Mar. 23, 2023

Industry Experts Anticipate Legal Problems Regarding Compensation Claims for Bohai Bay Oil Spill

Date: July 12, 2011


Reporter: Cai Yanhong


At present, the oil spill from the 19-3 well in Penglai has not been completely contained. However, the State Oceanic Administration of the People’s Republic of China will soon begin monitoring and assessment of the marine ecological damages caused by the spill. Once the extent of the damage has been assessed, the State Oceanic Administration will present ConocoPhillips with compensation claims as determined under China’s Marine Environment Protection Law.

“However, under the current legal basis provided by the Marine Environment Protection Law, national claims for marine ecological damage compensation are ambiguous. Therefore, there are many unclear legal issues regarding compensation for the 19-3 oil spill that may prove problematic. From a long-term perspective, China should think about revising the Marine Environment Protection Law in the future.” Jiayi Liu, an associate researcher of the China Institute for Marine Affairs, said during an exclusive interview with the Legal Daily.

The Practical Application of Regulations on Marine Ecological Damages Remains Difficult
Liu stated that the second paragraph of Article 90 of the current Chinese Marine Environment Protection Law dictates how the legal responsibilities for marine ecological damages are assigned. In turn, this comprises the legal foundation for national compensation claims against those parties responsible for marine ecological damages. The first incident brought to court under marine ecological damage laws in China was the “Tasman Sea” Ship case. This case also serves as a precedent for national compensation claims for marine ecological damages.
However, the outcome of the first trial on the “Tasman Sea” Ship case made it clear that the regulations concerning marine ecological damages in the Marine Environment Protection Law remain more normative principle than solid law. Many problems have arisen from the regulations’ vagueness and a general lack of practical applicability “The existence of these problems is the primary reason why so many oil spill compensation cases – regardless of size – have not been successfully resolved in Chinese courts,” said Jiayi Liu.
Jiayi Liu believes that the claim filing regulations under the current Marine Environmental Protection Law reflect normative principles rather than outline a strict legal process. Apparently, the claim filing process lacks a corresponding, well-developed legal theory along with the necessary protection clauses. Consequently, the vague and incomplete nature of this law presents judicial departments with other problems such as how to separate the meanings of such terms as marine environmental pollution damage and marine ecological damages.   
“An independent lawsuit relating to claims for marine ecological damages must resolve two issues. One is how marine ecological damage is defined and the other is who the liable party has damaged,” said Liu. For example, the plaintiffs in the “Tasman Sea” Ship case claimed marine ecological damages that included marine environmental capacity losses, biological governance research expenses and monitoring fees, marine ecological service function losses, marine sediment recovery payments and biological environmental recovery payments for tidal areas. These eight claims together amounted to more than ¥98 million, but the Tianjin Maritime Court only agreed with the plaintiff on the first two items and refused to consider the others as relevant. Although the Tianjin Oceanic Administration (the plaintiff) won the first trial, the compensation awarded amounted to only ¥9,958,100. These same legal problems will likely be encountered in the compensation claims for the 19-3 oil spill case.
“Although the State Oceanic Administration of the People’s Republic of China has approved ’The Assessment and Technical Guidelines on Marine Ecological Damages in Oceanic Oil Spills’ there is some controversy about whether this computational standard can form the basis of a court decision. In terms of the Penglai case, whether or not the defendants will agree to the computational standard used is determined by which evidence the local jurisdiction will accept,” said Jiayi Liu.
Local-Level Regulatory Documents Cannot Form the Basis of Compensation Claims
With regards to the Penglai oil spill, the press has reported that Shandong Province is only allowed to claim compensation up to ¥200 million under ‘The Interim Measure for Management of Oceanic Ecological Damages and Losses Compensation in Shandong Province’. However, some experts believe that the interim measure can only regulate the procedures and processes used by local government departments. In China, if the current legal, administrative, departmental, and government regulations available cannot provide any regulations relevant to a compensation case, local departments cannot draft or legislate regulatory documents to fill the regulatory gap. Therefore, while Shandong Province’s interim measure possesses a certain binding administrative effect, it cannot provide the legal basis for compensation claims in the Penglai case.
Over the past two years, the central and local governments have attached great importance to the supervision, prevention, emergency response, and claim management associated with marine oil spills. Some local government departments have established rules and charged penalties. "Some local provincial regulatory documents allow for marine ecosystem damage claims and compensation in figures of more than a billion Yuan. We can say that the principles and intentions behind marine ecological protection are good, but they do not match the relevant provisions of China's Legislation Law. This is the general consensus among legal experts " said Jiayi Liu.
The first article of Shandong Province’s interim measure states that its general approach is based on the Civil Law, the Marine Environment Protection Law, the Fisheries Law, various other laws or regulations, and is combined with the realities inherent to the province’s current level of development. Experts think that as a regulatory document only pertains to a local government department, the interim measure cannot act as a substitute for higher-level laws such as the Civil Law, the Marine Environmental Protection Law, and the Fisheries Law. This is a problem of legislative competence that has yet to be solved. Even if the interim measure was approved and enacted by the People's Congress of Shandong Province, the establishment and enforcement of practical procedures would remain a problem. The interim measure was developed and published by the Financial Department of Shandong Province and the Marine Fishery Department, but it does not have the same power and jurisdiction as Shandong’s higher-level provincial government regulations.
The interim measure specifies in Article 2 the links between issues such as marine pollution accidents, illegal exploitation of marine resources, damage to marine ecosystems, marine and coastal engineering, as well as ocean dumping and ‘payments.’ Any of the issues listed could potentially induce changes into the marine environment and theoretically should result in ‘payments’ for damage to marine ecosystems and the loss of ecological services. In this regard, experts think that the interim measure’s repeated use of the word ‘payments’ refers to the concept of compensation. However, it is difficult to say that Article 2 expands the interim measure’s mandate even though Chinese laws and regulations do not provide a clear approach towards the issues of marine ecosystem damage assessment and marine ecological compensation. Moreover, from the perspective of the legislative authorities, regulatory documents enacted by local government departments can only be used to direct the implementation of higher laws and regulations and not mandate or replace their content. Local government cannot overstep its authority in such matters even where the relevant laws and regulations are not specified.
The Marine Environmental Protection Law and Its Necessary Revision
Jiayi Liu thinks that given the rapid economic development of the marine and oil industry, new revisions that can prevent and limit oil spill damage to marine ecology are urgently needed. Based on the fact that China has already developed laws such as the ‘Regulations Concerning the Prevention and Rehabilitation of Pollution Damage to Marine Environment through Seashore Construction Projects’ and the ‘Regulations Concerning the Prevention and Rehabilitation of Pollution Damage to Marine Environment by Shipping’ revising the existing laws seems more practical than legislating new ones. The need for a relevant regulatory and legal framework is especially pressing in light of recent accidents such as the 2010 Dalian pipeline explosion and the Penglai oil spill. Further amendments to the Marine Environment Protection Law should be considered to make it more relevant and applicable to the current condition of China’s marine environment.
Jiayi Liu said that further revision of the Marine Environment Protection Law is necessary not just for problems such as oil spills but also for projects such as sea reclamation and desalination that may endanger or damage marine ecology. China has twelve existing marine industries, but still lacks laws to regulate and standardize ocean development and resource utilization. In fact, damage to the marine environment is caused by a variety of factors including both natural changes and human activities. Moreover, the effect of human activities on the marine environment is not limited to economic exploitation. Whether or not legislation is developed to control the damage from pollution or seawater desalination, this cannot solve the entire problem. Therefore it will be necessary to enact further revisions to the Marine Environment Protection Law. Finally, timely implementation of relevant rules and local laws and regulations will help improve the efficacy of the current legal framework.

Translator: Liu Tingying
Proofreader: Brendan Ebner

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