(Bloomberg) -- The mounting political and legal difficulties facing British water companies make for a risky investment case, according to a Citigroup Inc. analyst.

“Legal action cases, and also risk around political action means the sector may be viewed as largely uninvestable,” Jenny Ping wrote in a note to clients, a day after a court ruling that weighed on shares of United Utilities Group Plc, Pennon Group Plc and Severn Trent Plc.

The UK Supreme Court ruled on Tuesday that the operator of Manchester Ship Canal should be allowed to bring a private claim about dumping of sewage against the local water utility owner, United Utilities. Ping said the decision opens the way for potential claims against water companies from fishing clubs, swimmers and others.

The UK water industry has come under intense scrutiny amid rising bills, sewage spills, and debt problems at Thames Water Ltd. The company is waiting on a key July 11 ruling from water regulator Ofwat on its next business plan, a decision which will set price controls for water utilities. 

After the Manchester Ship Canal ruling, United Utilities said it’s considering the implications of the decision. “Any watercourse owner will now have a right to bring claims in common law nuisance in respect of pollution to their water,” according to a statement from BDB Pitmans, the law firm representing Manchester Ship Canal.

United Utilities shares dropped as much as 3.7% on Tuesday, along with other water utilities such as Pennon Group Plc and Severn Trent Plc. All three stocks rose on Wednesday. 

Pennon declined to comment to Bloomberg News. Severn Trent has been contacted for comment.

--With assistance from Eleanor Thornber.

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