By Wu Qing King & Wood Mallesons’ Commercial & Regulatory group
King & Wood Mallesons (“KWM”) is the exclusive partner firm of Thomson Reuters in PRC for its environmental law section. KWM has been a contributor to the “Environmental law and practice in China: overview” (the “Q&A Guide”) for three consecutive years (2016/17/18). The Q&A Guide is a specialized guide to China’s environmental law. It provides a high level overview of environmental law in China and looks at key practical issues including emissions to air and water, environmental impact assessments, solid and hazardous waste, contaminated land, and environmental issues in transactions. KWM provides updated insights for the Q&A Guide every year based on the latest environmental law and regulatory trends. The most recent edition of Q&A Guide 2017/2018 will be forwarded on “KWM Institute”(KWM_China), KWM’s official WeChat account, periodically as special session, providing companies with a complete guide to the legal system and practice of environmental law in China.
1. What is the regulatory regime for contaminated land?
Legislation and regulator
Legislation. There is no specific law on soil pollution. A Law on Prevention and Control of Soil Pollution has been included in the legislation plan of the twelfth National People’s Congress, and it is expected to be submitted to the National People’s Congress in 2017.
General principles for soil pollution are contained in the:
- Environmental Protection Law.
- Land Administration Law.
- Grassland Law.
- Mineral Resources Law.
Agricultural soil pollution is regulated in the:
- Agriculture Law.
- Quality and Safety of Agricultural Products Law.
- Pesticide Administration Regulations.
- Protection of Basic Farmland Regulations.
Industrial soil pollution is regulated in the:
- Prevention of Environmental Pollution by Solid Waste Law.
- Prevention and Control of Water Pollution Law.
- Promoting Clean Production Law.
- Safety Management of Hazardous Chemicals Regulations.
- Some provinces have issued local regulations for soil pollution prevention and control.
- The State Council and the Ministry of Environmental Protection has issued a series of administrative normative documents on the prevention and control of soil pollution (for example, the Soil Pollution Prevention and Control Action Plan issued in 2016 (Ten regulations on soil)).
- A Soil Pollution Prevention and Control Law of the People’s Republic of China was first reviewed by the National People’s Congress in June 2017.
Regulator. The control of soil pollution is supervised and administered by environmental administrative departments at all levels, as well as the:
- Ministry of Land.
- Ministry of Agriculture.
- Ministry of Water Resources.
- Ministry of Public Security.
- Ministry of Finance.
- Ministry of Industry and Information Technology.
- Ministry of Housing and Urban Construction State Forestry Bureau.
- Administration of Work Safety.
- National Development and Reform Commission.
- Health and Family Planning Commission.
Investigation and clean-up
Only the Ministry of Environmental Protection’s documents and related policies regulate investigation and clean-up of soil pollution. The land use right holder must engage professional organisations in environmental investigation and risk assessment of the original industrial sites. Land on which shut-down enterprises are located must not be transferred for development or use if the liable party has failed to carry out environmental investigation and risk assessment.
In addition, from 2017, the land use right holder will be responsible for investigating and assessing the soil’s environmental condition for (Soil Contamination Prevention Plan of Action):
- Enterprise land for non-ferrous metal smelting, petroleum processing, chemicals, coke, electroplating, leather and other industries for which land use rights are intended to be recovered.
- The land mentioned in the first bullet that is intended for transfer for use as residential and commercial land, schools, healthcare, pension institutions and other public facilities.
If the land has been resumed by local governments at local and county level, those governments are responsible for investigation and assessment.
Enterprises or individuals that cause soil contamination are responsible for environmental management and clean-up. If the land is transferred, enterprises or individuals that inherited credit and debt after the transfer are responsible for the contaminated land’s clean-up. If the land use right is transferred, the transferee or the party agreed by seller and buyer is liable for the contaminated land’s clean-up.
See Question: Penalties.Q&A: Water pollution
2. Who is liable for the clean-up of contaminated land? Can this be excluded?
See Question 1 for the party responsible for environmental investigation and clean-up. Where there are two or more polluters, the people’s court determines the liability of each polluter based on both (Interpretations of the Supreme People’s Court on Several Issues Concerning the Applicable Laws for the Trial of Cases Regarding Environmental Tort Disputes):
- The type, emission and hazard of pollutants.
- Whether the polluters have a pollutant discharge licence, have exceeded the pollutant discharge standards, or have exceeded the limits for the control of total emissions of major pollutants.
If the aggrieved party requests that the polluters assume joint and several liability, the people’s court must support such a request.
China will set up special funds for soil contamination prevention (Ten regulations on soil (see Question 1, Regulator and legislation)). The fund will be used for environment investigation, monitoring, evaluation, supervision, management, governance and repair of soil. When the liable party is insolvent, or is not clear or no longer exists, the available special fund will be used for soil contamination control and clean-up.
The land is owned by the state or is collectively owned. The occupant may be the land use right holder or the land user. Under the existing policies and documents, the:
- Land use right holder is liable for the investigation, detection and assessment of soil pollution.
- Polluter and actual user are liable for eliminating and recovering soil pollution.
Local laws and regulations also have relevant provisions. For example, the:
- Fujian Province Government Regulation on the Soil Pollution Prevention provides that the owner of contaminated land, the land use right holder and the land user are liable to control soil contamination.
- Hubei Province Regulation on the Soil Pollution Prevention provides that if it is impossible to determine the responsible party, the governments at county level or above are liable to control soil contamination expansion and restore the land.
Previous owner/occupier liability
In soil pollution cases, previous owners and occupants are liable for eliminating and repairing soil pollution if they caused the soil pollution (unless the parties made a special agreement on soil pollution responsibility when the land use right was transferred or changed).
Limitation of liability
There are no specific legal regulations for limitation of liability. Limitation can be determined by the parties.
Voluntary clean-up programme
There are no relevant policies for financially supporting or compensating a third party’s voluntary clean-up. However, to encourage the relevant enterprises to participate in controlling and repairing soil pollution, China plans to improve related incentive policies to support the production of organic fertilizer, comprehensive use of waste plastic sheeting, pesticide packaging waste recycling, and so on (Ten regulations on soil (see Question 1, Legislation and regulator)).
3. Can a lender incur liability for contaminated land and is it common for a lender to incur liability? What steps do lenders commonly take to minimise liability?
There are no laws and regulations on lenders’ liability for soil pollution. However, the Green Credit policy for banking financial institutions requires that lenders should have environmental and social risk investigation and assessment when they give credit to major construction projects and heavily polluting enterprises.
Lenders must urge clients to strengthen environmental and social risk management by improving contract clauses. With respect to clients with major environmental and social risks, lenders must require them to:
1. Submit reports on environmental and social risk.
2. Include in the contracts:
- environmental and social risk management and warranty clauses;
- clauses on the clients’ acceptance of the lender’s supervision;
- clauses on the remedies for banking financial institutions in the case of a client’s breach of contract due to environmental and social risk management.
4. Can an individual bring legal action against a polluter, owner or occupier?
An individual can bring an environmental case of public interest and a civil tort case for damage caused by the movement of contamination onto their land.
Social organisations and procuratorial bodies can bring an environmental case of public interest against a polluter for damage caused by the movement of contamination onto the land. The polluters include individuals, enterprises, land users and possessors.
Where an individual suffers personal injury or property damage as a result of land contamination, they can bring a civil tort case against the polluter, land user or possessor.