Recently, Shanghai Lujiazui Financial and Trade Zone Development Co., Ltd. (securities abbreviation: Lujiazui; securities code: 600663. SH) filed a hot search for a "toxic land" case claiming over 10 billion yuan from Jiangsu Sugang Group Co., Ltd. (hereinafter referred to as Sugang Group), government departments, and third-party institutions. The complex issue of soil pollution and the huge amount of claims have made the case even more complicated and confusing. The author will provide you with some sorting and evaluation from the perspective of resource and environmental law.

On October 17, 2016, a wholly-owned subsidiary of Shanghai Lujiazui Company jointly acquired 95% equity of Suzhou Green Bank Real Estate Development Co., Ltd. (hereinafter referred to as "Green Bank Company" or "Target Company"), with a total transaction amount of 8.525 billion yuan. The main assets of Green Bank Company are Su Di 2008-G-6 parcel located in the north of Su Tong Road and the east of Su Gang Road in Hushuguan Town, Suzhou High tech Zone, divided into 17 plots. Since 2022, 14 "toxic" cases have been identified in Lujiazui, with many elements in soil or groundwater significantly exceeding the standard, posing a serious pollution risk and not meeting the original planned land use standards of the plot. Subsequently, a series of rights protection measures were promoted, including recent lawsuits to the court.

After consulting multiple announcements from Lujiazui and the legal opinions issued by its law firm during the transaction, the main terms related to excessive soil pollution on the land include: soil and groundwater (not) contaminated, many elements in soil or groundwater significantly exceeding the standard, national and local environmental quality standards, etc. It is necessary for us to understand the specific standards for determining whether there is pollution.

1、 Ecological Environment Standards and Their Application

The development of ecological environmental standards is accompanied by the development of environmental laws. The "Trial Standards for the Emission of Industrial" Three Wastes "(1973) is considered the first sign of China's environmental protection standards. The" Standardization Management Regulations "of the State Council in 1979 and the" Standardization Law of the People's Republic of China "passed by the National People's Congress in 1988 established China's standard management system, including environmental standards.

After evolution, according to the "Management Measures for Ecological Environment Standards", ecological environment standards have developed into a standard system that distinguishes national and local standards, mandatory standards, and recommended standards. The specific types mainly include ecological environment quality standards, ecological environment risk control standards, pollutant discharge standards, ecological environment monitoring standards, ecological environment basic standards, and ecological environment management technical specifications. According to statistics, since the 18th National Congress of the Communist Party of China, the country has issued 1217 ecological and environmental standards.

Article 2 of the Standardization Law clearly stipulates that standards include national standards, industry standards, local and group standards, and enterprise standards. National standards are divided into mandatory standards and recommended standards, while industry standards and local standards are recommended standards. Mandatory standards must be implemented. The state encourages the adoption of recommended standards.

The difficulty in the application of standards lies in industry and local standards, which have a wide range of applications. According to legal regulations, if a recommended ecological environment standard is cited by a mandatory ecological environment standard, regulation, or administrative normative document and given mandatory enforcement effect, the referenced content must be executed, and the legal effect of the recommended ecological environment standard itself remains unchanged.

2、 Soil environmental quality, risk management and remediation standards for construction land

In 1996, China issued and implemented the "Soil Environmental Quality Standards" (GB15618-1995) (which has been abolished), which is applicable to soil in farmland, vegetable fields, tea gardens, orchards, pastures, forests, nature reserves, and other areas. In 2007, the "Evaluation Standards for Soil Environmental Quality of Exhibition Land (Provisional)" (HJ 350-2007) was formulated for the Shanghai World Expo (abolished by GB36600-2018). The "13th Five Year Plan for Ecological Environment Protection" and the "Soil Pollution Prevention and Control Action Plan" (also known as the "Soil Ten Articles") clearly require the revision of soil environmental quality standards according to land types, and implement two standards: the "Soil Environmental Quality Construction Land Soil Pollution Risk Control Standard (Trial)" (GB36600-2018) and the "Soil Environmental Quality Agricultural Land Soil Pollution Risk Control Standard (Trial)" (GB15618-2018).

The development of standards for soil pollution control and remediation is equally complex and challenging. Even though the "Industrial Enterprise Soil Environmental Quality Risk Assessment Benchmark" (HJ/T 25-1999) has been formulated and released, the former Environmental Protection Administration replied to the Guangdong Provincial Department of Environmental Protection in November 2009 that "environmental standards are normative documents formulated and implemented in accordance with the law. China has not yet formulated regulations or established management systems for soil pollution remediation, and there are no environmental standards applicable to industrial land soil pollution remediation". Until 2014, four technical guidelines for site environmental investigation, monitoring, risk assessment, and remediation were formulated and released for the first time and in one go (HJ25.1-2014, HJ25.2-2014, HJ25.3-2014, HJ25.4-2014). In 2016, the "Soil Ten Principles" proposed to complete the technical specifications for soil environmental monitoring, investigation and assessment, risk control, governance and restoration, as well as the revision of technical guidelines for environmental impact assessment. After the promulgation of the "Measures for the Management of Soil Environment in Polluted Land Sites (Trial)", the "Technical Guidelines for Risk Control and Assessment of Soil Remediation Effects in Polluted Land Sites" (HJ25.5-2018), "Technical Guidelines for Groundwater Remediation and Risk Control in Polluted Land Sites" (HJ25.6-2019), and "Terminology for Soil Pollution Risk Control and Remediation in Construction Land Sites" (HJ682-2019) were supplemented and formulated for the above-mentioned series of polluted land sites, and the 2014 series of standards were revised, Technical Guidelines for Soil Pollution Investigation on Construction Land (HJ25.1-2019 replaces HJ25.1-2014), Technical Guidelines for Soil Pollution Risk Control and Remediation Monitoring on Construction Land (HJ25.2-2019 replaces HJ25.2-2014), Technical Guidelines for Soil Pollution Risk Assessment on Construction Land (HJ25.3-2019 replaces HJ25.3-2014), and Technical Guidelines for Soil Remediation on Construction Land (HJ25.4-2019 replaces HJ25.4-2014). In addition, as a part of the soil environment and also as an evaluation content, groundwater should meet the water quality classification standards corresponding to the "Groundwater Quality Standards" (GB/T14848-2017).

3、 Analysis of the "exceeding standard" pollution of the involved plot

The issue of soil pollution in the involved plot is publicly visible to the public. It is the "Handling of the Sixth Batch of Letters and Visits Transferred by the Central Second Ecological Environment Protection Supervision Group to Our Province" published on the official website of the Jiangsu Provincial Government in 2022. One of the assigned matters is to reflect that the pollutants in the soil of multiple plots of the Suzhou Green Bank Project exceed the standard and do not meet the land use standards, The specific description is "based on on-site verification and the preliminary investigation report on soil pollution submitted by Suzhou Green Bank Real Estate Development Co., Ltd., some plots may have soil pollution risks (some points on plots 2, 3, 4, and 13 may have excessive levels of benzo [a] pyrene and naphthalene). Both substances belong to semi active organic compounds and are carcinogens.

When we traced back to the transaction between Lujiazui and Sugang, in October 2016, lawyers from Lujiazui issued a legal opinion on major asset purchases, stating that the issue of land pollution did not constitute a substantive obstacle to this transaction. The main review basis is the reports issued by Suzhou Environmental Science Research Institute and Suzhou Sucheng Environmental Technology Co., Ltd. commissioned by Suzhou Steel Group in 2014 and 2015. Third party organizations conducted preliminary investigations and detailed investigations of site pollution in different regions of the involved land, as well as human health risk assessments of soil and groundwater in some areas, According to the confirmation report, the pollution of the coking area in the old area of Sugang is mainly concentrated in the sewage treatment area and crude benzene workshop in the coking area. The soil pollution is mainly concentrated at a depth of 0-18 meters, with a pollution range of 17542 square meters and a polluted soil volume of 39604 meters ³” Conclusion.

On July 26, 2022, "Lujiazui" issued a notice involving reports from multiple investigation and evaluation institutions, as well as the report released by the People's Government of Hushuguan Town in early 2023. Both confirmed the presence of pollution in 7 plots, namely plots 1, 2, 3, 4, 5, 6, and 10. The soil pollution risk screening value exceeded the standard, involving some heavy metals, inorganic compounds, semi volatile organic compounds, and groundwater also exceeded the standard.

On June 20, 2023, Lujiazui issued a notice that in order to re verify the environmental conditions of plots 7, 8, 9, 11, 12, 13, and 17, Green Bank Company commissioned the Chinese Academy of Environmental Sciences to conduct soil pollution investigations on these seven plots. The survey results show that there are soil pollution risk screening values exceeding the limit in plots 9, 11, 12, and 17, and there are benzo [a] pyrene exceeding the second class land use control value in plot 9; 7. There is groundwater exceeding the standard in plots 8, 12, and 13.

In summary, a total of 14 plots are contaminated, with plots 1, 2, 3, 4, and 6 located in the coking area. Among them, plots 2, 3, and 4 were clearly contaminated during the transaction between the two parties and require environmental treatment before they can be used. 5. The plots 7, 8, 9, 10, 11, 12, 13, and 17 are located in the non coking area.

Analysis of the reasons for exceeding the standard of coking area plots

At that time, the only evaluation standard that could be used as a reference for the coking area plot was the "Evaluation Standard for Soil Environmental Quality of Exhibition Land (Provisional)" (HJ/T 350-2007) (abolished by GB36600-2018). Taking benzo [a] pyrene and naphthalene as examples, the standard limits for benzo [a] pyrene were A grade 0.3mg/kg and B grade 0.66mg/kg; The standard limits for naphthalene are A grade 54mg/kg and B grade 530mg/kg.

According to this standard classification: The A-level standard is the target value of soil environmental quality, representing the level of uncontaminated soil environment. Soils that meet the A-level standard can be suitable for various types of land use; The B-level standard is the soil remediation action value. When the soil pollutant monitoring value of a certain site exceeds the B-level standard limit, the site must implement soil remediation engineering to make it comply with the A-level standard; Soils that meet the B-level standard but exceed the A-level standard can be suitable for Class II land use types.

Therefore, that is to say, at that time, according to the land use nature of the coking area plot, B-level standards could be implemented. During the transaction, Su Steel also informed that "the pollution of the coking area in the old area of Su Steel is mainly concentrated in the sewage treatment area and crude benzene workshop in the coking area", which is the 4th plot.

Since 2022, the investigation should be inferred that the contaminated soil has been treated and repaired according to the requirements of the 2016 transaction disclosure. According to the "Soil Environmental Quality Construction Land Soil Pollution Risk Control Standards (Trial)" (GB36600-2018), soil environmental quality assessment was conducted. Benzo [a] pyrene and naphthalene were still used as examples, and the screening values for benzo [a] pyrene were 0.55mg/kg for the first type of land and 1.55mg/kg for the second type of land; The screening values for naphthalene are 25mg/kg for the first type of land and 70mg/kg for the second type of land.

Therefore, for plots 2, 3, and 4, which are the most prone to pollution in the coking area, as an example, plots 2 (changed to primary school land in 2019 and cancelled on August 2, 2023) and 3 should be surveyed and evaluated in the past two years according to the first type of land screening value, which is stricter than the B level value of HJ/T 350-2007; The fourth plot can implement the second type of land use screening value, with benzo [a] pyrene being wider than and naphthalene being stricter than the B level value of HJ/T 350-2007.

Analysis of the reasons for exceeding the standard of non coking area plots

As mentioned earlier, plots 5, 7-13, and 17 are located in non coking areas. During the soil pollution investigation in the non coking areas in 2014, there were no semi volatile organic compounds detected in the testing items, that is, no benzo [a] pyrene was detected in the soil; A total of 35 sampling points were set up, and only one soil sample near the coking plant was tested for volatile organic compounds (including naphthalene) [3]. The "Technical Guidelines for Site Environmental Investigation" (HJ25.1-2014) issued by the former Ministry of Environmental Protection mentioned that "the testing items should be based on the principle of conservation, according to the potential pollution sources and pollutants inside and outside the site determined in the first stage of investigation, while considering the migration and transformation of pollutants, and determining the testing and analysis items of the samples", The testing items that can be selected for general industrial sites include heavy metals, volatile organic compounds, semi volatile organic compounds, cyanide, and asbestos. Given the inadequate legal provisions on soil pollution at that time, all testing items that did not comply with this industry standard were sampled and tested, and the results were only of reference value for determining whether they were contaminated.

In the past two years, according to the 2019 construction land series survey and evaluation, and in accordance with GB36600-2018, soil environmental quality assessment has been carried out. For example, as an educational land, the No. 13 plot belongs to the first category of land screening values, and it has been found that benzo [a] pyrene and naphthalene also exceed the standard.

From the changes in the above standard limit values, it can be seen that GB36600-2018 is generally stricter than HJ 350-2007. Based on the analysis of the article "Analysis of the Causes of Excessive Soil Investigation in Suzhou Sugang Plot" by Green Net on July 8, 2022, the recent detection of excessive naphthalene in the soil of plots 2, 3, and 4 in the coking area may be due to the significant difference in the reference standard values before and after. The previous standard values were loose, but the current standard values are stricter [4].

In addition, the author believes that in the process of soil environmental remediation, if construction is not carried out in accordance with standard technical specifications to prevent secondary pollution, the possibility of exceeding the standard cannot be ruled out.

conclusion

The land involved in the case has been transferred from the primary land market to the present day, which is over a decade since China thoroughly eliminated outdated production capacity and resolved excess production capacity. A large number of industrial and mining enterprises have closed down and relocated, and the original plot of land has been redeveloped and utilized as urban construction land; It has also been more than a decade since the gradual improvement of soil management, with standard systems for soil environmental quality, construction land risk management and remediation emerging from scratch. The transaction involved in this case occurred in 2016, and Su Gang provided preliminary investigation reports completed by third-party institutions in 2014 and 2015. At that time, it was still in the early stage of implementing the soil pollution investigation and assessment standards for construction land (plots), and there were no mandatory requirements for soil environmental quality. The "Soil Environmental Quality Assessment Standards for Exhibition Land (Provisional)" (HJ 350-2007) was only an industry standard. From the perspective of standard application alone, it is difficult to determine that there is significant deception and fraud on the part of Su Gang.

Note: The above views only represent the author's own views and do not represent the views of any party or its interested parties in the aforementioned case.

References and Annotations

[1] Ma Xiangcong and Cai Shouqiu: "General Theory of China's Environmental Legal System", Xueyuan Publishing House, 1990.
[2] Liang Wenjing, Can HJ Industrial Standards Be Enforced and Served as a Basis for Law Enforcement? Official account: China Environment, 2023.8.28
[3] Greennet: Analysis on Causes of Exceeding the Standard in Recent Soil Investigation of Suzhou Sugang Plot, official account: Greennet Environmental Protection, 2022.7.8
[4] Ditto