Government Claims/Fines

For companies operating in the UK, there are more issues for public company directors and risk managers to consider when evaluating whether management’s operational philosophy poses risks that are not acceptable to the company and its shareholders. Among other things, a question to ask is whether an enterprise is prepared to accept the risk of large fines for multiple violations of laws. A new example arises as a UK court stated willingness, if not enthusiasm, for the imposition of  large fines for repeated incidents of pollution. The opinion arises under a newish sentencing statute, as reported in a June 3, 2015 article in the Financial Times. The BBC also has a story on the opinion.

The court expressed the view that there is a need to deter the business model in which modest fines are viewed as a cost of doing business:

“For example, to bring the message home to the directors and shareholders of organisations which have offended negligently once or more than once before, a substantial increase in the level of fines, sufficient to have a material impact on the finances of the company as a whole, will ordinarily be appropriate. This may therefore result in fines measured in millions of pounds.”

Global antitrust claiming/fining by governments continues to increase, which probably is not a surprise when government expenses are up and tax revenues are down. Go here for the story summarizing $ 3.6 billion of fines last year.

While you are at it, consider also Professor Yeazell’s wonderful article 2002 article explaining the economic forces and econonics that drive and create propensity to claim. Among other factors he explains, two are government’s facing increasing expenses and shrinking revenues.

See:

SYMPOSIUM ARTICLE: THE CHANGING LANDSCAPE OF THE PRACTICE, FINANCING AND ETHICS OF CIVIL LITIGATION IN THE WAKE OF THE TOBACCO WARS: Seventh Annual Clifford Symposium on Tort Law and Social Policy: RE-FINANCING CIVIL LITIGATION , 51 DePaul L. Rev. 183 (2002). The paper can be downloaded here.