Six major British water companies have successfully defended themselves against mass lawsuits amounting to over 1.5 billion pounds ($1.9 billion) over allegations of under-reporting sewage discharges and overcharging millions of customers.
The Competition Appeal Tribunal ruled in favor of the water utilities, citing the legal framework established by the Water Industry Act 1991 as a key factor in dismissing the claims.
The lawsuit, brought forward by environmental and water consultant Carolyn Roberts, marked the first environmental competition law action in the United Kingdom. It alleged that water companies, including Thames Water, Anglian Water, Northumbrian Water, Severn Trent, United Utilities, and Yorkshire Water, had misled the industry regulator, Ofwat, by under-reporting pollution incidents. This alleged misrepresentation purportedly allowed the companies to charge higher prices to customers than they would have otherwise been permitted.
In a hearing held in September, the water companies argued that the claims should be dismissed. On Friday, the Tribunal issued a written ruling stating that the claims were precluded by the Water Industry Act 1991. However, it also noted that, had the claims not been excluded by the Act, it would have otherwise approved the lawsuits to proceed.
The regulation of water and sewerage services in the UK is governed by the Water Industry Act 1991, which replaced the earlier Water Act 1989. Under this framework, private water and sewerage undertakers (WaSUs) operate as statutory monopolies responsible for water supply and sewerage services in specific regions. These entities are regulated by Ofwat, which oversees pricing mechanisms and enforces pollution-related targets.
The legal action alleged that the water companies failed to report the actual number of pollution incidents (PIs) accurately. As a result, they were able to charge higher prices, benefiting from the regulatory system that allows adjustments based on reported pollution levels. The claim, therefore, centered on allegations of abuse of a dominant market position in violation of the Chapter II prohibition under Section 18 of the Competition Act 1998.
The Tribunal cited Section 18(8) of the Water Industry Act 1991, which provides that any breaches related to regulatory conditions must be addressed through explicitly established statutory remedies. It referred to the recent Supreme Court decision in United Utilities Water Ltd v Manchester Ship Canal Co Ltd (No 2) [2024] UKSC 22, which clarified that claims based on breaches of statutory conditions under the WIA cannot be pursued through alternative legal routes.
The Tribunal ruled that the claimants’ case relied fundamentally on allegations that the water companies failed to supply accurate information for regulatory price control. Since such allegations fell within the scope of the Water Industry Act’s remedial framework, the claims were legally barred.
However, the Tribunal also noted that had the legal framework permitted, it would have granted the collective proceedings orders (CPOs) to allow the lawsuits to proceed. It distinguished this case from excessive and unfair pricing claims, which could have been considered under separate legal principles, such as those established in United Brands v Commission (Case 27/76).
The ruling comes at a time when public concern over sewage discharges into Britain’s waterways is at an all-time high. The controversy has led to increased scrutiny of water companies, prompting government pledges for stricter oversight of environmental compliance and pollution controls, Reuters reported.
While the ruling protects the water companies from financial liability in this instance, it has further intensified the debate over regulatory enforcement and transparency in the industry. Environmental advocates and consumer groups continue to push for greater accountability, and it remains to be seen whether future legal or regulatory actions will address similar concerns through alternative means.
