Cablegate: Chinese and U.S. Experts Discuss Coal Mine

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DE RUEHBJ #3804/01 3200541
ZNR UUUUU ZZH
P 160541Z NOV 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 2129
RUEHC/DEPT OF LABOR WASHDC PRIORITY
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHSH/AMCONSUL SHENYANG 7151
RUEHGH/AMCONSUL SHANGHAI 6429
RUEHCN/AMCONSUL CHENGDU 7503
RUEHGZ/AMCONSUL GUANGZHOU 1846
RUEHIN/AIT TAIPEI 6067
RUEHHK/AMCONSUL HONG KONG 8453
RUEHGV/USMISSION GENEVA 1429

UNCLAS SECTION 01 OF 07 BEIJING 023804

SIPDIS

SIPDIS
SENSITIVE

DEPT PASS USTR FOR KARESH, A. ROSENBERG, MCCARTIN
LABOR FOR ILAB
TREAS FOR OASIA/ISA-CUSHMAN
USDOC FOR 4420/ITA/MAC/MCQUEEN
GENEVA FOR CHAMBERLIN

E.O. 12958: N/A
TAGS: ELAB PGOV PHUM EMIN CH
SUBJECT: CHINESE AND U.S. EXPERTS DISCUSS COAL MINE
SAFETY-RELATED LEGAL ISSUES IN CHINA

(U) SENSITIVE BUT UNCLASSIFIED: NOT FOR INTERNET
DISTRIBUTION.

1. (SBU) Summary: On October 21-22, the American
Center for International Labor Solidarity (ACILS) co-
hosted a conference on "Legal Means to Address the
Problem of Mine Accidents" with Chinese experts in
Beijing. The Chinese experts were extremely candid
about the seriousness of China's mine safety problem,
and the reasons behind it. They described a failing
mine safety regime based on an incomplete legal
framework with poor enforcement. They described how
mine owners collude with corrupt government officials
to undermine this regime, and noted that mine workers
have virtually no effective means of protecting their
own rights. Chinese experts were very interested in
U.S. experiences, and how U.S. laws, regulations and
enforcement mechanisms have led to a vastly superior
safety record. Most Chinese experts showed a deep-
rooted suspicion of private ownership of mines, and
even private sector involvement in providing work
injury insurance. U.S. presentations were well
received, and Embassy believes Chinese experts and
policy makers are interested in, and would be
receptive to, more discussion of how the United States
has achieved its superior record on occupational
safety and health (OSH) within the context of a market
economy. End summary.

2. (U) On October 21-22, ACILS and the China
University of Political Science and Law co-hosted an
academic conference on "Legal Means to Address the
Problem of Mine Accidents." The proceedings painted a
picture of a fragmented and ineffective legal
framework for OSH regulation, enforcement and accident
compensation. Participants included an influential
cross-section of labor, OSH and work injury insurance
officials and experts. Several prominent Chinese
academic institutions were represented, as were the
Ministry of Labor and Social Security (MOLSS), the
State Administration for Work Safety (SAWS), the All
China Federation of Trade Unions (ACFTU), and other
government and ACFTU-affiliated institutions. ACILS
Labor Law Counsel/China Program Director Earl Brown
and U.S. mine safety consultant Joe Main also
addressed the conference on the U.S. experience.
Laboff and Labor Assistant participated as observers.

A FRAGMENTED LEGAL FRAMEWORK
----------------------------

3. (U) China's system for compensating victims of
mine accidents has two main components according to a
senior official from MOLSS: 1) a social insurance
system, based on the Labor Law and Civil Service Law,
which provides benefits to accident victims directly
from the local government budget or government
administered social pooling fund, and 2) civil
compensation for victims which exempts employers from
legal liability. The social insurance system is the
benefit provider of first resort.

4. (U) The social insurance system currently covers
95 million Chinese workers, according to MOLSS, 15
percent of whom are in "high risk" industries.
Employers in high risk industries pay higher social
insurance contributions, but the system does not track
the safety records of individual employers. Compliant
employers effectively subsidize non-compliant
employers. Benefits are based on lost wages, with
death benefits set administratively at 48-60 months
wages. According to several participants, the social
insurance is fairly reliable, as long as the employer
participates in it, but can be slow in paying claims.

BEIJING 00023804 002 OF 007

5. (U) Under civil law, lump sum or sustained
compensation payments are based on the victim's
salary, the level of injury and duration of
disability. However, China has no specific
regulations on what civil damages should be. These
appear to be up to the discretion of local judges. In
practice, according to conference participants,
workers and their families rarely seek civil
compensation, especially if they are covered by social
insurance.

6. (U) The Law on Production Safety requires
employers to purchase work injury insurance for
employees "in accordance with the law," and allows
workers to pursue compensation claims against the
employer "if, according to the civil laws, they have
the right to do so apart from enjoying the employment
injury insurances." Conference participants noted
that in practice this is a very difficult process and
rarely used. Courts can also reject such cases if the
employee is covered by social insurance.

7. (SBU) Commercially available liability insurance
also plays a role in accident compensation, in some
locations and some industries. MOLSS noted that some
government agencies, e.g., the Ministry of
Construction, require employers to purchase liability
insurance policies for workers. Private insurance
only comes into play for claims not covered by the
social insurance program. One presenter called for a
greater role for private insurance companies, arguing
that they could play an important role in bringing
mines into compliance with health and safety
standards, but presentations from MOLSS and other
Chinese presenters revealed deep-rooted doubts about
private sector involvement in a social welfare
function.

8. (SBU) There was considerable discussion at the
conference of the use of administrative orders to set
minimum compensation standards for injury or death.
Shanxi Province, for example, enacted a regulation in
2006 requiring coal mine owners to pay standard
compensation of 200,000 yuan (about USD 25,000) in the
case of mine-related deaths. A participant from MOLSS
criticized such administrative standards as having no
basis in any overarching law, and running contrary to
the principal of risk sharing. He added that in some
cases, mine owners stopped contributing (illegally,
but without consequence) to social insurance programs
after such administrative orders went into effect.
These employers argued that there is no reason to pay
into an insurance system that does not reduce their
potential liability. Other participants acknowledged
that such orders are "extra-legal" but said they are
effective -- mine deaths dropped 10 percent in Shanxi
after the regulations when into effect. Despite
debate over the legality of administrative
compensation standards, there is strong support among
academics at the conference for higher standards of
compensation to increase the cost to employers of
accidents.

9. (SBU) Conference participants showed strong
interest in greater use of criminal penalties to
prevent and punish mine accidents. Several conference
participants noted that articles of the criminal code
on forced labor and major accidents could potentially
serve as a basis for criminal penalties, but that the
criminal code focuses on the results of negligence,
not on negligence itself. One participant said that
under current law, a mine owner who orders production
operations to proceed under conditions he knows to be
dangerous cannot be held criminally accountable unless
there is an accident. One observer noted that the

BEIJING 00023804 003 OF 007

crime of "negligence" is too weak a charge, and that
the criminal code should be amended to allow charges
of premeditated murder in cases of mine accidents
resulting from negligence.

10. (U) The 1992 Law on Mine Safety gives county-
and higher-level governments authority over mine
supervision and inspection, but one presenter noted
that the law has not been revised to reflect the
economic transition that has taken place since its
passage. He pointed out that a strict reading of the
law would make it non-applicable to illegal mines, for
example, and that the State Council's creation of the
State Administration for Work Safety (SAWS) and the
State Administration for Coal Mine Safety (SACMS), the
Chinese Government's flagship agencies for protecting
mine workers, may not technically even be legal.
Other presenters were critical of the 2002 Law on
Production Safety, including for being biased in favor
of production over workers interests.

UNEVEN IMPLEMENTATION AND ENFORCEMENT
-------------------------------------

11. (SBU) Almost without exception, Chinese
presenters described China's legal framework for
addressing the mine accident problem as "incomplete,"
and enforcement as weak. MOLSS noted that although
participation in the workplace injury insurance system
is mandatory, many mine owners simply ignore it.
Penalties for not contributing are limited to a few
thousand yuan (several hundred dollars), insufficient
to force compliance. When accidents occur in mines
where employers have not paid their insurance
contributions, some local governments simply bow out,
advising victims and their families to seek civil
compensation, rather than paying benefits to the
victim and pursuing back contributions from the
employer. There is no guarantee fund to cover benefit
payments in cases where the employer is uninsured or
absconds. The social insurance contribution
collection and pooling system is ill-defined and
varies widely by location.

12. (SBU) Social insurance programs do not cover
informal employees, and when employers hire labor
through labor contractors or other middlemen, the law
provides little guidance regarding how to determine
who the "employer" is. (A draft Labor Contract Law,
currently under consideration in the National People's
Congress, may help to clarify this point.) One
presenter noted that the majority of mine workers are
migrant workers who do not enjoy full protection under
the law in any case. While the Labor Law makes no
distinction between migrants and other workers with
respect to rights and benefits, migrants often have
difficulty participating in local-government
administered social insurance programs, joining local
union branches, or receiving legal protection from
local law enforcement authorities or courts.

13. (SBU) MOLSS reported that 26 million migrant
workers are covered by work injury insurance in China
in all industries, but that no one knows how many
migrants are not covered. (Estimates of the total
number of migrant workers in China range from 120-200
million.) MOLSS hopes to achieve full workplace
injury insurance coverage for migrant workers in the
mining and construction industries by the end of 2008,
and is currently exploring ways to do this without
creating a new, duplicative system.

14. (SBU) A participant from the State Council Legal
Affairs Office criticized the system of accountability
for mine accidents. He said Central Government

BEIJING 00023804 004 OF 007

policies dating back to 2000, which hold local
government officials accountable for mine accidents
that occur within their jurisdictions, perversely
encourage these officials to cover up accidents or
pass off mine supervision responsibilities to younger,
less powerful officials. He added that regulations
governing mine accident investigations are overly
bureaucratic. Even local governments interested in
conducting investigations do not have the resources to
do so, especially given the large number of government
agencies required by law to be involved.

15. (SBU) Corruption was a major topic of
discussion. Numerous presenters blamed the high
frequency of mine accidents on collusion between mine
owners and local government officials responsible for
enforcing mine safety laws. One professor noted that
when compensation is paid to accident victims in
China, there is generally no follow-up to determine
whether the accident resulted from negligence by local
officials. Another professor, illustrating the point
that too many local government officials own shares in
small coal mines, described meeting a prison guard
with a share in a local coal mine. He added that
local governments cannot be relied upon to investigate
accidents. Local governments perform administrative
investigations before criminal investigations take
place, giving guilty parties an opportunity to
manipulate the accident site. One presenter noted
that many mine accidents, including accidents with
large numbers of fatalities, go unreported, and that
the actual number of mine fatalities and injuries is
unknown. If not for media attention, one participant
said, there would be even more violations.

16. (SBU) A vocal group of participants argued that
China should amend the criminal code to create
meaningful criminal sanctions against mine owners or
government officials whose negligence leads to mine
accidents. One presenter argued that mine owners who
knowingly allow production to continue under dangerous
conditions should be charged with premeditated murder.
Alternatively, he said, China could amend the criminal
code to create a new crime of "compromising production
safety," as long as this crime carried heavy sentences
sufficient to deter illegal behavior. Another
presenter suggested that China should add a new crime
to the criminal code for "dereliction of duty" in
order to make government officials legally liable when
they fail to enforce mine safety rules.

17. (U) The definition of what constitutes a
workplace injury is also an issue. For example, one
law school professor said that there is no legal
framework for dealing with injuries arising from
prolonged exposure to hazardous conditions, e.g., lung
disease. Without a specific accident in the
workplace, there is no way to compensate workers for
their injuries.

18. (SBU) Many presenters said China basically has
an adequate legal and administrative framework for
mine safety enforcement, but that the problem lies in
coordination and enforcement. One presenter argued
that legal responsibility for different aspects of
mine safety supervision and enforcement is unclear,
and that key functions fall through the cracks. He
described supervision and inspection activities by
local mine safety authorities as "perfunctory." Many
presenters pointed out that penalties for violations,
including serious violations, are too weak to deter
negligence or encourage investment in better safety
equipment, training and practices. SAWS reported that
cooperation between its local mine safety inspectors
who report to Beijing and those who still report to

BEIJING 00023804 005 OF 007

local governments remains problematic.

THE ROLE OF TRADE UNIONS
-------------------------

19. (SBU) By most accounts, the ACFTU plays no
significant role in preventing mine accidents or
protecting the interests of victims. The ACFTU has a
statutory right to supervise enterprise compliance
with OSH regulations and to participate in mine
accident investigations. However, academics at the
conference sharply attacked the union for its weakness
and its failure to represent its members in court.
One academic described the ACFTU to Laboff during a
coffee break as a "fake union." One presenter told
the conference that ACFTU unions are sometimes under
the control of the enterprise or its managers, and
that these unions side with management in pursuit of
their own personal interests. The presenter added
that despite the large number of mine accidents that
have occurred, he knows of no instance in which a
union branch has ever stood up to confront management
on behalf of workers' interests. Several presenters
noted that despite the special status afforded to
ACFTU by law, mine workers, especially migrant
workers, have no bargaining power, and that the union
does not protect the workers' right to call attention
to OSH violations in their workplaces.

20. (SBU) ACFTU representatives agreed that the
union needs to increase its efforts and offered no
examples of cases in which ACFTU union did stand up
against employers. One ACFTU presenter even said that
the union's level of activity in OSH work at the
enterprise level is in "obvious decline." She
attributed the union's weakness to the lack of a
formal, legally-established tripartite OSH
consultative mechanism. She described ACFTU's legal
role as participating in the "democratic management"
and "democratic supervision" of the enterprise,
meaning that it should encourage and assist the
government in supervising OSH compliance, point out
problems and raise "constructive suggestions" that
benefit both workers and the enterprise. There was no
discussion of strikes, halting production at non-
compliant mines, or defending workers who wish to
exercise their legal right to remove themselves from
dangerous working conditions. ACFTU experts said the
union is working with the Ministry of Justice to
establish new legal aid mechanisms for workers, and
trumpeted a program it is running to train 100,000
experienced coal miners as mine safety officers. Even
in the context of these limited programs, however, the
ACFTU expert warned against over-inflated
expectations, given the ownership structure of coal
mines and the legal framework for protecting workers'
interests.

INTERESTED IN U.S. EXPERIENCE
-----------------------------

21. (SBU) Several Chinese participants cited the far
superior mine safety record in the United States, and
showed interest in learning from the U.S. experience.
Brown's and Main's presentations on U.S. law, accident
prevention and compensation practices were very well
received. Chinese participants were particularly
interested in how the U.S. keeps track of who holds
financial interests in coal mines, and whether such
information is considered trade secrets. Explanation
of U.S. public disclosure rules led several Chinese
participants to conclude glumly that even if similar
regulations were enacted in China, owners would
circumvent them by buying and holding shares in
another person's name, or simply eliminating the paper

BEIJING 00023804 006 OF 007

trail that documents their ownership.

22. (SBU) Chinese participants showed strong
interest in U.S. laws under which employers, equipment
manufacturers, or other parties could face criminal
charges for intentional negligence, even in cases
where no accidents or injuries occur. Discussion of
U.S. law sparked debate among Chinese participants
about how to use criminal law to punish and deter
illegal or unsafe mining practices. Some Chinese
participants were intrigued by the idea that
misrepresentation or fraud could itself lead to
criminal sanctions. Several Chinese participants
lamented that existing Chinese criminal law focuses on
the consequences of criminal negligence, rather than
the criminal negligence itself.

23. (SBU) Chinese participants were interested in
U.S. rules which allow union members to demand safety
inspections at any time, at the employer's expense.
They also showed strong interest in U.S. and third
country models for Labor-Management Safety Committees.

LOOKING TO THE STATE FOR SOLUTIONS
----------------------------------

24. (SBU) The Chinese participants at the conference
presented a variety of viewpoints, but were generally
biased against the private sector, and skeptical that
market and civil mechanisms could effectively protect
workers' interests. Several participants suggested
that private ownership of mines leads inevitably to
non-compliance with OSH laws and regulations, that the
private sector is not "moral" enough to play a
significant role in providing workplace injury
insurance, or that the profit motive undermines any
possibility of achieving a balance between sustained
production levels and respect for workers' rights.
Participants were not blind to the Chinese
Government's failure to adequately resolve mine safety
problems, but still called for an even greater state
role -- tougher laws to deter corruption, stronger
administrative and criminal penalties, and increased
inspection and oversight to prevent mine accidents and
improve working conditions.

A CHANCE TO MAKE AN IMPACT
--------------------------

25. (SBU) Comment: The Chinese Government claims to
be serious about improving mine safety, and worker
safety in general, but has no clear strategy. Chinese
OSH experts at the conference were well aware of the
problems China faces, and see the United States as one
country which has valuable experience to offer.
Events like the conference on "Legal Means to Address
the Problem of Mine Accidents" provide an opportunity
for American presenters to introduce ideas that might
not come naturally to China's bureaucracy or
influential academics. At the same time, the candid
presentations of Chinese experts provided valuable
insight into China's management of labor-related
issues that could potentially affect China's social
stability. Embassy believes the conference was
beneficial for both sides, and thoroughly in line with
the goals of our Letters of Understanding with the
Chinese Government on labor issues. The conference
also brought to light key themes which the USG
agencies may wish to revisit when discussing OSH
issues with China. These include:

-- OSH is about rule-of-law, not property rights.
Private ownership of mines and other enterprises is
not inconsistent with high OSH standards. For
example, the U.S. coal industry, with 100 percent of

BEIJING 00023804 007 OF 007

mines in private hands, has an OSH record far superior
to China's.

-- The key to safe and healthy workplaces is a
functioning regulatory framework, combined with a
well-defined system for legal liability and effective
enforcement.

-- Civil law can provide just compensation for
accident victims and their families, and effectively
deter OSH violations, provided that damages are well-
defined and significant.

-- Private insurance can play a very useful function,
not only in sharing risk, but also by providing an
additional layer of scrutiny over the enterprises
covered by their policies. Private insurance
companies can base insurance premiums on an employer's
safety record, effectively forcing the non-compliant
employers to subsidize the compliant.

-- Worker involvement in monitoring OSH conditions
and reporting violations to management and/or relevant
government agencies can be extremely effective, but
only when workers are free to perform this function
without interference or fear of reprisal.

End comment.

RANDT

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