A claim against one of the UK’s largest water companies for allegedly misleading regulators about the number of times it discharged sewage into waterways has been brought in the Competition Appeal Tribunal (CAT) on behalf of the company’s eight million customers. It is the first time the “opt out” collective action regime established by the Consumer Rights Act 2015 has been used to bring an environmental claim and marks a significant development in the ESG litigation landscape in the UK.
The case against Severn Trent Water is the first of six parallel claims to be brought against water companies on behalf of more than 20 million customers across the UK. Leigh Day, acting on behalf of the claimant, has alleged that the companies abused their dominant position in the market to overcharge customers. It is alleged that by failing to properly report sewage spills to the Environment Agency and Ofwat, the companies evaded penalties which would have affected the price they could charge customers, with customers instead paying water bills on the basis that the companies were meeting required standards. If successful, the claims could require the defendants to pay compensation to anyone who has paid a water bill to any of these companies since April 2020, with total compensation arising out the six cases potentially amounting to over £800 million.
The claims are being brought under the opt out collective action regime for competition claims established by the Consumer Rights Act 2015. So long as a claim falls within the scope of the regime, this allows a single claimant to bring a claim on behalf of an entire class of affected consumers unless these consumers individually opt out of the claim. It is no surprise that claimant law firms are targeting the competition regime as a means of bringing environmental claims: the lack of a general opt out class action regime in the UK means that attracting sufficient numbers of claimants to make a claim financially viable is otherwise challenging.
However, whether the collective action regime will prove to be an effective means of bringing ESG-related claims will depend on whether such claims can pass the CAT certification stage. In order to proceed, proposed cases must pass a two-stage certification assessment which deems the proposed class representative as authorised to act and the claim as eligible for inclusion in collective proceedings. To date, few claims have passed the second eligibility stage of this assessment. Earlier this year, the CAT refused to certify a data privacy collective claim brought against a technology company on the grounds that it was doubtful whether the unfair trading conditions claims could be properly articulated as an abuse of a dominant position in breach of competition law. The CAT has directed the claimants to improve the proposed methodology of the claim in order for it to have a suitable “blueprint to trial”. Whether Leigh Day’s claims against the water companies will face similar issues at this crucial certification stage remains to be seen.