A little over a year ago, on January 1, 2015, China’s amended Environmental Protection Law (“EPL”) went into effect, representing a significant aspect of China’s concerted effort to place greater emphasis on environmental protection. See Huanjing Baohu Fa (环境保护法) [Environmental Protection Law] (promulgated by the Standing Comm. Nat’l People’s Cong., Apr. 24, 2014, effective Jan. 1, 2015). The new EPL provisions, consisting of 70 wide-ranging articles, were the first revisions to the EPL since 1989. The revisions not only opened the door for increased public participation in general, but also enhanced the ability of certain environmental organizations to file public interest lawsuits, commonly referred to in the United States as “citizen suits.” Although the impact of the revised EPL remains to be seen, the advent of meaningful citizen suits in China could be a watershed moment in Chinese environmental litigation, as was the case when citizen suit litigation was introduced into the United States decades ago.
Historic enforcement of environmental laws in China has been relatively lax, in part due to the country’s decentralized legal system where local environmental protection boards have most of the enforcement power but have not wielded it effectively. Citizen suits could potentially enhance the role that enforcement plays in promoting achievement of environmental protection and standards. That dynamic is especially noteworthy inasmuch as China’s Ministry of Environmental Protection (“MEP”) – China’s counterpart to the U.S. Environmental Protection Agency (“EPA”) – has only limited resources to devote to administration and enforcement of environmental requirements. MEP, for example, only has 300 employees to fulfill its mission, whereas the EPA has close to 17,000. Thus, citizen suits, which allow nongovernmental organizations (“NGOs”) to serve as “private attorneys general” in enforcing environmental protection laws when the government does not act, clearly could have major impacts on the landscape of Chinese environmental litigation and the potential environmental liabilities companies operating in China face.
The Revised EPL: Opening the Door to Public Interest Litigation
For 30 years, China has allowed private plaintiffs to pursue pollution-related tort claims. See generally General Principles of the Civil Law of the People’s Republic of China (adopted in 1986). NGOs, however, faced various difficulties bringing lawsuits for environmental degradation and natural resource damages on behalf of the public interest. The revised EPL, which was the product of three years of debate, was intended to pave a smoother path for NGOs to bring such suits.
Article 58 of the revised EPL establishes the conditions under which “social organizations” may file suit regarding activities that cause environmental pollution, ecological damage, or “social public interest” harm. EPL, Art. 58. In essence, an organization must: (1) be legally registered with the civil affairs departments at the prefecture level or higher; (2) have been continuously and especially active in environmental public interest activities for at least five consecutive years; and (3) have no record of violating Chinese law. Id.
The Supreme People’s Court’s Interpretation of the EPL
Shortly after the amended EPL took effect, China’s Supreme People’s Court (“SPC”) issued a judicial interpretation regarding environmental civil public interest litigation. Interpretations of the Supreme People’s Court on Issues concerning the Application of Law in the Trial of Environment-related Civil Public Interest Lawsuits, Fa Shi  No. 1 (Jan. 6, 2015). The SPC crafted its interpretation, consisting of 35 separate articles, according to the Civil Procedure Law of the People’s Republic of China, the Tort Law of the People’s Republic of China, and the EPL. Among other things, the SPC’s interpretation clarifies which organizations may file public interest lawsuits and under what conditions, prescribes which courts have jurisdiction over such lawsuits, addresses liability standards and the burden of proof, and sets forth the remedies that a court may order.
The first article of the interpretation appears to signal the SPC’s support for public interest litigation in general. More specifically, it provides that the people’s courts“shall accept” lawsuits that are filed in accordance with applicable law -- including the Civil Procedure Law and the EPL -- by “legally designated institutions and relevant organizations . . . against the 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.” SPC Interp., Art. 1 (emphasis added). Thus, the SPC made clear that courts have jurisdiction not only for claims alleging past and ongoing harm, but for those alleging likely future harm as well.
Notably, the SPC interpretation assigns people’s courts at the intermediate level or above with initial jurisdiction over public interest lawsuits. That arrangement seeks to prevent local protectionism, i.e., situations where local governments attempt to influence basic people’s courts’ decisions regarding whether to accept lawsuits against polluters who contribute to the local economy.
The SPC’s interpretation also fleshes out the provisions of the EPL addressing citizen suit “standing,” i.e., the conditions that must be met for an NGO to bring a public interest lawsuit. First, the SPC interpretation explains that “[s]ocial organizations, private non-enterprise units, foundations and others registered in the civil administrative departments of the people's governments at the city (divided into districts) level or above in accordance with laws and regulations” qualify as “social organizations” that may file suit against activities that cause environmental contamination, natural resource damage, and public interest harm. SPC Interp., Art. 2. Second, the SPC interpretation explains that “[w]here a social organization's purpose and main business scope specified in its articles of association are to maintain the social public interests and it is engaged in public environmental protection activities, it can be identified as ‘specially engage[d] in public environmental protection activities,’” a precondition to suit under the EPL. SPC Interp., Art. 4. However, the interpretation adds that the “social public interests involved in the lawsuit filed by a social organization” must be “related to its purpose and business scope.” Id. Third, the SPC’s interpretation makes clear that the NGO must not have been subject to sanctions for violating any laws or regulations by virtue of its business activities in the five years leading up to the lawsuit. See SPC Interp., Art. 5. It remains to be seen how these interpretations will be applied by the people’s courts, and whether they will be used to constrict or heighten the ability of NGOs to bring suit.
There are many other notable provisions in the judicial interpretation, all of which warrant close attention for those doing business in China. For example, with respect to available remedies, the interpretation states that 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.” SPC Interp., Art. 18. With regard to injunctive relief, the SPC interpretation provides that a court may entertain, in accordance with applicable law, 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.” SPC Interp., Art. 19. How reviewing courts will interpret and apply these provisions when awarding relief for meritorious claims remains unclear.
The SPC interpretation also addresses environmental restoration. Notably, a reviewing court may order the defendant to “restore the ecological environment to the state and function before the damage occurred.” SPC Interp., Art. 20. Where full restoration cannot be achieved, the interpretation allows “alternative restoration,” although that concept is not defined. Id. The interpretation does indicate, however, that –
[w]hile decreeing that the defendant shall restore the ecological environment, the people's court may determine the expenses for ecological environment restoration that the defendant shall bear when it fails to fulfill the obligation of restoration; or may also decree that the defendant shall bear the expenses for ecological environment restoration. The expenses for ecological environment restoration include the expenses for formulating and implementing the restoration plan and the expenses for monitoring and supervision.
Id. In other words, the SPC interpretation allows for both natural resource restoration and payment for both natural resource damages and costs associated with assessing those damages.
The judicial interpretation also authorizes attorney’s fees and costs, issues the EPL itself did not address. With respect to attorney’s fees, the SPC interpretation states: “Where a plaintiff requests the defendant to bear the expenses for inspection and appraisal, reasonable attorneys fee and other reasonable costs for litigation, the people’s court may provide support in accordance with the law.” SPC Interp., Art. 22. Unlike in the U.S., 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 of the SPC interpretation also seem to indicate broad “official support” for environmental public interest litigation. For instance, the interpretation authorizes “prosecuting organs, departments responsible for supervision and management of environmental protection, and other organs” to support NGOs in civil public interest lawsuits, including by assisting in investigation and collecting evidence. SPC Interp., Art. 11. Remarkably, the interpretation also directs the courts of first instance 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 directly in development of the evidence to be presented to the court. SPC Interp., Art. 14. 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 U.S.
In sum, the SPC’s interpretation attempts to add clarity to Chinese environmental civil public interest litigation and reflects the SPC’s effort to establish a framework for such litigation. There is uncertainty, however, as to the nature and extent of the impact the EPL provisions and this interpretation will have in Chinese courts going forward. Notwithstanding this uncertainty, decisions that have been handed down to date, including the landmark Nanping lawsuit discussed below, are beginning to shed light on this developing area of Chinese litigation.
Overview of Citizen Suit Litigation Under the Revised EPL
Reports indicate that as of November 4, 2015, Chinese courts had accepted 37 cases that were filed under China’s revised EPL. See Yanmei Lin & Jack Tuholske, Green NGOs Win China’s First Environmental Public Interest Litigation: The Nanping Case, 45 ELR 11102, 11103 (Dec. 2015). The majority of those cases were apparently pollution cases involving large companies, nine of which were rejected by the lower courts but then reversed by the provincial high courts. As a whole, experience to date reveals a mixed record regarding the receptivity of the courts to this new breed of suits by various NGOs.
The Nanping Case
One particularly noteworthy case among those decided to date is the so-called “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 allegedly illegal mining site. The two NGOs – Beijing-based Friends of Nature and Fujian Green Home – alleged that three defendants purchased a mining claim from the fourth defendant and then proceeded to carry out mining activities without obtaining the required permits. The mining activities allegedly began in 2008 and continued for a number of years despite repeated requests by local authorities to cease operations. The NGOs claimed that they met the revised EPL’s requirements needed to bring a public interest lawsuit, and, on January 1, 2015, the day the revised EPL took effect, the court accepted the case.
The Nanping case raised a number of issues of first impression. Among others, the court had to decide whether: (i) the NGOs had standing; (ii) the revised EPL, effective January 1, 2015, applied retroactively to defendants’ activities that began in 2008; (iii) the defendants’ actions amounted to ecological destruction harming the public interest; and (iv) the requested remedies were reasonable.
On October 29, 2015, in one of the first particularly notable reported citizen suit decisionssince the revised EPL went into effect, the court ruled in favor of the two environmental NGOs. In its groundbreaking decision, the court 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 that it could consider the SPC’s interpretation on public interest litigation. In this regard, the court determined that the defendants should bear civil liability because the ecological harm had not been remedied and continued to impact the public interest, even though the defendants’ activities leading to the ecological damage took place from 2008 to 2010, before the EPL was revised. In accordance with Chinese tort law, the court found the defendants jointly and severally liable.
The court ordered the defendants to pay a 1.27 million yuan ($200,000) fine and to remove all mining materials and waste rock from the site, to restore the site by planting new trees, and to ensure successful reforestation for three years. The court also ruled that failure to timely comply with the court’s order would lead to an additional 1.1 million yuan ($180,000) fine, which would have to paid to a special account that the court designated 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. Notably, because the revised EPL only authorizes recovery for interim losses, the court dismissed plaintiffs’ claim for actual damages for the permanent loss of the trees.
To prove the alleged ecological damages, plaintiffs used methods recommended by MEP, as set forth in a guidance document titled “Recommended Methods for Evaluation and Assessment of Environmental Damages.” MEP General Office No. 90 (2014). Resort to this government publication, as well as use of 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 held that plaintiffs’ claims were reasonable and therefore awarded plaintiffs 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 (i) injunctive relief to ensure the site is restored; (ii) monetary damages for certain ecological/natural resource damage; and (iii) attorney’s fees, expert consultant fees, and other litigation costs. Defendants had stated that they would appeal the decision to the Fujian Provincial High Court.
Noteworthy Developments Since the Nanping Decision
In what could be the largest fine imposed in a public interest environmental case in China, the SPC ruled on January 21, 2016 that six chemical, agrichemical and pharmaceutical companies must 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. 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 hydrocholoric waste acid 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.
Although beyond the scope of this article, a number of other notable citizen suits have been filed in recent months. These cases and forthcoming judicial decisions bear watching as harbingers of the likely impacts such suits will have on environmental enforcement in China. In that regard, the Supreme People’s Procuratorate (“SPP”) recently reported on the initial results of its pilot program designed, among other things, to enhance and expedite public interest claims. The SPP’s pilot program is intended to give local officials in certain provinces certain pre-trial authorities to address allegedly unlawful behavior adversely affecting the environment. The progress report summarizes some of the more significant enforcement efforts of local prosecutors related to environmental issues.
In another noteworthy development, measures are being taken to enhance the quality of scientific evidence that might be brought to bear in environmental citizen suits. Recognizing the increased number of environmental cases and public interest lawsuits, the SPC, SPP, and Ministry of Justice have stated that they are taking measures to ensure that scientific evidence is available in such cases. Toward this end, China stated in a Joint Announcement on January 14, 2016 that a development plan for creating highly-qualified forensic institutions will be announced in the future.
Implications of Citizen Suit Litigation 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 how such litigation might fundamentally change the landscape of environmental litigation in China. Companies doing business in China, therefore, would be wise to closely monitor how this area of law develops.
The experience with environmental citizen suits in the U.S. has taught 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 currently available in China to enforce environmental requirements, NGOs in that country may see the recently strengthened citizen suit framework there as a similar means to achieve environmental protection goals more expeditiously and effectively than would otherwise be the case. However, the current lack of ready access to government records and other information in China, in contrast to the relative ease with such information can be obtained in the U.S., may stymie NGO efforts to serve as “private attorneys general” in enforcing environmental laws.
Because the revised EPL and SPC interpretation do not clearly and fully address certain factors that will likely be central to the nature and effectiveness of citizen suits, further judicial interpretation and application of the EPL’s citizen suit provisions will need to occur before the contours and likely overall impact of such suits come more into focus. Factors that 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 will be able to qualify to bring such suits under the revised EPL, the SPC interpretation of the EPL’s citizen suit provisions, and the application by various Chinese courts of those provisions;
- in particular, whether Chinese courts will impose more stringent “standing” requirements for NGO plaintiffs that will restrict the ability of those organizations to bring suit (e.g., whether - as in the U.S. - NGOs bringing suits will have to have members who suffer actual or imminent injury from the activities complained of);
- the types of cases regarding which Chinese courts will allow citizen suits to proceed, and the scope of the relief those courts are willing to order;
- whether the courts will allow NGOs to proceed with such suits notwithstanding concurrent government proceedings of one sort or another addressing the same alleged 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 take measures to facilitate the introduction in such cases of the scientific evidence necessary to prevail in such cases;
- the willingness of courts to assess meaningful attorney’s fees and litigation costs, without which NGOs may find it difficult to finance and thus 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.
Given the experience to date, it is reasonable to expect that the NGO community will test in the coming year and beyond the limits of what it can achieve in human health and environmental protection through these enhanced rights to bring claims for environmental degradation and the natural resource damage. The results of these continuing early efforts may foreshadow the extent to which, as a practical matter, citizen suits are likely to substantially increase environmental liability exposure for entities doing business in China.