Facilities presenting high environmental risk required to purchase environmental liability insurance

On December 31, 2015, the Ministry of Environment promulgated the implementing regulations (i.e., the Enforcement Decree, and the Enforcement Rules) of the Act on Compensation Liability and Remedy of Environmental Pollution Damage (the "Environmental Pollution Damage Compensation Act" or "EPDCA"; enacted December 31, 2014). The implementing regulations took effect on January 1, 2016, and include new provisions stipulating, among other things, strict liability, presumption of causality, and joint and several liability. These and other key provisions of the implementing regulations are summarized below.

1 Limitation of liability (Enforcement Decree of EPDCA, Article 4, Appendix 2)

Owners/operators of facilities that cause environmental pollution damage will only be liable for damages up to KRW 200 billion, KRW 100 billion, or KRW 50 billion, depending on whether the facilities fall under Category A, Category B, or Category C, respectively, under environmental laws such as the Clean Air Conservation Act. Under environmental laws, pollution-generating facilities are divided into the above three categories depending on their size and the environmental risk they present.

2 Broader Applicability of Environmental Liability Insurance Requirement (Enforcement Decree of EPDCA, Article 7, Appendix 3)

In addition to the air/water-pollutant emitting facilities that are required to purchase environmental liability insurance under the EPDCA, the implementing regulations require the following facilities to sign up for environmental liability insurance: (a) oil-production/storage facilities that store at least 100㎘ of oil, and (b) facilities producing/storing harmful chemical substances that are required to prepare a risk management plan under the Chemicals Control Act.

3 Coverage amount of environmental liability insurance and guarantee amount under guarantee agreements stipulated (Enforcement Decree of EPDCA, Article 8, Appendix 4)

Facilities that cause environmental pollution damage will be required to purchase environmental liability insurance with a coverage amount of KRW 30 billion, KRW 10 billion, or KRW 5 billion (or to guarantee such amounts in their respective guarantee agreements) depending on the facility's size and the environmental risk they present, to ensure that any damages caused by pollution from the facility will be adequately covered by such insurance policy or guarantee agreement.

4 Standards stipulated for providing relief aid to parties who suffer damages from environmental pollution (Enforcement Decree of EPDCA, Articles 13-18, Appendix 5, 6)

In the event that a party suffers damages from environmental pollution due to unknown causes, and the subject party or his/her family members are not compensated for their damages/losses, the Ministry of Environment may provide the injured/aggrieved party or his/her family members with relief aid in the form of payment of medical expenses, rehabilitation allowances, funeral expenses, compensation for the aggrieved party's family, and/or compensation for property damage pursuant to the payment standards set forth in the Enforcement Decree of the EPDCA.

5 Process available for requesting access to or disclosure of information on environmental pollution damage (Enforcement Rules of EPDCA Articles 5, 6)

The Enforcement Rules of the EPDCA set forth a detailed process pursuant to which a party that suffers damages as a result of environmental pollution may request disclosure of or access to the information relating to the cause of the environmental pollution. The injured party may submit a written request for such disclosure/access directly to the responsible facility owner/operator, or apply to the Ministry of Environment for a Ministry-issued order requiring the facility to disclose such information to the injured party or provide the injured party with access to the information.

Facilities subject to the environmental liability insurance requirement will be required to sign up for the said insurance by July 1, 2016. The Korea Insurance Development Institute is currently in the process of calculating the appropriate premium rates and thus companies with facilities subject to the insurance purchase requirement under the EPDCA and its implementing regulations will need to make the necessary internal preparations in accordance with these developments.

Lee & Ko will continue to monitor any further legislative/regulatory developments surrounding the EPDCA and will keep you apprised accordingly. In the meantime, please feel free to let us know if you have any questions regarding the EPDCA and its implementing regulations.

Thank you.

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