The Tuo River Pollution Case

The Disaster. Water supplies for about one million people in the Tuo River region of Sichuan were contaminated from late February to March 2004. Over 1,000 businesses were forced to shut down operations during this period. The cause of the pollution was the continuing release of untreated industrial wastewater from Sichuan Chemical Limited Company(四川化工股分有限公司), a large state-owned fertilizer factory (hereafter, Sichuan Chemical). Pollutants were released into the Tuo River unchecked for over 20 days before the fertilizer factory was finally ordered to shut down and emergency measures implemented to address the disaster. Total damages caused by the pollution were estimated at Rmb300 million. It is anticipated that it will take at least five years for the Tuo River to recover to its former state.

Criminal Liability for Management and Government Officials. This month two separate criminal trials began in the Sichuan Chengdu Jinjiang District People's Court. The first is the prosecution of the three managers of Sichuan Chemical: the former general manager, deputy manager and the chief in charge of environmental safety. They were each charged with causing large-scale pollution to the Tuo River region. Under the PRC criminal code, if convicted, such crimes could carry a maximum sentence of three years' imprisonment, or if the circumstances are deemed to be particularly serious, the sentence could be up to seven years. The second trial was the prosecution of three former officials at the local Environmental Protection Bureau, including the former deputy head of the agency, who were each charged with criminal negligence in the monitoring and supervision of environmental protection. Under the PRC criminal code, if convicted, such crimes could carry a maximum sentence of three years. Criminal prosecutions show that there is some determination to deal with this disaster in a serious manner.

Administrative Liability. This tough stance with respect to individual responsibility for pollution was countered by a softer stance towards the enterprise. The Environmental Protection Bureau of Sichuan Province ruled the maximum administrative penalty for which Sichuan Chemical would be liable was Rmb1 million, which was significantly less than the estimated costs of Rmb300 million for damage actually caused.

Liability to Private Parties. More importantly, to date there appears to be an absence of private claims for compensation. According to some news reports, local governments have asked affected businesses to "have patience and try to avoid litigation in order to maintain social stability". The former head of Sichuan Chemical's parent company (who resigned because of the Tuo River case) maintains that if Sichuan Chemical is sued and ordered to pay full compensation, it would force Sichuan Chemical into liquidation and thousands of local workers would lose their jobs. This reasoning is being used to persuade businesses that suffered losses to accede to the local governments' wishes not to go to court.

Conflicts of Interest and Compromises. The government's approach in the Tuo River case is driven by its multiple roles:

· as owner of Sichuan Chemical, a state-owned enterprise; the government is also a victim as it bears much of the financial and environmental costs;

· as regulator, the government is also partly responsible for the disaster since the government's officials were alleged to be criminally negligent in halting the flow of contaminants; and finally,

· as judge and mediator, the government has been active in dealing with the aftermath of the disaster: ordering Sichuan Chemical to install the necessary environmental protection equipment; using significant amounts of government funding to clean up of the Tuo River; coordinating various businesses and parties to share the burden of the damages caused; and trying to minimize the loss of jobs in the local economy by not forcing Sichuan Chemical to liquidate.

It seems unlikely that the pragmatic approach taken by the Sichuan provincial and local governments in the Tuo River disaster offers a precedent for dealing with pollution cases in which significant foreign investors or lenders may be involved. In this case, government authorities are balancing competing local and governmental interests, all of which are perceived to have limited resources. Authorities have also not been focusing on uniform enforcement of the law or trying to create deterrents to future accidents.

National Perspective. On a national level, however, it seems that environmental disasters such as the Tuo River case are prompting the central government to take greater action, at least in the area of policymaking. Recently, top national leaders have been speaking about the importance of environmental protection in China's sustainable development; scholars have been advocating increasing the administrative penalties for environmental pollution; and the State Environmental Protection Administration will implement the Green GDP system on a trial basis. (Green GDP system is gross domestic product less environmental damages and less resources consumed). When it comes to disputes, however, a more uniform and transparent use of environmental laws has not been a frequent topic.