Environmental Law News Update

This week we cover:

• Thames Water – OfWat imposes its largest ever penalty;
• OfWat’s attack on Thames Water’s dividends.
• Climate protest – the 4 appeal cases about sentencing.
• Get ready for the Infrastructure Strategy: “NISTA” and Beyond.

Thames Water – OfWat imposes its largest ever penalty.
There is a growing head of steam in the news about the water and sewage industry. Indeed, the Government is itself actively promoting the enforcement actions. The OfWat press release on 28 May 2025 (which can be found here) credits the Environment Secretary, Steve Reed, as well as their own CEO. Mr Reed MP said:

“The Government has launched the toughest crackdown on water companies in history. Last week we announced a record 81 criminal investigations have been launched into water companies. Today Ofwat announce the largest fine ever handed to a water company in history. The era of profiting from failure is over. The Government is cleaning up our rivers, lakes and seas for good.”

It is notable that this issue remains a high political priority, even if it is unusual for a Minister to claim the credit for the actions of stand-alone statutory bodies.  But then again, this might  be seen as a positive reaction to the investigation by the OEP into this area which did look at the past inactions of Defra as well as the EA and OfWat.

The other matter to note is just how long these enforcement actions have taken to get even here.  The EA set up its own website page about the criminal investigations into potential widespread non-compliance by water and sewerage companies at wastewater treatment works 4 years ago.  The recent OfWat decisions were announced in draft last year, and are partly based on events and decisions that happened in 2022 and beyond.

But this is still a very significant event. The record £104.5m penalty applied by OfWat equates to 9% of Thames Water’s relevant turnover (out of a maximum possible penalty of 10%).  This is for breaches that OfWat have identified of the rules relating to its wastewater operations, for contraventions of the Urban Waste Water Treatment (England and Wales) Regulations 1994, section 94 of the Water Industry Act 1991 and Condition P of its Licence.  They have also issued an enforcement order under section 18 WIA 1991 requiring Thames Water to rectify breaches relating to its wastewater operations. This is all before the EA may or may not decide to prosecute Thames Water as well for some or all of these incidents.

The OfWat Chief Executive hopes that it provides a “clear opportunity for a break from the past”.  Certainly, the new management and set of investors in TWUL have their work cut out.

 

Thames Water and OfWat’s attack on dividends.

The more unusual aspect of the 28 May press release is the second decision by OfWat, about the company dividends.  They have imposed an additional penalty on Thames Water of £18.2m under section 22A WIA 1991, for breaches of rules relating to dividend payments paid in 2023 and 2024.  Their licence conditions require them to only declare or pay a dividend in accordance with a policy that has been approved by its board and which complies with a number of key principles. These include taking into account service delivery for customers and the environment, and the investment needs and financial resilience of the appointee over the longer term. OfWat considered that, in a scenario where a regulated business has serious performance issues, or is encountering issues with financial resilience, it seems reasonable to expect that company to consider whether the funds used to pay dividends would be better directed elsewhere.

As this the first time that OfWat has ever used these powers it reduced the final penalty to 0.75% of the company’s relevant turnover (rather than 1%). It has also deducted the full value of the tax losses surrendered by TWUL in 2020-2025 to its group companies from current and future tax allowances (which are otherwise paid for by customers).

The company’s very poor credit rating has also led to a severe restriction. Thames Water’s credit rating is currently below investment grade.  The company is therefore now in cash lock up and no further dividend payments can be paid by the company without first obtaining approval from Ofwat.  This arrangement will continue until Thames Water’s credit ratings improve and meet the requirements in their licence conditions. As OfWat noted in their decision, the purpose of this ring-fencing is to ensure that the regulated company maintains sufficient financial and management resources which enable it to carry out its functions in a sustainable manner. It protects the regulated company from the activities of other entities such as other group companies.

This does beg the question why OfWat and its political masters did not do this before now.  However, this power to limit the ability of a company to make decisions was only introduced into the water industry licences in May 2023 (after consultation in 2022).  There was also a grace period, so that the cash lock up condition only came into effect this year, on 1 April 2025.  We should perhaps have seen this May 2025 decision coming.

 

Climate protest – the 4 appeal cases about sentencing.

It is worth reflecting on where matters now stand on environmental protest, following the Court of Appeal’s judgment in Roger Hallam and others  v  Rex [2025] EWCA Crim 199 which can be found here.

Just Stop Oil may have announced an end to its protests, but it remains a headline issue.  Róisín Finnegan looked at the issue last August, in her previous blog,  when Crown Court gave Mr Hallam and his co-conspirators markedly greater sentences and the Police, Crime, Sentencing and Courts Act 2022 had introduced numerous provisions placing greater limitations on protests.

The Court of Appeal has looked again at those sentences, as well as the sentences of 11 other appellants in three other cases.  All arose from protests in the name of Just Stop Oil and sought to raise awareness about climate change issues.  The four cases and sentences in issue were:

• The Thurrock Tunnels Case: Protesters occupied tunnels near the Navigator oil terminal. Four were convicted of conspiracy to cause a public nuisance and were sentenced to immediate custody, with terms ranging from 15 to 36 months.
• The Sunflowers Case: Two individuals threw soup over the glass covering of Vincent Van Gogh’s “Sunflowers” in the National Gallery. They were convicted of criminal damage and received immediate custodial sentences of 20 and 24 months respectively.
• The M25 Conspiracy Case: Protesters climbed and attempted to climb various gantries along the M25. Five were convicted of conspiracy to cause a public nuisance, with four receiving an immediate custodial sentences of 4 years, and Mr Roger Hallam receiving a sentence of five years imprisonment.
• The M25 Gantry Climbers Case: Five of the appellants climbed gantries over the M25 and were convicted of causing public nuisance. They received immediate custodial sentences ranging from 20 to 24 months.

The Court reduced the sentences of the Appellants in the M25 Conspiracy case significantly, reducing Mr Hallam’s sentence to 4 years, two others to 3 years, and the remaining two to 30 months. In the M25 Gantry Climbers Case, the sentence imposed on Gaie Delap was quashed and a sentence of 18 months’ substituted. All other appeals were dismissed.

In doing so, the Court of Appeal identified some key principles:

• Sentencing in cases of non-violent protests is to be carried out in accordance with normal sentencing principles.
• Conscientious motivation will be a relevant factor to sentencing in each case, and as considered in R v Trowland [2023] EWCA Crim 919, it falls most logically to be considered when assessing culpability. However, even a well-intentioned protest will not preclude a finding that any appellant’s culpability is still high. There is also no obligation on a sentencing judge to specify an amount by which they have reduced a defendant’s custodial term to reflect their conscientious motivation.
• Articles 10 and 11 were engaged in each of the Appellants’ cases, despite not offering them a defence. It was therefore erroneous to conclude in Trowland that their “their acts of trespass removed them completely from the scope of Articles 10 and 11”. Instead, their actions weakened the protections afforded by these rights. However, Articles 10 and 11 will still be relevant at sentence, and sentences imposed must not disproportionately interfere with these rights.
• Each case will be inherently fact-specific, and the sentence of three years imprisonment imposed in Trowland should not be treated as a benchmark.

The judgment offers some welcomed clarity regarding the sentencing of climate protestors. However, it is unlikely to be the final word on the matter.  As sentencing in each case is to turn on its own facts, in the absence of Sentencing Council Guidelines, it is inevitable that certain sentences will be seen as controversial by segments of society. Sentencing judges will continue to grapple with the balance to be struck between one’s conscientious motives and their rights under Articles 10 and 11, and the need for punishment and deterrence where public nuisance and criminal damage is in issue.  Meanwhile, the new provisions of the Police, Crime, Sentencing and Courts Act remain in place.

 

Get ready for the Infrastructure Strategy: “NISTA” and Beyond

Whilst we are waiting for the Planning and Infrastructure Bill to work its way through Parliament, we can look forward to more immediate changes on the policy front.  A new Infrastructure Strategy is being developed in parallel to the government’s Spending Review, and these documents are due to be published together in June. The ambitions for what a 10-Year Infrastructure Strategy might be were unveiled as a Working Paper, accessible here, earlier this year, and stakeholders were asked for their views by way of an informal consultation process.  In April, also we saw the launch of the National Infrastructure and Service Transformation Authority (“NISTA”) to oversee the implementation of this Strategy.

This Strategy could clear a path for considerable infrastructural growth, in conjunction with Lord Banner’s comprehensive review (into legal challenges against NSIPs), and subsequent Governmental backing.

We have yet to see the detail, but the Working Paper promises much – and gives some useful examples about the likely contents. It is certainly ambitious, as it seeks to align infrastructure development with key government missions, economic growth, housing, clean energy, net zero, and improved public services.  The talk is of tackling long-standing challenges in infrastructure delivery, reduce uncertainty, and establish a stable framework for investment.

Key Objectives of the 10-Year Infrastructure Strategy

The Strategy is to be built around three core objectives:

1. Enabling Resilient Growth: Infrastructure improvements will boost productivity, remove barriers to expansion, and ensure resilience to future threats such as climate change and natural resource depletion. For example, transport upgrades will improve access to city centres, while investments in water, energy, and waste infrastructure will underpin housing delivery and economic expansion.
2. Delivering Clean Energy: A central priority is achieving clean power by 2030 and accelerating progress towards net zero by 2050. This will involve targeted investment in renewable energy infrastructure, upgrades to the national grid, and the deployment of enabling technologies such as EV charging infrastructure and energy-efficient buildings.
3. Supporting Social Infrastructure: Focused investment in hospitals, schools, colleges, and prisons will ensure that public services are equipped to meet the needs of a growing and ageing population. Notably, the Government aims to deliver 14,000 new prison places by 2031 and to refurbish schools and healthcare facilities in line with modern operational models.

Principles Guiding the Strategy

The Strategy is underpinned by four governing principles:

Mission-Oriented Prioritisation: Investment decisions will be guided by the delivery of the Government’s central missions, including net zero and economic growth, while ensuring non-viable options are ruled out at an early stage.

Providing Long-Term Confidence: A stable institutional framework anchored by five-year capital budgets and the creation of NISTA will provide much-needed certainty to both industry and investors.

Addressing Cross-Cutting Challenges: The Strategy will integrate initiatives across sectors to advance regional growth, deliver housing targets, and strengthen climate resilience.

Ensuring Deliverability and Affordability: Projects will be designed to be fiscally sustainable for taxpayers and billpayers alike, while remaining feasible within financial and delivery constraints.

The Role of NISTA

At the heart of the Strategy is the newly created National Infrastructure and Service Transformation Authority (NISTA). Embedded within HM Treasury and led by the Chief Secretary to the Treasury, NISTA is pivotal to delivering the Strategy’s long-term objectives. Its functions include:

Overseeing Implementation: NISTA will coordinate cross-governmental efforts, working with regulators and the private sector to ensure the successful delivery of strategic objectives.

Improving Delivery: By addressing delivery bottlenecks, sequencing investments effectively, and introducing planning reforms, NISTA will help accelerate infrastructure development and build public sector capacity.

Supporting Skills Development: In partnership with Skills England, NISTA will identify and respond to the workforce and skills gaps critical to the successful execution of major infrastructure projects.

Addressing Past Challenges

The Strategy is a direct response to long-standing structural weaknesses in the UK’s infrastructure regime, including policy instability, investment volatility, and spiralling costs. High-profile project cancellations, such as the termination of HS2 Phase 2 have undermined market confidence, delayed investment, and driven up delivery costs. NISTA seeks to reverse this trend by providing a coherent, enduring institutional structure that restores industry confidence and enables long-term planning.

A Comprehensive Approach

For the first time, the Strategy integrates economic and social infrastructure into a unified national framework. This holistic approach ensures that all sectors, whether transport, housing, energy, or healthcare are aligned and mutually reinforcing. The Strategy will also work in concert with broader government policies, including the industrial strategy, regional development frameworks, and the Carbon Budget Delivery Plan, fostering a joined-up approach to infrastructure planning.

Looking Ahead

The 10-Year Infrastructure Strategy should mark an evolution in the United Kingdom’s approach to infrastructure planning and delivery. With NISTA at the helm, the Strategy promises to deliver not only transformative infrastructure outcomes, but also the structural confidence and capacity needed to meet the demands of the future.  Many would say that this commitment to setting out long-term objectives is a long overdue step.  How bold the government will be remains to be seen.

 

 

 

 

Share this