This article is an edited reprint of an article which appears in Volume 8 of Law in Japan: An Annual, edited by Prof. John O. Haley of the University of Washington Law School, Seattle, Washington.

[5 ELR 50229]

Introduction and Summary of the Act

In 1972 the United Nations Stockholm Conference on the Human Environment highlighted for all the world the significance of foreign practice and experience in the search for more effective environmental management at home. Less well publicized is the mandate which the Conference imposed on the legal profession: to look through a foreign culture to the essence of its response, to translate it and, ultimately, to render it usable abroad. In this sense the Conference curiously was ahead of its time, sinceit asked of the legal profession a task which lawyers have been ill-equipped by training or proclivity to perform.

A central barrier for the American environmental lawyer venturing into this field is that a foreign approach, devised for the exigencies of another setting, may offend basic values and sensibilities. The establishment of a system of compensation to victims of pollution in Japan, for example, may outrage some American public interest lawyers uncompromisingly committed to preventative litigation. Nevertheless, patient study of alternative approaches can be rewarded by insights valuable to ourselves, and also, one hopes, to other countries. This is the challenge of the Japanese Law for the Compensation of Pollution-Related Health Damage enacted in 1973.¹

The Act establishes an administrative structure to oversee compensation payments. Pollution victims of designated diseases² arising in officially identified pollution areas³ are examined by a special Health Damage Certification Council,⁴ comprised of medical, legal, and other experts. Upon certification victims are eligible for reimbursement of medical expenses and loss of earnings; assistance is also provided to survivors for funeral and other expenses.⁵

Under the Act polluters pay the entire costs of victim assistance. For example, revenues for compensation of air pollution-induced disease attributable to multiple sources (Class 1 areas)⁶ are derived principally from a graduated emission charge,⁷ and secondarily, from a [5 ELR 50230] tonnage tax on automobiles.⁸ The emission charge is collected by a special authority and pooled at the national level; thereafter, the fund is distributed to provincial government for payment to the victims. Compensation payments for diseases traceable to a specific substance (Class 2 area diseases) are paid directly to victim groups at the local level without prior national collection by the authority.⁹

The act also establishes an apparatus for review of grievances. Pollution victims may petition the prefectural governor or mayor over the disposition of compensation benefits, certification, and other actions.¹⁰ Thereafter, the prefectural governor (or mayor) concerned may appeal to a central grievance board under the jurisdiction of the Environment Agency.¹¹ Polluters and others with complaints regarding the levy can request the Director-General of the Environment Agency and the Minister of International Trade and Industry to review the action.¹² It is clear, however, that in no case will administrative disposition of a case bar subsequent recourse to judicial relief.¹³

The system described should not be regarded by the reader as crisis legislation passed in response to some tragic quirk of the Japanese experience. Although scientific proof of causation is still lacking, a statistically significant correlation has been repeatedly demonstrated between high levels of air pollution in the United States and respiratory diseases such as emphysema, bronchitis, and even lung cancer.¹⁴ A dramatic example is the case of Donora, an industrial town in the mountains of western Pennsylvania, where in 1948 almost half of the town's 14,000 citizens fell ill from pollution and 20 persons died. Environmental Protection Agency (EPA) and Council on Environmental Quality (CEQ) statistics are also grim. A 1972 EPA report estimates the economic cost of human mortality and morbidity from air pollution in urban areas to be $6 billion annually; a 50 percent reduction in air pollution reportedly would lower the cost of damage to human health by $2.08 billion per year.¹⁵

In view of the seriousness of health damage from pollution in the United States, it is disturbing that so little scholarly, professional, and legislative attention has been devoted to developing an effective approach to compensation.¹⁶ In some ways our era resembles the [5 ELR 50231] state of the law of industrial accidents prior to the development of workmen's compensation.¹⁷ The law of pollution damage still views the problem as an individual struggle between polluters and victims.¹⁸ As a consequence, procedural barriers to class actions,¹⁹ the public nuisance doctrine,²⁰ and difficulties in proving disease causation from multiple sources of pollution²¹ present powerful obstacles to relief, as did the defenses of contributory negligence, assumption of risk, and the fellow servant rule²² a half century ago. Since most United States courts have refused to disturb these barriers to victim recovery,²³ the economic forces which impelled the American business community to seek a more certain, less expensive, vehicle for compensating workers have not yet been unleashed in the pollution field.

From this perspective, the establishment of a new compensation system in Japan is an event of significance for the United States. In our search for a more effective response to pollution injury we will need to examine along with the progress of the Act's implementation, the sociological, cultural, and economic forces which shaped its development. Inquiry will also be necessary into how the overriding problem of scientific uncertainty — more specifically, the question of pollution disease causation — is handled in administrative, judicial, and legislative forums in Japan.²⁴ Since the Act will also serve in Japan as a point of departure for the development of a comprehensive system for compensation for property damage,²⁵ a careful monitoring may in addition enrich our understanding of these related problems.²⁶

This article is intended as an overview of some of these questions, and not as an exhaustive analysis. Part I describes the cultural-institutional setting, legal foundations, and basic mechanics of the Act. Part II attempts only a preliminary evaluation. A forthcoming study will analyze more rigorously the Act's theoretical assumptions and its implications for extensions on present American practice.²⁷

Part I. Evolution and Major Features of the Act

A. The Act's Cultural-Institutional Setting and Legal Foundations

1. The Cultural-Institutional Setting

In order for the western reader to have complete understanding of the approach to compensation adopted by the Act it is necessary to capture a sense of its historical, cultural, and institutional setting. Historically, the Japanese never viewed pollution as a problem requiring independent study and redress. While anti-pollution protests and riots accompanied Japan's industrialization,²⁸ these were always considered [5 ELR 50232] intolerable intrusions into social harmony and impediments to industrial growth. Governmental attention was devoted to discovering ways to prevent recurrence of the demonstrations rather than examining underlying causes. During the early postwar period, pollution actually became the emblem of the nation's rebirth, glorified in an image of "cities engulfed in smoke" (kemuri no miyako) rising from the debris.²⁹

The first pollution-induced diseases began to appear in the mid-1950's against a background of growing national prosperity. In 1956 local inhabitants of Minamata, Kyushu, showed signs of a strange sickness which caused frightful pain, paralysis, congenital deformity in their children, and even death.³⁰ Evidence of the causative agent gradually began to point to the mercury-filled effluent from the acetylaldehyde process of the local plant of the Japan Chisso (Nitrogen Manufacturing) Company.³¹ Around 1961 epidemics of two more apparently pollution-related diseases were also reported. In Yokkaichi, site of a huge complex of oil refineries and petrochemical and power plants, many local residents were diagnosed as suffering from asthma, bronchitis, emphysema, and other respiratory diseases eventually traced to air pollution in the area.³² In Toyama prefecture many residents began to complain of a painful affliction which caused splintering of the bones, disfigurement, crippling, and a number of deaths.³³ Finally, in 1964 a second outbreak of Minamata disease was reported in Niigata City.

Although the victims of these diseases and their families petitioned the companies concerned and the local authorities for redress, a number of powerful socio-psychological forces held in check widespread citizen mobilization. Since childhood, Japanese society had lectured the individual on the necessity for obedience and deference to authority (okami ishiki), patience, and ultimately, resignation (akirame). A life-long employment system ("graduation to grave") imposed further economic restraints, since by protesting against one's company one could risk discharge without hope of an opportunity for equivalent employment. Thus, the protests which eventually erupted in all the above pollution-disease cases followed long years of intense and widespread suffering.

Until the early 1960's the companies involved succeeded in remaining indifferent. As in other countries, enterprise generally did not feel itself responsible for general public welfare. Social obligation was felt to grow rather from institutionally recognized relationships founded on reciprocal duties and benefits. Since the companies for the most part had no formal recognized connection with the victim groups, no mechanism was readily available to compel an accounting for the damages inflicted.³⁴ Victim appeals were answered by company denials of responsibility. The response of government was essentially embarrassment. A few cautious investigations were made, but when evidence began to point to negligence of the companies, the investigations were peremptorily interrupted.³⁵

One exception in the void of social responsibility was the tradition of extrajudicial monetary payments (mimaikin). As early as the Ashio³⁶ case a century [5 ELR 50233] before, mimaikin had served to mollify victim grievances and restore social harmony. During the 1950's mimaikin were frequently formalized in "compensation settlement" agreements negotiated by polluters and victims. While these agreements usually stipulated that payments would be made directly to the victims by the involved industry, local government at times acted as a conduit by creating a fund contributed to by polluters, which was then distributed to the victims.³⁷

As the protests of victim and citizen groups³⁸ increased during the mid-1960's, the fragile accomodation purchased through mimaikin collapsed. From the victims' perspective the payments were insufficient, unjustly excluded some individuals, and made no provision for pollution control. The institution also failed to confront what emerged as a central demand, that the companies involved admit responsibility.

From this perspective, the victim's eventual resort to litigation may have been inevitable. During the late 1950's and early 1960's, although the option of litigation was always available, it was still generally regarded as a foreign and unpredictable method of airing grievances. For some older victims, insistence on one's individual rights through a damage suit was tantamount to incorrigible selfishness.³⁹ In this context the victim suits represented an uncompromising break with the past, a proclamation of a desperate resolve to struggle with polluters and the central government, if necessary, heedless of the social consequences.⁴⁰

Before discussing the legacy of the pollution trials, it is useful to compare the Japanese situation in the late 1960's with the United States setting prior to the adoption of workmen's compensation. In the United States there existed a long tradition of litigation; in Japan, litigation was comparably untested at least in the pollution area.⁴¹ In the United States a collective business response to industrial accidents developed as part of an awakening concern with welfare objectives; in Japan, a more developed, though fragile, institutional basis already existed in mimaikin payments. In Japan litigation and mimaikin came to be viewed by some as almost antagonistic solutions in the 1973 Act. Before this accommodation could be achieved, however, certain technical barriers in the Civil Code had to be surmounted by victim groups. The collapse of these barriers and the resulting fear in the business community of exposure to incessant lawsuits provided sufficient economic incentive, in Japan, as it had earlier in the United States, for a search for alternatives.

2. Accomodations with the Civil Code: The Legacy of the Four Major Pollution Trials

Before the development of the Act, a number of accommodations with the Civil Code were necessary. First, the impossibility of obtaining speedy and adequate [5 ELR 50234] relief under it had to be recognized. Second, the barriers posed by the prevailing judicial construction of causation and responsibility had to be surmounted. The following discussion briefly sketches the crucial doctrinal breakthroughs in these areas, all of which are principally attributable to the four pollution trials.

Under the Civil Code prior to the four major pollution trial decisions, an injured party bore the entire burden of showing that a polluter's activity (i.e., discharge of pollutants from a factory) was the direct, scientific cause of injury.⁴² In itself onerous, the task was rendered virtually impossible by the protection given to corporate and government secrets and corporate proprietary information in Japan.⁴³ While burdenshifting procedural devices such as presumptions existed in Japanese law, their application to he pollution area had not been deeply explored either by the courts or the academic world prior to the pollution trials.⁴⁴ Plaintiff's problems of redress were further complicated by the absence of a doctrine of res ipsa loquitur.⁴⁵

Demonstration of legal responsibility under traditional principles of Japanese tort law was equally onerous for the pollution victims. Under the basic Civil Code tort provisions, Articles 709-715 and 718-719,⁴⁶ negligence (kashitsu) is one element in the determination of liability (baisho sekinin), a legal conclusion. To prevail, a plaintiff must show a specific duty of care (hence responsibility), the foreseeability of harm, proximate cause, and injury. Prior to the pollution trials both judicial and scholarly interpretations of the issues of duty of care and foreseeability were extremely narrow.⁴⁷ Consequently, plaintiffs faced major obstacles to relief.⁴⁸

It is useful to examine the treatment of causation and responsibility in the four pollution trials generally in the chronological order of the court's decisions, since in many ways each decision influenced the outcome of the next.⁴⁹

3. The Four Pollution Trials

a. The Itai-Itai Disease Case⁵⁰

In March 1968, 31 victims of itai-itai disease sued Mitsui Metal Mining Company whose upstream effluent they claimed poisoned them by concentrating downstream in their rice fields and drinking water. After three years of consideration, the Toyama District Court awarded plaintiff $380,000 in damages. Mitsui subsequently appealed the decision which was upheld by the Kanazawa Branch of the Nagoya High Court in August 1972, and no further appeals were made.

The central issue in the case was causation, not responsibility.⁵¹ The decision turned on a number of sub-issues which were to arise again in most of the other trials. The central question concerned the necessity and the degree of proof required of the causative agent, its mechanism, path of transmission, and manner of entry.

In halding these problems the court relied heavily [5 ELR 50235] on epidemiological analysis⁵² to fashion a four-pronged test. Drawing on past studies on the relation of cadmium and other toxic substances to health, the court required plaintiffs to demonstrate that: (a) discharge of the polluting agent had preceded outbreak of the disease; (b) increased exposure to the agent resulted in increased occurrence of the disease; (c) areas of low pollution were associated with low prevalence and incidence; (d) statistical inference of causality was not contradicted by clinical and experimental results.⁵³ In the trial the plaintiffs were able to show evidence of the possible "origin" and "transmission" of cadmium by differential analysis of cadmium concentrations in sludge deposits around the company's outfall and in the rice fields by the river; and "entry" by stool analysis of victim and non-victim populations.

Since the four "epidemiological principles" noted above were also satisfied, the court held cadmium to be the legal cause of the disease. The decision surprised many traditionalists since the presence of zinc and lead in the river, and the victims' severe malnutrition, vitamin D deficiency, and in some cases pregnancy, all appeared to be important contributing causes.

b. The Niigata and Kumamoto Minamata Disease Trials⁵⁴

The first suit was brought in June 1967 by 77 victims of Niigata Minamata disease and their families against Showa Denko (Electric Chemical) Corporation. In June 1969, 138 victims from Kumamoto in the Minamata Bay area also brought suit against the Japan Chisso Corporation in the biggest and most widely publicized of the four pollution trials. In September 1971, the Niigata District Court awarded the Niigata victims $920,000 in damages. In March 1973, the Kumamoto District Court, citing Niigata and the preceding Yokkaichi⁵⁵ trial as precedent, awarded plaintiffs $3.4 million in the larger Minamata action. Since many of the questions debated in these two trials were identical, discussion of them is consolidated below.

Causation issues proved troublesome for the plaintiffs. Although the agent, mercury, was well-established by the time of both trials, proof of the origin of the substance and the path of its transmission posed intractable problems. Transmission was at first obscure because methylated mercury, unlike cadmium, could not be detected simply from deposits in a river bed. Detection was impeded because of mercury's concentration in protein structures of the river's fish, a process first unrecognized and poorly understood.

Of necessity, plaintiffs sought to show transmission by epidemiological and statistical analysis of mercury concentrations in different types of fish, percentages of contaminated fish eaten, and differential studies of incidence of Minamata disease correlated with the type of fish eaten. The Niigata trial represents the first attempt in Japanese law at showing proof of physical injury by epidemiological analysis of indirect causation via the food chain.

The origin of the toxicant also became an issue in the Niigata case when defendants were able to show that a major earthquake the previous year had caused an explosion at a nearby chemical plant which resulted in discharge of mercury and other toxicants into the river. Further uncertainties were introduced by plaintiffs' inability to explain why all the victims had contracted the disease in the short period of 1964-65, and defendant's failure to explain why some patients had developed the disease prior to the earthquake.

The court disposed of these problems by stressing the importance of statistical probability and its relation to the burden of proof. Without expanding at length on the basis for its test, nor stating what order of probability it would require, the court held that if plaintiffs could demonstrate a high statistical correlation between defendant's activity and the occurrence of the disease, this would be sufficient. In addition, plaintiffs had to show: (a) the nature of the disease and the material that caused it; and (b) the mechanism by which the agent entered the host. Proof of these elements would create a rebuttable presumption shifting the burden to defendants of demonstrating that their activities were not the original source of the causative agent.

On the issue of negligence, the Niigata District Court developed a number of new standards in holding the defendant liable.⁵⁶ A chemical company, the court held, has a specific responsibility to provide continuous [5 ELR 50236] supervision to assure that toxic substances are not discharged into the surrounding environment. Industrial activity is permissible only to the extent that it does not endanger the environment. If a threat to human life can be shown even after the best technology available has been employed, a company can be ordered to curtail or cease operations. Since defendant had breached this duty of care, and since it should have foreseen the injuries which it inflicted, the court held the company responsible.

By the time of the second or Kumamoto Minamata trial, causation was no longer an issue and the problem of responsibility greatly alleviated. In this case the court had no difficulty in dismissing defendant Chisso Company's argument that a compensation contract negotiated by it with the victims was a bar to further liability under the Civil Code. The court sternly emphasized that the defendant had come to know the hazards of its activity and had suppressed information relating to the causation of the disease. The defendant was found negligent for not adopting necessary prevention measures and for its obstructionist acts during the preceding 20 years. The compensation contract was voided by the court as violative of public policy.

c. The Yokkaichi Trial⁵⁷

In the Yokkaichi case twelve victims sued Showa Denko and five other companies. Plaintiffs were awarded $300,000 in damages in July 1973 by the Yokkaichi District Court. The case was the most complex of the four pollution trials. Since plaintiffs with different diseases and medical symptoms had joined in one suit, difficult proof problems were presented. Unlike the Minamata disease, the Yokkaichi maladies were often chronic. Most importantly, the Yokkaichi case involved multiple sources of air pollution, whereas the other cases involved diseases traceable to the effluent of one company. Fluctuating environmental, meteorological, and demographic conditions (i.e., wind, season, weather, age, sex) and varying degrees of exposure to pollution posed special problems.

Because of multiple parties defendant, the Yokkaichi case involved a new theoretical basis for liability, Article 719 of the Civil Code. Since this provision was virtually untested in the pollution area,⁵⁸ the case raised a number of uncharted issues, including whether Article 719 created liability independent from Article 709 and whether it could be used to lighten plaintiffs' burden of proof of causation.

The Yokkaichi court, while refraining from a definitive determination on the latter question, adopted and extended the analysis of causation in the earlier pollution trials. The court drew a major distinction between causation by defendants' activity viewed as a whole and the contribution of individual parties. The court's use of epidemiological analysis in resolving both issues is instructive. With regard to the first, the court accepted evidence of "origin" based on statistics of regional pollution levels (Yokkaichi's was four times that of other areas): sulfur oxide (SO[x]) studies by year, seasonal fluctuation of pollutants, emission discharges from individual facilities, and studies of the type of pollution equipment used. "Transmission" was identified by data on yearly and seasonal wind patterns affecting sulfur oxide discharges from polluting factories. These and other elements were corroborated by statistics on differential incidence and prevalence of victims controlled for age, sex, and physical condition; by comparison of hospital admissions and outpatient statistics for pulmonary diseases for polluted and non-polluted areas; by statistics on the increase of pulmonary diseases over time, control data for smoking and other potential causal factors, overlay map studies of pollution disease; and by clinical data (results of animal experiments with sulfur oxide under polluting conditions). In light of this evidence, the court adopted the probability test of the Niigata Minamata court and concluded that defendants' pollutant discharges were the legal cause of the plaintiffs' injury. Severe problems remained, however, in allocating defendants' individual responsibility for causation.

In disposing of this problem the court divided defendants in two groups. One group, the Mitsubishi complex, was so entwined by its interlocking corporate management, stock ownership, and supply of parts and products, that the court held the companies' acts could be attributed to each other, even where the polluting discharges of one was negligible. Companies linked in this way were treated as a unit for purposes of causation.

The court used the concept of foreseeability to impose responsibility on other companies which appeared to have a more tenuous relation with the occurrence of disease. These companies, the court held, were also contributing causes of the victims' injury since they were on notice of the health hazard produced by the smoke and pollutants emanating from their own and others' facilities.

In its treatment of responsibility the Yokkaichi court expanded on the principles earlier articulated in the Niigata decision. It held that a duty to investigate possible impacts on human health attaches when a company begins its site location for an industrial plant, and that it continues throughout the operation. If an industrial site [5 ELR 50237] is near human settlements, the company is on notice of the clear possibility of harm. The court further identified a correlative duty for an enterprise to employ the best technology available in any part of the world. In its summation the court held the use of such technology would not shield defendants from liability if other protective measures also could have been employed; that administrative air quality standards are merely guidelines which cannot be used to bar liability; that no prescriptive right to pollute can be established; and that even compliance with existing zoning regulations would not be a sufficient defense where injury such as that in Yokkaichi occurred.

From a doctrinal standpoint the Yokkaichi decision is far reaching. As a declared standard it is more stringent than that which any American court has yet ventured,⁵⁹ although its impact on judicial thought in Japan is still uncertain. Its influence, however, is clear in the mechanics of the Act.⁶⁰

The principal legacy of the pollution cases is their application of epidemiological, clinical, and experimental data to the problem of causation and their expanded interpretation of polluter responsibility. Most scholars construe the decisions broadly. Thus, it is generally accepted that the court's use of epidemiological data in Yokkaichi would also have application to an action under Article 709. In addition, many scholars believe that the Yokkaichi rationale would probably be extended to the case of multiple source pollution outside an industrial complex. In such a case, a small polluter unlike Yokkaichi would be allowed to show that its polluting discharges were minimal and thereby escape the attribution rules articulated by the Yokkaichi court for companies in an industrial complex. Finally, it is noteworthy that the statistical probability test for causation developed in the four pollution trials has not been further judicially clarified.

4. Statutory Precursors of the 1973 Act

a. The Basic Law for Environmental Pollution Control and the 1969 Pollution Victim Assistance Law

As the protests of the victims increased in the middle and late 1960's, an embarrassed government at last recognized that a comprehensive pollution control program was necessary. Between 1967 and 1970 the country's future response to the pollution problem was charted in the Basic Law for Environmental Pollution Control (Kogai taisaku kihon ho)⁶¹ and 14 other special laws. The Basic Law, as amended in 1970, sets out basic policy guidelines and an administrative framework reflecting the balance of interests between industry, government, and pollution victims.⁶² The most significant provision of the Basic Law for the development of the 1973 Act is Article 21⁶³ which mandates the government to adopt all necessary measures for pollution victime relief and the harmonious settlement of disputes.

In historical perspective the government's reaction to victim assistance was traditional. The system of relief enacted in the 1969 Law for the Relief of Victims of Pollution Disease (Kogai ni kakaru higai no kyusai ni kansuru tokubetsu sochi ho),⁶⁴ which implemented the directives of the Basic Law, was a kind of centralized mimaikin system. For example, the 1969 law established a central assistance fund which was supported by national and local tax revenues and by voluntary company contributions.⁶⁵ Under the law, designated victims of Minamata, itai-itai disease, and air pollution-induced respiratory ailments were screened by a Pollution Victim Review Committee⁶⁶ which recommended them for assistance.

The 1969 relief system was plagued with many of the deficiencies of traditional mimaikin payments. Assistance reached only a small number of victims and was generally inadequate. Furthermore, no mechanism was readily available to compel pollution abatement. Worst, the system depended on the caprice of company largesse. The 1969 system in historical perspective awaited the arrival of a better alternative. Before the courts' decisions in the four pollution trials set in motion forces which compelled the 1969 system's ultimate demise, however, a statutory foundation for the allocation [5 ELR 50238] of costs in the 1973 Act was being developed during the intervening years (1969-1973).

b. Legal Basis for Cost Allocation under the Act

A fundamental departure from the 1969 system introduced by the 1973 Act is its financing of victim compensation payments through a pollution levy. This provision embodies three important concepts: first, a judgment in Japan that pollution damage and control costs should be initially imposed all or in part on the polluter; second, a mechanism for the enforced collection of the pollution levy; and third, a determination that the fund so generated should be used for compensation of victims.⁶⁷

General statutory authority for a pollution control levy was originally contained in Articles 4 and 5 of the Basic Law, which direct central and local governments to conceive, adopt, and implement measures to prevent environmental pollution. Articles 3 and 22 of the Basic Law authorize the imposition of pollution control costs on enterprise.⁶⁸ This policy was later refined in 1970 by the Pollution Control Public Works Allocation Law (Kogai Boshijigyohi jigyosha futan ho),⁶⁹ which required that a company share the financial burden of construction and operation of pollution control facilities in proportion to its contribution to the pollution of an area.

An additional influence on the thought underlying the 1973 Act in this area was the introduction to Japan of the "polluter must pay principle" (PPP) articulated by the Organization for Economic Cooperation and Development (OECD) in 1972.⁷⁰ This principle requires that polluters bear the costs of pollution abatement and control measures to ensure that the environment be maintained in an acceptable state.⁷¹ The OECD declaration, which was originally designed to mitigate dislocations in international trade, was received with interest in Japan as a principle for domestic policy. A series of discussions was initiated by the newly formed Japan Environment Agency⁷² and the Environmental Committee of the OECD on air and water pollution management, toxic chemical control, and the regulation of motor vehicles. The experience gained through this cooperation provided an additional foundation for the decision to allocate victim compensation costs in the 1973 Act through a pollution levy.

c. Legal Basis for the Treatment of Responsibility in the Act

In addition to the influence of the pollution trial decisions, a further factor influencing the treatment of responsibility in the Act was the amendment of the air and water pollution laws to include liability without fault.⁷³ Although many analysts initially hailed the amendments as a sign of a sterner governmental attitude toward polluters, critics of the laws have pointed out their major limitations, .e., restriction to physical injury and the retention of onerous Civil Code requirements for proof of causation. From the perspective of the Act, the inclusion of a strict liability principle for pollution injury provided an essential legal underpinning for the compulsory levy.⁷⁴

During the Diet debates on the Act, industry vehemently opposed compulsory payment for victim relief on the theory that this exaction would be tantamount to recognition of liability under the Civil Code.⁷⁵ It is noteworthy that neither the Act nor its regulations state explicitly that a charged enterprise will be deemed responsible for a victim's injury. While the use of the word "compensation" (hosho) would suggest liability when contrasted with the term "assistance" (kyusai) used in the 1969 law, the area is unclear.⁷⁶ The result ultimately arrived at the Act no doubt reflects the political [5 ELR 50239] struggle surrounding its enactment.⁷⁷

A final and unresolved area relates to the impact of the Act on collateral or subsequent litigation arising over the same set of facts. Theoretically, a victim is permitted judicial recourse for uncompensated injury even for the same type of damage if payments received are inadequate. This raises several as yet unanswered questions. Will the finding of causation and responsibility underlying the pollution levy be dispositive of these issues in a judicial forum? In what ways is the burden of proof on these issues alleviated? What is the probative value in litigation of epidemiological analysis used in the administration of the Act? May a victim use administrative determinations of any of these issues as a basis for injunctive or other equitable relief?⁷⁸

B. Technical Aspects of Administrative Practice under the Act

1. General Treatment of Causation

Under the Act victims are relieved of the burden of proving disease causation. This is not to suggest that the Act ignores this crucial question. Rather, the administrative practice under the Act has refined the basic approach to causation developed in the pollution trials, supra,⁷⁹ into a central methodologyfor disease, area, and victim designation.

Causation is handled in part as a statistical question. When a "significant" correlation between disease and pollution is identified, causation is inferred. Epidemiological analysis plays a crucial role in such determinations. Clinical and experimental data, as well as mortality and morbidity statistics are also carefully considered.⁸⁰ Administrative determinations are also guided by the use of presumptions, and the doctrines of joint liability and foreseeability of harm as developed in the pollution trials. At times, however, since administrative agencies have wide discretionary powers in these areas, proof of causation is regarded as sufficient under circumstances which would probably not have been adequate to support judicial findings.

A basic general tool for probability analysis is the concept of "order of risk." Order of risk refers to a probability of occurrence of disease when an individual is exposed to certain environmental conditions. It is derived from prevalence and incidence rates of pollution disease, and clinical and experimental studies of pollution. For example, a recent study⁸¹ describes the order of risk of exposed populations to Kanemi oil poisoning (polychlorinated bi-phenyls or PCB) or itai-itai disease as very high, i.e., one person in ten or one in a hundred (10<-1>, 10<-2>) respectively. The order of risk of these diseases for the entire Japanese population is described as relatively low, i.e., one person in a million (10<-6>). As will be seen the concept of order of risk is expecially useful in the designation of pollution areas.

2. The Designation Process

Before a victim becomes eligible for compensation under the Act, a number of administrative determinations involving causation have to be made. These are official designation of toxic substances and pollution-induced diseases, pollution zones, and finally, pollution victims.

[5 ELR 50240]

a. Designation of Toxic Substances and Pollution Diseases

Epidemiological and other data developed over the last 20 years now provide Japanese administrators with a basis for a determination of the "causal relation" between certain toxic substances and pollution disease. For example, pursuant to cabinet orders and other regulations, cadmium, mercury, arsenic lead and sulfur oxides have been officially designated sources of itai-itai, Minamata disease, arsenic poisoning, and Yokkaichi respiratory sickness.⁸²

From a scientific perspective the designation process abounds in uncertainties. Intractable problems now confront Environment Agency administrators, for example, in deciding whether to designate nitrogen oxides and particulates as sources of respiratory disease.⁸³ Particularly difficult problems are posed by synergistic⁸⁴ reactions of these substances, which impede the development of even a minimum data base. Problems in gathering reliable monitored data are also aggravated in the case of nitrogen oxides whose ambient concentrations may vary depending on the heat of the processes involved.

Official designation has always been subjected to conflicting political pressure and bureaucratic procrastination. For instance, the 20-year history of Minamata disease is now being repeated to some extent in the recent cases of hexavalent chromium poisoning.⁸⁵ At present, a pre-designation investigation has been initiated by local government, the Ministry of International Trade and Industry, and the Environment Agency. Although clinical tests of victims show a chromium concentration in tissue three times the normal population, difficult problems remain in analyzing the chemical's toxic properties and its role in cancer etiology. Because of jurisdictional disputes between the government agencies concerned, there is a major question whether chromium will be officially designated under the Act.

b. Designation of Pollution Zones

A second area which necessitates administrative treatment of the causation problem is the implementation of Article 2.1 of the Act which requires the formulation of rules to integrate disease "prevalence" with "marked" pollution.⁸⁶ In the administrative practice now developed, several stages of investigation precede an ultimate determination that disease and pollution in these areas is so intimately connected (causally related) to warrant designation. The process begins with analysis of sulfur and nitrogen oxide and particulate concentrations derived from national monitoring reports.⁸⁷ General note is made even at this early stage of the relationship between disease and high concentration of all these substances. Areas are thereafter distinguished based on whether they conform to or exceed national ambient standards, and the extent to which pollution disease occurring in a polluted area exceeds natural prevalence levels.⁸⁸

Thereafter, sulfur oxides, for which the most data has been accumulated, are used as the standard for area designation. Four general classes of sulfur oxide levels based on a yearly average monitoring sample have been distinguished.⁸⁹ Polluted areas under investigation are then compared with these classifications.

When an area of high prevalence is identified, generally a team of governmental scientists, doctors, bureaucrats, lawyers, and economists is dispatched, and environmental, meteorological, and clinical surveys are conducted. A particularly useful tool in this connection has been the questionnaire of the British Medical Research Council (BMRC), which is employed to gather data not only on disease prevalence, but also on age, sex, and smoking habits of victims.⁹⁰ These data are [5 ELR 50241] then compared with a guideline table which distinguishes three categories of prevalence using the "natural rate" of the disease as a basis for comparison.⁹¹

After disease and pollution level data have been collated with the above tables a number of administrative determinations can be made. Areas of high sulfur oxide concentration (i.e., "C" level) and of disease prevalence (i.e., "C" or 2-3 times the natural rate) are easily designated. More difficult problems, however, are presented in cases where disease prevalence is high but observed pollution levels low; or conversely, in areas where pollution is high, but disease prevalence low. In the first case, a comprehensive further investigation is initiated. For example, if yearly average data were initially used, monthly data are carefully scrutinized. Available information on possible synergistic effects of nitrogen oxides and particulates are also analyzed. In the second case, further clinical study is given of victim cases and initial diagnoses reconsidered.⁹²

After an area is recommended for designation, a complicated debate usually develops at the local level. Since zones are initially narrowly delineated, local governments usually seek to expand the area of designation in order to qualify for compensation funds, while local enterprises oppose designation in order to escape the stiffer pollution levy imposed on the sources within designated zones. Designation by the Environment Agency becomes official after approval by local government and consent by the Central Advisory Council are obtained. Areas are thereafter expanded or contracted as the data base is developed.

c. Designation of Pollution Victims

Once a pollution area has been designated, a victim population can be identified.⁹³ Important problems involving disease causation have arisen over the issues of typical cases and the length of exposure to toxicants.

Atypical cases⁹⁴ are problematic in that they do not display the entire range of classical symptoms, although frequently they may be equally serious. The questions involved are first whether the disease observed is a "true" designated disease or whether it is a separate disease; and second, whether its etiology is the same. The desirability of extending compensation to the victim in such cases is often outweighed by the uncertainty of disease causation, and the administrative difficulty of handling such aberrant forms.

A related problem is how to distinguish victims with long exposure to a polluted area from those who contracted the disease elsewhere. "Residency rules" have been developed by cabinet order⁹⁵ so as to provide a sensible basis for distinguishing such individuals. The rules now in practice require victims to demonstrate, along with appropriate symptoms of a designated disease, proof of exposure either through length of residence or work. The formulation of the residency rules required extensive analysis of epidemiological, clinical, and experimental data to identify a length of time which would adequately reflect medical conclusions as to the probability that a given "dosage" (exposure) was adequate to infer causation.⁹⁶

Analysis of disease prevalence data is also useful in assessing future trends. For example, the Environment Agency's analysis of epidemiological, clinical, and other data produced an estimate of a one percent prevalence for victims in Class 1 areas.⁹⁷ More severe problems are present in predicting victim populations in newly designated areas, since environmental and demographic conditions are less well understood. Data developed is usually collated with that of more thoroughly studied areas. From such comparative analysis, basic prevalence and incidence rates can be formulated. For example, the Environment Agency estimates that in Class 1 areas the average incidence rate for the four designated Class 1 diseases will be 1.63 percent of the population of the area per month.

3. Cost Mechanics

a. Assessment of Victim Costs and Expenses

In addition to providing coverage for medical care and rehabilitation expenses, the Act adds payments for disability, survivors' benefits, and funeral expenses. Of these categories, the issue of disability payments is [5 ELR 50242] most controversial.⁹⁸ The central question during the Diet debate over the Act centered on an appropriate level for disability payments. Victim groups pressed for the equivalent of the average monthly wage while industry pressed for the lower levels paid under the Japanese workmen's compensation system. At last, a compromise of 80 percent of the former level was negotiated. A related question was whether the Act would also provide victimes with compensation for pain and suffering (isharyo). Although industry spokesmen have argued that the difference paid above the workmen's compensation schedules is tantamount to payment for pain and suffering, most scholars disagree with this construction of the Act.⁹⁹

A complicating feature in the treatment of cost is the role of conciliatory agreements (chotei and wakai kyotei) mostly negotiated by victims and polluters during the late 1960's and early 1970's.¹⁰⁰ These agreements provided additional relief during the period of the 1969 law and up to the enactment of the Act. Since a number of costs covered by those agreements (nursing, medical care and treatment, pain and suffering, funeral expenses, etc.) are now compensated under the Act, they are superseded with respect to Class 1 area diseases, but retained to the extent they remain uncovered for Class 2 area diseases.

b. Determination of a Budget under the Act

Once a victim population and the types of compensable costs are determined, it is a comparatively easy task to compute a necessary budget. Simply by summing all payments per individual by designated area times the total victim pool, a close approximate of budgetary requirements can be identified.¹⁰¹ Budgetary analysis differs by pollution area. For example, the budget for Class 2 areas is calculated and the fund assessed and distributed at the regional-local level. The budget for Class 1 areas is computed nationally; funds initially collected at the local level are pooled at the national level and then released to local government. The principal reason for this appears to be the facilitation of centralized control of the system's financing.

c. Allocation of Cost

Allocation of cost differs by pollution area. In Class 2 areas, where the pollutant is traceable to a specific source (as for example, Japan Chisso Company in Minamata, Kumamoto prefecture), the enterprise concerned is theoretically¹⁰² compelled to bear the entire burden of compensation payments. Where the pollution source is not identified with a specific substance, as in Class 1 area diseases, all polluting sources are charged, except that those sources within the designated area are charged more severely.¹⁰³ Thus, after a requisite budget is determined for Type 1 area diseases, a ratio is computed to determine the share of contribution of Type 1 area and outside sources. A standard pollution levy is then derived. Polluters within the designated area pay an amount reflecting the product of the standard emission charge and the ratio.¹⁰⁴ It is noteworthy that, although the charge within designated areas is a multiple of the outside areas, it is linear, thus reflecting an assumption that the real damage cost of pollution increases proportionately with the level of discharge.

A further complicating feature was introduced in Class 1 cost allocation by an amendment which provides that 20 percent of the budgetary requirement will be assessed by a tonnage tax on automobiles and motor bikes. This tax approximates the estimated contribution of these mobile sources to air pollution throughout the country.¹⁰⁵ Since the tax by the amendment's own terms automatically expires in two years from the date of implementation, study is at present being directed toward developing an effective alternative.

A final note should be made on the treatment of rehabilitation and administrative expenses. The Act is clear that for both Class 1 and Class 2 areas, the cost [5 ELR 50243] of rehabilitation and care facilities is to be defrayed one-half by designated polluting sources, one-fourth by regional government, and one-fourth from national tax revenues. Administrative expenses relating to the above activities will be split equally by local and national government. Administrative expenses of the special payment collection organization and those attributable to the national grievance system will be defrayed entirely from national tax proceeds.¹⁰⁶

4. Environmental-Econometric Models

Under the Act, the potential exists for the integration of risk assessment, designation, and cost allocation decisions in administrative practice with other aspects of national environmental and economic planning.¹⁰⁷ One important tool useful for this purpose is an environmental-econometric model developed by the Environment Agency through collaboration with the OECD. It collates data from pollution monitoring with projections of national and regional pollution; projected public demand for environmental protection; varying levels of investment in pollution control technology; anticipated effects on prices, employment, related industries, imports and exports and the balance of payments; and projected growth rates for the economy. Although the model does not seem to be widely in use at present, it nevertheless provides a basic frame of reference for decision making for some government officials and members of the business community.¹⁰⁸

The model facilitates correlation of a number of related variables. For example, projections of levels of sulfur oxides, biological oxygen demand (BOD), particulates and solid wastes across the country can give agency officials a general impression of future damage, avoidance, prevention or transaction costs.¹⁰⁹ Once the general magnitude of these costs is understood, it is possible to determine economic trade-offs required for levels of increasing investment in pollution control technology.¹¹⁰ For example, as investment increases, pollution levels and resulting damage costs are expected to decrease. The model indicates, however, associated inflationary effects on prices, a negative influence on the balance of payments and a reduction in the nation's rate of economic growth.¹¹¹

The model as published does not explicitly incorporate analysis of forecasts of future victim populations. It is important to recognize, however, that such data and other information directly relevant to the implementation of the Act can be derived. For example, by use of the model it is possible to forecast future toxicant levels from present pollution trends and projected levels of pollution control technology investment. By use of epidemiological analysis a gross estimate of future victim populations also can then be made. Under the model it is clear that high victim incidence associated with low pollution control technology investment correlates directly with high economic growth rates and increased exports; conversely, high investment is associated with declining victim populations, reduced economic growth rates, and dislocations in price and employment within the industry. From such estimates, assessments are possible of future budgetary requirements under the Act; the possible economic consequences of different cost allocation decisions can also be evaluated.

Planners within the Environment Agency now note that victim incidence is expected to peak in the late 1970's and then to begin to decline as pollution control technology and other pollution prevention measures begin to take effect. As a result, compensation payments required for pollution diseases now designated are also anticipated to rise and them to decline until their need is eliminated.¹¹²

Part II. A Tentative Evaluation of the Act

Although the Act is only one component in a comprehensive environmental management system now being developed by the Japanese government,¹¹³ it [5 ELR 50244] represents an integrated approach aimed at several specific goals, and employing different strategies to achieve them. The principle purpose is to expedite the compensation of pollution victims and the resolution of pollution-related disputes. A secondary goal is to achieve pollution control and abatement by use of the pollution charge and the revenue generated by it. In order to evaluate the Act's possible utility for United States policy makers, it is necessary to analyze these functions separately before discussing the ostensible benefits and limitations of their combination in one system.¹¹⁴

A. The Compensation Objective of the Act

For the victim, it is clear that the Act has introduced a regularity and dispatch into compensation payments which is preferable to the onerous procedures and delays involved in civil litigation or the uncertainties of the 1969 relief system. Despite these benefits the Act has been sharply criticized on a number of grounds.¹¹⁵ One major complaint has been directed at the criteria for victim designation. These criteria allegedly create arbitrary classes and unjustly exclude many potentially eligible individuals.¹¹⁶ Victims have also expressed dissatisfaction over the amount of compensation received and have challenged the Act's failure to compensate for pain and suffering or for loss in earnings. In addition, they have decried the notion of compensation for permanent physical impairment or death. Finally, the Act has been discredited on the ground that it does not even begin to address the immense true social cost of pollution in Japan.¹¹⁷

These specific criticisms do not detract from the Act's potential to overcome them. It is clear that the Act is conceived as a basic framework for compensation policy which can be built on and modified where necessary in the future. Depending on changes in governmental policy and advances in epidemiology and related sciences, it is theoretically possible for the law, by virtue of its rule-making procedures, to expand both the class of beneficiaries, the range of diseases covered, and the scope of possible recovery. In addition, as experience with the system accumulates, procedures can be made more flexible. Since the Act does not bar litigation, a victim can at least theoretically recoup through judicial channels payment for pain and suffering and other uncompensated items.¹¹⁸

It is insufficient to focus on the benefits of compensation to the victim, while neglecting the impact on the polluter. The issue of polluter impact is relevant to an evaluation of the Act's compensatory function. For if a system achieves its objectives unfairly or at too great a cost to any party, it will probably invite concerted attack and become impracticable.

In general, the Act treats the polluter fairly. Exactions have not been excessive and have corresponded to the level of pollution discharges. The fund itself has been put to a use reasonably related to the pollution activity, victim compensation, and thus the danger of arbitrariness in exaction is reduced. Finally, the regularity of the charge allows a polluter time to plan for the additional cost. Thus, sudden wipeouts are avoided.

Behind the question of the impact of compensation on victims or polluters is the causation issue. Although the incorporation in administrative practice of the statistical proof methods of the pollution trials represents a major innovation,¹¹⁹ the system's reliance on a methodology to resolve the causation problem may introduce a fatal inflexibility. From the victim's perspective, hope for the expansion of the system is dependent on developments in epidemiological techniques. To the extent that the methodology developed is incapable of explaining the etiology of atypical disease patterns or other pollution-related maladies, the system must remain narrowly restricted to the present most extreme cases of victimization from pollution.

The Act's possibility for expansion presents a different problem for the polluter. To the extent that future [5 ELR 50245] extensions attempt to circumvent the causation issue or are scientifically insupportable, a danger will exist for excessive or arbitrary exactions. In such a case the entire system could come under attack, and the delicate balance of cooperation thus far achieved would be destroyed.¹²⁰ These comments are not intended to suggest that the system is incapable of expansion as originally contemplated. Rather, a premium will simply continue to be placed on the development of a statistical and scientific data base adequate enough to justify any further extentions.

B. Abatement: The Act as an Alternative Strategy to Direct Regulation or Subsidy Schemes for Pollution Control

For the American reader, the use of an emission charge in the Act may represent an unfamiliar departure from what has been described by one commentator as a national fixation on direct governmental regulation of pollution.¹²¹ We are only now just beginning to question the effectiveness of this shibboleth, and thus our experiential base for evaluation of other systems is limited. Nevertheless, scholarly writing on pricing mechanisms and proposals for legislation incorporating pollution charges are increasing yearly.¹²² The following section summarizes some of the chief objections to direct regulation and a second option, subsidies to industry, as a foil for comparison with the Act.

1. Direct Regulation and Subsidies

Direct regulation seeks to deal with pollution by tackling the problem at its physical source, i.e., the polluter. Control is achieved via standards, licenses, zoning, and other strategies.¹²³ Direct regulation has come under increasing challenge in recent years as inefficient and ineffective.¹²⁴ The approach has proved administratively expensive and time-consuming, for it necessitates large administrative staffs to monitor compliance, compile reports, and issue corrective orders.¹²⁵ Enforcement of standards or regulatory orders frequently has been ineffective and unfair. A principal reason is that it often has to rely on the criminal process, a cumbersome tool whose constitutional protections allow polluters many opportunities for delay or relief.¹²⁶ Enforcement has also been haphazard, introducing frustrating uncertainty into business activity. At times, enforcement has been inadequate in that it is usually directed against the small or medium enterprise rather than the industrial giant. Finally, enforcement has been eroded by the practice of granting variances to polluters.

Commentators also note that direct regulation provides little continuing incentive to industry to develop technological improvements.¹²⁷ In practice, direct regulation has tended to be crisis oriented. A premium is placed on the discovery of any technological solution, rather than the best technology measured by a broader range of economic, environmental, social, and human factors.¹²⁸ Once the palliative of technical relief is achieved, the bureaucrat's and politician's attention shifts to the next problem and the original situation is neglected.

The rigidities of the regulatory approach have also been condemned as inhibiting rather than stimulating risk assessment and control.¹²⁹ Standards and the criteria [5 ELR 50246] behind them become a point of attack for powerful industrial lobbyists. Frequently, rather than enforce the standards, government officials capitulate by ignoring their findings or amending their results.¹³⁰ Since the regulatory approach is frequently tied for compliance to the existence of a particular technology, a vicious circle is produced. Risk assessment is conducted in the context of narrow available technological alternatives with no real incentive for independent research. Official encouragement of technological innovation is in turn impeded by resulting deficiencies in the data base.

One alternative to direct regulation, used sparingly in the United States, is subsidy schemes for polluters.¹³¹ This strategy seeks to induce industry via monetary incentives to achieve higher levels of environmental quality. In practice the idea has entailed a number of major drawbacks. Frequently subsidies, such as tax incentives, merely reduce the cost of unprofitable pollution control equipment without inducing the firm to install it. Tax incentives also tend to be ineffective in that they cover, at least in their present form, only the capital costs of pollution control, which may be only a fraction of a firm's pollution control costs.¹³² From the perspective of economic efficiency, subsidy schemes are also problematic. For example, it is difficult to determine from an administrative standpoint just how much of a plant's investment should be charged to pollution control and how much to capital improvements like expansion in plant productive capacity, an investment which might be made in any case. Subsidy of these later expenses would clearly be inefficient. Lastly, subsidy schemes have been criticized as regressive in that they transfer tax revenues to relatively affluent groups; for many people they are also morally repugnant in that they acknowledge a substantive right to pollute.

2. The Effectiveness of the Pricing Mechanism in the Act

The inadequacies of direct regulation and subsidy schemes have stimulated interest in pricing mechanisms such as the pollution levy in the Act. In order to evaluate the effectiveness of the levy, it is useful to describe its supposed theoretical advantage. Economic theory would suggest that the pollution levy scheme provides greater flexibility for polluters and the public than a regulatory approach. For example, a polluter facing the pollution levy enjoys a variety of alternatives. He can modify his activity by changing fuels, install pollution control technology, pay the charge, or a mix of any of these and other alternatives. The public also is benefited. Imposition of the cost of the levy introduces an incentive for the firm to consider modifying the harmful aspects of its polluting activity. Although in most cases the firm will pass this cost on to the consumer through a price increase, theoretically, under "conditions of perfect competition," the consumer will still retain ultimate control over the direction of economic activity and the allocation of society's resources.¹³³ Consumers may exercise their option of shifting purchases to the lower priced goods produced by non-polluting firms. Low-polluting firms are rewarded by increased purchases, increased market shares, and higher profits. Polluters, however, are penalized by declining sales, lower market shares, and falling profits. In this way the pollution levy discourages polluting behavior. Through the decentralized operation of its price mechanism, the Act avoids the administrative costs required by a regulatory approach and a far more efficient allocation of resources is theoretically predicted.

Despite these theoretical advantages, implementation of the Act entails a number of problems which bring into question the effectiveness of the Act's pricing mechanism. One basic problem relates to the impact of the "internalization" of the emission charge on the firm and the issue of pass-through of the cost to the consumer. As noted, under classical assumptions of perfect competition no firm independently can influence the prevailing market price and thus consumer purchases can dictate the course of a polluting firm's behavior. A practical problem occurs in the case of highly industrialized countries, such as Japan, where industry is oligopolistic or otherwise non-competitive. In such cases, when the pollution levy is passed on by one firm, all firms may follow suit. Thereafter, all prices throughout the industry may rise, or alternatively, production may be curtailed. From the consumer's perspective, two problems result. The deterrent effect of the price mechanism breaks down and inflation results.¹³⁴

[5 ELR 50247]

The Act does not address the problem of pass-through. In the United States one somewhat dubious remedy attempts simply to forbid it.¹³⁵ A good example is the prohibition on a manufacturer's pass-through of the cost of compliance with a regulatory standard to the dealer and ultimately the consumer. This approach appears deficient in several ways. From a regulatory perspective, it is costly and difficult to enforce. From the public's perspective, it is almost impossible to recoup the increment even with special provision in the Act for citizen suits.¹³⁶ Price controls, an alternative method of controlling pass-through, pose as many difficulties as they provide solutions.

A further serious problem in the Act is presented by the imposition of an emission charge linearly proportional to increased emissions. The underlying question is whether the charge should be adjusted to reflect damage costs which may increase exponentially at higher pollution levels.¹³⁷

If damage costs are shown to increase at an exponential rate but the charge imposed under the Act remains linear, a number of deficiencies would occur in the system. The Act would then demonstrably be inequitable since it would impose a discriminatorily onerous burden on smaller-medium concerns and grant an economic advantage tantamount to a license to larger enterprise. From the perspective of economic theory, damage costs left "externalized," would result in further dislocations in resource allocation and impede economic planning. Finally, the system itself is deprived of revenues which higher levies could provide.¹³⁸

A final problem presented by the Act is its treatment of administrative costs and the expenses of rehabilitation facilities. Under the Act costs associated with the establishment of the system, enforcement, the special collection agency, and the grievance appeal system are defrayed from national tax funds; rehabilitation facility expenses are shared by polluters and local and national government.

Although this formula was based on political compromise, there is a serious question as to whether the allocation is theoretically justifiable. If all these costs are proximately related to pollution, should they not fairly be placed fully on the polluter? Alternatively, are some of these costs so natural and expected a price of life in contemporary society to justify their present allocation? In that the Act does not appear to address such questions, further analysis of the redistributive effects and other consequence of such resource-allocation decisions is required.¹³⁹

[5 ELR 50248]

3. The Act as a "Mixed System"¹⁴⁰ for Pollution Control

A distinguishing feature of the Act is its integration of several functions usually separated in Western pollution control programs. First, the Act links an administrative no-fault compensation scheme with a pollution levy, while preserving available judicial remedies. Second, its procedures are integrated with regulatory measures in other laws.¹⁴¹ Third, coordination with economic and environmental planning can be facilitated by use of the environmental-econometric model. The central question to be assessed is whether the mix of these strategies in one law improves their separate functioning and assists environmental and economic planning; or alternatively, whether the approach is likely to become prohibitively expensive and confusing, and thus, ineffective and inefficient. While these questions cannot be answered in the absence of adequate empirical data, some general comments are possible.

A good point of departure is to recognize an implicit tension in the Act between two desirable objectives, achieving comprehensive compensation¹⁴² and maximum deterrence. As noted earlier, the difficulty in establishing causation drives a wedge between them. It inhibits an expansion of compensation payments and by restricting the number of possible beneficiaries, it necessarily limits the number of polluters affected. Some countries facing this dilemma have opted for the objective of comprehensive coverage as illustrated by New Zealand's no-fault insurance system for accidents.¹⁴³ A basic problem with this approach is that in making compensation an exclusive remedy, the deterrent potential is sacrificed.

The approach adopted by the Act to this problem is to preserve the deterrent potential by retaining a victim's recourse to litigation.¹⁴⁴ It is possible that the Act may even enhance the effectiveness of this strategy. For example, as noted earlier,¹⁴⁵ a grey area exists as to whether administrative determinations on causation under the Act can be used as a sword in litigation. In this case, a victim's obtaining further damage payments for pain and suffering uncompensated under the Act, or even an injunction, would certainly cause polluters to give greater attention to control.¹⁴⁶ A second ostensible benefit created by an administrative compensation system is the disincentive to frivolous claims¹⁴⁷ and the [5 ELR 50249] reduction of the social costs of litigation. It is, however, not clear in practice whether retention of judicial remedies actually preserved the deterrent potential or whether this hope is illusory.

The most promising aspect of the Act is potentially its internal financing by the pollution levy and the possible uses of the proceeds.¹⁴⁸ To the extent that the revenues for compensation are derived directly from the polluter, the approach appears efficient since it theoretically achieves deterrence and requisite financing together.¹⁴⁹ The system also appears to have two benefits from the perspective of income distribution.¹⁵⁰ First, it avoids the potentially regressive impact of reliance on the local tax base.¹⁵¹ Second, it transfers the proceeds of the emission levy to pollution victims, who generally are the poorer strata of Japanese society. Despite these benefits, hard questions remain as to whether a pollution levy can continue to finance the system as it is expanded.¹⁵²

A related inquiry is whether risk assessment is stimulated or discouraged by the mix of strategies in the Act.¹⁵³ As noted,¹⁵⁴ risk assessment in both industry and government is at times impeded under a direct regulatory approach, where a familiar pattern recurrs. Once it has identified a significant risk of harm, government is faced with the embarrassing task of having to reduce it. At times it is forced to promulgate and enforce standards based on its own assessment with possibly drastic economic consequences. In order to avoid economic dislocation, industry pressures and usually co-opts government. Thereafter the standard is weakened and further risk assessment discouraged.¹⁵⁵

The question thus arises whether the combination of a pollution levy, a compensation objective, and creative use of the fund can stimulate more effective risk assessment than either a regulatory or more traditional pricing system. On a general level the Act seems to alleviate some of the problems of these approaches. Government has a powerful moral argument that industry should pay those individuals injured by its activities. Industry, on the other hand, benefits by the fact that the exaction is applied at a reasonable level. For both industry and government the system focuses attention on the issue of causation. This, however, is salutary, since resolution of this question induces further risk assessment by both sectors. As more data indicating a correlation between pollution and disease is developed, the relevant question for industry soon becomes not whether to comply with the exaction, but how much must be paid. When this stage in the negotiations is reached, both sides at least have been forced to deal with the question of the actual risk involved, rather than to ignore its existence. Thus, a basis for a more positive approach is established.

Despite these generally positive aspects, the Act at least in its present form is seriously weakened by a vicious circle of problems. The difficulty is traceable to the causation issue. As long as the system is predicated on an inflexible demonstration of a causal relation between pollution and victim disease and as long as such questions remain scientifically uncertain, the application of the Act must remain limited. To the extent that this uncertainty inhibits administrators from imposing a higher pollution levy, the system can quickly transpose from innovation to license.¹⁵⁶ A related unfortunate aspect is that by tying the levy to the compensation budget, the Act requires a pool of victims before its potential deterrent effect becomes operative. There is no provision in the Act to set deterrence in motion prior to the occurrence of injury. One consequence of this would be to encourage plants to locate in unpolluted areas, which might not be desirable.

It is possible that the system could be adjusted to remedy some of these problems. For example, if the pollution levy were freed from a rigid budgetary ceiling and tied to a higher charge (possibly reflecting marginal control costs),¹⁵⁷ several benefits might be achieved. First, the higher cost imposed could provide greater incentive [5 ELR 50250] for the firm to adopt control technology,¹⁵⁸ and second, the fund so generated could be put to a number of uses. For example, it could be used as a source of award payments to those firms curtailing their pollution or allocated to industrial or government research on pollution disease. It is possible also that for some types of diseases or toxicants the pollution levy could also be adjusted to include the cost of anticipated harm (risk) triggering the deterrence mechanism prior to the actual outbreak of disease.¹⁵⁹

The impact of the pollution levy in combination with a creative subsidy program financed by the fund might also provide greater incentive for technological innovation than the vagaries of a direct regulatory approach. As noted, under conditions of perfect competition, the internalization of the charge should theoretically provide an effective stimulus, especially if the charge is increased. The process could also be assisted by an increased understanding of pollution disease etiology, a possible benefit of research subsidized by the fund.¹⁶⁰

The Act's integration of a mix of environmental control strategies may provide a useful approach for environmental planners. To the extent that fiscal and regulatory measures are coordinated in the Act their trade-offs may more easily be assessed than in a fragmented regulatory approach.¹⁶¹ A continuing underlying question will be whether the present benefits to planning will be retained as the system is enlarged to encompass a broader range of victims, diseases, or processes. An answer to this question must await further experience with the Act.

Conclusion

The Law for the Compensation of Pollution-Related Health Damage is the major product of developments in Japanese tort and environmental law over the past few years. As its name suggests, its primary objective is the compensation of victims of pollution, a tragic by-product of Japan's post-war economic resurgence. Before the United States or other Western observers judge too harshly the circumstances which necessitated this law, its development should give us pause: Japan has had simply to face squarely a reality which we and others have ignored. Thus, the establishment of a new compensation system in Japan is also an event of significance for the West.

The Act's most innovative aspect is its application in [5 ELR 50251] administrative practice of statistical proof methods for pollution disease causation developed by the four celebrated pollution trials. A second important conceptual advance is its finance of compensation payments through a pollution levy.

In practice, implementation of the Act has entailed many problems. The system's continuing adherence to the necessity of a demonstrable causal link between pollution and disease, despite its innovative use of epidemiological, clinical, and experimental data, has necessitated inflexible, cumbersome, and costly procedures. Uncertainty over causation has also inhibited the system's extension to a wider range of diseases and victims. Negatively stated, the Act restricts its benefits to only the most extreme cases.

From a theoretical perspective the Act's integration of compensatory, regulatory, and fiscal objectives suggests a different aproach to environmental management to be considered beside direct regulation, subsidies, and current experiments with various environmental charges. This article's examination of the Japanese approach has also raised many important subsidiary concerns: Does a mixed system like the Act stimulate technological innovation or risk assessment more effectively than prevailing alternatives? Can the Japanese approach be adjusted to function prospectively so that polluters and others who unleash unreasonable risks on the public are charged for the present cost of future harm? And finally, is it possible to achieve comprehensive compensation coverage and maximum deterrence by tying a Japanese-type approach to a program of national health insurance? These are frontiers for future inquiry whose consideration by scholars, lawyers, and policy makers will, it is hoped, contribute to more efficient and socially responsive environmental planning in the United States, Japan, and other countries.

1. Kogai Kenko Higai Hosho Ho, Law No. 111, Oct. 5, 1973, hereinafter referred to as the Act.

2. Diseases designated at present are bronchitis, pulmonary emphysema, chronic bronchitis, Minamata (mercury poisoning) disease, itai-itai (cadmium poisoning) disease, and chronic arsenic poisoning.

3. See page 50239, infra, for a discussion of the procedures for area designation.

4. Articles 44-45 provide that the Council be comprised of no more than 15 persons appointed by the prefectural governor. Council members are forbidden to divulge confidential information relating to the cases. Government officials may serve on the Council in their expert capacity.

5. Articles 19-43 cover medical care benefits, compensation to the handicapped and survivors (including a lump sum payment), a child compensation allowance, medical care allowance, and funeral expenses.

6. These are diseases for which no substance regarded as the "but for" cause of the disease can be identified. This somewhat curious link between the Act's approach to disease etiology and its financing will become clearer for the Western reader after the discussion of the legacy of the four pollution trials. A second influence is the fact that the principal architects of the law were former senior officials with the Ministries of Finance, and Health and Welfare, who were experts in these respective areas.

7. An "emission charge" refers to a levy on discharges of pollution for their use of an ambient air shed; an "effluent charge" is a corresponding levy on water pollution sources. Most charges of this sort are calculated based on marginal control costs. As described at page 50242, infra, the Act uses damage cost estimates as a basis for calculation of the charge. See generally Environmental Law Institute, Effluent Charges on Air and Water Pollution (1973); Anderson, Kneese, Stevenson and Taylor, Environmental Charges: Economic, Technical, Legal, and Political Aspects (forthcoming, 1975).

8. The procedure developed by special amendment to the Act (Law No. 85, June 11, 1974) will transfer a portion of the regular tonnage tax to the Class 1 area fund to be used for compensation purposes.

9. The reasons for these collection procedures can only be understood after the discussion of the four pollution trials on pp. 50233-37, infra.

10. Articles 106-108 provide inter alia that complaints should be filed with the prefectural governor under whose jurisdiction the action was taken.

11. Articles 111-135 stipulate that the Pollution-Related Health Damage Compensation Grievance Board consists of six members to serve for three years appointed by the Prime Minister with the concurrence of both houses of the Diet. Rules are also provided for meetings, removal of office, disposition of complaints, and the compensation of Board members.

12. Articles 109-110.

13. The question of whether, and to what extent, the Act will discourage litigation is discussed on pp. 50248-49, infra.

14. Lave and Saskin, Air Pollution andHuman Health, Science, August 1970; Jury, Living in Providence Valley, Maryland Can Kill You, Today's Health, June 1975, p. 24; Cancer's Hotspots, Newsweek, July 7, 1975, p. 42. Note should also be made that mercury poisoning or "Minamata" disease, generally thought to be only a Japanese affliction (see p. 50235, infra), has recently been discovered in Canadian Indian reservations. See, e.g., Fleetwood, The Tribe that Caught Cat Dancing, New Times Magazine, Oct. 31, 1975, pp. 37-41.

15. See Second Annual Report of the Council on Environmental Quality 106 (1971). The report also notes that pollution in the United States each year extracts a terrible cost in damage to crops, animal health, materials, and reduced property values; damage to recreational or aesthetic interests, while more difficult to assess, is also great. Pollution also necessitates the yearly expenditure of huge sums on prevention and avoidance. For further discussion of the damage, avoidance, transaction, and prevention costs of pollution, see CEQ Annual Reports for 1970, 1972, 1973, 1974. Total water pollution damages in the United States in 1970 were estimated to range from $5.5 to $15.5 billion with a best estimate of $10.6 billion. Seventy percent ($7.5 billion) of this estimate is damages in terms of reduced value of outdoor recreation. About ten percent is psychic damage. Damages in other categories include health effects ($ .6 billion), materials damage ($ .5 billion) and production costs ($ .7 billion). Some reports on damage from air pollution are more pessimistic. In 1970 the United States Department of Health, Education and Welfare (HEW) published a study which estimated $27 billion in damages to health, property, materials, and vegetation. HEW, Public Health Service, The Cost of Air Pollution Damages: A Status Report (1970). See also Abel, National Benefits of Water Pollution Control, Washington Environmental Research Center, United States Environmental Protection Agency (EPA) (unpublished); Waddell, The Economic Damages of Air Pollution, Washington Environmental Research Center, U.S. EPA, May 1974; Haverman, On Estimating Environmental Damage: A Survey of Recent Research in the United States, in Environmental Damage Costs, 101 (OECD, 1974).

16. The author knows of no study which has investigated the extent of compensation paid to sufferers of pollution throughout the United States. Judging from the number of recoveries in this area, the percentage and amounts would seem very small. In the United States pollution prevention and control have somehow been split off from the main body of thought on compensation. The current debate in these fields concerns alternative schemes for pollution control or, in other areas, alternative programs for assistance to the injured victim of accidents. Both fields of thought have given some recognition to the potential benefit of incorporation of aspects of the other. For example, prevention and mitigation have been correlative objectives of many proposed and adopted compensation schemes outside the pollution area in the United States. Similarly, regulatory models for control of air, water, or noise pollution have generally not been intended to bar the potential for compensation through a private nuisance action. The point, however, is that little scholarly thought, and less legislative experimentation, have been given to the potential benefit of integrating control and prevention with compensation in one "mixed" statutory system in the pollution area. Finally, note should also be made of the sluggishness of developing compensation procedures for victims of crimes in the United States.

17. For an important article in this area, see Friedman and Ladinsky, Social Change and the Law of Accidents, 67 Colum. L. Rev. 50 (1967). See also Nonet, Edministrative Justice, Ch. 1 (1969).

18. Friedman and Ladinsky, supra n. 17, point out a similar pattern in the industrial accident area in the 19th century prior to the expansion of welfare-oriented thought.

19. See, e.g., Zahn v. International Paper Company, 414 U.S. 291, 4 ELR 20100 (U.S. 1973).

20. See Bryson and Macbeth, Public Nuisance, The Restatement (Second) of Torts and Environmental Law, 2 Ecology L.Q. 241 (1972).

21. For a vivid illustration of this problem see Diamond v. General Motors Corp., No. 947429 (Cal. Super. Ct., dismissed Aug. 20, 1969).

22. Under the rule a servant (employee) could not sue his master (employer) for injuries caused by another employee.

Friedman and Ladinsky emphasize that the weakening of these powerful defenses allowed courts to hold in favor of plaintiffs in the hard cases, which in turn stimulated further litigation. The rising costs of litigation as well as insurance premiums soon prompted employers to seek alternative economic vehicles to cope with the problem of worker injury. The result was suggestions that business collectively respond by spreading the risk. Proposals for workmen's compensation were one result of these economic pressures. Supra n. 17, at 60-61.

23. For some progress in this area see Michie v. Great Lakes Steel Division, 4 ELR 20324 (6th Cir. 1974).

24. For a useful study of such questions in the United States, see Gelpe and Tarlock, The Uses of Scientific Information in Environmental Decision Making, 48 So. Cal. L. Rev. 371 (1974). See also B. Ackerman, The Uncertain Search for Environmental Quality (1974).

25. At present several advisory groups to Japan's Environment Agency are studying this problem, although legislation has not yet been drafted. The government already has established a small fund, drawn also from industry contributions, for compensation to fishermen Government programs have been initiated to purchase and store polluted rice and to replace toxic soils. Use of environmental charges in the noise pollution area is illustrated by a 600 yen ($2.00) charge which was levied on jet plane passengers (after October 1975) and is used to abate pollution (Asahi Evening News, August 9, 1972). Legislation for compensation of damages from noise pollution is also contemplated in a few years.

26. A number of states have already enacted compensation fund statutes for property damage from oil pollution. See Florida, Oil Spill Prevention and Pollution Control Act, Florida Statutes Annot. Ch. 376 (Supp. 1973); Maine, Oil Discharge Prevention and Pollution Control Act, 38 Maine Rev. Stat. Annot.

27. This inquiry was initiated by the author and Professor Fujikura with Will Irwin of the Environmental Law Institute. The author hereby invites interested readers to comment on the instant Article by writing to him at the Institute.

28. Perhaps the most well publicized early controversy involved the Ashio Copper Mine's pollution of the Watarase River around 1890. Originally established around 1610, the mine became a major pollution source in the 1890's. During this period repeated demands were made on local government and on the Ministry of Agriculture by farmers whose crops and domestic animals were injured by the mine's discharges. The primary emphasis of the authorities continued to be on settlement of the dispute rather than on a correction of its causes. For a discussion of this case see Huddle and Reich, Island of Dreams, 30 (1975); Pyle, Notehelfer & Stone, Symposium: The Ashio Copper Mine Pollution Incident, 2 J. Japanese Studies 347 (1975). A pattern of protest, investigation, and settlement is repeated throughout Japan's industrialization. This pattern is illustrated by the cases of petitions to the Ministry of Home Affairs against smoke damage from Besshi Mine Niihana Smelters (1898); disputes between Mitsubishi Paper Company and farmers and fishermen living near the Kako River (1901); settlements over the smoke damage from the Hitachi mines (1906); and petitions and demonstrations against pollution at Annaka (1941). For a general analysis, see Ui, Sonoda & Iijima, Environmental Pollution Control and Public Opinion (unpublished) (1970); Ui, Singularities of Japanese Pollution, Japan Quarterly, 1972; and Tsuru, Environmental Pollution Control in Japan, in International Symposium on Environmental Disruption (Tokyo 1970).

29. As Huddle and Reich describe, the Yokkaichi "konbinat" (an industrial complex) was originally welcomed as a "show piece" of the city. While such attitudes are now changing, the memory of these difficult years remained a basic underpinning of the frantic drive toward economic growth during the 1950's and 1960's. Supra n. 28, at 51-78.

30. This was the now-famous Minamata disease or mercury poisoning. For a good discussion of the history of this disease, see generally Huddle and Reich, supra n. 28; Smith, Minamata (1975). Huddle and Reich note that conflicts between the responsible company and the local populace occurred even in the pre-war era around 1926 and also in 1946. These earlier disputes, however, concerned damage to local fishing interests. In 1953 the first warnings of the later human tragedy were evidenced by local cats, which, poisoned by eating contaminated fish, began to hurl themselves into the bay.

31. See p. 50235, infra, for a discussion of the subsequent trial and court's decision.

32. The issue of causation was a central question in the subsequent trial; see p. 50236, infra.

33. This was itai-itai (it hurts, it hurts) disease (cadmium poisoning), so-called because of the pain it brought to its victims.

34. See Kawashima, Dispute Resolution in Japan, in Law in Japan: The Legal Order in a Changing Society (1964) for a discussion of the traditional reluctance to litigate such issues. See also n. 41, infra.

35. For example, Huddle and Reich report that the day after the Ministry of Health and Welfare finally published its report on Minamata disease, the case was summarily transferred for "reexamination" to the Ministry of International Trade and Industry which thereafter attempted to suppress the report. Supra n. 28, at 113.

36. According to Huddle and Reich (supra n. 28), in Ashio, the victims were granted a bulk indemnity of about 7000 (Meiji) yen ($4,900). In modern times, mimaikin performs a number of functions. For a victim of a car accident or collapsed building it provides perhaps the only source of assistance, where judicial recourse would be either too protracted to be effective or otherwise unattractive. More generally, monetary payments also provide a vehicle for the expression of strong feelings of generosity and human connection between strangers. For example, mimaikin payments are at times given to members of a bereaved family at a funeral even by individuals virtually unacquainted with the family.

For a general discussion of mimaikin, see Togashi, Mimaikin keiyaku no koryoku ni tsuite (on the effect of mimaikin contracts), Horitsu Jiho 15 (special issue, February 1973); Nagai, Minamata-byo hanketsu no mimaikin keiyaku (the mimaikin contract in the Minamata disease decision), 45 Horitsu Jiho 32 (1973); Chiba & Ishimura, Niigata Minamata-byo jiken (the Niigata Minamata disease case), 12 Tokyo Toritsu Daigaku Hogakukai Zasshi (1972); Yamaguchi, Kogai sosho ni okeru mimaikin keiyaku no koryoku, Hanrei Jiho (No. (No. 696) 6 (1973). See also Minji chotei ho (Civil affairs conciliation law) (Law No. 225, 1951).

See page 50242, infra, for description of another traditional Japanese compensation custom known as chotei and wakai kyotei (conciliatory agreements).

37. A number of such agreements were concluded in Yokkaichi. For the most part the Payments were not generous. One settlement provided the entire fishing population with about $100,000 (about $100-150 per person) for damage to their catch from from pollution; a specially created local foundation agreed to contribute $500 toward the medical care of the pollution victims. In Minamata, Chisso Corporation agreed to pay the City Fisherman's Union an initial compensation sum of $98,000 followed by annual payments of $5,600. Another solatium agreement negotiated by Chisso provided $800 for deaths, $280 annual stipend, and $56 for funeral expensee in exchange for a waiver by the victim of all future demands against the company. See Huddle and Reich, supra n. 28, at 117. See p. 50236, infra, for the fate of this agreement.

38. Huddle and Reich point out that there were roughly two types of protest groups, victim groups and citizen groups. The latter consisted of a broader constituency which protested a whole range of declared injustices in related consumer and labor areas. At time these groups worked closely together, although internal abtagonisms have sometimes precluded cooperation. Supra n. 28, at 113-32.

39. For a general discussion of the traditional, limited role of litigation in Japanese society, see Kawashima, The Status of the Individual in the Nation of Law, Right, and Social Order in Japan, in The Japanese Mind (Moore, ed. 1973). See also Kawashima, supra n. 34.

40. In private discussions some lawyers in Japan have suggested other functions of litigation. They point out the use of the courts by some individuals as a forum to promote political and ideological change. Most activist lawyers in Japan indeed applaud the use of litigation as a vehicle to publish grievances, especially in view of the mass media coverage the cases have received. Others have confessed privately that this feature of litigation has been so useful to them that it is frequently the determining factor in a decision to bring an otherwise unpromising lawsuit.

41. See Kogai Handobukku (Handbook on Pollution) (1974) for an analysis of some early cases. A combination of factors is no doubt responsible. In Japan the absence of powerful judicial remedies such as a mandamus or a contempt power over bureaucracy, and even the narrow circumstances under which injunctions are issued against polluters, are important institutional reasons why a "compensation" as opposed to "preventative" approach was adopted. The small size of the country and its social traditions have also been seen as necessitating special conflict resolution methods such as compensation. See generally Chie Nakane, Japanese Society (1970).

42. See Kato, Fuhokoi (Torts) 61 (Hotitsugaku zenshu, 1974); Hirai, Kyodo fuhokoi ni kansuru ichi kasatsu (One thought on joint torts) in 2 Mimpogaku no gendai-teki kadai (Contemporary issues in civil law studies) 289 (Kurusu ed. 1972); Awaji, Kagai no shiho-teki kyusai ingan kankei (Private law assistance for pollution causation), in Kogapho no seisei to tenkai (Developments and prospects in pollution law) 415 (Kato ed. 1968).

43. See Kokka Komuinho (National public employees law) (Law No. 120, 1947). This law has been recently upheld in the celebrated Nishiyama newspaper case (Japan v. Nishiyama, Hanrei Jiho (No. 732) 32 (Tokyo Dr. Ct., Jan. 31,) 1974), where a Mainichi Shimbun reporter was brought to trial, but not convicted of having obtained secret government information on the reversion of Okinawa to Japan from a female clerk in the Ministry of Foreign Affairs. The clerk was convicted. Corporate secrets are also broadly protected in the new toxic substances law. See n. 81, infra.

44. One exception is article 3 of the motor vehicle compensation law (Jidosha songai baisho hoshoho; Law No. 120, 1955), which shifts the burden of proof. Article 5 of the Law on the Punishment of Pollution Crimes Affecting the Health of Persons (Hito no kenko ni kakaru kogai hanzai no shobatsu ni kansuru horitsu) (Law No. 142, 1970), which creates a presumption of causation.

45. In Japanese law, among the leading academic works are H. Kaneko, Rissho sekinin (Burden of proof), in 2 Minji Soshoho Koza 573 (1954); also H. Kaneko, Minjo Soshoho Taikei 198 (1964). For an interesting comparison with relevant French law, see Crabb, Res ipsa loquitor and Article 1384 of the French Civil Code, 4 Inter-American Law Review 257 (1962).

46. The two most important provisions which were the focus of the pollution trials are Articles 709 and 719. Article 709 states: "A person who violates intentionally or negligently the right of another is bound to make compensation for damage arising therefrom." Article 719 states: "If two or more persons have by their joint unlawful act caused damage to another, they are jointly and severally liable to make compensation for such damage; the same applies if it is impossible to ascertain which of the joint participants has caused the damage."

47. Professor Morishima of Nagoya University has noted that one exception is the area of medical malpractice where a standard almost approaching strict liability has been mandated.

48. For a good discussion of responsibility, see Awaji, A Discussion of Responsibility in the Minamata Decision (in Japanese) (Minamata byo hanketsu ni okeru sekininron), Hanrei Jiho No. 696 at p. 3, Apr. 21, 1973; Awaji, The Legal Significance of the Yokkaichi Pollution Case (in Japanese), (Yokkaichi kogai hanketsu no hoteki igi), Hanrei Jiho No. 672 at 7, Aug. 21, 1972.

49. The Act had been adopted by the time the last case, the Kumamoto Minamata disease action, was decided. The case was nonetheless in important influence on the formulation of the Act, as described infra.

50. See komatsu v. Mitsui Kinzoku Kogyo, Hanrei Jiho, No. 635, at 17, June 30, 1971. See Hanrei Jiho, No. 674, at 25, Aug. 9, 1972, for appellate opinion.

51. The need for proof of responsibility was eliminated since the plaintiffs sued under a theory of strict liability based on Article 109 of the Mining Law. Article 109 states: "A proprietor of a mining right is liable for damage inflicted on another person by digging a mine or by disposing of waste or sludge from it."

52. Epidemiology is the science which deals with the incidence (rate of new cases), prevalence (distribution of cases per area per time) and determinants of disease in human populations. In essence, epidemiology views man (the host), the agent (the toxic substance) and the surrounding environment as interrelated. Disease is thus studied from a tripartite perspective within different human populations, subjected to different toxicant dosages, at different time and places, etc. A good basic reference is Pugh, Principles of Epidemiology. This article discusses the use of epidemiology in the Act at p. 50239, infra.

53. It should be noted that clinical and experiemental studies were also regarded of considerable importance by the court. A general analytical approach of using all three was then adapted, as will be described in administrative practice by the Act. Some of the earliest work in this area is attributable to Tokumoto, Causation Problems in Liability for Pollution (in Japanese) (Kogai baisho ni okeru inga kankei) 63 Kogaiho Kenkyu.

54. The Niigata decision is Ohno v. Showa Denko Co., Hanrei Jiho No. 642, at 96, Sept. 29, 1971; the Kumamoto decision is Watanabe v. Japan Chisso Company, Hanrei Jiho No. 696, at 15, Mar. 20, 1973. Both were prosecuted under § 709 of the Civil Code, which governs single-actor harms. For text, see n. 46, supra.

55. See p. 50236, infra, for a discussion of the Yokkaichi case.

56. The new judicial standards are currently being utilized in an attempt to impose on Japanese enterprise an obligation to do environmental impact assessments of the type mandated by the National Environmental Policy Act. A conference on this subject was held in Kyoto in November 1975.

57. Shiono v. Showa Yokkaichi Petroleum Co., Hanrei Jiho No. 672, at 32, July 24, 1973.

58. For text of Article 719, see n. 46 supra. One possible precedent is the Sanogawa case, Japan v. Hattori, 27 Minshu (Japan Supreme Court Law Report) 964 (1968), where several water power companies and the sovereign were sued by local farmers for the pollution-induced damage to their rice fields. The court held under Article 719 in plaintiffs' favor. Scholars debate the precedential value of this case for Article 719, arguing that an Article 709 claim would also have prevailed since plaintiff was able to show the court that each of defendants had been separately negligent. Therefore, unlike the Yokkaichi case, it was unnecessary to develop a theory of attributive negligence under Article 719.

59. The Yokkaichi decision is several years ahead of the present "best practicable technology" test in the Federal Water Pollution Control Act of 1972, § 306, 33 U.S.C. § 1316. It is unclear, however, how enforceable the Japanese court's decision is as a national standard.

60. As of this writing the decisions in the four pollution trials remain as leading precedents for this area of Japanese law. In a later decision, the Osaka International Airport case, the sovereign was held as in Yokkaichi to have a continuing responsibility to maintain an airport under safe conditions. Plaintiffs in this case were awarded damages for injuries suffered from jet-induced noise. Ueda v. Japan, Hanrei Jiho No. 729, at 3, Feb. 27, 1974.

61. Kogai taisaku kihonho (Law No. 132, 1967, as amended in 1970). For a general discussion of all these laws see Sand, Legal Systems for Environmental Protection, Japan, Sweden and the United States (FAO, 1972).

62. The Basic Law also mandates the establishment of environmental standards, identifies those control measures to be undertaken by the central authorities, and by local governments, stipulates how environmental protection costs are to be allocated, and establishes a special Conference on Environmental Control to advise the Prime Minister.

63. Article 21(1) states: "The government shall adopt those measures necessary to establish a system for the settlement of disputes in connection with environmental pollution."

Article 21(2) states: "The government shall take all necessary measures to establish a system which will facilitate the efficient implementation of relief measures for damage caused by environmental pollution."

64. Law No. 90, 1969. See Kanazawa, A System of Relief for Pollution Related Injury, 6 Law in Japan 65 (1973), for a discussion of this earlier system.

65. The allocation of the burden of these donations was left completely to company discretion.

66. The earlier committee was comprised solely of medical specialists whereas the 1973 Act Review Committee has added legal and environmental experts as well.

67. The issue of the use of these revenues for the defrayment of administrative costs of the system is discussed on p. 50247, infra.

68. Article 22 states:

1. Enterprise shall bear all or part of the necessary costs of the works carried out by the State or local government bodies to control environmental pollution arising from industrial activities of such enterprise.

2. The nature and amount of the costs which the enterprise shall bear under the preceding paragraph, the enterprises which shall bear such costs, the method of calculation of the amount to be borne by such enterprises, and other necessary matters relating to the bearing of costs, shall be laid down in other laws.

69. Law No. 133, 1970.

70. Recommendation of OECD Council on Guiding Principles Concerning International Economic Aspects of Environmental Policies (June 6, 1972). See also The Polluter Must Pay Principle (OECD, 1974).

71. The notion of "acceptable state" implies that "through a collective choice and with regard to the limited information available, the advantage of a further reduction in the residual social damage involved is considered as being smaller than the social costs of further prevention and control." The Polluter Must Pay Principle, supra n. 70, at 15.

72. For a discussion of the Agency, see its publication Quality of the Environment in Japan (1973 and 1974).

73. Article 25, Law for the Prevention of Air Pollution (Taiki Osen Boshi ho) (Law No. 97, 1968, amended 1970, 1971, 1972); art. 19, Water Pollution Prevention Law (Suishitsu Odaku Boshi ho) (Law No. 138, Dec. 1970).

74. For a general discussion of these laws, see Awaji, Problems in the Pollution Strict Liability Law (in Japanese) (Kogai no Mukashitsu Ho no Mondaiten) Juristo No. 503, at 16 (1972).

75. The industry argument overlooked the fact that government in Japan has always had the authority to tax polluters under its general taxing powers.

Japanese Law does not seem to pose the type of dilemma involing "police power" exactions versus "taxing power" exactions present in the United States. Compare Japan Constitution Articles 84, 94 and 29 with a typical United States case, Portland Pipe Line Corp. v. Environmental Improvement Corp., 307 A.2d 281 (Sup. Jud. Ct. Me. 1973).

76. Professor Morishima suggests that legislative reluctance to impinge on the prerogatives of the judiciary may have been one reason for avoiding an explicit determination on the issue of negligence.

77. The Act was conceived in some haste. In response to the turmoil surrounding the pollution trials, the Environment Agency announced in September 1972 the need for establishing a new compensation system at least partially to avoid the disruption of further suits. From September to November two subcommittees within the Agency's consultative organization (Chuo Kogai Taisaku Shingkai) worked furiously, meeting 13 times with the Agency. By December an interim draft (chukan hokoku) had been prepared and circulated to concerned groups (including the victims), the bar associations, and the industrial business world. The debate over the draft continued into the spring of 1973. By April the advisory organ had collated all comments and prepared a final draft report which it presented to the Environment Agency on April 5, 1973. The Environment Agency itself then set to work in drafting the new law. By May 18 a draft was approved by cabinet meeting and presented to the Diet. Although many groups in the Diet strongly opposed the draft, it ultimately passed all hurdles. On October 10, 1973, the bill was enacted into law with a curious coalition of the Liberal Democratic Party, Communists and Democratic-Socialists in support, and the Socialists and Komeito Party ("Clean and Pure") opposed. Necessary implementing regulations (serei, kisoku, etc.) were all completed uneventfully during 1974.

78. There is a considerable divergence of opinion on such questions. Administrators in the Environment Agency note that the Act may alleviate proof problems of causation in a civil action with respect to the toxicity of a substance. They question, however, the use of the administrative determinations to dispense with the need to prove the pathway of occurrence. Some scholars assert that the law will be helpful in this regard as well.

79. See p. 50237, supra, for a summary of the present state of the law.

80. For example, as early as 1956 research scientists at Kumamoto University had initiated epidemiological and clinical study of Minamata disease. In 1957 experimental work on animals and post mortem analysis were also commenced. A similar data base has been developed in some of the other pollution cases over the past 19 years. The Japan Environment Agency and the recently-formed National Institute for Pollution Research have also begun studies on "diagnostic problems of itai-itai disease and cadmium," "diagnostic problems of atypical Minamata disease," "pathological-histological research of the human lung," "epidemiological studies of Minamata disease," "health surveys of residents in the vicinity of inactive or abandoned mines," and "clinical studies of serious health damage from air pollution." In fiscal year 1974, 73 million yen (about $240,000) were appropriated for additional study of "the effects of cumulative substances on the human body," "research on the effect of heavy metals on human health," and "research into the accumulation of chemical substances."

81. Hashimoto, An Approach to the Problems of Risk and Damage for the Formulation of Environmental Policy (unpublished Japan Environment Agency Document, Aug. 1972). An approach similar to this is discussed in Hamilton, Assessment of Risk of Damage to the Environment, Environmental Damage Costs (OECD 1974).

82. See joint order of the Miti and Prime Minister's Office (Kogai kenko higai hoshoho shikokitei) No. 404, Aug. 31, 1974. Such substances were formerly regulated under the Toxic and Inflamatory Substance Control Law (Dokubutsu oyobi gekibutsu torishimari ho) (Law No. 2, Dec. 28, 1950) and its regulations. A new law, The Law Concerning the Examination and Regulation of Manufacture of Chemical Substances (Kagaku busshitsu no shinsa oyobi seizo to kisei ni kansuru horitsu) (Law No. 117, 1973) also deserves separate careful consideration. This law, which came into force on April 16, 1974, provides for a pre-use screening system for new substances and for strict regulation of the manufacture or import of such substances. Major present administrative attention under the law has focused on the regulation of PCB's. In addition, however, the Ministry of International Trade and Industry has recently prepared a catalogue of 20,000 toxic substances widespread in Japan.

83. Nitrogen oxides may be designated in 1976 and particulates in 1977. A general discussion of these problems is found in Currie, Pollution — Cases and Materials, 181-200 (1975).

84. A reaction is synergistic if the toxicity of one substance is unpredictably changed (enhanced, diminished, or triggered) by the presence of another.

85. Over 23 people have thus far died of chromium-induced lung cancer caused by discharges from chromium producing chemical plants in Hiroshima Province, Kitakyushu and other areas. In Niigata of 206 victims of chromium poisoning, 26 are suffering from perforated septums. Japan Times, Aug. 14, 1975, p. 2.

86. Article 2(1) states: "The term 'class 1 region' in this law refers to regions designated by cabinet order as being those where marked air pollution has arisen over a considerable area as a result of business activity or other human activity and where diseases due to the effects of such air pollution are prevalent."

87. For a discussion of Japan's telemeter system, see Japan Environment Agency, The Quality of the Environment in Japan 199 (1972).

88. This determination is not as specific as the subsequent one based on sulfur oxide criteria. For a general discussion of these measures, see Japan Environment Agency, Kogai kankyo Higai Hosho Horei shu (Collection of laws and orders on compensation for pollution and environmental injury).

89. At present these classifications are: (A) .02 ppm-.04 ppm; (B) .04 ppm-.05 ppm; (C) .05 ppm-.07 ppm; (D) over .07 ppm. See also Currie, Supra n. 81.

90. BMRC surveys generally extrapolate samples based on ages 40-50.

91. This is one area in which the concept of "order of risk" is useful. The BMRC approach is used in designated and nondesignated areas. Based on information gathered, a natural prevalence (i.e., the disease prevalence occurring at any time in a non-polluted area) is identified. From this base higher levels of prevalence can be identified. These categories are: (B) two times the natural rate; (C) two-three times the natural rate; and (D) four times and above the natural rate. These higher rates illustrate higher "orders of risk" which are then taken as important guidelines for administrative determinations.

92. At such times patients with atypical symptoms may be included in the determination process. For a discussion of some of these cases, see infra, this page.

93. The most recently published data on officially designated victims by area appears in Table 1 [omitted; copies of Tables 1-3 and Diagram I may be obtained from ELR for $0.10 each. — ed.].

94. A good example of an "atypical" form is the outbreak of a Minamata-type disease in the area of the Ariake Sea, Kyushu. Environment Agency investigators and representatives of many citizen groups went to this area, and conflicting reports have been made. These victims, however, have as yet not been officially certified.

95. Cabinet order No. 295, June 11, 1974.

96. Difficult problems were presented by the fact that the different individual "threshold" levels may be triggered by different time periods, or by age, sex, and previous health conditions.

97. Higher rates are to be expected as environmental stress intensifies. For example in 1973, there were 173 victims of Minamata disease in Niigata City; by 1974, there were 254. It is medically unclear, but very important, whether these represent new cases (incidence) or cases induced by prior exposure.

98. The regulations distinguish four classes of payments for disability. These are: (1) payments to a special class of individuals who require constant medical care and treatment and who are unable to work; (2) payments to disabled individuals who do not require constant attendance; (3) payments to those severely retarded in their work: (4) payments to those impaired in varying degrees. Full compensation is paid the first two groups, with the first class receiving about 55 dollars as an additional monthly allowance. Groups 3 and 4 receive 50 percent and 30 percent of the standard schedule respectively.

99. It should be noted that at times victims have several options to choose from for compensation besides the Act, i.e., national health insurance, and workmen's compensation. They may not, however, recover double payment.

100. These should be distinguished from mimaikin, discussed at pp. 50232-33, infra.

101. This sum totaled 340 million yen (about $1,130,000) in fiscal year 1972, 725 million yen (about $2,416,000) in fiscal year 1973, and 4 billion yen (about $13,300,000) in fiscal year 1974. The sum is estimated to rise to approximately 16.1 billion (about $53,600,000) in 1975, 32 billion yen (about $106,000,000) in 1976, and 100 billion yen (about $333,333,333) in 1977.

102. Reports indicate that these payments have thrown Chisso into severe financial distress. The Japanese government, however, has recently announced a low interest, long-term loan to Chisso of about $6.5 million to assist the company in its distress. Of course, such government assistance will undercut the deterrent impact of compensation payments.

103. Article 52 provides an exemption for companies which are small dischargers. Usually these companies are small and medium enterprise.

104. As already noted the emission charge is presently correlated with SO[x]. The present ratio of SO[x] pollution within and outside designated areas is 9:1. After comparing this ratio with the required budget, a basic pollution charge is derived of 1.76 yen per cm³ SO[x] for non-designated areas and 15.84 yen per cm³ for designated areas. In 1975 this charge will be 77.31 cm³ for designated areas and 8.59 cm³ for non-designated, corresponding to a new ratio.

105. See Table 2 [omitted, see n. 9o, supra — ed.].

106. Administrative expenses of the system totaled $60 million in 1974 and will increase to $168 million by 1976.

107. Coordination has for the most part taken place at the national level, although some attention has been given to cooperation with regional and local level compensation programs. At present 21 provincial municipalities and townships have set up systems along the lines of the 1969 relief system and 5 systems have used a model resembling the Act. These programs serve to provide a resevoir of funds for victims assisted under the national program.

108. Long Term Prospects for Preservation of the Environment, An Interim Report of the Planning Committee Central Council for Environmental Pollution Control; see also OECD, Macro-Economic Implications of Environmental Policies: The Japan Experience, (Paris 1974). The extent of actual use of this model is unclear. The author has been told by a number of groups that the model serves as a basic analytical tool within government and private research bodies. According to Environment Agency officials, however, it is not used at present within the Agency.

109. See Table 3 for these projections [omitted, see n. 93, supra — ed.].

110. Costs are generally evaluated by taking present assessments, and adjusting for inflation and other variables.

111. These relationships are illustrated in diagram 1 [omitted, see n. 93, supra — ed.].

112. The phenomenon of increasing victim prevalence during the next few years is considered by Environment Agency officials not to indicate an increase in the rate of new cases (incidence). In fact, the Agency officials have indicated that incidence levels for sulfur oxide-induced disease are falling. They claim that the increasing number of victims is due (a) to a backlog of cases which the system is only now able to process; (b) the phenomenom of old cases coming forth and seeking compensation. In contrast, the incidence of nitrogen oxide or particulate-induced diseases may be rising. It is important for the reader to note that while such general patterns of disease incidence and prevalence are observable, sufficient detailed analysis to permit administrative determination may not be possible.

113. See Japan Environment Agency, Quality of the Environment in Japan (1975). The Environment Agency and Japan Federation of Bar Associations have now conducted extensive research on United States' methods of environmental impact assessment and several draft laws have been prepared. For two important laws which incorporate impact assessment provisions, see Harbor Law (Kowan ho) (Law No. 218, 1950, as amended 1971), art. 12; and the City Planning Law (Toshi keikaku ho) (Law No. 100, 1968), art. 13(1)(1-3). Some experiments will deserve careful study by United States' analysts such as the Seto Inland Sea Conservation Law (1974), which recently enacted planning measures with environmental impact assessment.

114. I am indebted to Professor John Costonis for alerting me to the similarities between the "mixed" Japanese approach and his own work on development transfer rights in the land use area. See generally Costonis, Development Rights Transfer: An Exploratory Essay, 83 Yale L.J. 75 (1973).

115. See Morishima, Legal Problems with Law for the Compensation of Victims of Pollution-Induced Disease (in Japanese) (Kogai Kenko higai hoshoho no hoteki mondaiten), 4 Ao to Midori 1 (Dec. 1, 1974).

116. See p. 50241, supra for a discussion of atypical cases.

117. Surveys of some of the dimensions of this cost are only now beginning to be performed. For example, a recent survey of the Environmental Section of Osaka City reports Y20,202,230,000 ($67,340,760) physical damage there from air pollution in 1972 (Y24,216 or $30.72 per person) and Y4,809,323,000 or $16,021,000 soil substance (Y5,765 or $19.21 per person). A recent report from Koto and Sumida Lands of Tokyo by the Research Institute for Environmental Protection of the Tokyo Metropolitan Government notes Y32,515 ($108.38) extra spending per household per year due to pollution or approximately 21.1 percent of annual family income. Reportedly, at least 13 percent of the Japanese population has developed related health disease with the percentage as high as 16.7 in the large cities.

118. But see p. 50249, infra for a discussion of whether the Act will create an incentive or disincentive to litigation.

119. For a comparison with Untied States thought and practice, which generally does not favor statistical methods of proof, see Tribe, Trial by Mathematics: Precision and Ritual in the Legal Process, 84 Harv. L. Rev. 1329 (1971); for an unsuccessful attempt to use statistical proof in the criminal context, see People v. Collins, 68 Cal. Rptr. 2d 319, 438 P.2d 2833 (Cal. Sup. Ct. 1968).

120. Reportedly the Act has been effective from the perspective of enforcement. Polluters have paid the emission charges faithfully, and there have been few cases of cheating.

121. Krier, The Pollution Problem and Legal Institutions: A Conceptual Overview, 18 UCLA L. Rev. 429 (1971).

122. See n. 7 supra. See also Irwin & Burhenne, A Model Waste Oil Disposal Program in the Federal Republic of Germany, 1 Ecology L.Q. 471 (1971), for a study of the German experience.

123. For example, in the air pollution field direct regulation is illustrated by performance and specification standards. The former allows polluters to act as they wish so long as their emissions do not exceed specified limits. The latter decrees not what goals should be accomplished, but how they should be achieved. Specification standards commonly require pollution control equipment to meet certain design requirements, although they may also stipulate a particular make or model of equipment. Some regulatory systems combine both approaches. For a general discussion, see Krier, supra n. 121.

124. For a major attack in the land use area, see Ellickson, Alternatives to Zoning: Covenants, Nuisance Rules, and Fines as Land Use Controls, 40 U. Chi. L. Rev. 681 (1973).

125. See generally Krier, Environmental Law and Policy, 353-97 (1973).

126. Many commentators have recommended the use of civil monetary penalties as a more effective enforcement tool. See, e.g., Goldschmid, An Evaluation of the Present and Potential Use of Civil Monetary Penalties as a Sanction by Federal Administrative Agencies, Administrative Conference of the United States (Nov. 17, 1972). Some statutes have adopted such penalties in addition to traditional criminal sanctions. See Federal Water Pollution Control Act § 309(b); Clean Air Act § 113(b).

127. This appears especially true in the case of specification standards where a firm is mandated to devise one specific type of technological solution. For a case illustrative of corporate resistance to technological innovation under a direct regulatory system, see International Harvester Co. v. Ruckelshaus, 478 F.2d 615 (1973). The problems of technological innovation even under a "best available technology" standard are analyzed in Mihaly, The Clean Air Act and the Concept of Non-Degradation: Sierra Club v. Ruckelshaus, 2 Ecology L.Q. 817 (1972).

128. See analysis of the roots of our regulatory tradition in the crisis produced by the Donora incident (p. 50230 supra) in Krier, supra n. 125, 300-02.

129. Two key illustrative cases in this area are Kennecott Copper Corp. v. Environmental Protection Agency, 462 F.2d 846, 2 ELR 20116 (D.C. Cir. 1972) and Environmental Defense Fund (EDF) v. Ruckelshaus, 439 F.2d 584, 1 ELR 20059 (D.C. Cir. 1971). Both cases addressed the question of a need to develop a "margin of safety" as a buffer against errors in assessment of threshold levels. In Kennecott, the effort of EPA to establish a margin of safety was frustrated by the appellate courts. Upon remand heavy industrial pressure forced EPA to amend its standard to a less stringent level. In EDF, the appellate court attempted to impose more adequate procedures for risk assessment on a reluctant Administrator of the Federal Insecticide, Fungicide and Rodenticide Act. Both cases reveal the present uncertainty and inadequacy in treatment of the problem of risk assessment under direct regulatory regimes.

130. For a good further discussion, see the emasculation of sulfur oxide criteria under The Air Quality Act of 1967 in Esposito, Vanishing Air (1970).

131. For a general discussion, see Krier, supra n. 125.

132. The situation of course might be improved by giving a credit for business expenses. Krier has also suggested the use of award payments for pollution abatement as a potentially more effective form of subsidy, supra n. 125. See p. 50250, infra, for discussion of possible enhanced effectiveness of subsidies in a mixed approach.

133. The theoretical model of course grossly simplifies reality. For a discussion of the complications introduced by oligopoly and other departures from perfect competition, see infra, this page.

134. In the Japanese context we have little data as yet on the pass-through problem. One interesting statistic is that in 1975 one of Japan's leading steel producers will pay 2 billion yen or $6,666,666, equivalent to 20 percent of its estimated profits under the Act this year. A price increase of 10 percent is expected.

Several key theoretical questions in this area require empirical analysis. The first is whether in a competitive market the "internalization" of cost will have a deterrent effect. The answer would seem to be affirmative on two grounds. A "rational" firm would attempt to reduce such costs by adopting pollution control technology or other preventative measures if marginal costs of these options are less than the marginal cost of the charge; consumer purchases will, as noted, reward firms with lower priced products. These questions become more difficult under an oligopolistic situation. Since the so-called "price leader" can undercut any other firm which might seek to reduce its price, there is an industry-wide disincentive to such price reduction. It is also arguable that the oligopolistic situation is so inflexible that firms have no real incentive to reduce costs due to long-term contracts, etc., even where cost-reducing alternatives, such as new technologies or less polluting fuel, are present. For a general discussion of such questions, see Jaskow, Inflation and Economic Concentration: Structural Change in the Process of Public Utility Price Legislation, 17 J.L. & Econ. __ (1974) (forthcoming).

There would seem several counter arguments to the pass-through problem even in an oligopolistic market structure. These are: (a) the whole industry may be replaced as canals were by railroads, see Schreiber, The Ohio Canal Era (1965); (b) even oligopolistic firms will attempt to reduce costs, and therefore the incentive is preserved; (c) pass-through will result in a great decline in sales; (d) pass-through may be incomplete, or resulting inflation not severe.

135. See Noise Control Act of 1972, ELR 41501.

See also Ayres, Enforcement of Air Pollution Controls on Stationary Sources Under the Clean Air Amendments of 1970, 4 Ecology L.Q. 464 (1975), which discusses various United States state public utility service commission rules prohibiting pass-through of costs of capital equipment such as pollution control technology.

136. The effectiveness of class action citizen suits for damages under the federal rules has been seriously inhibited by Eisen v. Carlyle Jacquelin, 417 U.S. 156, 4 ELR 20513 (U.S. 1973); see also Zahn International Paper Co., 414 U.S. 291, 4 ELR 20100 (U.S. 1973). See Friedman, supra n. 17, for a historical perspective.

137. The issue of whether health damage (cost) increases exponentially (perhaps due to synergistic processes) is unclear. Many scientists believe that for some types of pollution, for some levels, the damage rate may increase exponentially; for others not so. We need more data on such questions. It is also not clear whether the reasons for the imposition of a linear charge in the Act stems from political compromise or the uncertainty of the scientific data base. If stronger scientific data were available, it is certain that the levy could be adjusted to an exponential rate.

138. The area is filled with further complexities. If a pessimistic view of the pass-through problem is adopted, imposition of an exponential charge may simply produce exponential inflation. A more general problem is presented by any charge which begins at a low level and then rises. One difficulty is that an unacceptable pollution level may already be present at the point at which an incentive is introduced to adopt preventive measures such as pollution control technology (i.e., the point at which the marginal costs of the tax exceeds the marginal cost of control.) A second difficulty arises from the fact that small-medium industry in Japan which may be the most susceptible to the price incentive may not receive a sufficient stimulus if the tax at lower levels of emission is too low. The response of imposing a heavy basic levy on low levels of pollution, however, may also be problematic in that it can penalize smaller enterprises unfairly.

139. Several different perspectives can be brought to bear on this problem. Theoretically, one line of argument would be that administrative and related costs engendered by the polluter should be borne by the polluter. If the internalization of costs of the pollution levy has a deterrent effect, the effect would be multiplied by the imposition of administrative costs. Finally, defrayment of such costs by tax revenues, especially local tax revenues, at least in the United States, could be regressive. See Council on Environmental Quality, 1973 Annual Report 73.

A counter argument would be to point out dangers of tying the financing of the administration of the system to the regulated enterprise. The danger lies essentially in cooptation and the loss of administrative independence. One possible solution may be found in proportional funding whereby the basic funding is provided by tax revenues and thereinunder by government. Cf. the procedures of the United States Bureau of Mines' Safety Division whereby the industry pays for the administrative costs associated with safety inspection. 30 U.S.C. § 7.

140. The Act, of course, really represents only one element in the environmental management "system" now being developed. For analytic purposes, however, we deal with it as an independent, integrated approach.

141. For example, see the Special Law for the Resolution of Pollution Related Disputes (Kogai funso shoriho) (Law No. 108, 1970).

142. For a general discussion of the elements of a "good" compensation system see Keeton, Compensation for Medical Accidents, 121 U. Pa. L. Rev. 590 (1973).

143. See Palmer, Compensation for Personal Injury, A Requiem for the Common Law in New Zealand, 21 Am. J. Comp. L. 1 (1973). See also, O'Connell, Expanding No Fault Beyond Auto Insurance: Some Proposals, 59 Va. L. Rev. 749 (1973).

144. One idea which has not been adequately explored either in Japan or the United States is the linkage of a Japanese-type compensation system with a program of national health insurance. The purpose of this tie would be to achieve comprehensive victim coverage, while preserving deterrence of polluter activity. A conceptual breakthrough, however, may be necessary: administrators and others have to become used to separating the criteria used to determine the burden of the pollution levy from those used to allocate the benefits of entitlement of the fund. Marginal cost criteria, for example, might be used for the pollution levy and divorced from the welfare objectives guiding dispensation of national health insurance. Heavy polluters in sparsely populated areas under this scheme could still be heavily charged, and the proceeds of the levy co-mingled with the insurance fund. Under this system, the administrative costs and rigidities of tying both the fiscal and compensatory functions to causation might be lessened. For a similar line of thought, see Franklin, Replacing the Negligence Lottery: Compensation and Selective Reimbursement, 53 Va. L. Rev. 774 (1967); Calabresi & Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089 (1972).

145. See p. 50239, supra, for a discussion of this point.

146. From the perspective of workmen's compensation litigation, its expense and the reduction in the value of money through inflation have set up barriers to bringing suit on claims already compensated through administrative procedures. It is also unclear whether the receipt of compensation under the Act will encourage or discourage litigation in Japan. The history of the Minamata victims' use of the court's decision to bootstrap further compensation payments would belie an easy interpretation that the receipt of compensation through the Act will squelch further demands. This question may become important to the future implementation of compensation systems in Japan, since the industrial community still hopes that compensation payments will have a mollifying effect. Finally, in the United States also the potential impact of a Japanese type system is unclear. Although the receipt of compensation payments will not have the dramatic political overtones which they do in Japan, it is clear from the area of no-fault automobile insurance cases that a good lawyer would probably not hesitate to advise his client to litigate further, if insurance payments received were grossly inadequate and the chances of success in the courts were great. For a discussion of questions of comparative litigiousness, see Sarat & Grossman, Courts and Conflict Resolution: Problems in the Mobilization of Adjudication, Am. Pol. Sci. Rev. (forthcoming).

147. To the extent that it provides adequate coverage, an administrative compensation system might actually reduce not only frivolous claims but all litigation. A basic reason lies in the present discounted value of money. A prospective plaintiff faced with a choice of whether to litigate a claim or receive compensation under an administrative system might well opt for the latter given the greatly reduced present value of the higher award possibly attainable through litigation.

148. It is interesting that although pricing systems have recently been touted in the literature, discussion of the uses of the fund generated by environmental charges has been virtually unaddressed. The thesis proposed is that the creative uses of the fund represents a frontier for further research. As noted, development rights transfer schemes or even the highway trust fund represent somewhat analogous models in the United States. See the authorities cited in n. 114 supra.

149. But see infra, this page for a discussion of problems with the deterrent effect.

150. It is assumed that a system is more equitable if the poor are not further impoverished for the enrichment of the wealthy; preferably, their lot is improved. Cf. Rawls, A Theory of Justice (1974).

151. In Japan the local tax base is so fragile that a full-fledged compensation system probably could not be supported. In the United States local tax funding has generally had a regressive impact, whereas funding based on national tax revenues has reportedly been slightly progressive. See Council on Environmental Quality, 1973 Annual Report 73-120.

152. Other problems are the dangers of cooptation and the transfer of personnel from government to the regulated industry. This pattern is described in Selznick, TVA and the Grass Roots (1949). There is also an institutionalized pattern in Japan where high officials descend from the heavens of bureaucracy (ama kudari) to the mortal peaks of industry. See also Granick, The European Executive (1962).

153. For a discussion on risk-benefit analysis, see generally National Academy of Engineering, Perspectives on Benefit-Risk Decision Making (1972).

154. Supra p. 50245.

155. This is precisely what occurred during the sulfur oxide criteria controversy. See Kennecott Copper v. EPA, supra n. 129; Esposito, Vanishing Air (1970); see also Kohlmeier, The Regulators (1969).

156. This contingency would seem even more probable if the Act creates a disincentive to further victim appeals.

157. See Anderson et al., supra n. 7.

158. But see p. 50246 supra for a counter argument.

159. This is not the place to analyze the further complexities of this idea. Only an outline is possible. (a) Theoretical basis. In United States law both traditional tort or property concepts may support an administrative charge on polluters (or others who impose unreasonable risks) for unreasonable hazards imposed on the public. The charge might be predicated either on tort notions of the individual right to be free of unreasonable risk; or on the property concept that freedom from risk is an asset, like quietude, the use ofwhich must be paid for. Also, in theoretical economic terms, the imposition of an unreasonable risk can be viewed as an "externality," by analogy with air or water pollution. (b) Assessing and pricing risk. A basic problem in an administrative risk pricing scheme will be the assessment and pricing of risk. At least in the beginning the system would no doubt be more feasible for substances like sulfur oxides or radiation about which we already have considerable data. In addition, those activities which would have a possibility of injuring many people (like a nuclear accident) would have to be distinguished from less dangerous activities which would not require a charge. Clearly not all risks would be chargeable, only unreasonable ones. For a discussion of techniques on pricing risk, see OECD, Environmental Damage Costs (1974); OECD, Environmental Damage Functions: Their Estimation and Utilization (draft handbook 1974). In the United States cost-benefit analysis mandated by a number of statutes can also be used to estimate anticipatory harm. In the environmental area, see The National Environmental Policy Act (NEPA), 42 U.S.C. § 4321 et seq. (1970), ELR 41009; Environmental Defense Fund v. Tennessee Valley Authority, 4 ELR 20120 (E.D. Tenn. 1973); Environmental Defense Fund v. Corps of Engineers, 4 ELR 20329 (5th Cir. 1974). (c) Collection of the risk charge and its impact. The risk charge can be added to the pollution levy and collected along with it. The risk charge, like the present pollution levy, would be continuous and hopefully an incentive to reduce unreasonable risks. To the extent that a polluter maintained the same level of risk, the charge would remain. To the extent that risks were reduced (i.e., by the adoption of pollution control technology), the charge could be reduced. Payment of a risk charge would alleviate payment of future damage, if it occurred, on the theory that the payment had already been "amortized." A central conceptual assumption of the risk charge would be that administrative practice implementing it would not have to produce a showing that it was scientifically, "accurate" but merely that it was fair, unarbitrary, and uncapricious. (d) Integration with NEPA environmental impact assessment. Critics of the Japanese approach may attack its emphasis on post hoc compensation. United States practice, however, can also be faulted since we, after assessing the cost and benefits, allow the costs to lie where they fall if they are exceeded by the ostensible benefits of a project. In point of fact, consideration should be given in both Japan and the United States to integrating both approaches, i.e., the risk-cost-benefit-preventative approach and the compensation objective. One way of implementing this idea in the case of NEPA is to have the costs which are identified in an environmental impact statement become the basis for an administrative charge. (e) Extensions. Eventually, the idea of assessing and charging for unreasonable risk through an administrative structure might itself be expanded to cover compensation for risk of property damage or even aesthetic damage. In the future an Environmental Trust Fund (see Costonis, supra n. 114) might receive the proceeds from environmental charges on air, water, or land use processes. The fund might thereafter be allocated to research or used as a source of transfer payments to coordinate planning in these areas.

Readers interested in commenting on these ideas or otherwise communicating with the author concerning his more complete evaluation of the Act are invited to communicate with him at the Environmental Law Institute, 1346 Connecticut Ave., N.W., Washington, D.C. 20036.

160. The incentives to technological innovation stimulated by appropriations from the fund could also be supported by a combination of other regulatory and pricing measures.

161. See n. 159, supra. For example, an land use decision which might have an adverse impact on receiving waters might be adjusted (compensated) by a transfer payment from the Environmental Trust Fund to users of the water resource or applied to protective measures for the resource.

5 ELR 50229 | Environmental Law Reporter | copyright © 1975 | All rights reserved