Ferris-USCBC: Clearing the Air

©2015 Foley & Lardner LLP

Clearing the Air,

Understanding China’s Environmental Protection Law

US-China Business Council, April 2, 2015

Tad Ferris, Partner

Co-Chair, Greater China Regulatory Practice

©2015 Foley & Lardner LLP ©2015 Foley & Lardner LLP

Agenda

• China’s 2014 Environmental Protection Law (EPL) amendments - understanding the environmental, legislative and regulatory context for these amendments.

• Examples of Key Provisions in the 2014 EPL

• Implementing the 2014 EPL

• Enforcement and Litigation under the 2014 EPL

• USCBC Members and the 2014 EPL – A Discussion of Next Steps

• Q&A

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Context - Environmental

• The Environmental Context is Evident

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Context - Legislative

• The EPL was China’s first environmental statute,

enacted “for trial implementation” in 1979,

abrogated 10 years later with the adoption of the

1989 EPL (predecessor to the 2014 EPL).

• The 1979 EPL established a number of key

principals, including those supporting citizen

reporting of polluters, construction project

environmental approvals, and restrictions on

transfer of facilities that cause severe pollution to

entities that are unable to control such pollution.

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• The National People’s Congress and drafters at the now Ministry of Environmental Protection (MEP) deliberated for years over adjustments to the 1989 EPL. The most controversial issues included economic impacts of increased financial penalties.

• One question continually arose, essentially asking: “why update the EPL again given the massive growth of environmental law in China since 1989?”

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• The answer, involving the enactment of the amended EPL in 2014 (25 years later), reflects considerations such as the need for a primary statutory basis for key principals (including those listed as examples on the next slide, from among the more than 30 key adjustments to the 1989 EPL).

• The EPL is best understood as an “enabling statute.” As such, a key role for the EPL is serving as the source of authority and inspiration for countless implementing measures.

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Examples of Key Provisions (Excerpts)

• Article 5: Protection first, public participation, and focus on prevention.

• Article 8: New media to play proper role in advocacy, outreach, education, supervision and other environmental protection activities.

• Article 15: More autonomy to local governments to draft more stringent environmental quality standards.

• Article 26: Establishment of a performance evaluation system for people’s government’s at or above the country level, with evaluation results to be made public.

• Article 36: Prioritization of procurement of “green” products.

• Chapter 5: Environmental information disclosure, public participation , citizen suit rights and obligations.

• Article 59: Institution of continuous daily fine penalty program.

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Context - Regulatory

• Implementing the 2014 EPL. Since enactment on April 24, 2014, a number of measures have been issued to “flesh out” particular aspects of the amendments. This underscores the additional time needed for these amendments to “gain traction on the ground” in China.

• Examples of implementing measures include:

– Measures of the Environmental Protection Administrative Department on [Property] Seizure and Detention (MEP December 19, 2014, effective January 1, 2015). (Article 25)

– Measures on Environmental Information Disclosure for Enterprises and [Other] Entities (MEP December 19, 2014, effective January 1, 2015). (Articles 53, 55)

– Measures of the Environmental Protection Administrative Department on Implementing Consecutive Daily Fines (MEP December 19, 2014, effective January 1, 2015). (Article 59)

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Enforcement and Litigation

• Earlier this year, MEP announced enforcement results tied to the 2014 EPL.

– The announcement, at a media event, recounted 12 enforcement cases. Two involved daily consecutive fines (per Article 59), two more involved manufacturing equipment seizures (Article 25), another four involved responsible person administrative detentions (Article 63) and the remaining four involved criminal charges (Article 69),

• Resources:

– MEP releases quarterly reports on environmental enforcement and violation information. There is some lag time in government report availability. For example the recently published report for the third quarter 2014 is at the following link: http://www.mep.gov.cn/gkml/hbb/qt/201412/t20141208_292592.htm

– More current information is available via periodic media announcements, such as noted above.

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https://urldefense.proofpoint.com/v2/url?u=http-3A__www.mep.gov.cn_gkml_hbb_qt_201412_t20141208-5F292592.htm&d=AwMGaQ&c=Rlm5WhGmPEr8srpDE4r86Q&r=8vPHAvJuHX32jie82hTQlfpHJW9JfYKG5Dv_ac_7RRE&m=URKFwxf9HQ80gqLRSRxeNpb_JRcvoKZF4FyObL4_khA&s=z9B5PcyMSNAr6pvvKfZ5ngqTJnxxfDrp9aehbCOg9A4&e=



• Examples of three environmental organization law suits

filed in the first month after the 2014 EPL entered into

effect.

– One: Friends of Nature and Fujian Green Family. Against four

individuals for illegal mining and deforestation activities.

– Two and Three: All China Environment Federation. Including a

suit against Dejian Chemical Plant for noncompliance,

including alleged violations of hazardous waste laws. Also

including a case against Dongyin Jinruilian Electronic

Materials, for alleged discharge and emission of toxic

substances into water, air and soil, in violation of

environmental protection laws.

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• Should we expect significant growth in the number of citizen environmental suits this year?

• Challenges Remain:

– Qualification of Groups. (Registration with Department of Civil Affairs, engaged in environmental protection activities for five or more consecutive years, etc.)

– Funding. Preliminary investigations and legal fees pose a very significant burden for Chinese environmental groups.

– Capacity. Legal professionals are in short supply in local environmental groups. This creates difficulties where environmental groups are expected to take the leadership role in such suits.

– Political Pressures. Local protectionism remains strong in some instances, which can be a very significant issue when a citizen group is bringing a case against a major local taxpaying enterprise.

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The EPL and Your Company

USCBC Members and the 2014 EPL –

A Discussion of Next Steps

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Thank you very much! 多谢！

Questions? 问题？

About Tad Ferris, Partner and Co-chair, Greater China Regulatory Practice, Foley & Lardner LLP. Tad has spent the better part of his career working on China environmental, healthcare and other regulatory and risk-management issues in China on behalf of multinational and other clients. He is also general counsel of the China EHS Roundtable, an association of companies committed to leadership in the compliance and sustainability areas in China. As part of his work, he frequently meets with Chinese law drafters and enforcement authorities.

Direct dial (USA): 02-295-4090; [email protected]

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