On 15 November 2016, Sanya Division of China Marine Surveillance (affiliated to the Defendant Sanya Oceans and Fisheries Bureau) detected an ongoing project of land reclamation 1 kilometer south of Phase I of New Airport Industrial Park when they were inspecting the construction site of Sanya New Airport in the waters of Hongtangwan, Tianya District, Sanya. As the plaintiff, Sanya New Airport Industrial Park Airport Zone Construction & Development Co., Ltd. (hereinafter “New Airport Zone Company”), failed to present a certificate of right to use sea areas and related approvals for the project, Sanya Oceans and Fisheries Bureau decided to investigate into the project and on 17 November gave New Airport Zone Company an Order to Cease an Illegal Act. On 21 December, Sanya Oceans and Fisheries Monitoring Centre measured the site of the project and ascertained that the area of sea illegally used was 1.4174 hectares. On 15 May 2017, Sanya Oceans and Fisheries Bureau made and served Decision  No. 15 on Penalties, ordering New Airport Zone Company to return and restore the illegally occupied sea areas and imposing a fine of RMB22,324,050. New Airport Zone Company disagreed with the decision and brought an action before this Court requesting for the dismissal of the decision.
It was also ascertained that the Relocation Project of Sanya Phoenix International Airport (hereinafter “Sanya new airport project”) was a major construction project of Hainan Province. The Outline of the 13th Five-Year Plan for the National Economic and Social Development of Hainan Province listed the relocation project of Sanya Airport among the ten major infrastructure projects of Hainan Province. The plan of Sanya New Airport comprised three areas, namely the Air and Sea Port Operational Area (also known as the Artificial Island), Airport International Tourism and Trade Area (also known as Lianhua Island, Airport Industrial Park or Airport Economy Zone), and Airport Supporting Industrial Area (on land). The area of land to be reclaimed for the project was up to 28.18 km2. The owner and constructor of the project was HNA Group. New Airport Zone Company was affiliated to HNA Group.
In November 2011, Hainan Provincial Government held a special meeting to study and advance the relocation project of Sanya Airport. In December 2012, the Provincial Government decided to set up a leading team to take charge of the arrangements for and coordination of major issues of the project. HNA Group undertook the preliminary work of the project by working with the Development and Reform Commission of the province and HNA Airport Group Co. Ltd., and was responsible to report and obtain various approvals as required in different phrases of the project. In August 2013, the Provincial Government held a special meeting on which it generally agreed to relocate Sanya Airport on a reclaimed land and that Hongtangwan waters was preferred for the relocation. In November 2014, the Provincial Development and Reform Commission submitted a report on selecting Hongtangwan as the relocation site of Sanya New Airport to the Civil Aviation Administration of China for approval. As it was not consistent with marine functional zoning, the State Oceanic Administration reported to the State Council and applied for approval for amendments to the Marine Functional Zoning of Hainan Province (2011-2020) regarding Hongtangwan waters. The proposed amendments were to change part of the marine functional zones in Hongtangwan into waters for industrial and urban uses so that the airport could be constructed there. Thereafter, Sanya New Airport project was listed as a new project and a continuing project in the 2016 and 2017 plans for investment in key projects of Hainan Province. The Provincial Government demanded more efforts to be made to the preliminary work of the project and required that all the construction works shall be based on scientific reasoning and carried out in compliance with applicable laws and regulations, and that land reclamation procedures shall be completed properly to make sure that the project would be commenced by the end of 2016 and completed and put into use in 2020.
To advance the construction of Sanya New Airport, Sanya New Airport Investment and Construction Co., Ltd., an affiliate to HNA Group, designated Phase I of New Airport Industrial Park and Artificial Island Starting Zone respectively out of the Airport International Tourism and Trade Area and the Air and Sea Port Operational Area. Then it started a land reclamation project without authorization. In July 2016, permission was given for the use of 47.8879 hectares of sea areas for Phase I of New Airport Industrial Park, and the right to use was granted for a period of 50 years. Likewise, New Airport Zone Company commenced sea-taking projects, including a sea-crossing bridge, steel vibrating cylinders and Artificial Island Starting Zone since October 2016 without obtaining the right to use sea areas. Even when competent authorities ordered it to stop the works and imposed fines, the company did not stop working but carried on by paying the fines. The construction came to a full stop in July 2017 when the State Oceanic Administration Office gave notification in July that the assessment report on the impacts of the Artificial Island on the environment did not pass, and that the constructor of the project was required to provide sufficient reasoning about the problems mentioned in the notification in an amended report and resubmit it according to procedures. In 2017, the Fourth Environment Supervisory Inspection Group released the Opinions on the Environment Supervisory Inspection of Hainan Province, in which it pointed out that “Sanya New Airport International Tourism and Trade Area Project commenced construction before obtaining authorization and the barbarous approaches damaged the marine ecosystem”. To address the problems pinpointed by the opinions of environment supervisory inspection group, rectification measures were proposed in the Rectification Measures of Hainan Province in Implementing the Opinions of the Environment Supervisory Inspection Group. The measures included accelerating the preliminary work of the Sanya New Airport and its supporting industrial projects and completing necessary formalities in accordance with the Master Plan of Hainan Province (Space 2015-2030), the Master Plan of Sanya City (Space 2015-2030) and the requirements for marine functional zoning. The rectification plan was submitted and approved by higher authorities, despite that the plan did not mention any adjustment to the selected location of Sanya New Airport at all. The Guiding Opinions of the CPC Central Committee and the State Council on Supporting Hainan in Comprehensively Deepening Reform and Opening-up proposed that preliminary work of Sanya New Airport shall be commenced.
Opinions of this Court: New Airport Zone Company commenced the project of the Artificial Island Starting Zone without legally obtaining the right to use sea areas. The act constituted illegal occupation of sea areas by reclaiming land without authorization. It was appropriate for Sanya Oceans and Fisheries Bureau to impose administrative penalties according to Article 42 of the Law on the Administration of Sea Areas. However, due to its failure to correctly and fully understand the provision, it did not take into account of “the period of illegal occupation of sea areas” when considering the penalty basis. As a result, the amount of penalties was apparently inappropriate. Moreover, Sanya Oceans and Fisheries Bureau did not fully consider the fact that the project concerned was a key infrastructure project and that it had already obtained most of the supporting documents. Neither did it consider whether restoration of the reclaimed land would cause secondary pollution to the marine environment. Thus, the penalty decision that ordered “return and recovery the illegally occupied sea areas to their original state” was obviously unreasonable. For this reason, this Court made a judgment to dismiss the Decision  No. 15 on Administrative Penalties made by Sanya Oceans and Fisheries Bureau and ordered it to make new administrative penalties. Sanya Oceans and Fisheries Bureau was unsatisfied with the results and proceeded to file an appeal. The Higher People’s Court of Hainan Province affirmed the original judgment in the second instance proceedings.
This case clarifies the vague understanding of marine administrative authorities on the application of Article 42 of the Law on the Administration of Sea Areas (hereafter “Article 42 provision”) and provides significant guidance for the correct application of the provision. It also sets a good example on how to support the construction of key projects while protecting the lawful use of sea areas and the marine environment.
First, when imposing penalties for illegal land reclamation or occupation of sea areas, the “period of illegal occupation of sea areas” shall be taken into account. First of all, the Notice of the Ministry of Finance and State Oceanic Administration on Strengthening Management on the Collection of Royalties for the Use of Sea Areas provides for the collection of royalties from entities and individuals who legally use the sea areas, whereas the Article 42 provision sets out penalties for illegal occupation of sea areas. They are of different natures and indented for different targets. Moreover, Article 42 provision has taken into account the different extents of damage caused by illegal occupation of sea areas for land reclamation and other acts of illegal occupation of sea areas. Based on this it sets out more severe penalties for the former. At the same time, it decides on the amounts of penalty by considering the “period of illegal occupation of sea areas” and the “size of sea areas illegally occupied” as measurement for the extent of damage caused by the violation act. It respects the principal that a punishment shall be proportional to the severity of an illegal act itself, which is also the intention of this mechanism. Therefore, when imposing a penalty for illegal reclamation or occupation of sea areas subject to the Article 42 provision, consideration shall be given to the period of illegal occupation of sea areas instead of simply collecting a maximal royalty in a lump sum for 50 years.
Second, the three punishment measures including ordering the return of illegally occupied sea areas, ordering the recovery of the sea areas to original state, and forfeiting the illegal proceeds do not stand side by side. First of all, Article 42 provision expressly specifies that the above three punishment measures do not stand side by side. When imposing administrative penalties under this provision, it is unnecessary to impose all three measures at the same time. Only fines may be imposed together with one or more of these measures. Moreover, illegal use of sea areas involves different background facts and complicated violations. If the above penalties are imposed at the same time without regarding the specific facts and severity of the violation acts, it would be against the principle of proportionality and might cause failure to the purpose of the administrative penalty.
Third, administrative penalty shall be both legal and reasonable. The purpose of administrative penalty is to correct administrative violations, to support and monitor the administration acts of the administrative authorities, and to protect public interests and maintain the social order. When imposing administrative penalties, particularly when key infrastructure projects are involved, we should take into account of various aspects such as the economy, politics, society, and ecosystem. A penalty should be reasonable and proportional to the severity of the illegal act. Sanya New Airport project was a key infrastructure project, the selection of site had been approved and the State had requested to commence the preliminary work. As regards how to recover the sea areas to their original state and whether the recovery would cause secondary pollution and damage to the marine environment, in consideration of the nature, current status, and possibility of continuity of the project and according to the principles proposed in the Opinions on Environment Supervisory Inspection of Hainan Province, i.e. “restore what needs to be restored, adjust what needs to be adjusted, and remedy what needs to be remedied”, this Court corrected the decision made by the administrative authorities who simply applied all the penalty measures under Article 42 provision as punishment. The judgment of the court achieved both the juridical purpose and social effects by taking into account of the lawfulness and reasonableness of the administrative actions.