By King & Wood Mallesons Compliance Group

On 24 April 2014 the PRC Government approved changes to the Environment Protection Law of the People’s Republic of China, for the first time in 25 year (“Revised Law”). The Revised Law will come into force on January 1, 2015 and apply to almost every article of the current law. The Revised Law imposes stricter obligations on enterprises regarding pollution prevention and control, and provides for more severe penalties. With regard to public policy, the Revised Law specifies that the Government shall support the development of the environment industry and shall encourage enterprises to take environmental protection measures. Furthermore, the Revised Law allows for environment public-interest litigation. Details are as follows:

I. Greater liability for enterprises

1. The Revised Law expands the scope of projects that shall be subjected to environmental impact assessment, and clarifies the legal consequences in the event of non-compliance. Development and utilization plans and construction projects that have an impact on the environment must be subjected to an environmental impact assessment. Enterprises are prohibited from commencing projects that have not undergone an environmental impact assessment in accordance with the law.

2. The Revised Law compels enterprises to establish environmental protection responsibility systems. Enterprises that discharge pollutants must establish environmental protection responsibility systems, and must specify the responsibilities of persons-in-charge. In addition, enterprises that discharge certain key pollutants must install and use monitoring equipment, and must keep all original monitoring records.

3. The Revised Law implements a control system for total emissions of key pollutants. In addition to implementing the national and local pollutant discharge standards, enterprises must also follow the control indicators of total emissions of key pollutants allocated to the enterprises. That is to say, the enterprises should meet the pollutant discharge standards first. If the enterprises fail to reach the control indicators of total emissions of key pollutants allocated to them, the enterprises must implement stricter emission standards to share the control indicators.

4. The Revised Law provides for a pollution discharge license. All enterprises must apply for a license for discharging pollutants, and must observe the requirements of the license. Currently, the Ministry of Environmental Protection is establishing an integrated pollution discharge license management system, and has recommended that the State Council formulate implementation regulations.

5. The Revised Law requires enterprises to prepare emergency response plans for emergency incidents, and file them with the competent department of environmental protection for its records. When emergency incidents occur, the enterprise must immediately take specific measures.

6. The Revised Law contains a chapter on ‘Information Disclosure and Public Participation’, and requires enterprises to establish an information disclosure system. This chapter clarifies that enterprises that discharge certain key pollutants must truthfully disclose their major pollutants, discharge methods, emission concentration, total emissions, excessive emissions as well as the construction and operation of pollution prevention and control facilities, and will be subject to supervision. The requirements in relation to disclosing information on pollutants in the current law are voluntary, but those in the Revised Law are compulsory. Further, enterprises are required to provide information to the public where members of the public are affected by the pollutants are solicit public opinions when preparing environmental impact reports.

II. More severe punishment for illegal acts

1. The current law specifies that any enterprise that fails to eliminate or control pollution within a specific period of time may be ordered to suspend or shut down its operations. The Revised Law allows the competent authorities to take measures such as restricting and suspending production in order for the company concerned to rectify the situation. Additionally, the authorities may also directly order the enterprises concerned to suspend or shut down production.

2. The competent departments may close down and detain facilities and equipment causing pollution discharge. Such measures do not exist in the current law, and the Revised Law provides greater powers to the authorities in order to punish companies for the discharge of pollutants.

3. The Revised Law establishes a “daily penalty” system, and sets no limit to the total amount of the fines. The fines specified in the Revised Law shall be implemented according to factors such as the operating costs of pollution prevention and control facilities, and direct losses arising from violations or illegal gains. Further, if an enterprise illegally discharges pollutants and is subsequently fined, the enterprises will be ordered to rectify the situation. If the enterprise refuses to do so, the authority that imposed the penalty may impose cumulative daily fines. Accordingly, the costs of unauthorized pollution discharge may increase rapidly.

4. The Revised Law establishes a “pollution blacklist”. The pollution blacklist will record all environment violations and will be publicly available.

5. If an enterprise refuses to make an environmental impact assessment, discharge pollutants illegally, falsifies the monitoring data or conducts other illegal activities, employees who are directly in charge of such environmental violations may face detention. Institutions that commit fraud in providing environmental services are liable for any environmental pollution or ecological damage that results. Such institutions, include environment impact assesment organizations, environmental monitoring institutions, and institutions engaging in he maintenance and operation of environmental monitoring equipment and pollution prevention and control facilities. These parties can also be held jointly liable for pollution or ecological damage.

III. The establishment of environment public-interest litigation

1. The Revised Law clarifies the scope of environmental public-interest litigation. A social organization that meets certain conditions may appeal to the court for acts that pollute the environment, damage ecology, and harm the public interest. Public-interest litigation provides a legal channel for citizens and community groups to participate in environmental protection. There are a number of conditions that the social organization is required to meet. For example, the social organization must be registered in the civil administrative must be registered in the civil administrative department of the local government, and the organization must have specifically engaged in public environment protection activities over five consecutive years without any violations. According to preliminary estimates, nearly 300 social organizations in China meet these requirements.

2. The Revised Law clarifies the legal basis of environmental public-interest litigation. If environmental pollution causes any ecological or environmental damage, persons responsible should bear tortious liability in accordance with the Tort Law of the PRC.

3. The limitation period for any case brought for compensation for environmental damage is three years. The limitation period is calculated from the date on which the relevant party first becomes or should have become awareness of the environmental damage.

IV. How to meet the challenge?

The Revised Law expands the scope of liability and increases the severity of punishment for enterprises that pollute. In consequence:

1. Enterprises should adopt pollution prevention and control technologies so that any pollution they discharge complies with national or local pollution discharge standards and the control indicators of total emissions of key pollutants allocated to the enterprises.

2. Enterprises should establish systems for preventing pollution in accordance with the Revised Law. The relevant systems include environmental protection responsibility systems, emergence response plans for emergency incidents, information disclosure systems, and other necessary systems.

3. Enterprises should cooperate actively with the supervision authorities in order to avoid punishment; should prepare environmental impact assessments if their construction projects have an impact on the environment; should install and use equipment, and keep all original monitoring records, when discharging certain key pollutants,; and should rectify illegal discharge behavior immediately to avoid cumulative daily fines. These measures can help enterprises avoid huge economic loses.

Enterprises must comply with the Revised Law by January 1, 2015. In the meantime, we expect that authorities will promulgate a series of related laws, regulations, and implementation rules.


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