Q&A

On April 22, 2014, the Standing Committee of the National People’s Congress passed a revision to the 1989 Environmental Protection Law. The Revised Law, which contains 70 articles in comparison to only 46 in its predecessor, will take effect on January 1, 2015. Overall, the Revised Law emphasizes the principles of transparency, accountability, rule of law, and public participation in environmental monitoring. These make it inevitable that the costs of doing business in China for foreign-invested enterprises will go up – whether it be in the form of upgrading manufacturing facilities to comply with new environmental standards, establishing pollution control systems or via the penalties of non-compliance.

One of the biggest changes introduced in the Revised Law is the shift from a system of one-time fines to daily increasing fines for environmental violations. It is widely noted that under the old system, it was often much cheaper for a polluting enterprise to simply pay the fine and continue on in its old ways rather than reform its practices or replace equipment to conform with environmental standards. The new system, however, based on the principle of removing any benefits derived through illegal activity, removes all caps on the fines applicable to polluters.