China Environmental Law

The Ministry of Environmental Protection has issued a Notice (Chinese only version here; accompanying Q&A here) which sets forth a regulatory opinion on the imposition of administrative punishment in environmental cases.

The Opinion reiterates some basic points, includes some significant new interpretations, and generally provides a welcome clarification of many of the issues surrounding the imposition of penalties and other administrative sanctions in environmental cases.

Here are the highlights:

1. Focus on corrective action (Paragraph 9).

The opinion notes that punishment is not the ultimate objective of environmental enforcement and that special attention should be paid to the correction of existing violations and prevention of future violations.  For first offenses in ordinary, non-emergency situations, the appropriate course of action is to order correction of the violation immediately or within a reasonable length of time.  In either situation, the corrective actions required of the offender should be specifically stated.  Diligent and strong follow up inspection actions should ensure compliance with the corrective action order.  This policy is in accordance with generally accepted environmental enforcement norms.

2. Violations which are intentional, have serious consequences, impact “sensitive” areas, and/or are committed by repeat offenders should be punished severely (Paragraph 13)

The opinion gives several examples of “intentional” or “malicious” violations: use of secret discharge pipes, use of dilution to achieve compliance with water discharge limits, unauthorized facility construction, obstruction by facility operators of site-inspections by regulatory personnel, unauthorized changes to monitoring equipment, forgery of monitoring data, etc. 

Violations with “serious” consequences include those that lead to an interruption of drinking water supplies and/or cause serious harm to human health.  Those which impact “sensitive” areas include violations which effect drinking water source protection zones, nature reserves, scenic spots, and farmland protection areas.  A “repeat offender” is defined as an entity that commits a new violation within 12 months of being previously sanctioned. 

3. Lenient punishment (Paragraph 14)

Where a violator promptly acts to correct the violation, eliminates or mitigates the consequences of the violation, actively cooperates with the regulatory authorities to correct matters, and/or where the ecological harm caused by the violation is minor, “lighter” punishments may be imposed.  Again, this policy fully comports with international norms.

4. Double penalties

Penalties for environmental violations can be imposed on both the enterprise committing the violation and the individuals directly responsible for the violation.  Appropriate punishments for individual offenders include fines, disciplinary actions, and removal from positions charged with environmental compliance. 

This paragraph specifically cites Article 83 of the new Water Pollution (discussed here) which provides that “directly responsible personnel” who cause “severe water pollution incidents” may be personally fined up to up to half of their income of the previous year.  No other Chinese environmental law yet contains similar provisions, although we may see a such a provision in amendments to the Air Pollution Law which should be promulgated by the end of this year (although the latest reports indicate it may slip to next year).

5. Daily Penalties (Paragraph 16)

Where environmental violations are of a continuous nature or a violator refuses to correct a violation within the period of time fixed by the regulators (see Item 1 above), the regulators may impose cumulative daily fines.  The opinion cites as a model Article 111 of the Chongqing Municipal Environmental Protection Ordinance, which provides for cumulative daily fines.

In my estimation, this is the most significant provision of this opinion.  The ability to impose daily fines has never, to my knowledge, been explicitly acknowledged before at the national level.  Penalty maximums in most Chinese environmental laws are relatively low; however, if these penalties can treated as daily maximums which continue to accumulate until the violation is corrected, you can start to talk about real money. 

6. One Heavy Punishment (Paragraph 17)

Where one act violates two or more laws which address and regulate the same behavior and are based on the same policy goals, the regulator should choose the law with the heaviest punishment provision and impose penalties based on the provisions of that law.  The opinion gives as an example the “burning of medical waste” which is prohibited (for basically the same reason) by both Article 41 of the Air Pollution Law and Article 17 of the Solid (& Hazardous) Waste Law.  In that case, penalties should be imposed based on the penalty provisions of the law with the highest penalty provisions (although the opinion does not say which law that would be, and your correspondent is too lazy to try to provide an answer at this point).

Regulatory schemes in other countries are divided on this issue; the Chinese approach is rational and supportable.

7. Separate Penalties for Separate Violations

Still with me?  Pay attention now because this section gets a little complicated when we try to distinguish it from the policy set forth in the previous paragraph.  Where one act violates two or more laws which address different policy issues, the penalty provisions of all the violated laws may be imposed. 

The example given is where a construction project has been initiated in violation of both the Environmental Impact Assessment (EIA) Law and the “Three Simultaneous Policy” (which requires that the facility and its required pollution control measures be designed, constructed, and placed into operation at the same time).  The “Three Simultaneous Policy” specifically addresses pollution control measures, while the EIA Law addresses (in addition to pollution control measures) a broader set of issues such as industrial policy, environmental function zoning, and the total pollutant control issues.

Thus, the violating entity may be ordered to stop production and fines imposed pursuant the penalties applicable for violation of the “Three Simultaneous Policy,” and it may be ordered to submit or resubmit (in the event its initial EIA was not approved) a completed Environmental Impact Assessment and fined under the EIA provisions.

8. Combine penalties with other economic sanctions (Paragraph 19)

As you may recall, China has recently added a number of finance related sticks to its environmental enforcement arsenal (see here).  Where an entity is charged with a serious pollution violation, the environmental regulatory authorities should report the violation to the People’s Bank of China, securities industry regulatory bodies, commercial banks and credit institutions, and/or the Securities and Futures Commission as required by the applicable regulations.

Two thumbs up and three cheers for the this opinion.  Now if we could just make sure it is uniformly and consistently applied by the sub-national Environmental Protection Bureaus, China would be making real progress.