The Guideline applies to Magistrates’ Courts and Crown Courts throughout England and Wales, and a court must follow it from 1st July 2014 (no matter when the offence was committed) unless it is satisfied that it would be contrary to the interests of justice to do so.

The Guideline applies specifically to only a small number of offences:

• Section 33 Environmental Protection Act 1990

• Regulations 12 and 38(1), (2) and (3) Environmental Permitting (England and Wales) Regulations 2010

These are certain waste offences (including fly-tipping) and the offences committed when an activity is carried out without the requisite Environmental Permit being held, or in breach of the permit’s conditions. They are all triable either way (i.e. in the Magistrates’ Court or in the Crown Court), depending on the seriousness of the offence. Fewer than 40 organisations (but several hundred individuals) were sentenced for such offences in 2012.

The maximum sentence for each offence is an unlimited fine and/or five years in prison, although Magistrates’ sentencing powers are limited to a £50,000 fine and/or 12 months’ custody. The Guideline is divided into separate sections depending on whether the offender is an individual or an organisation. In each case there is a twelve step process that the court must follow when deciding on a sentence.

For organisations the steps are as follows:

1. Consider whether the offender should be made to pay compensation for any personal injury, loss or damage resulting from the offence, e.g. by carrying out remedial work.
2. In the Crown Court, consider whether a confiscation order should be made under the Proceeds of Crime Act 2002.
3. Categorise the degree of harm caused and the offender’s level of culpability. Harm is classified from 1 (the most serious harm) down to 4 (a risk of minor harm) and culpability is categorised as deliberate, reckless, negligent or low/no culpability.
4. Determine the starting point from which to begin calculating the provisional fine, by reference to a prescriptive matrix, and then apply adjustments for any aggravating or mitigating factors to move the provisional fine within the range specified in the matrix. In some circumstances there will be an adjustment outside of the range at this stage.
5. Consider whether the proposed fine together with any compensation and confiscation order is sufficient to remove any economic benefit derived from the offending.
6. As the matrix of starting points and ranges is based on financial turnover, the level of fine may need to be adjusted where the offending organisation’s profit margin is unusually high or low.
7. Consider whether there are any further factors that warrant adjustment of the proposed fine.
8. Consider any factors which indicate a reduction, such as assistance to the prosecution.
9. Consider a reduction for a guilty plea.
10. Consider whether to make any ancillary orders (e.g. an order to forfeit a vehicle that has been used for fly-tipping).
11. In cases where the offender has been convicted of multiple offences or is already serving a sentence, consider whether the total sentence is just and proportionate to the offending behaviour.
12. Give reasons for, and explain the effect of, the sentence.

In Step 4, the guidance document provides matrices of starting points and ranges of fines, depending on the offender’s annual turnover (or equivalent, in the case of public sector bodies). The starting point and range are based on culpability and the degree of harm caused to the environment, human health or quality of life, as determined in Step 3. The Guideline states that the approach to sentencing set out in Steps 1 to 3 and 5 to 7 should also apply to other relevant and analogous environmental offences, and an indicative, non-exclusive list of these is provided.

Where the statutory maximum penalties for such offences differ from those mentioned above, the court will need to adjust the starting points and ranges provided in the matrices when carrying out Step 4.

Applying the sentencing matrix to a ‘large’ corporate offender (turnover above £50 million p.a.) that has intentionally breached the law (or flagrantly disregarded it, or deliberately failed to put in place and enforce appropriate systems to avoid the offence), resulting in substantial harm, gives a starting point fine of £1 million with a sentence range of £450,000 – £3 million.

However, courts are advised to move outside this range to achieve a proportionate sentence when dealing with companies with turnovers well above the ‘large’ threshold. The Sentencing Council expects the new guidance to increase the current levels of fines received for some offences by some offenders. It seems clear that this will be the case for larger companies, even where their degree of culpability is low.

Prosecutors may be more likely to seek to have such cases heard in the Crown Court, since the starting points can be above the Magistrates’ sentencing powers. There is therefore the possibility of some erosion of local justice. Many environmental offences are “strict liability”, meaning that no blameworthy behaviour is needed, all the prosecution has to prove is that a particular incident occurred.

Even well-managed organisations can find themselves in the dock on occasion. With the introduction of this sentencing guidance and the high starting points for fines imposed on large organisations, we can expect a step change in sentencing outcomes. The potential consequences of systems failures, inadvertent breaches and genuine accidents are about to rise.

Sellafield Limited (“SL”) pleaded guilty in 2013 to seven offences committed on or before April 2010 which concerned the management, transport and disposal of certain radioactive and exempt waste arisings from its site in West Cumbria.

Approximately 5,000 waste bags were sent to a conventional landfill following incorrect readings from instruments intended to ensure that only waste classified as “exempt” (non-radioactive) left the site for that disposal route.

Whilst there was no evidence of harm to persons or the environment, there were failings that gravely concerned the court, not least with the management system and operating culture under which the mistakes were made.

Workington Magistrates’ Court considered that it had inadequate sentencing powers and passed the case to Carlisle Crown Court, where the judge imposed a fine of £700,000. That sentence was appealed by SL on grounds that it was manifestly excessive, but the appeal was dismissed and the sentence reaffirmed by the Court of Appeal which confirmed that when sentencing a large company which had a record of non-compliance and previous convictions it was appropriate to send a message to the directors and shareholders to give effect to the statutory purposes of sentencing.

Such purposes included protecting the public and preventing re-offending by providing a real incentive to remedy the failures.

Summary of facts

SL sought to identify and segregate “exempt” waste fractions from “non-exempt” Low Level Waste (LLW) to allow exempt waste to be correctly disposed of in a conventional landfill in accordance with waste hierarchy principles. A number of steps were involved. Likely waste categories were identified and waste items were measured with handheld radiation detectors.

The waste which was indicated to be exempt was then bagged and passed through two further monitoring devices intended to measure any radiation dose. Waste with a measured dose at the first monitor was to be set aside for radioactive categorisation. Waste measured as exempt was passed through the second monitor for a final check.

A report was produced for each bag. However, the monitors had not been correctly calibrated and thus returned misleading readings. The error was discovered by chance during a training exercise, prior to which approximately 5,000 bags of waste had already been sent to landfill. The court heard that of these, only 5 bags had exceeded the exempt threshold. Four such bags had gone to landfill. One bag was of a higher (Intermediate Level) waste category.

Expert evidence was that there would be a small but perceptible increase in the risk of death from cancer to those handling the waste.

The court found that the errors were avoidable and that numerous simple opportunities to detect the problem had been missed.

In Carlisle Crown Court His Honour Judge Peter Hughes QC said:

“that such a basic mistake could possibly occur in what needs to be an industry managed and operated with scrupulous care for public safety and the environment is bound to be a matter of grave concern…. what adds significantly to the concern and seriousness of the mistake is that it had been in existence and allowed to go undetected for the period of 4 months or so that the system had been in use”.

The Judge found that these failings “indicate basic management failures and a deeply concerning lack of procedures” and he concluded that the failures:

“demonstrate … a custom within the company which was too lax and … to a degree complacent and senior management must bear its share of the responsibility”.

Aggravating features

The Judge identified three aggravating features, namely that:

i) The failure was systemic.
ii) The failure involved potential exposure to persons.
iii) These were not first offences. SL had an unhappy record of offending and had previously been fined £500k and £75k for emitting radioactive materials.

Mitigating features In mitigation, the breaches were not deliberate or reckless, the actual risk of harm was relatively low and SL had readily co-operated and pleaded guilty at the first opportunity.UK Environmental sentencing: A large fine can be appropriate for a medium culpability, low harm offence committed by a large entity.

R v Sellafield Limited (January 2014) Sellafield Limited (“SL”) pleaded guilty in 2013 to seven offences committed on or before April 2010 which concerned the management, transport and disposal of certain radioactive and exempt waste arisings from its site in West Cumbria. SL’s grounds of appeal The main appeal ground was that the fine was manifestly excessive, given the findings on actual harm and risk of harm. SL argued that the level of fine equated with a major public disaster or loss of life, a significant nuclear event or an unmitigated pollution incident – which was not the case here.

The Court of Appeal verdict

The court reviewed the issues of principle concerning the level of fines to be imposed on large companies. SL had a turnover of over £1.6 billion, a profit of £29 million (or £560k per week). The Court of Appeal noted that Parliament places a duty on courts when sentencing to have regard to:

(i) Punishing offenders.
(ii) Reducing crime (including by deterrence).
(iii) The reform and rehabilitation of offenders.
(iv) Protecting the public.

The Court is to have regard to culpability (or blameworthiness) and harm caused, or harm which may foreseeably be caused. It should inquire into the offender’s financial circumstances and take into account the circumstances of the case.

The words of Scott Baker J in R v F Howe & Sons [1999] were influential: The objective of prosecutions…for offences in the work place is to achieve a safe environment for those who work there and for 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 to its shareholders.

Where companies turnover more than £1bn the court is to examine the structure, turnover, profitability and remuneration of directors to assess the financial circumstances of the defendant so as to assess the most efficacious way of giving effect to the purposes of sentencing. SL profits were paid to shareholders by way of dividend. A financial penalty would therefore directly affect the shareholders. The narrow shareholding of SL should enable the 3 shareholders to hold the directors of SL to account and require them to remedy the failures which resulted in the criminal convictions.

It was not appropriate to consider a fine of £1million as apposite to a major disaster. Viewed in the financial context of this company, £700k reflects moderate culpability, where actual harm was in effect nil and the risk of harm very low. A little more than a week’s profit and 2% of weekly income would achieve the statutory purpose by bringing home to the directors and the company’s professional shareholders the seriousness of the offences and provide a real incentive to remedy the failures … particularly the custom which was too lax and to a degree complacent. The Court of Appeal therefore had no grounds for criticising the level of fine.

COMMENT

Sellafield Limited carries out a large and technically complex operation of national importance and manages a range of waste arisings. The corporate structure is not divided into a number of operating subsidiaries and the turnover of the SL entity was substantial.

Where earlier offences have been committed the SL corporate entity has been convicted. The court was mindful that SL was thus a serial offender and imposed a level of fine intended to make the shareholders take notice and bring pressure to bear in order to rectify the identified failings which appeared to stem from a complacent approach to core functions such as radioactivity measurement and waste segregation.

The court set out the statutory intent of criminal sentencing to explain why such a relatively high fine had been imposed with regard to medium culpability offences with low levels of harm. The level of fine was seen as commensurate to the annual and weekly turnover and profitability of the company. Presumably a company with a smaller financial footprint and with a lower consequence operation would face a proportionately smaller penalty.