Water company faces first CAT environmental collective action

Roberts: Representative claimant

Leigh Day has launched the first environmental collective action at the Competition Appeal Tribunal (CAT) against Severn Trent Water – one of six it is planning against water companies.

The well-known law firm said the opt-out class action, backed by global litigation funder Bench Walk, would be followed by five others against UK water companies on behalf of a total of 20m customers.

It said the case was the first collective action where the competition abuse centred on compliance with environmental laws and reporting responsibilities to regulators.

Further claims would be issued “in the coming months” against Thames Water, United Utilities, Anglian Water, Yorkshire Water and Northumbrian Water.

All six are accused of underreporting the number of times they cause pollution incidents by spilling or discharging sewage into waterways in breach of environmental laws and as a result avoiding penalties from the regulator Ofwat, which would have reduced customers’ bills.

The claim against Severn Trent is brought on behalf of eight million customers and has an estimated value of over £330m. The total value of claims against all six companies is estimated at £800m.

Professor Carolyn Roberts, an environmental and water consultant, is the representative claimant said she was bringing the claims on behalf of customers “overcharged because of the companies allegedly abusing their monopoly position”.

They are accused of breaking competition law by misleading the Environment Agency and Ofwat as to the number of pollution incidents – discharges of untreated sewage into rivers, lakes and coastal areas causing damage to the environment.

A Leigh Day statement said: “Water companies are required to report such incidents as part of their legal duties and responsibilities, but it appears many pollution incidents have gone, and continue to go, unreported.

“The number of pollution incidents a company reports to their regulators is an important factor in determining the price water companies can ultimately charge for their services.”

Professor Roberts argues in the claim that, if the water companies had correctly reported the number of pollution incidents, performance penalties would have been applied and paid back to consumers through lower water bills over a period of time and/or through rebates.

She says the six water companies’ conduct amounts to an abuse of a dominant position for the purposes of competition law.

Leigh Day said anyone who paid a water bill from any of the six water companies from April 2020 might be entitled to compensation. In the case of Severn Trent Water, consumers could be entitled to compensation if they paid a water bill from April 2017.

It predicted that, if the case succeeded, compensation would be paid by the relevant water company and its shareholders, not by increasing customers’ bills. This is because of the way that Ofwat’s price control regime operates, which determines the amount water companies can charge.

Zoë Mernick-Levene, partner at Leigh Day, commented: “These claims are hugely significant. Not only is compensation being sought for millions of customers who have, and continue to, pay higher water bills, but we hope that it will also send a message to water companies that they cannot unlawfully pollute waterways and mislead their regulators without consequence.

“As well as providing individual compensation and justice, opt-out proceedings such as these claims act as a deterrent to future misconduct.”

Professor Roberts added: “It appears that, because of the serial and serious underreporting at the heart of these claims, water companies have been avoiding being penalised by Ofwat. I believe this has resulted in consumers being unfairly overcharged for sewage services.

“Millions of consumers have been paying their water bills on the basis that water companies are meeting their targets, but instead every year water companies let raw or only partially treated sewage into the environment in breach of the rules.”

Factor Risk Management acted as broker for both the litigation funding and after-the-event insurance.

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