What "Due Diligence" Obligations Do Companies Operating in Japan Have to Prevent Transboundary Harm under International Environmental Law?

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read

In an era of heightened environmental awareness and increasing interconnectedness, the potential for activities in one state to cause environmental harm in another—or to areas beyond national jurisdiction—is a significant concern. International environmental law has evolved to address this, establishing principles that place responsibilities on states, and by extension, on the private entities operating within their territories. For companies operating in Japan, whether domestic or foreign-owned, understanding these obligations, particularly the concept of "due diligence" to prevent transboundary harm, is crucial for legal compliance, risk management, and responsible corporate citizenship.

The Bedrock: State Responsibility and the "No Harm" Principle

The foundational principle underpinning the obligation to prevent transboundary environmental harm is a customary rule of international law often referred to as the "no harm" rule. This principle, an application of the maxim sic utere tuo ut alienum non laedas (use your own property in such a manner as not to injure that of another), dictates that states have a responsibility to ensure that activities within their jurisdiction or control do not cause significant damage to the environment of other states or of areas beyond the limits of national jurisdiction.

Several landmark international legal decisions and instruments have affirmed and elaborated on this principle:

  • The Trail Smelter Arbitration (United States v. Canada), Award of March 11, 1941, is a seminal case. The tribunal famously held that "no State has the right to use or permit the use of its territory in such a manner as to cause injury by fumes in or to the territory of another or the properties or persons therein, when the case is of serious consequence and the injury is established by clear and convincing evidence." This case clearly established state responsibility for transboundary air pollution originating from industrial activities.
  • While not purely an environmental case, the Corfu Channel Case (United Kingdom v. Albania), Judgment of April 9, 1949, before the International Court of Justice (ICJ), affirmed "every State’s obligation not to allow knowingly its territory to be used for acts contrary to the rights of other States." This general principle has implications for transboundary environmental harm.
  • The Lac Lanoux Arbitration (Spain v. France), Award of November 16, 1957, dealt with the use of an international watercourse. It underscored the duty of an upstream state to take into account the rights and interests of downstream states, and to engage in negotiations and seek agreement before undertaking projects that could significantly affect those interests. While not finding a breach in that specific case, it highlighted procedural obligations to prevent harm.
  • The Stockholm Declaration on the Human Environment (1972), in its Principle 21, and the Rio Declaration on Environment and Development (1992), in its Principle 2, both explicitly codify this "no harm" principle. The ICJ, in its Advisory Opinion on the Legality of the Threat or Use of Nuclear Weapons (July 8, 1996), recognized that "the existence of the general obligation of States to ensure that activities within their jurisdiction and control respect the environment of other States or of areas beyond national control is now part of the corpus of international law relating to the environment."

This principle of state responsibility forms the basis from which the more specific obligation of "due diligence" arises.

"Due Diligence": An Obligation of Conduct

The "no harm" rule is operationalized through the concept of "due diligence." This is an obligation of conduct, meaning states are required to take all appropriate and reasonably practicable measures to prevent significant transboundary environmental harm. It is not an obligation of result; harm may still occur despite a state's diligent efforts.

The standard of due diligence is objective but also context-dependent. It varies based on factors such as:

  • The nature and magnitude of the activity.
  • The degree of risk of significant transboundary harm.
  • The foreseeability of such harm.
  • The availability and feasibility of preventive measures.
  • The current state of scientific knowledge and technology.

States fulfill their due diligence obligation primarily by establishing and implementing appropriate domestic legal and administrative frameworks to regulate potentially harmful activities conducted by both public and private entities within their jurisdiction. This implies that companies operating within a state's territory are the primary actors whose conduct must be managed to meet this international standard.

Corporate Due Diligence Obligations in Japan

For companies operating in Japan, the international due diligence obligation to prevent transboundary harm translates into a need to comply with domestic environmental laws and to adopt practices consistent with international best standards.

Domestic Environmental Legislation

Japan has a comprehensive suite of environmental laws aimed at preventing pollution and protecting the environment. Key legislation includes:

  • The Basic Environment Law (Kankyō Kihon Hō), which sets out the fundamental principles for environmental conservation.
  • Specific pollution control laws such as the Air Pollution Control Act (Taiki Osen Bōshi Hō), Water Pollution Prevention Act (Suihitsu Odaku Bōshi Hō), Soil Contamination Countermeasures Act (Dojō Osen Taisaku Hō), and Waste Management and Public Cleansing Act (Haikibutsu no Shori oyobi Seisō ni Kansuru Hōritsu).
  • Laws related to chemical substance management, such as the Act on the Evaluation of Chemical Substances and Regulation of Their Manufacture, etc. (Kagaku Busshitsu no Shinsa oyobi Seizō tō no Kisei ni Kansuru Hōritsu).

These laws impose various obligations on businesses, including obtaining permits, adhering to emission and effluent standards, proper waste management, and taking measures to prevent accidents. Compliance with these domestic laws is a fundamental aspect of corporate due diligence.

Application of International "Due Diligence" for Transboundary Harm

Beyond specific domestic statutes, the international concept of due diligence provides an overarching standard, particularly relevant for operations with the potential for transboundary impacts. This is especially pertinent for:

  • Large industrial facilities located near Japan's maritime borders or in areas that could affect international air currents or shared marine ecosystems.
  • Activities involving the handling or transport of hazardous materials that could spill or be released with transboundary consequences.
  • Projects that might affect migratory species or ecosystems shared with neighboring countries.

Key elements of corporate due diligence in this context include:

  1. Environmental Risk Assessment and Management: Proactively identifying potential transboundary environmental risks associated with current and planned operations. This involves understanding the pathways through which pollutants or harmful effects might cross borders and implementing robust risk management systems.
  2. Adoption of Best Available Technologies (BAT) and Best Environmental Practices (BEP): A general expectation in international environmental law is that operators will utilize the best available, economically achievable technologies and practices to minimize pollution and environmental degradation. This is a dynamic standard that evolves with technological advancements.
  3. Contingency Planning and Emergency Response: Developing and maintaining effective contingency plans and emergency response procedures to address accidents or unforeseen events that could lead to transboundary pollution or harm. This includes notification procedures to relevant authorities and potentially affected parties in other states.
  4. Monitoring and Reporting: Regularly monitoring environmental performance and the impact of operations, and transparently reporting on these aspects.

The Linchpin of Due Diligence: Environmental Impact Assessment (EIA)

A critical procedural tool for fulfilling the due diligence obligation, particularly for new projects or significant modifications to existing ones, is the Environmental Impact Assessment (EIA). An EIA is a systematic process used to identify, predict, evaluate, and mitigate the potential environmental (and associated social and economic) consequences of a proposed action before major decisions are taken and commitments made.

International Law and EIA

The importance of EIA is widely recognized in international law:

  • Principle 17 of the Rio Declaration states that "Environmental impact assessment, as a national instrument, shall be undertaken for proposed activities that are likely to have a significant adverse impact on the environment and are subject to a decision of a competent national authority."
  • The ICJ in the Pulp Mills on the River Uruguay case (Argentina v. Uruguay), Judgment of April 20, 2010, unequivocally affirmed that "the obligation to protect and preserve [the environment], under Article 41 (a) of the [1975 Statute of the River Uruguay], has to be interpreted in accordance with a practice, which in recent years has gained so much acceptance among States that it may now be considered a requirement under general international law to undertake an environmental impact assessment where there is a risk that the proposed industrial activity may have a significant adverse transboundary impact."
  • The ICJ further clarified that while the specific content of an EIA is for each state to determine in a given case, it must be conducted prior to the implementation of a project and must be sufficient to evaluate the project's likely transboundary impact.
  • Numerous multilateral environmental agreements, such as the UN Framework Convention on Climate Change and the Convention on Biological Diversity (to which Japan is a party), also contain provisions encouraging or requiring EIAs for relevant projects.

EIA in Japan

Japan has its own domestic EIA system, primarily governed by the Environmental Impact Assessment Act (Kankyō Eikyō Hyōka Hō), which came into full effect in 1999, replacing earlier administrative guidance and cabinet decisions. This Act mandates EIAs for large-scale projects of certain types (e.g., construction of roads, dams, power plants, industrial complexes) that are likely to have significant environmental impacts. The process typically involves scoping, conducting the assessment, preparing an EIA report, public consultation (including with local residents and governments), and review by relevant authorities.

For projects located in Japan that have the potential for significant transboundary environmental effects, the principles of international law, including the findings in the Pulp Mills case, would suggest that the EIA process should adequately consider such transboundary impacts. While Japan is not a party to the UNECE Espoo Convention on EIA in a Transboundary Context, its general obligation of due diligence under customary international law would still require appropriate assessment of potential cross-border effects.

Corporate Responsibility in the EIA Process

Companies proposing projects subject to EIA are generally responsible for:

  • Conducting or commissioning the EIA studies.
  • Ensuring the assessment is comprehensive, scientifically sound, and addresses all potentially significant impacts, including transboundary ones.
  • Preparing a clear and accessible EIA report.
  • Participating transparently in public hearings and consultation processes.
  • Implementing the mitigation measures identified in the EIA and approved by the authorities.

Procedural Duties: Notification, Consultation, and Cooperation

Flowing from the due diligence obligation are also key procedural duties, particularly when activities carry a risk of significant transboundary harm.

  • Prior Notification and Consultation: As highlighted in the Lac Lanoux Arbitration and emphasized by the ICJ in the Pulp Mills case, there is a general obligation for a state planning activities with potential significant adverse transboundary impacts to notify and consult with potentially affected states in good faith. These consultations should allow for a meaningful exchange of information and consideration of concerns.
  • Information Exchange: This involves providing timely and relevant information to potentially affected states regarding the planned activities and their potential impacts.
  • International Cooperation: A broader duty exists for states to cooperate in addressing transboundary environmental problems. This is reflected in numerous environmental treaties and declarations.

While these are primarily inter-state obligations, they have indirect implications for companies. A state, in fulfilling its own due diligence and procedural duties, will likely require companies undertaking relevant projects to provide necessary information and participate in processes that facilitate such international engagement. Transparency and a willingness to engage with stakeholders in potentially affected regions or countries can be crucial for companies to maintain their social license to operate and manage risks.

Consequences of Inadequate Due Diligence

Failure by a company to exercise appropriate due diligence, if it leads to significant transboundary environmental harm, can have several consequences:

  • State Responsibility: If a state fails to ensure, through its regulatory system, that companies within its jurisdiction exercise due diligence, and this failure results in significant transboundary harm, the state itself may incur international responsibility.
  • Domestic Liability: Companies are subject to liability under the domestic environmental laws of the state where they operate (e.g., Japan) and potentially under the laws of the state where the harm occurs, depending on jurisdiction and applicable private international law rules. This can include civil liability for damages, clean-up costs, and administrative or criminal penalties.
  • Reputational Damage: Environmental incidents, especially those with transboundary effects, can severely damage a company's reputation, leading to loss of consumer trust, investor confidence, and difficulties in obtaining future project approvals.
  • Operational and Financial Risks: Failure to manage environmental risks can lead to operational disruptions, increased insurance costs, and potential difficulties in accessing finance from institutions that adhere to environmental and social safeguards (like the Equator Principles).

The Special Case of Ultra-Hazardous Activities

It's important to distinguish the general due diligence obligation to prevent harm from specific international legal regimes that address "ultra-hazardous activities." These are activities that, despite all reasonable precautions, carry a risk of catastrophic harm, often transboundary in nature (e.g., operation of nuclear power plants, launching of space objects). For such activities, international law has, in some instances, developed specialized conventions that may impose stricter liability standards, sometimes approaching strict or absolute liability for the operator or the launching state, regardless of fault. Examples include the Vienna Convention on Civil Liability for Nuclear Damage and the Convention on International Liability for Damage Caused by Space Objects. While these specific liability regimes exist, the underlying duty of due diligence in conducting these activities to the highest possible safety standards remains paramount.

Conclusion

The obligation for companies operating in Japan to exercise due diligence in preventing significant transboundary environmental harm is a critical aspect of modern corporate responsibility. This obligation is rooted in fundamental principles of international environmental law, notably the "no harm" rule, and is increasingly operationalized through domestic legislation, international agreements, and evolving best practices.

Conducting thorough Environmental Impact Assessments for new projects, employing best available technologies and environmental practices, maintaining robust risk management and emergency response systems, and engaging transparently with all stakeholders are key components of fulfilling this due diligence duty. For businesses, embracing this obligation is not merely about avoiding legal liability or reputational damage; it is about contributing to sustainable development and demonstrating a commitment to being a responsible actor in an environmentally conscious and interconnected global community. As environmental challenges transcend national borders, the role of corporations in proactively preventing harm becomes ever more vital.