A collective action involving a novel application of competition law has been brought against water companies over pollution incidents. The opt-out claim is being brought at the Competition Appeals Tribunal by high-profile London firm Leigh Day on behalf of environmental and water consultant Professor Carolyn Roberts, who seeks to act as class representative.

It is the first collective action case centring on compliance with environmental laws and reporting responsibilities to regulators. The claim is based on the allegation that water companies have abused their local monopolies to under-report sewage and other incidents to the regulators, thus avoiding the imposition of charging cuts. 

'It appears that because of the serial and serious under-reporting at the heart of these claims, water companies have been avoiding being penalised by Ofwat,' Roberts said. 'I believe this has resulted in consumers being unfairly overcharged for sewage services.'

According to Leigh Day, the claims can thus be treated on an opt-out basis under the 1998 Competition Act. The first such claim has been issued against Severn Trent Water, the firm said today. 

Severn Trent described the legal action as 'a highly speculative claim with no merit which we strongly refute'. It denied any failure to report incidents. 'Should pollutions ever occur, they are always reported to the Environment Agency. Any claim to the contrary is wholly and completely wrong,' a spokesperson said. 

Five further claims will be issued, against Thames Water, United Utilities, Anglian Water, Yorkshire Water and Northumbrian Water, over the next few months, the firm said. It  plans to propose that the claims be handled together. In all, the claim will state that 20 million household customers have been overcharged; the six claims are expected to seek compensation payments of over £800m.  

US-based litigation finance specialist Bench Walk is funding the action under an agreement announced by Leigh Day in November last year. 

Zoë Mernick-Levene, Leigh Day partner and competition act specialist, told the Gazette that water companies have been able to mislead the regulator because of their monopoly position. 'If there was proper competition, others would come in and report,' she said. 

Mernick-Levene added: 'As well as providing individual compensation and justice, opt-out proceedings such as these claims act as a deterrent to future misconduct. Consumers can act together to hold businesses to account for any rule breaking.'

The firm will tell claimants that, if the case is successful, any compensation will be paid by the relevant water company and its shareholders rather than customers. 'It is unlikely that Ofwat would allow them to increase bills,' Mernick-Levene said. 

The action is likely to be strongly contested by water companies. The Severn Trent spokesperson added: 'Our regulators set strict targets and performance measures that deliver for our customers and the environment. Severn Trent is recognised as a sector leader by both regulators across operational and environmental measures. We consistently deliver for our customers, and recently received the highest four-star status for environmental performance from the Environment Agency for the fourth year running.'

 

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