Environmental Liabilities and Insolvent Polluters in China: Learning Lessons from the UK and US

Within the context of Enterprises Bankruptcy Law (EBL) in China, this thesis offers an effective means to remedy the issue of how Chinese law ought to ensure that polluters, are held to account for their environmental liabilities. The ‘polluter pays’ principle has been implemented by several pieces of environmental legislation in China, as a means to confront the issue of liability in the case of insolvent polluters. The principle requires those responsible for environmental damage or imminent threats of damage to bear the necessary costs of remediation and prevention. However, in practice, the principle has been rendered relatively ineffective due to current Chinese bankruptcy legislation. Under EBL, an insolvent company externalises its costs associated with its environmental liabilities to society. Firstly, the cost of environmental liability is not specifically mentioned in Chinese EBL and can therefore only be categorised as a general, unsecured liability in the order of distribution during liquidation. Secondly, unsecured liability is difficult to discharge in Chinese bankruptcy cases. This results in environmental liabilities ultimately being borne by the taxpayer, which contradicts with the polluter pays principle. This research references the response of the UK and US to the challenges of environmental liability in insolvency law in order to provide potential solutions for the case of China. The thesis finds that it may be responsible to Chinese law by reducing the externalisation of environmental liability for insolvent polluters and effectively realising the polluter pays principle. It is suggested that this may be achieved by way of EBL reform and the establishment of a financial assurance mechanism.