The recent decision in South East Water Ltd v The Environment Agency [2026] UKFTT 293 (GRC) raises an interesting question about how environmental “harm” is categorised under the Sentencing Council’s Environmental Offences Guideline (“Guideline”) and, specifically, how a Category 4 harm can ever apply to an offence where no risk of actual harm has occurred.
Facts
South East Water (“SEW”) had abstracted groundwater for 47 days after the expiry of its abstraction licence between 4 May 2021 and 19 June 2021. The reasons given by SEW for this oversight was human error; a change in personnel meant that, although SEW had acknowledged in a meeting with the EA on 18 May 2021 that the licence had lapsed, the operations team were not aware of this fact. It was recognised that, as soon as the error was noticed, the abstraction was stopped and immediate and preventative steps were taken by SEW to avoid a recurrence.
The abstraction volumes were within the limits of both the expired licence and the subsequently granted replacement licence, and importantly, there was no evidence that the unlicensed abstraction had an adverse impact on the environment. The Environment Agency (“EA”) issued a notice of intent to impose a Variable Monetary Penalty or “VMP” (a form of civil sanction which can be used in lieu of criminal sanctions) in the sum of £75,859.10. This sum had been reached by reference to the Guideline and on a determination of Category 3 harm, which entails one or more of the following:
- Minor, localised adverse effect; damage to air or water quality, amenity value, or property
- Minor adverse effect on human health or quality of life, animal health or flora
- Low costs incurred through clean-up, site restoration or animal rehabilitation
- Limited interference with or undermining of other lawful activities or regulatory regime due to offence
- Risk of category 2 harm.
SEW responded to the notice, objecting to the calculation used by the EA in reaching the proposed VMP sum on the basis that the absence of environmental harm should warrant a Category 4 finding, i.e. a ‘risk of Category 3 harm’ (it also made representations as to culpability and other factors, which we have not considered in further detail in this article).
Despite SEW’s response, on 25 July 2025, the EA issued a VMP final notice in the same sum, disputing that there was no environmental risk at all, because, it argued, operating without a licence brings with it a risk to the environment simply because it is unregulated. Its position was that because one of the category 3 harm factors was present, it would not be appropriate to assess the harm as lower than that category (although it accepted that harm was at the lower end of the category 3 scale). Overall, the EA’s justification for the Category 3 classification was that there had been ‘limited undermining of the regulatory regime’ as a result of the offending.
Appeal
In its appeal, SEW relied heavily on the principle of proportionality, arguing that “’undermining’ should properly be confined to deliberate or reckless acts that genuinely frustrate regulatory control, not inadvertent administrative lapses” and that the application of Category 3 here, despite no evidence of environmental harm, was disproportionate. It submitted that the case should be placed at the lowest possible end of harm, supporting a Category 4 classification’ and sought a reduction in the financial value of the VMP on that basis.
The EA’s response focused on the lack of provision in the Guideline to state expressly that ‘undermining the regulatory regime’ was confined to deliberate or reckless acts, separately arguing that, as the penalty represented just 0.027% of the company’s annual turnover for 2023-2024, it did not consider the fine to be disproportionate (it is worth noting that SEW’s submissions on proportionality appeared to concern the categorisation, rather than the fine value itself). Ahead of the hearing, SEW made further submissions pointing to a miscategorisation of harm, stating that Category 3 “connotes conduct that meaningfully frustrates regulatory control”, rather than an administrative oversight (as was the cause of the failure to renew the licence here). It also submitted that the EA should have considered impact classification via reference to its Common Incident Classification Scheme (“CICS”) and that the decision to apply Category 3 here, despite no environmental consequence, was treating non-compliance itself as the harm. The EA largely reiterated its earlier submissions, maintaining the position that, “as one of the category 3 factors is present, the correct category of harm is category 3 at the lower end”.
Tribunal decision
In its decision regarding the value of the VMP, the Tribunal upheld the EA’s assessment of harm as Category 3 rather than Category 4, notwithstanding its acceptance that there was no actual environmental harm and only a low risk of harm. It placed great emphasis on the purpose of the licensing regime and the need for the regime to provide ‘appropriate oversight’. By virtue of abstracting without a licence, the Tribunal considered that the oversight had been undermined, as the EA’s ability to regulate effectively had, in its view, been disrupted.
This reliance on the technical non-compliance itself as a standalone basis for elevating the harm to Category 3 is problematic. If, irrespective of harm or consequences, a regulatory breach no matter how trivial or technical will ‘undermine the regulatory regime’, it is difficult to see how Category 4 could ever apply. Almost all environmental offences, by definition, undermine the regulatory framework to some degree. This decision therefore seems to muddy the distinction between Category 3 and Category 4, the latter presumably intended by the drafters of the Guidelines to recognise instances where an offence occurs without environmental consequence and without meaningful interference beyond the fact of non-compliance itself. Moreover, the Tribunal’s approach arguably conflated harm with culpability. Administrative failings and inadequate systems are classic indicators of negligence, not environmental harm. Treating inadvertent, time-limited non-compliance resulting from human error as Category 3 harm because it offends the integrity of the regime risks double-counting regulatory failure at both the harm and culpability stages.
Although the decision is not binding, it is still at odds with the logic and purpose of tiered harm categorisation and is out of kilter with the categorisation principles under other relevant regimes such as CICS and the permit compliance classification scheme. Whether SEW will appeal the decision remains to be seen but, for now, careful consideration of the harm factors will be required by those applying the Guideline in circumstances where a non-compliance has occurred despite a distinct absence of environmental harm.
If you would like to understand more about what implications the decision could have for you or your business, please get in touch with Michael Barlow or another member of the Environment Team.
This article was written by Philippa Shepherd
The principal issue in dispute in this case was the categorisation of harm. SEW argues that there was no environmental harm or undermining of the regulatory regime and that the harm should have been category 4 not category 3.
