By Karl S. Bourdeau and Daniel B. Schulson
As part of China’s effort to emphasize environmental protection, the amended Environmental Protection Law (EPL) consisting of 70 wide-ranging articles that were the first revisions to the law since 1989, went into effect a little more than a year ago. The revisions not only increased public participation, but also enhanced environmental organizations’ ability to file public interest lawsuits—commonly called citizen suits in the United States. The advent of meaningful citizen suits in China could be a watershed moment in environmental litigation, much as it was decades ago in the United States.
Historically, enforcement of environmental laws in China has been lax, in part because of the country’s decentralized legal system that leaves local environmental protection boards with most of the enforcement power, which has not been used effectively. Citizen suits could enhance the role of enforcement in promoting environmental protection and standards achievement.
That dynamic could aid China’s Ministry of Environmental Protection (MEP)—China’s counterpart to the US Environmental Protection Agency (EPA)—because it has only limited resources to devote to administration and enforcement. MEP, for example, only has 300 employees to fulfill its mission, whereas the EPA has close to 17,000. Citizen suits, which allow nongovernmental organizations (NGOs) to serve as “private attorneys general” in enforcing environmental protection laws, could alter the landscape of Chinese environmental litigation and potential corporate liabilities.
Opening the door to public interest litigation
For 30 years, private plaintiffs could pursue pollution-related tort claims. NGOs, however, struggled to bring lawsuits for environmental degradation and natural resource damages on behalf of public interest. The revised EPL—the product of a three year of debate—was intended to pave a smoother path for NGOs to bring such suits.
Social organizations can file suits regarding activities that cause environmental pollution, ecological damage, or “social public interest” harm, according to Article 58 of the law. In essence, an organization must be legally registered with the civil affairs departments at the prefecture level or higher; have been continuously active in environmental public interest activities for at least five consecutive years; and have no record of violating Chinese law.
Supreme People’s Court’s interpretation
Shortly after the amended EPL took effect, China’s Supreme People’s Court (SPC) issued an interpretation that clarified which organizations may file public interest lawsuits and under what conditions, prescribed which courts have jurisdiction, addressed liability standards and the burden of proof, and set forth the remedies a court may order.
The interpretation signals support for public interest litigation, and, more specifically, rules that the people’s courts has jurisdiction of lawsuits filed in accordance with applicable law—including the Civil Procedure Law and the EPL—“against acts that pollute the environment and damage the ecology, which have harmed the social public interests or have the major risk of harming the social public interests” alleging past and ongoing harm, as well as acts that likely will cause future harm.
The SPC interpretation assigns initial jurisdiction of public interest lawsuits to people’s courts at the intermediate level or higher. That arrangement seeks to prevent local protectionism, for example, situations where local governments attempt to influence decisions about lawsuits against polluters who contribute to the local economy.
In order for an NGO to bring a public interest lawsuit, it must qualify as a social organization and its purpose must be to maintain social public interests and the organization must engage in public environmental protection activities.The “social public interests involved in the lawsuit filed by a social organization” must also be “related to its purpose and business scopez.” The NGO can not have been sanctioned for violating any laws or regulations in the five years leading up to the lawsuit. It remains to be seen how these interpretations will be applied, and whether they will be used to constrict or heighten the ability of NGOs to bring suit.
The plaintiff “may request the defendant to bear civil liabilities, including cessation of infringement, removal of obstruction, elimination of danger, restoration to the original state, compensation for losses and apology.” A court may entertain requests that the defendant “cease the infringement, remove the obstruction and eliminate the dangers so as to prevent the occurrence and expansion of the damages to the ecological environment.” How courts will interpret and apply these provisions when awarding relief remains unclear.
A reviewing court may order the defendant to “restore the ecological environment to the state and function before the damage occurred.” Where full restoration cannot be achieved, the interpretation allows “alternative restoration,” although that concept is not defined. The interpretation does indicate, however, that both natural resource restoration and payment for natural resource damages and costs associated with assessing those damages can be ordered.
The judicial interpretation also authorizes attorney’s fees and costs, issues the EPL itself did not address. “Where a plaintiff requests the defendant to bear the expenses for inspection and appraisal, reasonable attorney’s fee and other reasonable costs for litigation, the people’s court may provide support in accordance with the law.” Unlike in the United States, where defendants in meritless citizen suits can recover their attorney’s fees and litigation costs in limited circumstances, the SPC interpretation does not address recovery by defendants in the event of frivolous claims.
Certain provisions indicate broad support for environmental public interest litigation. For instance, it directs the courts to “investigate and collect evidence that it deems necessary for the trial of an environment-related civil public interest lawsuit,” thereby potentially involving the courts in development of evidence to be presented. Involving courts directly in the investigation and collection of evidence is extraordinary and, depending upon how such evidence gathering and investigation powers are employed, could impact the presentation of public interest claims in ways unheard of in the United States.
In sum, the SPC’s interpretation attempts to add clarity and establish a framework for Chinese environmental civil public interest litigation. There is uncertainty, however, as to the nature and extent of the effect the EPL provisions and this interpretation will have in Chinese courts. Decisions that have been handed down to date, including the landmark Nanping lawsuit, are shedding light on this developing area of Chinese litigation.
Overview of citizen suit litigation
As of November 4, 2015, Chinese courts accepted 37 cases filed under China’s revised EPL. The majority were pollution cases involving large companies, nine of which were rejected by lower courts and then reversed by the provincial high courts. As a whole, experience reveals a mixed record regarding the receptivity of the courts to this new breed of suits.
The Nanping case
On December 21, 2014, two environmental NGOs filed a complaint against four individuals in the Nanping Intermediate People’s Court, seeking cleanup and restoration of an illegal mining site. The two NGOs—Beijing-based Friends of Nature and Fujian Green Home – argued three defendants purchased a mining claim from the fourth defendant and carried out mining activities without obtaining the required permits. The suit said the mining activities began in 2008 and continued for years despite repeated requests by local authorities to cease operations. The NGOs claimed that they met the revised EPL’s requirements to bring a public interest lawsuit, and, on January 1, 2015, the day the revised EPL took effect, the court accepted the case.
The court had to decide whether the NGOs had standing; the revised EPL, effective January 1, 2015, applied retroactively to defendants’ activities that began in 2008; the defendants’ actions amounted to ecological destruction harming the public interest; and the requested remedies were reasonable.
On October 29, 2015, the court ruled in favor of the NGOs, and—in a groundbreaking decision—held the defendants liable for damaging 1.89 hectares of forestry land. First, the Court found that the NGOs had standing, including the Beijing-based Friends of Nature, even though it brought suit in Fujian, outside of its place of registration. Second, the court concluded that the revised EPL applied retroactively and the defendants should bear civil liability because the ecological harm had not been remedied and continued to affect the public interest, even though the defendants’ activities leading to the ecological damage took place from 2008 to 2010, before the EPL was revised. The court found the defendants jointly and severally liable.
The court ordered the defendants to pay a 1.27 million yuan ($200,000) fine, remove all mining materials and waste rock from the site, restore the site by planting new trees, and to ensure successful reforestation for three years. The court also ruled that failure to timely comply would lead to an additional 1.1 million yuan ($180,000) fine paid to a special account for site remediation and restoration. The court also held the defendants responsible for 1.27 million yuan ($200,000) in interim losses of natural resource service functions, to be paid into an account for other ecological restoration projects. However, because the revised EPL only authorizes recovery for interim losses, the court dismissed the plaintiff’s’ claim for actual damages for the permanent loss of the trees.
To prove ecological damages, plaintiffs used the Recommended Methods for Evaluation and Assessment of Environmental Damages by MEP. Use of this government publication, as well as a technical expert (which is relatively rare in Chinese jurisprudence), likely enhanced the effectiveness of plaintiffs’ case.
With regard to fees and costs, the court said plaintiffs’ claims were reasonable and awarded 121,461 yuan in attorney’s fees, 38,702 yuan in litigation costs, and 6,000 yuan in expert consultation fees for damages assessment, a total amount of slightly over $27,000. Because attorney’s fees are based on the prevailing local rate, the urban attorneys representing the plaintiffs were awarded more than the rural attorneys.
In short, the court’s award of relief was quite broad, providing injunctive relief to ensure the site is restored; monetary damages for certain ecological/natural resource damage; and attorney’s fees, expert consultant fees, and other litigation costs.
Developments since the Nanping decision
The SPC on January 21, 2016 ordered six chemical, agrochemical and pharmaceutical companies to pay 160 million yuan ($24.3 million) in remediation fees and another 100,000 yuan ($15,000) to cover environmental damage assessment fees in connection with illegal waste disposal activities that contaminated the environment— the largest fine imposed in a public interest environmental case in China.
In 2014, the All China Environment Federation (ACEF), a government-endorsed NGO, accused the six Chinese companies of illegally transferring 25,000 metric tons of sulfuric and hydrochloric waste to an unlicensed disposal company. Between January 2012 and February 2013, the unlicensed disposal company allegedly dumped the waste into local canals and waterways, causing serious environmental damage.
The Supreme People’s Procuratorate (SPP) recently reported the initial results of its pilot program to enhance and expedite public interest claims. The program is intended to give local officials certain pre-trial authority to address unlawful behavior that affects the environment. The progress report summarizes some of the more significant environmental enforcement efforts of local prosecutors.
Measures are also being taken to enhance the quality of scientific evidence used in environmental citizen suits. Recognizing the increased number of environmental cases and public interest lawsuits, the SPC, SPP, and Ministry of Justice are taking steps to ensure scientific evidence is available in such cases. China also announced a development plan for creating highly-qualified forensic institutions is in the works.
Implications for companies doing business in China
While it remains to be seen how potent a force public interest litigation will be in advancing China’s environmental protection goals, the Nanping and ACEF cases illustrate a shift in environmental litigation. Companies doing business in China would be wise to closely monitor this area of law.
Experience with environmental citizen suits in the United States has proven that they can be applied expansively and present significant potential liabilities in terms of civil penalties for regulatory violations, injunctive relief to address environmental contamination, and attorney’s fees. Given the very limited government resources available in China to enforce environmental requirements, NGOs may see the strengthened citizen suit framework as a means to achieve environmental protection goals more expeditiously and effectively. However, the lack of ready access to government records in China may stymie NGO efforts to serve as “private attorneys general” in enforcing environmental laws.
Factors that need clarification and will likely affect the extent to which citizen suits play a prominent role in increasing the liability of companies doing business in China include the following:
- how easily NGOs can qualify to bring such suits, the SPC interpretation of the provisions, and the application by various Chinese courts;
- whether courts will impose stringent “standing” requirements for NGO plaintiffs that will restrict those organizations from bring suit (for example whether NGOs filing suits have to suffer actual or imminent injury from the activities);
- whether the courts will allow NGOs to proceed despite concurrent government proceedings addressing the same conduct;
- the burden of proof that the courts will impose upon plaintiffs or defendants;
- the extent to which the courts—or the Chinese government more broadly—will facilitate the necessary scientific evidence ;
- the willingness of courts to assess meaningful attorney’s fees and litigation costs, without which NGOs may find it difficult to proceed with more than a limited number of these cases; and
- the ability of plaintiffs to seek and obtain enforcement of judgments against recalcitrant defendants.
It is reasonable to expect that the NGO community will test the limits of what it can achieve in human health and environmental protection through these enhanced rights. The results of these early efforts may foreshadow the extent to which, as a practical matter, citizen suits will substantially increase environmental liability exposure for entities doing business in China.
Karl S. Bourdeau and Daniel B. Schulson are environmental and natural resources lawyers with Beveridge & Diamond, P.C., a USCBC member company with 100 lawyers in seven U.S. offices to help clients around the world resolve critical environmental, natural resource, project development, and sustainability issues relating to their facilities, products, and operations. The firm focuses on delivering outstanding client service and value through strategic advice, regulatory compliance counseling, transaction and land use support, or representation in litigation and alternative dispute resolution.