Draft criminal law increases environmental liability

In August, the 11th National People’s Congress of the People’s Republic of China reviewed the draft eighth amendment of the PRC Criminal Law. One of the major focuses of the draft amendment appears to be to lower the threshold for conviction for crimes of environmental pollution. This is yet another aspect of what seems to be a continuing trend by the government to toughen enforcement activities against persons and entities who cause pollution and/or contamination of the environment.

Stiffer penalties

Increasingly, stiffer penalties for activities which harm the environment are being imposed. Often, the penalty for such harm is in the form of fines, warnings, and/or orders for rectification. In the past year, however, there have been several publicized cases in which polluters that have caused serious pollution or contamination to public water areas have been arrested and charged with the crime of “endangering public security”. The maximum penalty for endangering public security is death. In contrast, the current maximum penalty for an “environmental crime” is only seven years’ imprisonment.

Here’s an example of one of those cases. In 2009, a company in Yan city, Jiangsu province, discharged poisonous waste water, causing serious contamination of public water. The contamination resulted in the cut-off of the supply of water to the areas surrounding Yan city, depriving 200,000 people of access to the water supply for approximately 66 hours.

The chairman of the polluting company was arrested, convicted of the crime of “dumping dangerous substances,” and sentenced to 11 years’ imprisonment. The crime for which he was convicted falls under the category in the PRC Criminal Law of “endangering public security”.

In convicting the chairman, the court found that he had clear knowledge not only of the poisonous substances in the company’s waste water but also of the serious consequences that such substances could cause. The court further found that the chairman, despite this knowledge, still let the polluting company discharge the waste water without taking any measures to protect the environment – even after the local environmental protection bureau had earlier penalized the polluting company and had ordered it to rectify the waste water problem. Because the court determined that the chairman had “wilful intent” to let the serious contamination happen, it convicted him of the crime of “dumping dangerous substances”, instead of an “environmental” crime (which lacks, as an element, a “willful intent” to cause the pollution).

Draft amendment

Article 338 of the PRC Criminal Law currently in effect stipulates that the following conditions must be met in order to convict a polluter for the crime of “serious environmental pollution incident”:

• the polluter dumps “hazardous waste”; and
• the polluter causes a serious environmental pollution incident which results in serious loss of public or private property, or in injury or death to a person.

The draft amendment, among other things, reduces the damage requirement, broadens the scope of activities that are subject to penalty, and changes the above-mentioned conditions to the following:

• the polluter dumps “harmful substances”; and
• the polluter causes serious environmental pollution.

Under applicable laws and policies, what substances constitute “hazardous wastes”, generally, are well-defined. In contrast, the scope of “harmful substances” is not yet definitively defined or described – however, it seems that the threshold for those substances which qualify as “harmful substances” is a lower one than that which applies to “hazardous substances”.

The proposed changes in the criteria for a “serious environmental pollution incident” suggest that the draft amendment aims to expand the scope of what types of polluting activities involve criminal liability – thereby, the threshold for when those activities amount to a crime is lowered. Moreover, the draft amendment removes the requirement that loss or injury be established.

The draft amendment also provides some insights into punishments applicable to certain activities involving harmful discharges or emissions. For instance, anyone who (i) discharges, dumps or disposes of radioactive waste, waste containing pathogens of contagious diseases, toxic substances or other hazardous substances, and (ii) causes serious environment pollution, could be subject to imprisonment of up to three years, and also could be subject to fines. In extreme cases, where serious harm is caused to the environment, the draft amendment indicates that stricter penalties should be imposed – e.g. a minimum of three years up to a maximum of seven years imprisonment, together with a fine.

Trend towards greater liability?

The contents of the draft amendment, reported cases and recent regulatory developments collectively indicate that there is some momentum among PRC courts and regulatory bureaus to increase enforcement efforts and to impose harsher penalties for activities which result in environmental harm.

The draft amendment proposes a lowered threshold for what types and magnitude of activities can give rise to criminal liability for environmental pollution. As mentioned above, company managers now are potentially at greater risk of criminal liability for their failures to recognize and manage the risks of environmental pollution. And, among some of the significant aspects of the PRC Tort Law, which came into effect several months ago, is the special focus that it places on environmentally related torts and the increase in the number of ways for victims of environmental pollution to seek redress for the damage which they have suffered.

Only time will tell, however, whether such regulatory momentum will develop into a concerted and consistent pattern of enforcement of the PRC’s
environmental laws and regulations.

Beatrice Schaffrath regularly advises on China-related environmental law and compliance matters
Zhang Danian is the chief representative of the Shanghai office of Baker & McKenzie