Roberts v Severn Trent Water: when does section 18(8) of the Water Industry Act 1991 bar competition claims?
A class representative's competition claim against six water companies is barred where the alleged abuse of dominance cannot be separated from a breach of licence conditions under the Water Industry Act 1991.
Professor Carolyn Roberts sought a Collective Proceedings Order under section 47B(4) of the Competition Act 1998 to bring opt-out claims against six water and sewerage undertakers — Severn Trent, United Utilities, Yorkshire Water, Northumbrian Water, Anglian Water and Thames Water. The claim alleged that each company had systematically under-reported pollution incidents to Ofwat, causing the regulator to set Revenue Allowances at artificially inflated levels and, in turn, permitting the companies to overcharge customers.
The Competition Appeal Tribunal refused the order on the basis that the claims were excluded by section 18(8) of the Water Industry Act 1991 (WIA). The Court of Appeal, by a majority (Sir Geoffrey Vos MR and Falk LJ, Zacaroli LJ dissenting), dismissed the appeal.
The section 18(8) framework
Section 18(8) WIA bars remedies that are available only "by virtue of" an act constituting a contravention of a condition of a water company's appointment. Following the Supreme Court's analysis in United Utilities Water Ltd v Manchester Ship Canal Co Ltd (No 2) [2024] UKSC 22 (MSC2), the provision excludes a claim only where contravention of a licence condition is an "essential ingredient" of the cause of action. Where a common law claim would lie independently of any statutory breach — as in MSC2 itself, where United Utilities' discharges grounded an action in nuisance — the remedy survives.
The majority's reasoning
The majority held that, on a purposive and realistic reading of the statute, Professor Roberts's claims could not be disentangled from the licence conditions. The alleged "misleading" of Ofwat was only meaningful by reference to paragraph 9.2 of Condition B, which required the water companies to furnish Ofwat with accurate information for the purposes of periodic price reviews. Ofwat's reliance on the information — and therefore the possibility of its being misled — was founded on its reasonable assumption that the water companies were complying with that obligation. Absent the reporting duty, no misrepresentation to Ofwat could have had any bearing on Revenue Allowances or pricing.
The majority drew a deliberate contrast with MSC2, where the nuisance claim was coherently pleaded without reference to the regulatory regime. Here, the claim form itself acknowledged the licence conditions as foundational, and the pleading could not have been made sensibly without them. Consistent with Marcic v Thames Water Utilities Ltd [2003] UKHL 66, where the nuisance claim depended on a statutory duty to construct new sewers, the breach of the reporting obligation was not mere background but a constituent element of the asserted wrong.
The dissent
Zacaroli LJ would have allowed the appeal. In his view, the essential ingredients of an abuse of dominance claim — inaccurate information provided to Ofwat, Revenue Allowances set at an inflated level as a result, customers charged more accordingly — did not require proof that the provision of inaccurate information constituted a breach of the licence conditions. The competition law claim would arguably have lain even had the reporting been voluntary, as illustrated by AstraZeneca v Commission, where no reporting obligation existed yet misleading representations to patent offices still constituted an abuse. The majority's approach, he considered, conflated the manipulation of a regulatory regime with a breach of a licence condition — two analytically distinct matters.
The judgement confirms that section 18(8) operates beyond cases of physical nuisance and extends to competition law claims where the alleged abuse is inseparable from a statutory reporting obligation. Water companies facing follow-on or standalone claims will find the decision of considerable utility where the impugned conduct is embedded in the Ofwat regulatory framework. The dissent, however, articulates a coherent counter-analysis that may yet have traction should the matter proceed further.
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