The Tsunami of March 2011 and the Subsequent Nuclear Incident at Fukushima: Who Compensates the Victims?
91 Pages Posted: 9 Feb 2013
Date Written: February 8, 2013
It is well-known that there are major environmental problems in China. Some hold that China has become one of the world’s largest polluters. Hence, many efforts are undertaken to create institutions aiming at the prevention of environmental harm in China. A topic that, however, also becomes increasingly important is what remedies are available for environmental damage after it has happened. To accurately analyse these remedies from a theoretical and practical perspective is precisely the goal of this article.
We describe that, strikingly, on paper environmental law in China is quite elaborate and developed. Various special statutes already had strict liability, but a recent tort liability law (of 2009) generalised strict liability for environmental harm, thus also putting an end to earlier disputes in legal doctrine and in case law. Moreover, the burden of proving causation is reversed to the benefit of the victims.
However, as we mentioned, the goal of our article was not only to analyse the compensation for environmental harm in China from the legislative perspective (sometimes referred to as law in the books) but also to examine how victims can in fact get compensation in practice (referred to as law in action). Practice shows a totally different picture than theory. Barriers to access to justice for victims seems to be considerable and clean up actions are often not undertaken at all. Moreover, the only entity asking compensation for environmental harm is often the government. The reason for claiming remediation e.g. of polluted soils is than not so much the long-term restoration of the environment, but rather a clean up to make the redevelopment of the land possible. Hence, clean up is often paid for by new developers, but not by past polluters. The fact that these past polluters often are state owned enterprises may of course explain this.
Given the relatively limited exposure to environmental liability it is also not surprising that environmental insurance in China is not very well developed. Theoretically there are quite a few possibilities to obtain insurance coverage and various national companies offer a variety of environmental insurances, also backed up through international reinsurers. However, supply is still limited compared to other countries and moreover demand is very low. The low demand is inter alia caused through the relatively high premiums and the limited coverage which is provided. Environmental liability insurance is moreover not compulsory.
The only domain which shows a somewhat different picture is marine oil pollution. This is largely due to the fact that China has joined the Civil Liability Convention (CLC) which forced signatory states to introduce mandatory financial security (like insurance) for the liable tanker owners. Even though (like in the international regime) the liability of the tanker owner is limited the practice shows that to a large extent compensation and remediation for marine pollution occurs in a much more satisfactory way than with land based pollution. The reason is not only the mandatory financial security imposed via the CLC, but also the fact that so-called protection and indemnity clubs (risk sharing agreements between tanker owners) provide this financial coverage. Moreover, various specialised agencies (like the State Oceanic Administration) are competent to clean up environmental harm and to claim for compensation from polluters. Also court cases show that in some cases polluters causing marine environmental pollution are exposed to serious compensation awards.
We therefore conclude in this article that on the one hand China is well on its way to improve compensation for environmental harm via better legislation. However, especially as far as the area of land pollution is concerned important steps still need to be taken to improve access to justice for victims. Moreover, clear rules e.g. on damage assessment are also lacking. The latter is also a problem in the only field where remediation occurs in a more satisfactory way, marine oil pollution. Experts complain that clear criteria to assess environmental damage are often lacking.
There is, so we show, an important evolution as far as compensation of environmental harm in China is concerned. The development is certainly in the direction of more adequate compensation and remediation. However, still many issues need to be clarified. This not only concerns adequate assessment rules, but for example also a duty to remediate past pollution. The important challenge for China now is how to implement the available legislative tools at a practical level. Given the increasing environmental awareness in the Chinese population it can be expected that victims will increasingly claim compensation and governments may increasingly become active in claiming remediation of the polluted environment. These steps are important, so we argue, since they will better expose polluters to the full social costs of the environmental pollution they are causing. This will in the end be an important result since it may provide polluters ex ante incentives for better prevention of environmental harm. Thus an adequate compensation system can also stimulate investments in precautionary measures aiming at the prevention of environmental pollution.
The enclosed article is hence based not only on analysis of legislation, policy documents, legal doctrine and case law in China. We have, moreover, analysed the available recent empirical literature describing problems that victims of environmental pollution encounter in China. Moreover, we have conducted many interviews with experts in China (in the Beijing and Guangzhou areas) providing us valuable information on the practice of compensating environmental harm in China.
Keywords: Fukushima, nuclear liability, insurance, regulation, financial cap, limit on liability, disaster, government intervention
JEL Classification: K32, K13, K33
Suggested Citation: Suggested Citation