Revisions target liability of foreign enterprises that harm environment

In the previous issue, this column discussed the environmental protection regulations that foreign enterprises in the PRC need to heed; in this issue, the focus is the environmental legal liability of enterprises. The environmental legal liability of enterprises, particularly foreign enterprises investing in the PRC, has never received as much attention as it has today. The environmental legal liability that enterprises in violation of laws are required to bear includes administrative, civil and criminal liability.

These may apply singly, or in combination. For example, in the Ding River pollution incident in which Zijin Mining was involved, the implicated enterprise bore administrative, civil and criminal liability.

Administrative liability

Most times, violations of environmental laws by enterprises will first be punished by the environmental authority. Depending on the circumstances of a violation of the law, administrative liability may be divided into such forms as warnings, fines, orders to suspend production and undergo rectification, orders to suspend production, halt operations or close down, and suspensions or revocations of permits or certificates. Fines are the most commonly applied. At present, PRC environmental laws have not centrally set an upper limit to fines. Rather, relevant fine amounts are set for specific violations of laws by enterprises in the regulations of various authorities. Environmental law enforcement efforts in the PRC are being increasingly intensified, e.g. in the incident of the pollution of the Ding River by the Zijinshan Gold and Copper Mine. The Fujian Provincial Environmental Protection Department issued fines totalling RMB9.56 million (US$1.5 million).

In practice, in addition to a fine, the authorities will issue administrative orders to suspend construction or production. The imposition of administrative penalties on an enterprise that violates the law does not exempt the concerned party from its obligation to pay the pollutant discharge fee in accordance with the law, or its liability for civil damages or criminal liability.

Civil liability

Environmental civil liability is also known as liability for compensating for pollution damage. The PRC Environmental Protection Law, the general provisions of the Civil Code and the Tort Law all contain detailed provisions addressing this.

In legal actions, many enterprises in their defence will argue that “our pollutant discharges met standards”, or “we paid the pollutant discharge fee”, or “we did not commit a violation of environmental laws”. This is a typical misunderstanding. Pursuant to PRC laws, even if an enterprise has not committed a violation of environmental laws, as long as its pollution emissions cause environmental pollution damage and the enterprise is unable to give evidence to show that there is no cause and effect relationship between its acts and the damage, it will be required to bear environmental civil liability.

Two or more offenders

Where there are two or more polluters, the determination and allocation of liability becomes the focus. PRC laws specify that the liability to be borne by each polluter is determined based on such factors as the type of pollutant, quantity discharged, etc. For example, in the Shanghai incident of high lead levels in blood, in which Johnson Controls is involved, as there are several enterprises that discharged lead- containing pollutants, the determination of the liable entities remains in dispute to this day.

In current practice, the environmental pollution liability of an enterprise is usually limited to compensating for the damage or injury to the property and the person of citizens, enterprises, etc., caused by its pollution. The amount is quite low, and does not include compensation for the environmental damage caused. However, with the heightening of environmental protection awareness, this is gradually changing.

For example, in the oil seepage incident in Bohai Bay, in which ConocoPhillips was involved, the implicated enterprise has reached an administrative settlement with the Ministry of Agriculture, etc., with ConocoPhillips paying out RMB1 billion to compensate for the damage to Bohai natural fishery resources.

Additionally, ConocoPhillips and China National Offshore Oil Corp will pay out RMB100 million and RMB250 million respectively from the marine environment and ecology protection funds that they have committed to initiate, which will be used for such tasks as resource recovery and conservation.

Furthermore, the legislative authority is arranging for amendments to be made to the Civil Procedure Law and the Environmental Protection Law, and is leaning towards determining an environmental public interest litigation system for the PRC. Should that happen, liability for compensating for environmental damage caused by an enterprise’s pollution will see the light of day, and the environmental civil liability that enterprises will bear will be greater.

Criminal liability

If an enterprise causes severe environmental pollution, it is required to bear environmental criminal liability. Punishment for the environmental criminal liability of an enterprise takes the form of a bipartite punishment system where the enterprise is penalised with a fine and the persons responsible are sentenced to up to seven years in prison, or penal servitude and a fine, or only a fine.

For example, in the Zijin Mining incident, the Fungjian Longyan Intermediate People’s Court found in May 2011 found the defendant, Zijinshan Gold and Copper Mine, guilty of the crime of causing a major environmental pollution accident, fining it RMB30 million and sentencing five persons directly liable for the accident to prison for between three years and three years and six months, plus fines.

Furthermore, in the Bill for Amending the Criminal Law No. 8 of 2011, the provisions on environmental criminal liability have been amended to intensify the crackdown on environmental pollution crimes. The provisions not only expand the scope of application of environmental crimes, changing the violation of environmental law in the current Criminal Law from discharge of “dangerous waste” to “hazardous substances”, but they also lower the threshold for convictions, amending the “causing a material environmental pollution incident” specified in the current Criminal Law to “serious contamination of the environment”. These revisions greatly increase the probability of enterprises violating environmental criminal law.

Accordingly, enterprises in the PRC need to pay great heed to environmental protection compliance.

Wang Jihong is the managing partner at V&T Law Firm; Shi Jie is a partner at V&T Law Firm