MEE Opinions aim to clarify application of laws, expand the scope of illegal behaviour, and introduce new administrative penalties.
The Department of Laws, Regulations, and Standards of China’s Ministry of Ecology and Environment (MEE) recently issued a notice of Public Consultation for the Opinions on Several Issues on the Application of Laws concerning Administrative Penalties for the Illegal Activities of “Production before Final Acceptance” (the 2019 Public Consultation).
This blog will discuss the background to the 2019 Public Consultation, and the MEE Opinions that aim to clarify application of laws, expand the scope of illegal behavior, and introduce new Administrative Penalties.
State Council Regulations 1998 and 2017
In November 1998, China’s State Council promulgated the Regulations on the Administration of Construction Project Environmental Protection
(RACPEP 1998). In 2017, the State Council amended RACPEP 1998, deleting several articles and adding new provisions and content (RACPEP 2017).
In relation to construction projects, RACPEP 2017 requires construction enterprises to submit environmental impact reports for review by government departments. If a project has changed in nature, scale, location, and/or manufacturing process since approval, the applicant must revise and resubmit environmental impact reports. Approved environmental impact reports are valid for five years: if construction begins more than five years from the approval date, the project’s documents must be submitted and reviewed again.
RACPEP 2017 also requires the inspection and approval of environmental protection facilities built alongside construction projects prior to use. RACPEP 2017 urged construction enterprises to make inspection reports publicly available, unless national regulations require confidentiality.
2019 Public Consultation
Since the implementation of RACPEP 2017 on October 1, 2017, China has experienced transitional difficulties in moving from RACPEP 1998 to RACPEP 2017, particularly in relation to Administrative Penalties. Administrative Penalties are assessed and levied in cases of “production before final acceptance” (PBFA). PBFA describes a situation in which the main project has been constructed, and has been put to use, but the required environmental protection facilities are incomplete, have not been approved by the regulators, or have failed to pass inspection.
The 2019 Public Consultation describes a PBFA as an “illegal activity,” and sets out MEE’s Opinions on the application of laws regarding Administrative Penalties.
The 2019 Public Consultation outlines the following proposed general rules in relation to Administrative Penalties:
Relevant Legal Provisions
RACPEP 1998 provided for the suspension of production or use of a construction project, and a fine of up to RMB 100,000 as the penalty for PBFA. This provision was abolished by RACPEP 2017. In its place, the 2019 Public Consultation proposes the following regulation:
“Where a construction project goes into production or is delivered for use without the completion of construction of environmental protection facilities required for the construction project or without undergoing or passing approval inspections in violation of the provisions of the Regulation, or where falsified information is provided during the examination and acceptance of environmental protection facilities, the violator shall be ordered to correct within a time limit and imposed a fine of not less than 200,000 yuan but not more than 1 million yuan by the environmental protection administrative department at or above the county level; if the violation is not corrected within the time limit, a fine of not less than 1 million yuan but not more than 2 million yuan shall be imposed; the management personnel with direct responsibilities and other responsible personnel shall be fined not less than 50,000 yuan but not more than 200,000 yuan; if major environmental pollution or ecological damage has occurred, the production or use of the construction project shall be ordered to be suspended, and the construction project shall be ordered to be closed upon the approval of a competent people’s government with approval authority.”
The inclusion of providing falsified information is a significant expansion of the conduct proscribed under RACPEP, as are the addition of a time limit for rectification and variable fines. Further, new language providing that projects causing major ecological damage or environmental pollution will be subject to closure represents a significant statement of “zero tolerance” for flagrant violation of environmental laws. Previous penalties included only suspension of production or use.
Application of Laws
The 2019 Public Consultation proposes that, according to general rules on the application of laws, if a PBFA occurred before the implementation of RACPEP 2017 and the Administrative Penalty decision is made after the implementation of RACPEP 2017, RACPEP 1998 will apply unless the administrator’s legal rights and interests would be favored by application of RACPEP 2017.
Application of Laws in Specific Situations
The 2019 Public Consultation sets out the following Opinions on the application of RACPEP 1998 and RACPEP 2017 to specific situations:
- If a PBFA occurred after the implementation of RACPEP 2017, that regulation would govern penalties.
- If a PBFA occurred before the implementation of RACPEP 2017, and continued after October 1, 2017 (a “continuing breach”), that regulation would govern penalties.
- If a PBFA ended before the implementation of RACPEP 2017, that PBFA would be penalized in accordance with RACPEP 1998, unless the administrator’s legal rights and interests would be favored by application of RACPEP 2017.
- If, before a PBFA is penalized, the environmental impact assessment category of the project was legally changed from environmental impact statement or reporting form to environmental impact registration form, then the PBFA would be exempt and would not be penalized. However, if the project applicant fails to file an environmental impact registration form according to law, the construction unit would be penalized under Article 31(3) of the Environmental Impact Assessment Law.
The 2019 Public Consultation attempts to clarify the application of RACPEP 1998 and RACPEP 2017, extend the classification of illegal activities qualifying as a PBFA, and implement new Administrative Penalties.
The consultation deadline is August 2, 2019.
Latham & Watkins will continue to monitor developments in this area.
This post was prepared with the assistance of Zhuoshi Liu at the Environmental Law Institute in Washington, D.C., and Martin Cassidy in the London office of Latham & Watkins.