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Newsletter | May 2014, Issue 2 |
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ENVIRONMENT |
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Draft Act on Compensation and Relief of Environmental Pollution Damage |
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The Korean Government has launched a government project to establish a system to compensate and insure against environmental pollution damage, and is pursuing the introduction of a legal relief system for environmental pollution damage. Such Government initiative is intended to address the current situation where environmental pollution accidents inflict serious damage on society due to the enormous amount of tax money that is required for curing the pollution, while companies that caused the accident sometimes go bankrupt because they cannot bear the financial burden of paying the compensation. Moreover, the victims of environmental pollution accidents are often unable to obtain proper compensation due to the burden of proving that their injury resulted from the pollution or due to the prolonged litigation process which is unavoidable in light of the nature of environmental pollution. |
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Current Progress of Draft Legislation |
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Starting from March 2013, the Government received opinions from various groups by organizing a forum of interested parties comprised of the industry, National Assembly, academia and civic groups. On July 30, 2013, Assemblyman Wan-Young Lee tabled a draft Act on Compensation and Relief of Environmental Pollution Damage. After three rounds of consultation with the Ministry of Trade, Industry and Energy (“MOTIE”) and the industry in November 2013, a final agreement was reached on December 16, 2013 through the united administrative consultative council of the Ministry of Environment and MOTIE. |
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Major Content of Draft Legislation |
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| Issue |
Major Content |
| Strict Liability of Polluter and Limitation on Liability |
| Impose strict liability for environmental pollution damage pursuant to the installation and operation of facilities emitting pollution. |
| Set limitation on maximum liability (KRW 200 billion); the minimum amount will be stipulated in the Enforcement Decree taking into account the size of facility, among other factors. |
| The above will not apply to willful misconduct or gross negligence or violation of the law. |
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| Facilities Subject to Liability and Scope of Compensation for Damage |
| Facilities subject to liability: facilities handling harmful chemical substances and facilities emitting air, water, soil, waste, noise and vibration pollution. |
| Set limitation on maximum liability (KRW 200 billion); the minimum amount will be stipulated in the Enforcement Decree taking into account the size of facility, among other factors |
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| Mitigated Burden of Proof for Victim of Environmental Pollution Damage |
| Causation will be assumed in case of substantial probability between the installation and operation of a facility emitting pollution and the occurrence of damage. |
| Grant right to claim disclosure of and inspect information on the installation and operation of facility as necessary to meet the burden of proof regarding damage. |
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| Application for Environmental Pollution Liability Insurance |
| The following facilities must apply for environmental pollution liability insurance: facilities handling harmful chemical substances; certain facilities emitting air and water pollutants; facilities treating designated waste; and facilities subject to specific soil pollution management. |
| Minimum insurance amount will be stipulated in the Enforcement Decree based on the amount insured and scale of facility. |
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| Fund to Compensate Environmental Pollution Damage |
| The fund is intended to compensate environmental pollution damage where (i) the use of the pollutant or polluter is unclear, does not exist, or is incompetent, or (ii) the upper limit of compensation has been exceeded. |
| Source of revenue for the fund: Government contribution, reinsurance premium and earnings derived from operation of the fund. |
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Future Plans |
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The government is planning on legislating the Act by June 2014 after resolution from the regular session of the National Assembly and review by the Environment and Labor Committee and Judiciary Committee. By December 2014, an industry conference will be formed to draft the secondary regulations, collect the industry’s opinion on the detailed implementation criteria and make a preliminary announcement of the lower statutes. |
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Moreover, the authorities are planning to develop an insurance product by December 2014 via calculating the premium rate, developing standard terms and preparing the criteria for evaluating environmental pollution damage. In addition, the authorities are developing a program for insurance operation and management from August 2014 through the end of 2015 in order to administer policyholders, take administrative measures and manage statistics. |
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Once the draft of the Act on Compensation and Relief of Environmental Pollution Damage (“CREPD Act”) is legislated, there may arise many controversial issues concerning not only the cost of compulsory application for insurance policy but also the allocation of liability for environmental pollution damage or the scope of compensation. Accordingly, companies should pay attention to and prepare for the upcoming draft of CREPD Act and lower statutes. |
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