An update on environmental law in China

Lester Ross, a partner in WilmerHale’s Beijing office, discusses developments in the environmental sector

Read InsideCounsel's cover story, The China Report

Six years ago, Lester Ross, a partner in WilmerHale’s Beijing office, shared an overview of environmental law in China. Here he offers update on the latest developments in the sector.

Q: The last time InsideCounsel spoke with you, you said there was a greater awareness of environmental problems, as well as heightened attention toward enforcement of environmental law, in China. How has the country’s attitude toward environmental law and enforcement evolved since then?

A: At the popular level, demonstrations now take place frequently against industrial projects that are perceived to be threats to the environment and/or quality of life, in several cases forcing changes. For example, there were demonstrations in Shifang, Sichuan, this past summer against a smelter. There also are demonstrations with respect to pollution problems for which the authorities have failed to take strong enforcement actions. For instance, demonstrations concerning Lake Tai resulted in the cleanup or closure of multiple industrial plants which had been dumping untreated or undertreated effluent directly into the lake, causing fish kills, and prohibitions on the use of lake water for human consumption and agricultural use. In Beijing, monitoring of air quality by the U.S. Embassy helped to arouse public discontent, leading the government in Beijing and some other parts of China to accelerate publication of particular matter (PM) 2.5 concentrations, rather than just PM 10 concentrations.

With respect to legislation, several laws have been enacted or amended, including the Promotion of the Cycle Economy Law (effective 2009) and the Tort Liability Law (effective 2010), which includes a chapter on environmental torts as well as numerous central and local government regulations and several Supreme People’s Court interpretations. The Environmental Protection Law (1989) also is being amended for the first time since its enactment—a draft was published in August for comment. 

Enforcement has been tightened, though it is still inadequate. Among the tightened enforcement measures are stiffer disclosure requirements in credit applications.

Q: Six years ago, you noted that China was particularly focused on environmental reform in preparation for the 2008 Summer Olympics. Has the focus died down in the wake of the games, or is environmental law and compliance still a major priority?

A: It is less of a priority for the relevant municipal governments [Beijing regarding the Olympics, Shanghai regarding the 2010 World Expo)]now that the events are over, but the projects conducted in association with the events accomplished a great deal with respect to environmental quality, including accelerated relocation and/or upgrade of industrial facilities, and the relevant governments are more aware of the importance of environmental quality for the economy and society.

Q: In 2006, you said the central government was giving more power and resources to China’s top environmental watchdog, the State Environmental Protection Agency (SEPA). How has SEPA grown since then?

A: SEPA has been upgraded to a full ministry, the Ministry of Environmental Protection (MEP), and there are unconfirmed reports that MEP’s authority may be expanded at the next meeting of the National People’s Congress to incorporate functions of other ministries. The Ministry and local environmental protection departments and bureaus have somewhat greater enforcement authority and public support. 

Q: What advice do you have for U.S. companies that are just beginning to do business in China as far as environmental law is concerned? What resources should they consult? How can they ensure they are complying with the law?

A: First, understand that China does have laws and regulations that require compliance. Second, anticipate applying the same high standards in place at the corporate level for operations elsewhere in the world, but recognize that Chinese documentation and approval requirements are different yet must be complied with. Third, if there are unreasonable local regulations or standards that may affect the project, try to have them revised before getting underway. Fourth, have Phase I and, if recommended, Phase II environmental due diligence conducted before acquiring and certainly before building on or operating a facility to establish a base line between the presence of  pre-existing and new pollutants. Fifth, conduct preemptive community outreach/public relations if there is any reason to anticipate public misunderstanding or fear about the project. Sixth, be sure to have good internal and/or external environmental and legal advisers to guide the process.

Ashley Post

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