An FDI projects environmental damage is not “priced” by free negotiation like contract damages: Articles 130-133 of the Law on Environmental Protection 72/2020/QH14 establish a state determination mechanism — the provincial Peoples Committee organises determination of damage to publicly owned environmental components and demands compensation on behalf of the community, based on the cost of remedying and restoring the environment to an equivalent state and the value of damage to each environmental component under Article 131. In parallel, directly damaged individuals and organisations claim compensation themselves; and under Article 602 of the Civil Code, the polluting party must compensate even without fault.
Legal basis
- Article 130 of the Law on Environmental Protection 72/2020/QH14 on principles of compensation for damage caused by environmental pollution and degradation: organisations and individuals whose acts cause environmental pollution or degradation must compensate damage under that law and civil law; damage must be compensated fully, promptly, to the right subjects and at the correct damage value.
- Article 131 of the Law on Environmental Protection 72/2020/QH14 on determining environmental damage: damage comprises (i) damage from decline of environmental functions and usefulness — determined on the basis of the cost of remedying and restoring the environment in the damaged area to a state equivalent to that before the damage occurred, and the value of damage to the degraded environmental component during the unrestored period; (ii) damage to life, health, assets and lawful interests of organisations and individuals caused by the decline of environmental functions and usefulness.
- Article 132 of the Law on Environmental Protection 72/2020/QH14 on compensation claims: the provincial Peoples Committee is responsible for organising damage determination and demanding compensation from the damaging organisation or individual for environmental damage in its locality; where damage occurs across 02 or more provinces, the Ministry of Agriculture and Environment presides; directly damaged organisations and individuals may claim compensation themselves or authorise a state agency to claim on their behalf.
- Article 133 of the Law on Environmental Protection 72/2020/QH14 on compensation settlement: the parties may agree on the level and mode of compensation (in money, in kind, or by performing works); where no agreement is reached, one party may request the competent authority to organise determination of the compensation level or sue at Court for resolution under civil procedure law.
- Article 602 of the Civil Code 91/2015/QH13: a subject causing environmental pollution that causes damage must compensate under the law, even where the polluting subject is not at fault — liability for environmental damage is no-fault liability, separate from administrative liability for the polluting act.
The state mechanism for determining compensation: from damage assessment to the compensation demand
The state-side process operates under Articles 131-132 of the Law on Environmental Protection as follows: when an incident or polluting act causes damage spreading to public environmental components (rivers, groundwater, public land, ecosystems), the provincial Peoples Committee where the damage occurs organises the damage determination — establishing or hiring a specialised organisation to collect current-state data, compare against the pre-incident baseline, calculate the cost of remedying and restoring the environment to an equivalent state, and value the environmental functions lost during restoration. The determination result is the basis for the provincial Peoples Committee to issue a compensation demand to the damaging party, stating the amount, deadline and performance mode; where the damage spans 02 or more provinces, the Ministry of Agriculture and Environment presides over determination and the compensation demand.
The core difference from private compensation claims: the State claims for damage to environmental components under entire-people ownership — damage that no individual has standing to represent; while damage to assets, health and income of each affected household and enterprise is determined and claimed separately by the damaged persons themselves (or by authorising a state agency to claim on their behalf under Article 132). These two damage layers are independent of administrative fines under Decree 45/2022/ND-CP: paying a fine does not extinguish the compensation duty, and compensation cannot “buy” immunity from prosecution where the act meets the elements of an environmental crime.
Where the enterprise does not compensate voluntarily: the practical enforcement path
If the damaging party does not perform the provincial Peoples Committees compensation demand, or cannot agree the compensation level with the damaged persons, the mechanism moves to litigation: the state agency on behalf of the community (or the damaged persons) files a civil lawsuit at Court claiming compensation for environmental pollution damage under Article 133 of the Law on Environmental Protection and the Civil Procedure Code; the Courts effective judgment is enforced through the civil judgment enforcement agency with coercive measures such as deduction from accounts, distraint and disposal of the enterprises assets. Meanwhile, the environmental authority still independently applies administrative measures: suspending the polluting activity, compelling remediation and environmental restoration under the sanction decision — the enterprise cannot invoke “the compensation level is disputed” to keep operating the pollution source.
For an FDI project, the practical consequences extend beyond the case: the damage determination result and performance of the compensation demand enter the projects environmental compliance file, affecting assessments when amending the investment registration certificate or renewing the environmental licence, and are mandatory due diligence information in project transfer transactions. The correct handling strategy is to join the damage determination process from the start (providing monitoring data, proposing a self-performed restoration plan in lieu of cash compensation under the mode Article 133 permits — compensation by performing restoration works), instead of denying liability in a wait-to-be-sued posture, because the no-fault compensation principle in Article 602 of the Civil Code makes the “whether to compensate” question nearly non-arguable — the substantive debate lies in the scope and level of damage.
Frequently asked questions
How is environmental damage compensation for an FDI project calculated?
Under Article 131 of the Law on Environmental Protection 72/2020/QH14, the compensation level is determined from actual damage comprising: the cost of remedying and restoring the environment in the damaged area to a state equivalent to before the damage; the value of damage from decline of environmental functions and usefulness during the unrestored period; and damage to life, health, assets and lawful interests of affected organisations and individuals. There is no fixed schedule — each case is separately determined on the basis of current-state assessment and restoration costs.
How is the compensation level determined?
Three anchors under Articles 131-132 of the Law on Environmental Protection 72/2020/QH14: for damage from decline of environmental functions and usefulness, the compensation level is determined on the basis of the cost of remedying and restoring the environment to an equivalent state plus the value of environmental functions lost during restoration; the organising determiner is the provincial Peoples Committee where the damage occurs (the Ministry of Agriculture and Environment if the damage spans 02 or more provinces); for damage to the health and assets of each organisation and individual, determination follows civil law rules on non-contractual damage compensation.
Who may claim compensation?
Under Article 132 of the Law on Environmental Protection 72/2020/QH14: the provincial Peoples Committee organises damage determination and claims compensation for damage to entire-people-owned environmental components in its locality (the Ministry of Agriculture and Environment presides for inter-provincial damage); organisations and individuals directly damaged in life, health or assets may claim compensation from the damaging party themselves or authorise a state agency to claim on their behalf; socio-political and social organisations may also support damaged persons in claiming compensation as prescribed.
What enforcement applies if compensation is not paid?
Refusing voluntary compensation does not make the obligation disappear: under Article 133 of the Law on Environmental Protection 72/2020/QH14, where no agreement is reached, the state agency or the damaged persons sue at Court; the effective judgment is coercively enforced through the civil judgment enforcement agency (account deductions, distraint and disposal of the enterprises assets). At the same time the management authority independently applies administrative sanctions under Decree 45/2022/ND-CP — suspending the polluting activity, compelling remediation and environmental restoration — and the compensation obligation arises even where the polluter is not at fault under Article 602 of the Civil Code.
This article has been quality-reviewed by the FLAW AI Legal Council