News
April 2013
Albion Water awarded record damages of over £1.6 million against Welsh Water
Judgment condemns “a conspicuous and reprehensible failure of corporate governance” on the part of Welsh Water
Twelve years after Welsh Water (Dŵr Cymru) offered Albion Water an abusive common carriage price for water supply to Shotton Paper, justice has been served. On 28 March, the Competition Appeal Tribunal (CAT) handed down a landmark judgment, including a damning indictment of Welsh Water’s conduct since 2000.
Welsh Water will now have to pay the largest damages claim ever awarded in a water competition case of over £1.6 million plus interest.
Commenting on the judgment, Albion’s chairman, Dr Jerry Bryan, said:
“This is an important judgment that will be welcomed by all those seeking a fairer and more innovative water industry. The sum awarded will repair some of the damage inflicted on Albion by Welsh Water’s abusive conduct but there are wider implications. Industrial companies in Wales have been poorly served by Welsh Water and this judgment sends the clear message that there are better alternatives available.”
Regarding the actions of Welsh Water that led up to and followed the abusive pricing, the CAT found (at paragraph [286]):
“Despite the salience of this, the first common carriage application in England and Wales, the Board [of Welsh Water] did not institute any effective mechanism for ensuring compliance with the law or independent quality control of the price calculations being made. We find that this constituted a conspicuous and reprehensible failure of corporate governance” (emphasis added).
What is equally alarming is that Ofwat, the regulator, failed to identify this behaviour despite frequent and, as it transpires, accurate warnings from Albion. Indeed Ofwat spent many millions of pounds of public funds in trying and failing to defend its original conclusion that Welsh Water was innocent of any wrongdoing.
The CAT found that mistakes made by Welsh Water were due to incompetence, inexperience, and lack of adequate supervision. Great concern was expressed over the lack of appropriate witnesses fielded by Welsh Water and it is clear that, during the Ofwat investigations, Welsh Water’s officers allowed misleading submissions to be made to the court.
As Dr Bryan observes:
“There are important lessons to be learnt by Ofwat from this judgment and we will be pursuing these with them as matters of urgency. We will also be looking to Ofwat to dramatically improve its own performance and to make it clear that this kind of regulatory gaming is wholly unacceptable.
Whilst this judgment will provide a sound platform for Albion’s continuing growth there is a clear need to bring to account those who failed so spectacularly in leadership, who allowed incomplete or misleading evidence to be presented to the regulator and to the court and who failed to act on Albion’s evidence.”
Is this the end of the saga? Not quite. Albion is due back in court in mid-May for the Judicial Review of Ofwat’s price determination for its supplies to Shotton Paper.
Dr Bryan views the CAT judgment as pointing to important evidence in that case:
“The damages trial uncovered important evidence that Ofwat does not appear to have known about or properly considered. The losers are not just Albion but other large industrial customers in Wales who make a significant contribution to the Welsh economy. We think that this belated disclosure will prove valuable in the forthcoming Judicial Review.”
For the full judgment, please use this link www.catribunal.org.uk.