Environmental and Health and Safety fines for large companies – the sky’s the limitPrint publication
On 17 January 2014 the Court of Appeal considered the levels of fines imposed for radioactive waste and health and safety offences committed by large companies and introduced requirements on those offenders regarding the provision of financial and corporate information prior to sentencing.
Sellafield and Network Rail
The Court of Appeal heard two appeals jointly, due to the shared issues they raised – issues of principle on the levels of fines to be imposed for offences by large companies.
The first appeal R v Sellafield Ltd, involved a number of offences committed by Sellafield in failing to separate radioactive waste from non-radioactive waste and dispose of the radioactive waste appropriately. Sellafield pleaded guilty and the Crown Court imposed a fine of £700,000. In its appeal, Sellafield argued that the fine was manifestly excessive because it had pleaded guilty and co-operated fully in the prosecution of offences where there had been no actual harm suffered and the risk of harm was low.
In the second appeal, R v Network Rail Infrastructure Ltd, Network Rail pleaded guilty to a breach of section 3 of the Health and Safety at Work etc Act 1974 for failing to conduct an appropriate risk assessment of a level crossing on which a child was very seriously injured. The Crown Court fined Network Rail £500,000 which it appealed for being manifestly excessive. It argued that its guilty plea had not been taken into consideration, nor its record or commitment to safety and its recent safety improvements.
Court of Appeal
The Court of Appeal dismissed both appeals.
In making its decision, the Court of Appeal referred to the landmark case on sentencing for these offences, R v F Howe  which confirmed that the object of health and safety prosecutions is:
“…to achieve a safe environment for those who work there and for other members of the public who may be affected. A fine needs to be large enough to bring the message home where the defendant is a company not only to those who manage it but also to its shareholders.”
With that in mind, a court should then look to the Criminal Justice Act 2003 which sets out the court’s duty and the applicable principles:
- The purposes of sentencing include :
- the punishment of offenders
- the reduction of crime by deterrence
- the reform and rehabilitation of offenders
- the protection of the public
- the making of reparation by offenders
- In considering the seriousness of the offence, the court must regard the seriousness of the harm caused or foreseeable harm
- When considering fines :
- the court must inquire into the offender’s financial circumstances
- the amount of the fine should reflect the seriousness of the offence
- regard for the circumstances of the case including any financial circumstances, which could increase or reduce the amount of the fine.
In short, the basic approach for deciding a fine is to consider (a) the seriousness of the offence and then (b) the financial circumstances of the offender. This approach is the same regardless of the size of the offending company’s turnover.
What is different for companies with a turnover of more than £1 billion, the Court of Appeal observed, is that the court must examine in detail the corporate structure, its turnover, its profitability and the remuneration of its directors.
In terms of seriousness of the offence in the Sellafield appeal, the Court of Appeal noted that while there was no actual harm and a small risk of harm, the failure was easily avoidable and should have been detected easily. Sellafield’s custom had been too lax and complacent for which management should bear responsibility.
In the Network Rail appeal, the actual harm was very serious and the foreseeable harm even greater, but the failures were at an operational not at senior management level.
(b) Financial circumstances
Sellafield and Network Rail each have a turnover of more than £1 billion and discharge important services of a public nature. However, Sellafield makes profits for its shareholders (which are large multinational companies), while the parent company of Network Rail has no shareholders receiving profit and invests its profit in the rail infrastructure.
The Court of Appeal dismissed Sellafield’s appeal because the fine was sufficiently large to make the seriousness of the offence clear to management and shareholders alike and incentivise them to remedy the failures.
It also dismissed Network Rail’s appeal, but for different reasons. A fine did not serve to affect the shareholders, but would in fact affect the public as resources used to improve the network would be redirected to pay the fine. Nevertheless, the fine should be at a high level to satisfy other requirements of sentencing, such as to deter Network Rail from further offences and to protect the public.
These recent appeals make it clear that a large corporate offender will need to make available to the court detailed company accounts and company structure information, well in advance of the sentencing hearing.
There appears to be no ceiling to a fine that can be imposed for health and safety or environmental offences, if the company is a large one and the court feels it is necessary in order to satisfy the sentencing principles of the 2003 Act.
For more information, contact Walker Morris Regulatory Group partner, Andrew Northage.
 R v F Howe and Son (Engineers) Ltd 2 All ER 249
 Section 142 of the Criminal Justice Act 2003
 Section 164 of the Criminal Justice Act 2003