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Environmental Protection Series No. 4: Challenges and Countermeasures regarding Environmental Compliance Inspections

2019.09.19 ZHU, He (George)NI, Tianling (Carey Nee)

Introduction: Following the “Environmental Protection Storm”, the central government’s environmental compliance inspections initiated in 2016, the Ministry of Ecology and Environment (“MEE”) have now launched a second round of inspections in 2019. The inspections focus on the prevention and control of pollution and a goal of three years has been set for the next round of central government’s routine inspections regarding ecological and environmental protection and one year for an investigation into “identified issues”. The inspections happened in July and occurred in the provinces and cites of Shanghai, Fujian, Hainan, Chongqing, Gansu, Qinghai and included two state owned enterprises, China Minmetals Corporation and China National Chemical Corporation Ltd. Enterprises will face more and more challenges arising from governmental investigations into environmental protection...

These new rounds of central inspections regarding environmental protection have just begun. On July 8, MEE sent letters to various provinces, cities and companies that have been inspected with regard to a “One Size Fits All” issue which the enterprises are most interests in, which prohibit absolute “One Size Fits All” and “Excessive Accountability”. Many enterprises are confused by these administrative cases and are concerned about the protection of their own legitimate rights and interests. In this context, we will briefly introduce some countermeasures that enterprises may adopt when facing environmental administrative cases.

1. Verification of the Case Facts

In an administrative investigation by a law enforcement department, enterprises should first compare the facts asserted by the environmental law department with the facts of their own environmental management. If the enterprise finds that the facts asserted by the law enforcement department are wrong or exaggerated, enterprises should prepare background materials, which should include, but not limited to, an introduction, documents, photographs and third-party reports. Upon the confirmation of facts, enterprises should ascertain clarification from the law enforcement department (if necessary).

2. Attention to Procedures and Timelines

Businesses should pay attention to the procedures and timelines of the case when receiving documents from law enforcement departments. Specifically, the law enforcement departments, before deciding to impose administrative penalties, shall notify the party of the relevant facts, grounds and the right of the state to defend itself in accordance with the law. Law enforcement departments shall notify the concerned party of their right to request a hearing before making a decision on an administrative penalty that could involve an order for the suspension of production or the suspension of business, the temporary suspension or revocation of the business license and a fine, or the confiscation of more than RMB 50,000 (applicable to enterprises). Enterprises shall submit a statement for the hearing and their defense in a timely manner.

3. Communication with environmental lawyers

Where a hearing is applicable, in addition to the submission of the receipt of the hearing, enterprises may also submit a written application which contains the reasons they are questioning the facts of the case and/or the application of the law held by the law enforcement department, together with the evidence. In the application for a hearing and the defense statement, any questioning of the facts and the application of the law shall be well-grounded, and be prepared on the basis of sufficient communication with professional environmental lawyers, in order to ensure the accuracy of the facts. It shall be supported by sufficient evidence, and be free from irrelevant content or an emphasis on unhelpful information.

4. Tracing the Process of the Case Further

A decision on the administrative penalties for environmental protection shall be made within three months after the case is placed on file (excluding the time of hearing, announcement, monitoring, examination, delivery, etc.). In practice, law enforcement departments may contact enterprises for further information after the hearing and enterprises may still have the opportunity to supplement defensive statements. Enterprises shall trace the process of the case and protect their own legitimate rights and interests within the parameters of the law enforcement departments’ discretion. Moreover, enterprises may further improve their environmental compliance management through communication with the law enforcement departments. If necessary, enterprises may protect their own legitimate rights and interests by means of administrative reconsideration or an administrative lawsuit after receiving a formal decision for an administrative penalty issued by the law enforcement departments.

5. Conclusion and further suggestions

Regarding the state’s strengthening of environmental compliance inspections, enterprises can refer to the several points above to undertake countermeasures for administrative investigation. According to the law and our practical experience, enterprises will not attract heavier penalties merely due to undertaking their defense. In addition, considering that the Ministry of Ecology and Environment explicitly states that the law enforcement departments, in giving administrative penalties shall follow the principles of being “Reasonable, legitimate, open, fair and just and, that punishment is equal to the crime,”, we take the view that enterprises may protect their own legitimate rights and interests through due process and effective defense under the legal regime. Even in a case where the illegal act occurred, enterprises can strive for an exemption of the penalty under legitimate circumstances or apply for the lowest fine within the range stated. The participation of environmental lawyers can help enterprises during different phrases such as during the defense, hearings, administrative reconsideration, administrative lawsuits, etc. With regard to countermeasures for coping with administrative cases, we will continue to update you.

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