When Environment Meets Bankruptcy: Global Lessons for and from China

Abstract

China has firmly committed to achieving its 2030 Carbon Peak and 2060 Carbon Neutral goals. However, the rising number of bankruptcy cases involving environmental concerns has posed significant challenges. A fundamental tension persists between the public interest nature of environmental claims and the private rights-focused bankruptcy law. This article conducts a systematic study of environmental issues in Chinese bankruptcy proceedings, with a comparative analysis of the experiences of other jurisdictions. This article argues that a comprehensive review of environmental regulations and bankruptcy laws is necessary, and a balanced approach should be adopted. First, environmental claims can be categorised as either bankruptcy expenses or common debts, thereby receiving preferential treatment. Additional measures could be taken, such as prioritising environmental claims in creditors' ranking, exempting environmental actions from automatic stays or disallowing the abandonment of onerous property. Second, the bankruptcy law should mandate that insolvency practitioners duly consider environmental issues and allow environmental regulators and other relevant stakeholders to participate directly in the bankruptcy process.

Keywords: Environment, Bankruptcy, Public Interests, Private Rights, China