoring systems were too lax. In this type of industry the Court highlighted that Parliament had attached particular weight to the need to make safety a priority.

The Court justified its fine on the following basis:

1. the Company turnover and profits of £1.6 billion and £29 million respectively;
2. that the maximum fine considered of £1 million (which would have been imposed had Sellafield not entered a guilty plea) should not only be incurred where major disasters had occurred;
3. the reduced fine (£1 million to £700,000) reflected the Company’s moderate culpability, it took into consideration that no actual harm had occurred and the foreseeable risk of future harm was low;
4. the fine was only 2 per cent of weekly turnover and therefore could not be criticised; and importantly, that
5. the fine needed to be at a level which would impact on the directors and shareholders to act as a deterrent not to commit breaches in the future.

In relation to R v Network Rail, the decision was impacted by the “public” aspect of the role of Network Rail.  The Court held that the risk of harm was serious and the foreseeable risk was even greater. However, no evidence of management failure existed. The failures were at an operational level.

1. the maximum fine considered was £750,000, and was considered appropriate in cases where a fatality occurred. The Court found that this could be appropriate in cases where a fatality had not occurred- it was the financial position of the offender which needed to be considered;
2. the reduction in the fine from £750,000 to £500,000 represented a discount;
3. any fine imposed would inflict on the public- as network rail does not have shareholders, and profits are reinvested back into rail infrastructure; and
4. the Court however found that it would act as a deterrent to such offending.

In both instances the Court was clearly considering not only the company’s ability to pay, but also what level of fine would cause sufficient pain to the company in order to encourage it not to offend again.

It remains to be seen whether further appeals will be made, but it is clear from these decisions that the Courts are drawing a hard line in respect of large companies that are able to pay large fines.  The Court is viewing the use of large financial sanctions as a measure which will act as a suitable deterrent to companies.  If this deterrent proves to be ineffective, then we may see the levels of fines rise further still.

If you would like more information in relation to any of the issues discussed in this article, please contact mark Howard, a Partner in the Environmental Team, at mark.howard@michelmores.com.