There have been many important developments in regulatory law (particularly health, safety, environmental and corporate crime) in 2018. From legal privilege to the possible introduction of the first independent environmental regulator to ensure the UK’s environmental standards are maintained in a post-Brexit world, a lot has happened in 2018 which will feed into what will happen in 2019.
First we have a look back at the top 5 regulatory cases of 2018 as regulatory issues maintain their prominent position on the agendas of boardrooms of companies all over the country.
We then look forward to what we can expect in 2019 from a regulatory perspective and developments that the Licensing and Regulatory team at Harrison Clark Rickerbys will be watching with interest as the New Year unfolds.
The 5 Top Regulatory Cases of 2018
With financial penalties in both environmental and health and safety cases now directly linked to the risk of harm as a result of failings rather than any actual harm caused (as was previously usually the case), the Definitive Guidelines applicable to environmental offences and health and safety offences (which were first introduced in 2014 and 2016 respectively) continue to mark a distinct shift in focus on sentencing, with hefty fines becoming the norm and immediate custodial sentences for individuals at fault on the rise.
2018 was no exception.
1. Thames Water – £2 million – December 2018 – Environmental water offence
Thames Water was fined £2 million after raw sewage polluted two Oxfordshire streams, killing almost 150 fish. The sewage also flooded a nearby garden. The judge sitting at Oxford Crown Court ruled the incident in 2015 as a high-end, category three harm offence.
Numerous failures in the management of a sewage pumping station operated by the company led to sewage created by two villages emptying into two brooks leading to the River Evenlode, a tributary of the River Thames, for up to 24 hours.
Investigations by the Environment Agency revealed Thames Water was aware the pumping station failed several times in the 12 months up to and including the incident in August 2015.
Thames Water admitted to breaching Regulation 12(1) (b) and 38(1) (a) of the Environmental Permitting (England and Wales) Regulations 2016.
2. Eurasian Natural Resources Company – September 2018 – Corporate Crime
The standout development in corporate crime in 2018 was the Court of Appeal’s decision in Director of the Serious Fraud Office v Eurasian Natural Resources Company.
Here the Court of Appeal provided much needed clarity to the law on legal professional privilege in the context of criminal investigations.
While the decision focuses on the application of litigation privilege in criminal investigations, it is also a significant decision on legal advice privilege and its application in the modern commercial world. The judgment restored the status quo in relation to the application of legal professional privilege to internal investigations.
3. BUPA – £3 million – June 2018 – Health and safety offence
Bupa Care Homes was fined £3 million following the death of a resident from Legionnaire’s disease. The care home provider failed to implement measures to control and monitor the hot and cold water systems at the Hutton Village Nursing Home in Brentwood during refurbishment works. In addition it had failed to properly train staff responsible for overseeing legionella controls and measuring the temperature of water. Kenneth Ibbetson, 86, died 3 months after moving into the nursing home and contracting the disease, which is a waterborne form of pneumonia.
Bupa Care Homes pleaded guilty to breaching s 3(1) of the Health and Safety at Work Act.
The Health and Safety Executive (HSE) was responsible for investigating the incident, which happened before April 2015 when the Care Quality Commission (CQC) took over as the lead enforcement body at CQC-registered sites.
4. Southern Health NHS Foundation – £ 2 million – March 2018 – Health and safety offence
Southern Health NHS Foundation was fined £2 million for failures that resulted in the deaths of two patients.
Connor Sparrowhawk, an epileptic teenager with autism drowned in a bath at an NHS care unit in 2013. Teresa Colvin, 45, died in 2012 after being found unconscious at an acute mental health unit where she had been admitted only 48 hours earlier.
Southern Health admitted to “systemic failures” and acknowledged that both deaths were entirely preventable.
It pleaded guilty to breaching section 3(1) of the Health and Safety at Work Act 1974.
5. Poundstretcher – £200,000 – January 2018 – Fire safety offences
Poundstretcher pleaded guilty to the offences, and appeared at Portsmouth Crown Court for sentencing on 12 December.
This was made up of a £200,000 fine for five offences in Newhaven Sussex, prosecuted by Lewes District Council, and fines of £100,000 and £133,333 relating to two of three breaches at a store in Newbury, Berkshire, prosecuted by West Berkshire Council.
The third case, brought by Swindon Borough Council, resulted in the largest fine: £200,000 for one breach and two fines of £133,333.
The breaches at Swindon were discovered after an unannounced visit to the store in St Margaret’s Park on 17 November 2014, following a complaint made by a member of staff.
The officer found the warehouse at the rear of the store in a “grossly overstocked and chaotic condition”. Improvement notices were served but, soon afterwards, another complaint was received regarding the safety of young seasonal staff working over the Christmas period.
The conditions found were once again considered wholly unacceptable by the council.
The retailer was charged with 16 offences under the Health and Safety at Work Act, including failure to keep aisles and walkways clear of obstruction, blocking fire exits and placing young persons at risk of harm without the necessary training.
What does 2019 have in store?
The regulatory (health, safety and environmental) position in 2018 continued an upward trend as follows:
• There were 144 fatal incidents arising from work during 2017/18 (an increase on the 2016/17 figure of 135)
• The construction, agriculture and waste sectors remain the most hazardous from a health and safety perspective
• The average health and safety fine per conviction is now £147,000 and the average fine for a conviction arising from an environmental offence is £147,575
• Approximately £72 million in fines resulting from prosecution taken by the HSE in 2017/18 and just over £5 million in fines resulting from prosecutions undertaken by the Environment Agency.
Against this backdrop the next 12 months are likely to see a number of changes to the regulatory landscape:
• By March 2019 we expect to see revisions to HSE guidance for employers on the assessment and management of work-related mental ill health and to its stress management standards (it is notable that the education and human health and social work sectors have the highest average rates of stress, depression or anxiety)
• The government will continue to implement aspects of its strategy for improving the work opportunities for persons with disabilities and health conditions in England
• We will see the HSE consult on replacing the statutory Adventure Activities Licensing Authority with a non-statutory industry run scheme
• The government will implement recommendations of the independent review of workplace mental health support (which is currently ongoing)
• 1 April 2019 will see the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2018 come into force. This will amend existing legislation in order to require landlords of certain domestic private rented properties in England and Wales to not only oversee investment in energy efficiency improvements to these properties but, where necessary, to self-fund such improvements subject to an upper spending cap on the overall amount to be spent on the improvements.
Other sector specific regulatory updates during 2019 include:
The Department for Education delayed for a third time its deadline for schools to complete their entry in the asbestos management assurance process (AMAP), which asks schools’ responsible bodies to declare whether they are compliant with their duty to manage asbestos.
Schools have now been given until 15 February 2019 to make the declaration. 68% of the 17,000 schools that have replied to the survey were deemed to be legally compliant. Given that nine in 10 schools contain asbestos and that the condition of asbestos deteriorates over time and 60% of the school estate is at least 40 years old it seems odd that the Department only “expects” responsible bodies to complete the survey and does not require them to do so.
Agriculture and training
The HSE ran Agricultural Compliance Events (ACE) between October and December 2018, delivering targeted training events to groups of farmers in East Anglia, the West Country, Wales and Scotland.
It is understood that the HSE is now analysing feedback from the events and they will next carry out follow up inspections of farms in each region, covering farmers who attended and farmers who were invited but did not attend, in order to assess compliance. Now may be an opportune time to review your policies and procedures if you are in the agricultural sector.
Corporate crime and sanctions
We are keeping a close eye on the development of the financial sanctions and trade sanctions regime in 2019.
2018 saw the passing of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA 2018), which was one of the first Brexit related pieces of legislation. Sanctions law currently comes to the UK in the form of EU law.
Brexit therefore created an urgent need for a new legal basis for the implementation of international sanctions by the UK. SAMLA 2018 provides that legal basis and introduces a new framework for the implementation of sanctions post-Brexit.
It is interesting that these provisions are being brought into force now, and this is perhaps indicative of the importance that the Government places on this area of law.
On 12 October 2018, the Department for Exiting the European Union published a technical notice about the implications of exiting the EU in March 2019 without a deal in place from a sanctions policy perspective. This set out the implications for the implementation and enforcement of international sanctions, including further domestic legislation to be introduced before March 2019 under SAMLA 2018.
The UK intends to implement UN sanctions, and is looking to carry over existing EU sanctions, but it should not be assumed that all aspects of existing EU sanctions will be replicated in either scenario.