Continuing from the previous text: Gaopeng Focus | Environmental Lawyers Guide You to Understand the "Ten Billion Poisonous Land Case" (1): Beyond the Standard, What is the Target of Exceeding the Standard

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 plots in Lujiazui have been identified as "toxic", 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 for the plots.

Subsequently, the company promoted a series of rights protection measures. In August 2023, Lujiazui notified Jiangsu Sugang Group Co., Ltd., Suzhou Environmental Science Research Institute, Suzhou Sucheng Environmental Technology Co., Ltd., Suzhou National High tech Industrial Development Zone Management Committee, Suzhou Natural Resources and Planning Bureau, and other five units, belonging to the trading entity, third-party public institutions/companies, government and regulatory departments. Legal practitioners have also raised a series of questions about the subject matter of the transfer, litigation strategy, plaintiff subject, defendant subject, and litigation request. The author believes that it is advisable to first understand how the law regulates the responsibility for soil pollution control and restoration in response to construction land pollution plots.

1、 The principle of polluter burden and relevant legal provisions

The polluter's burden, that is, the principle of whoever pollutes will govern. It was officially proposed internationally in the 1970s and further recognized and promoted [1]. In 1979, the Environmental Protection Law (Trial Implementation) stipulated that "units that have caused pollution and other public hazards to the environment should formulate plans and actively manage them according to the principle of whoever pollutes should govern them. After the improvement and development of national regulations, the Environmental Protection Law, the Water, Solid Waste, Air, Soil and other pollution prevention and control laws, as well as other separate laws, the polluter's burden principle has become one of the indispensable basic principles of environmental law.

The third paragraph of Article 6 of the 2014 Environmental Protection Law stipulates that "enterprises, institutions, and other producers and operators shall prevent and reduce environmental pollution and ecological damage, and shall bear responsibility for the damage caused in accordance with the law." However, the second paragraph of this article stipulates that "local people's governments at all levels shall be responsible for the environmental quality of their respective administrative regions." It can be said that although enterprises, institutions, and other producers and operators are the first responsible persons, The government is responsible for the overall principle of regional environmental quality, which means it has a "bottom line" role in controlling and repairing environmental pollution and ensuring that environmental quality meets standards.

Article 3 of the 2018 Soil Pollution Prevention and Control Law stipulates that soil pollution prevention and control should adhere to the principle of "pollution responsibility", and Article 4 (2) stipulates that "land use rights holders engaged in land development and utilization activities, enterprises, institutions, and other production and business operators engaged in production and operation activities should take effective measures to prevent and reduce soil pollution, and bear responsibility for the resulting soil pollution in accordance with the law".

This law establishes the system of responsible persons for soil pollution from the perspective of national legislation for the first time, but does not stipulate that the government is responsible for soil environmental quality. Only Article 5 stipulates that local governments should be responsible for the prevention and safe use of soil pollution in their respective administrative regions. According to the provisions of the Constitution and the Land Management Law, the land in our country is owned by the whole people, that is, by the state and collectively. The ownership of state-owned land is exercised by the State Council on behalf of the state. The provisions of Article 5 of the Law on the Prevention and Control of Soil Pollution and Article 10, Paragraph 3 of the Measures for the Management of Soil Environment in Polluted Land Sites (Trial Implementation), which states that if the responsible party is lost or unclear, the county-level people's government in the place where the responsibility is located shall bear the responsibility for soil control, are both supplementary to the principle of "polluter burden", It also reflects that local governments have the responsibility of supervising and managing land within their administrative areas in accordance with the authorization.

2、 Responsibility for soil pollution control and remediation of construction land

（1） Regulations on the Main Responsibilities of Soil Pollution Control and Remediation in Construction Land

As mentioned earlier, although China has long established the principle of "polluter burden", the legislation or national policies to implement this principle in the field of soil pollution prevention and control have been "delayed". The release of the 2016 Soil Pollution Prevention and Control Action Plan (hereinafter referred to as the "Soil Ten Articles") marked a comprehensive strategic deployment for China's soil pollution prevention and control work at that time and in the following period. It also laid the groundwork for the subsequent formulation and promulgation of the 2018 Soil Pollution Prevention and Control Law, thereby promoting the construction of a legal system for soil pollution prevention and control led by the law and with regulations, documents, standards, etc. as the main body.

The "Soil Ten Articles" first defined the main body of governance and restoration, and the responsibilities are divided as follows: (1) According to the principle of "whoever pollutes, who governs", the unit or individual causing soil pollution shall bear the main responsibility for governance and restoration. (2) If there is a change in the responsible party, the unit or individual that inherits its creditor's rights and debts after the change shall bear the relevant responsibilities; (3) If the land use right is transferred in accordance with the law, the transferee of the land use right or the responsible person agreed upon by both parties shall bear the relevant responsibilities. (4) If the responsible party is lost or the responsible party is unclear, the local county-level people's government shall bear relevant responsibilities in accordance with the law. The "Measures for the Management of Soil Environment in Polluted Land Sites (Trial Implementation)" also adds a situation where the original land use right holder is responsible for the soil pollution caused during the period of using the land if the land use right is terminated. At the same time, it is clear that lifelong responsibility system will be implemented for soil pollution control and remediation.

As mentioned earlier, the Soil Pollution Prevention and Control Law for the first time includes the person responsible for soil pollution in legal provisions, but does not define it. Prior to the "Ten Articles of Soil", provinces such as Hubei and Fujian established local legislative provisions for soil pollution control, remediation, and accountability. According to the 2021 Interim Measures for the Identification of Responsible Persons for Soil Pollution on Construction Land, the responsible persons for soil pollution on construction land refer to units and individuals who, due to the discharge, dumping, stockpiling, landfill, leakage, scattering, leakage, loss, dispersal of pollutants or toxic and harmful substances, cause soil pollution on construction land and are required to bear the responsibility for soil pollution risk control and restoration in accordance with the law.

The provisions of Articles 39, 42, 45 to 48, and the section on "Construction Land" of the Soil Pollution Prevention and Control Law confirm or refine the legal responsibilities for soil pollution control and restoration determined in Article 10 and the Measures (Trial). The detailed parts can be summarized as follows: (1) If the person responsible for soil pollution cannot be identified, the land use right owner shall implement risk control and restoration; (2) If the person responsible for soil pollution is unclear or there is controversy, the local government's environmental regulatory department should work together with the natural resources regulatory department to determine the person responsible for soil pollution. (3) If the purpose is changed to residential, public management, and public service land, the land use right owner should conduct an investigation. (4) After evaluation, if it is found that the control standards are exceeded, the soil pollution responsible person and land use right owner shall evaluate it. After being included in the control and restoration list, the control and post restoration evaluation shall be the responsibility of the soil pollution responsible person. The removal of the list shall be applied for by the soil pollution responsible person or land use right owner. Compared to the above provisions, the "Measures (Trial)" as a departmental regulation on investigation, assessment, risk control, governance, and remediation have added the role of the person responsible for soil pollution. It is stipulated that if there is any inconsistency, the later and more effective "Soil Pollution Prevention and Control Law" should be applied.

（2） Responsibility for soil pollution during the recovery and transfer of construction land use rights

In 2018, the revised "Land Reserve Management Measures" added a new regulation that contaminated land shall not be stored and transferred until it is verified, evaluated, and treated by relevant units in accordance with relevant regulations. This means that land that has not been treated and repaired will not be stored and transferred. This is the implementation and response to the provisions of Article 10 (5) of the "Soil 10" and Article 10 (5) of the "Measures for the Management of Soil Environment in Polluted Land Sites (Trial)", which stipulate that "if the land use right is terminated, the original land use right holder shall bear relevant responsibilities for soil pollution caused during its use of the land site". But if it is found that the pollution has been recovered by the government, the Soil Pollution Prevention and Control Law stipulates that if the person responsible for soil pollution is the original land use right owner, the local people's government shall organize the implementation of soil pollution risk control and restoration.

Article 10 (4) of the Measures (Trial Implementation) stipulates that "if the land use right is transferred in accordance with the law, the transferee of the land use right or the responsible person agreed upon by both parties shall bear the relevant responsibilities." Article 67 of the Soil Pollution Prevention and Control Law stipulates that "the key regulatory units for soil pollution shall conduct a soil pollution investigation in accordance with regulations before the use of the production and operation land is changed or the land use right is recovered or transferred, The investigation report should be submitted to the real estate registration agency and filed with the environmental department.

As can be seen from the above regulations, firstly, if the land has been reclaimed before the implementation of the law and the person responsible for soil pollution is the original land user, the government shall implement control and restoration. Secondly, in the case of termination of land use rights after the implementation of the law, the original land use rights holder shall bear the responsibility, and the key regulatory units shall conduct investigations by the land use rights holder before the recovery of production and operation land. Thirdly, before the transfer of production and operation land by key regulatory units, the land use right holder is responsible for investigating; The division of repair responsibilities during the transfer shall be based on the transfer agreement. If there is no agreement, the transferee of the land use right shall bear the responsibility.

（3） Responsibility for soil pollution when the responsible party changes

Article 10 of the Soil Law stipulates that "in the event of a change in the responsible party, the unit or individual that inherits its creditor's rights and debts after the change shall bear the relevant responsibilities", which is confirmed in the Soil Prevention and Control Law. Changes occur, taking the company as an example, mainly due to the merger or division of the company.

（4） Joint and Several Liability of Third Party Institutions

Professional institutions entrusted to engage in activities related to suspected contaminated land and contaminated land, or third-party institutions entrusted to evaluate the effectiveness of governance and restoration, shall be responsible for the authenticity, accuracy, and completeness of the investigation and evaluation reports. The entrusted institution that causes environmental pollution and ecological damage through fraud shall not only be punished in accordance with relevant laws and regulations, but also bear joint and several liability with other responsible parties for environmental pollution and ecological damage in accordance with the law.

3、 Preliminary analysis of soil pollution responsibility in the involved plot

The plot involved in the case, as a land used by Sugang, has a certain history and involves various types of land such as industrial and residential use. From the legal opinion provided by Lawyer Lujiazui during the transaction, it can be seen that the Su Di 2008-G-6 parcel involved in the case was obtained by Su Steel Group through public bidding in the land trading market on December 30, 2008, for a price of 647559705 yuan. This transfer was a primary market transfer of land, which means that the land was once used by Su Steel, but before the transfer, it went through the process of government recovery or early recovery of the land use right upon expiration.

In 2014, the Huqiu Branch of Suzhou Planning Bureau agreed to adjust the land use nature according to regulatory regulations, and the Sudi 2008-G-6 parcel was divided into 17 plots. After Su Steel Group paid the land transfer fee, the use right was transferred to Green Bank Company. After the 2016 equity transaction, the control of Green Bank Company changed.

According to the environmental regulatory requirements of the steel industry and multiple investigation reports, the pollution that existed or may exist before the development and construction of the Green Bank project is the most important reason caused by the years of production and operation of Su Steel. According to the soil pollution control and remediation regulations and technical specifications, secondary pollution cannot be ruled out in the investigation and evaluation of developed or under development land plots.

Above all, land use rights have been reclaimed, transferred, injected into companies (possibly), control rights have been transferred, and re developed and utilized, as well as natural changes in the soil environment over a decade (soil pollution has a hidden characteristic, which is that soil pollution may be exposed and its scope may change over time and due to physical, chemical, and biological factors in the environment), The reasons for the soil pollution currently observed are not fully clear; Moreover, changes in land ownership occurred before the promulgation of the Soil Pollution Prevention and Control Law and the Soil Environmental Management Measures for Polluted Land Sites (Trial), as well as before the formulation of the "Soil Ten Articles". Regarding the division of soil pollution responsibilities and the subsequent determination and attribution of soil pollution damages, whether relevant regulations can be applied, the issue of legal traceability should be analyzed, or whether the division of responsibilities can be completed by referring to the polluter burden principle in the Environmental Protection Law, As well as issues such as the determination of the person responsible for soil pollution, the eligibility of the plaintiff and defendant, the identification of soil pollution damage, and environmental infringement, please follow the author's subsequent understanding and sharing.

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: "Basic Issues of Environmental Protection Law", China Social Science Press, 1983.