Continuing from the previous text: Gao Peng's Focus | Environmental Protection Lawyers Guide You to Understand the "Billion Dollar Toxic Land Case" (II): Responsibility Division for Soil Pollution Control and Restoration

Recently, Shanghai Lujiazui Financial and Trade Zone Development Co., Ltd. (securities abbreviation: Lujiazui; securities code: 600663. SH) filed a "toxic land" case with Jiangsu Sugang Group Co., Ltd. (hereinafter referred to as Sugang Group), government departments, and third-party institutions claiming over 10 billion yuan, which has become a hot topic in the search. The complex soil pollution problem and huge claims make 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 won 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 the Su Di 2008-G-6 plot located in the north of Sutong Road and the east of Sugang 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 (Shanghai Jiawan Asset Management Co., Ltd., Shanghai Jiaer Industrial Investment Co., Ltd., and Shanghai Lujiazui Financial and Trade Zone Development Co., Ltd.) filed a lawsuit against Jiangsu Sugang Group Co., Ltd., Suzhou Environmental Science Research Institute, Suzhou Sucheng Environmental Technology Co., Ltd., and Suzhou National High tech Industrial Development Zone Management Committee Suzhou Natural Resources and Planning Bureau and five other units, belonging to trading entities, third-party public institutions/companies, government and regulatory departments. We can't help but ask: who can sue whom, that is, the subject matter of the plaintiff and defendant.

1、 The significance of the defendant's eligibility in soil pollution liability disputes

What does "soil pollution liability dispute" refer to? It refers to the disputes arising from the entry and accumulation of pollutants generated by human activities into the soil to a certain extent, causing deterioration of soil quality, and subsequently causing certain indicators in crops to exceed national standards, causing damage to the personal and property of others, or other public environments and public property, or when there is a risk of causing damage, the responsible party shall bear tort liability in accordance with the law. The 2008 version of the Civil Cases Provisions stipulated four types of pollution infringement disputes: water, atmosphere, noise, and radioactivity. There were no soil pollution infringement disputes until the 2011 version added soil pollution liability disputes and adjusted the order to air and water pollution liability disputes in the 2020 version.

In soil pollution liability disputes with long-term concealment, lag, and accumulation characteristics, there may be multiple batches of enterprises, institutions, and production operators, multiple rounds of production and operation activities, or other activities on a piece of land. It is particularly important to clarify the infringers and joint infringers responsible for soil pollution as defendants, and promote accurate and effective resolution of such disputes.

According to the conditions for litigation involving the parties stipulated in the Civil Procedure Law, the plaintiff shall have a direct interest in this case, and the defendant shall be clear. This differentiated standard of prosecution can be summarized as "the plaintiff is qualified and the defendant is clear" [1]. If other acceptance conditions are met, the people's court shall file a case for acceptance and bring the case into the substantive trial procedure. Unless the plaintiff has malicious litigation purposes, the court should rule to dismiss the lawsuit, and there is no qualification for the defendant.

Therefore, after many years of implementation of the registration system, the accurate expression of eligibility for the plaintiff and defendant should be: who is the eligible plaintiff and whether the defendant is clear.

2、 Which parties have the right to file a lawsuit for soil pollution liability disputes?

The Civil Code sets up a special chapter on "Environmental Pollution and Ecological Destruction Liability" in the tort liability section, and Article 1229 stipulates that if the infringement causes damage to others due to environmental pollution or ecological destruction, the infringer shall bear the tort liability. Article 64 of the Environmental Protection Law stipulates that those who cause damage due to environmental pollution or ecological damage shall bear tort liability in accordance with the relevant provisions of the Tort Liability Law of the People's Republic of China. Article 96 of the Soil Pollution Prevention and Control Law stipulates that if soil pollution causes personal or property damage to others, they shall bear tort liability in accordance with the law. If the person responsible for soil pollution cannot be determined, and the land use right holder fails to fulfill the obligations of soil pollution risk control and restoration in accordance with the provisions of this Law, causing personal or property damage to others, they shall bear tort liability in accordance with the law. Civil disputes caused by soil pollution can be mediated and resolved by the parties to the local people's government's ecological and environmental authorities, or they can file a lawsuit with the people's court.

Article 1 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Disputes over Ecological Environment Infringement Liability (Fa Shi [2023] No. 5, hereinafter referred to as the "Judicial Interpretation") stipulates that if the infringer causes personal or property damage to others by polluting the environment or damaging the ecology, and the infringee requests the infringer to assume ecological environment infringement liability, five situations of polluting the environment or damaging the ecology are listed.

According to the above provisions, the subject of civil litigation eligible to file soil pollution liability disputes (unless otherwise specified, all civil litigation referred to in this article is civil private interest litigation) is citizens, legal persons, and other organizations who have suffered personal or property damage. From the perspective of types of damage:

（1） Analysis of personal injury suffered by the infringed party

According to the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Cases of Personal Injury Compensation (Fa Shi [2022] No. 14), personal injury refers to the infringement of life, body, and health, and "compensation rights holder" refers to the victim who directly suffers personal injury due to infringement or other causes of harm, as well as the close relatives of the deceased victim. Assuming that the land involved in the case has a claim for personal injury, it is considered a separate case.

（2） Analysis of situations where the infringed party suffers property damage

According to the Constitution, Civil Code and other provisions, the property of civil subjects includes legal income, houses, savings, daily necessities, cultural relics, books and materials, trees, livestock, and legally permitted means of production, as well as other legal movable and immovable properties, as well as financial assets, intellectual property rights, data, etc. In this case, the land use right holder Green Bank Company, based on the independence of the parent and subsidiary companies, as the infringed party, filed a lawsuit against Su Gang, who still holds 5% equity, which is naturally possible. However, this case did not operate in this way. Green Bank Company was only listed as a third party, and it is unknown whether it was arranged based on litigation strategy.

The difficulty lies in determining the plaintiff's qualifications in the event of indirect property losses. After investigation, it has been found that Lujiazui currently holds 95% of the equity of Green Bank Real Estate through Jiawan and Jia'er Company, which is sufficient for consolidation of financial statements. Lujiazui has absolute control and control over Green Bank. The development interests of 17 plots under the subsidiary Green Bank Company's name will be directly affected by pollution, which will result in damage to the interests of the parent company. The author believes that as shareholders or indirect shareholders, Lujiazui, Jiawan, and Jia'er companies, if they can prove that their infringement behavior has caused damage to the interests of shareholders, it is not impossible to claim their rights from the infringer.

Therefore, in the "billion dollar toxic land case" based on property losses, when it comes to the losses caused by soil pollution, the first one is the damage to the property rights and interests of the land owner, that is, the entire population (in this case, ecological environment damage compensation and environmental public interest litigation can be practiced, and this article will not analyze them for the time being); Next is the holder of land use rights, and Green Bank Company, based on the land use rights, is the right holder to compensate for direct property losses by occupying and using the land and obtaining profits. Finally, for Lujiazui, Jiaer, and Jiawan companies, as shareholders or indirect shareholders of Green Bank Company, if it can be proven that due to soil pollution, the profits of Green Bank Company are damaged based on shareholder rights, they have the right to file a lawsuit, and the interests of the lawsuit belong to the subsidiary Green Bank Company. Their litigation subject is qualified.

In addition, theoretically speaking, homebuyers and residents living here may also be affected by pollution or suffer economic losses, or become victims of infringement due to pollution causing personal injury.

3、 How to accurately list the defendants in soil pollution liability disputes?

According to the provisions of the Civil Code and Judicial Interpretation, infringers refer to citizens, legal persons, and other organizations who have committed environmental pollution and ecological destruction, that is, the damage caused by the pollution behavior. The responsible person is the polluter, who bears lifelong responsibility. As an infringer, there are no obstacles to being listed as a defendant. In infringement disputes, joint infringement is also a common situation. Joint infringement refers to the infringement caused by two or more perpetrators jointly infringing on the legitimate civil rights and interests of others, and the perpetrators should bear joint and several liability. Article 4, Paragraph 2 of the Judicial Interpretation stipulates that if other responsible persons other than the perpetrator are at fault for the occurrence of damage, they shall bear tort liability. The Soil Pollution Prevention and Control Law stipulates that the responsible persons for soil pollution, land use rights holders, and third-party institutions shall bear the responsibility for soil pollution control and restoration. This has been analyzed in the previous article of this series, titled "Environmental Lawyers Guide You to Understand the" Billion Poisonous Land Case "(II): Responsibility Division for Soil Pollution Control.".

（1） Joint and Several Liability of Third Party Institutions

According to the provisions of the Environmental Protection Law and the Judicial Interpretation, it is known that professional institutions such as environmental impact assessment agencies and environmental monitoring agencies engage in fraudulent activities related to environmental services. If they intentionally provide false evaluation documents and are responsible for the environmental pollution and ecological damage caused, the court supports the victim's request for third-party institutions to bear joint and several liability. Therefore, third-party organizations listed as defendants in soil pollution liability disputes have clear legal basis, but the difficulty lies in how to prove malicious collusion between the third-party organization and the other party with interests.

（2） Discussion on Other Situations: Government and Natural Resources Departments

One of the focal points of widespread discussion about the "Billion Dollar Poison Land Case" is that some people believe that the Suzhou National High tech Industrial Development Zone Management Committee and the Suzhou Natural Resources and Planning Bureau are neither parties to the contract nor have they committed any acts of polluting land. If their supervision is not effective or ineffective, causing damage to the interests of equity buyers, it is unreasonable to constitute civil joint infringement. In this regard, the author believes that for the land involved in the case, the Development Zone Management Committee and the Municipal Self Planning Bureau are not only regulatory bodies, but also authorized managers of land ownership, exercising a series of actions such as land collection and storage, property registration, management, and transfer. Based on the author's practical experience in dozens of development and construction projects in special areas such as land reserves and development zones, the management committee of such development zones, as a government dispatched agency, is established to "develop and construct" the development zone and fulfill its management responsibilities. The land transfer fees within the region, as the most important government fund income for local finance, are also mainly used for local development and construction after various special projects are provisioned.

Although the 2019 "Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Administrative Agreement Cases" stipulated that compensation agreements for land and housing expropriation, as well as agreements for the transfer of state-owned natural resource use rights such as mining rights, should be regarded as administrative agreements. If an administrative lawsuit is filed, it should be accepted. However, regarding the earlier occurrence of land collection, storage, and transfer involved in this case, there have been different opinions and viewpoints in the theoretical and practical circles regarding whether the collection and storage agreement and land use right transfer agreement belong to administrative agreements or civil agreements in the past. In different judgments, there are both those recognized as administrative agreements and those recognized as civil agreements. Moreover, this case involves land collection and storage, transfer, and regulation and transformation. At that time, the focus was more on coordinating with urban development, land use, and other planning processes. However, in these actions, including the subsequent equity transactions in 2016 where the land use right holder, Green Bank Company, remained unchanged but the actual controller of the company changed, the government's implementation of the "Ten Measures for Land Use" was insufficient, and there was a clear "lack of attention" to land pollution control, Perhaps they are more concerned about who will "develop and construct" (it is not ruled out that there are meetings, agreements, and minutes between the government and Suzhou Iron and Steel in the relocation arrangement, and the plan is to arrange for Suzhou Iron and Steel to be responsible for the development of the original factory area in the future, which is why Lujiazui has disclosed that the management committee has stopped Suzhou Iron and Steel from "selling land"), or it may be based on insufficient awareness of pollution, and of course, it is not ruled out that a series of illegal and irregular activities, falsification, and failure to perform duties in accordance with the law are also involved.

In the field of environmental infringement, the government, natural resources, and related departments are authorized to claim compensation for ecological environment damage from polluters based on the legal status of natural resource owners, in accordance with Article 1234-1235 of the Civil Code. This is known as the ecological environment damage compensation system. From the perspective of institutional evolution, the situation of "virtual property rights of natural resources and inadequate ownership" has greatly improved. As mentioned in the first part, the government and natural resources departments can also act as plaintiffs and claim compensation from entities such as Sugang and Lujiazui for ecological environment damage caused by emission pollution behavior, failure to treat and control pollution transfer measures in accordance with the law during development and utilization.

In summary, from the perspective of the requirement of "clarifying the defendant" in filing a case, it is not impossible for the management committee and the self regulatory bureau to be listed as joint defendants in activities such as land storage, transfer, regulation, and land supervision, as they may constitute joint civil infringement.

In summary, filing a lawsuit based on the cause of soil pollution liability dispute can break through the limitations of the litigation subject in contract cases, that is, in contract cases, rights can only be claimed against the counterparty to the contract, and cannot be extended to other subjects, unless there are special legal provisions; Infringement disputes can incorporate the efforts of all parties as much as possible.

References and annotations:

[1] Yuan Lin: "Examination and Adjudication of Defendants' Eligibility in Civil Litigation", Legal Science (Shanghai) 2021, Issue 20218, pp. 137-150.