Legal Shifts in England’s Water Industry: A Brief Discussion

On Sunday 3rd November 2024, thousands of protesters marched through central London calling for the greater regulation of water companies in order to protect Britain’s ‘blue spaces’.¹ For many protesters, this march represents years of frustration with Ofwat’s perceived ‘failure’ in their regulatory capacity. The general population may well recognise this presentation of the water industry which has become a regular feature in headlines,² with particular zest following the 2024 election where Labour promised ‘water companies [would be] forced to clean up our rivers’.³

This article examines the legal background of these headline political stories, unpacking how the Supreme Court judgement earlier this year in the Manchester Ship Canal Company v United Utilities Ltd⁴ (“MSCC”) case reflects the turning tide in water regulation case law, potentially favouring environmental conservation. It will then briefly touch upon the impact the MSCC judgement is already having on ‘right to swim’ claims. Finally, some of the largest political issues on the horizon for the Water Industry will be briefly explored, to put these legal changes in a wider context.

The Legal Change: The Manchester Ship Canal Company 

The Supreme Court Judgement

Earlier this year, the Supreme Court ruled unanimously in favour of MSCC, clarifying that they in fact did have a right of action to bring a private law claim in nuisance and / or trespass against United Utilities (“UU”) in respect of the unauthorised discharges of untreated foul water by UU into MSCC’s canal. 

Previously, case law prevented private law claims against water companies except in very specific circumstances. It was reasoned that allowing such claims would conflict with the existing statutory regime under the Water Industry Act 1991, effectively putting the courts into Ofwat’s shoes. As a result, the lower appellate courts followed this principle, well-established in case law such as Marcic v Thames Water Utilities Ltd⁵, and found in favour of UU, asserting that the involuntary escape of sewage due to inadequate facilities would not be enough to allow a right of action under tort law.

In July, the Supreme Court departed from the Court of Appeal’s judgement, reasoning that:

1. The Principle of Legality holds in this case: this establishes that a statutory body (such as United Utilities, a statutory water / sewage undertaker) will not be exempt from tort law unless statute makes this explicitly clear.
2. Parliament did not intend statutory powers to be exercised in a way that would affect private property rights, unless that interference was inevitable.

The Supreme Court found that, in the case of UU’s discharges:

1. The relevant statute (The Water Industry Act 1991) does not explicitly authorise UU to cause a nuisance / trespass by discharging foul water by outfall into the canal.
2. These discharges are not, in fact, inevitable. If UU invested further in their infrastructure, the discharges could be avoided.

Following these, and other,⁶ lines of argument the Supreme Court found that UU is not exempt from tort law claims. This judgement establishes that private bodies can bring tortious claims in nuisance and/or trespass against water companies in respect of unauthorised discharges of untreated foul water, even if there was no negligence or deliberate misconduct. 

The Impacts

The judgment in MSCC is grounded in a variant of the ‘polluter pays’ principle, which assigns the responsibility for the costs of environmental remediation to the polluter rather than the victim. This approach aligns with a growing trend in environmental conservation which aims to leverage private investment in order to effectively address nature conservation challenges.

Involving private investment in the conservation sector is a concept underpinned by the ‘Natural Capital’ approach,⁷  a developing area of law and policy which looks to provide aspects of our natural environment with economic value, thus inviting investment and generating measurable economic returns. Through this approach, features of our natural landscape, such as clean water, are given value which can be directly compared with the costs of infrastructure or business development.

If Supreme Court judgments are indicative of the broader sentiments within British society, the MSCC case suggests that the UK is increasingly recognising the importance of redistributing the financial responsibilities associated with environmental conservation from resting purely on the shoulders of public bodies, ultimately encouraging large-scale change via private investment.

Only a matter of months after the judgement in MSCC, a claim based in the right to swim has altered its case, widening the basis of the claim from only 10 days of lost swimming to over 300.⁸ This change was explicitly made in reliance on the MSCC ruling which equipped private citizens with the right to bring a claim of nuisance over sewage-related pollution in watercourses, even where there has been no negligence or deliberate misconduct.⁹ If this reaches the courts, it will be the first time the MSCC ruling is tested in court, and it will remain to be seen whether it stands up to scrutiny and is applied in the “lost swimming” context. 

Political Changes in the Water Industry

Water (Special Measures) Bill 2024¹⁰ 

The Water (Special Measures) Bill, first introduced in September 2024, is indicative of Labour’s commitment to making big changes in the Water Industry. The Bill aims to restore public confidence in the industry by:

• Stopping bonuses on the basis of failures to meet environmental targets
• Increasing regulatory powers through stronger fines and individual criminal charges
• Requiring automatic monitoring at all sewage outlets subject to independent scrutiny¹¹

As the Bill travels through Parliament amendments and tweaks are expected. However, regardless of what emerges from the legislative process, the negative tone of the Water (Special Measures) Bill reflects a broader societal sentiment that will likely continue to permeate our politics, news, and courts. 

Defra Commission¹²

An independent commission, anticipated to be ‘the largest review of the water industry since privatisation’¹³ , was raised by Defra in October, with a report expected by Q2 2025. While maintaining a focus on improving aspects of the Water Industry to restore public faith, this consultation adopts a more positive approach. Rather than imposing fines and criminal charges, the consultation’s objectives revolve around tackling water management issues by attracting investment, driving innovation, and planning for the future. 

EA Prosecutions¹⁴ 

The recent news that Wessex Water has been fined £500,000 for pollution spills resulting in fish deaths comes as part of what the Environment Agency calls a “crackdown on water companies to improve water quality.” This major success for the EA, along with the broader context of the MSCC ruling, suggests that we may expect to see more prosecutions in the coming months.

Conclusion

Recent legal and political shifts in England's water industry reflect a growing public sentiment that seeks to place accountability and expectations for environmental conservation on the water industry. The Supreme Court’s ruling in MSCC, which empowers private entities to hold water companies accountable for environmental damage, reinforces the ‘polluter pays’ principle. By encouraging and, in some cases, enforcing private investment in natural capital, much-needed private finance is redirected into environmental conservation efforts. 

Politically, the Water (Special Measures) Bill and the Defra Commission's consultation respond to the popular demand for stricter regulation and transparency in the water industry. As the consultation moves forward, sustainable and innovative water management practices will be developed, with public trust in the industry expected to grow as a result.

As the Environment Agency continues its ‘crackdown’ on water pollution, these combined efforts across the legal and political sectors are set to drive significant improvements in water quality and environmental protection. This response promotes societal recognition of the importance of ‘blue spaces’ in Britain’s natural landscape. 

1 Thousands of blue-clad protesters join London march for clean water | Water | The Guardian

2 See, for example, Revealed: water firms in England ‘passed’ pollution tests that were never carried out | Water | The Guardian

3 Change-Labour-Party-Manifesto-2024-large-print.pdf, p47

4 [2024] UKSC 22

5 [2003] UKHL 66

6 Read the full Judgement for greater detail on the Supreme Court’s reasoning: The Manchester Ship Canal Company Ltd (Appellant) v United Utilities Water Ltd (Respondent) No 2 - The Supreme Court

7 Enabling a Natural Capital Approach guidance - GOV.UK

8 Swimmer broadens sewage claim against water firm in wake of Supreme Court judgment

9 Jo Bateman’s claim against South West Water strengthened by Supreme Court ruling in sewage case | Leigh Day

10 Water (Special Measures) Bill [HL] - Parliamentary Bills - UK Parliament

11 Water (Special Measures) Bill: policy statement - GOV.UK

12 Independent commission on the water sector regulatory system: terms of reference - GOV.UK

13 Governments launch largest review of sector since privatisation - GOV.UK

14 Wessex Water fined £500,000 for sewage killing thousands of fish - GOV.UK