Chinese Law Prof Blog

Editor: Donald C. Clarke
George Washington University Law School

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Saturday, September 10, 2005

Criticism of Yahoo!'s role in prosecution of journalist Shi Tao

In a news release dated Sept. 6, Reporters Without Borders has criticized Yahoo! because Yahoo! Holdings (Hong Kong) Ltd. (hereinafter "Yahoo HK") "provided China’s state security authorities with details that helped to identify and convict" journalist Shi Tao.

This post is not going to examine the merits of the case against Shi. What I want to discuss is an interesting sentence in the news release, where it says, "[T]he company will yet again simply state that they just conform to the laws of the countries in which they operate . . . .  But does the fact that this corporation operates under Chinese law free it from all ethical considerations?" According to a Reuters report, Yahoo! did indeed subsequently make precisely this claim in a statement emailed to Reuters by Yahoo HK:

"Just like any other global company, Yahoo! must ensure that its local country sites must operate within the laws, regulations and customs of the country in which they are based," Yahoo spokeswoman Mary Osako said in a statement e-mailed to Reuters by the firm's Hong Kong arm.

RWB may have accepted Yahoo's claim too easily. Assuming that Yahoo HK is, as it appears to be, a Hong Kong entity, then it is not generally subject to PRC law. It is, of course, subject to Hong Kong law. But Article 18(1) of the Basic Law, the PRC statute that serves as Hong Kong's constitution, states: "National laws shall not be applied in the Hong Kong Special Administrative Region except for those listed in Annex III to this Law." Annex III to the Basic Law lists the following laws:

1. Resolution on the Capital, Calendar, National Anthem and National Flag of the People's Republic of China
2. Resolution on the National Day of the People's Republic of China
3. Order on the National Emblem of the People's Republic of China Proclaimed by the Central People's Government
4. Declaration of the Government of the People's Republic of China on the Territorial Sea
5. Nationality Law of the People's Republic of China
6. Regulations of the People's Republic of China Concerning Diplomatic Privileges and Immunities

None of these would seem to provide any basis for requiring a Hong Kong company such as Yahoo HK to hand over information to the PRC authorities, and the company has not to my knowledge claimed that any Hong Kong law required it to do so. If Yahoo HK were a wholly-owned subsidiary of a PRC-domiciled company (let's call it "Yahoo China Parent"), then there would be a plausible case for saying that Yahoo China Parent could be required by the Chinese government to cause its wholly-owned HK subsidiary to do certain things. But since Yahoo HK is listed as a subsidiary of Yahoo!, Inc., the US parent, in the latter's most recent Form 10-K (Annual Report for 2004, dated March 11, 2005), then it seems that no entity in the chain of control is under PRC jurisdiction and required to comply with PRC law. Whether or not to comply with a request or demand for information becomes just a business decision.

The facts here are complicated and I may have got some wrong. I am opening this post to comments if anyone can add more factual details or legal analysis. (There are many other places on the web to rant against Yahoo!, so please don't do so here.)

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Comments

I'm not a lawyer, so forgive me if I'm not adding anything useful.

Shi Tao was using Yahoo!China's website (cn.yahoo.com) for mail, as his address ended in (...@yahoo.com.cn). On the bottom of Yahoo!China's homepage, there are links to the Ministry of Commerce registration#, among other things. Clicking on that link (http://cn.yahoo.com/ft/1) brings you to a page where Yahoo's offices are registered in the mainland -- specifically in the HeQiao building in Beijing.

Would it be possible for this company to be legally forced to provide the IP information, but have the HK headquarters actually serve this info to the court?

Posted by: Sorourke | Sep 10, 2005 1:03:16 PM

"it seems that no entity in the chain of control is under PRC jurisdiction and required to comply with PRC law"

Not correct. As pointed out by Sorourke, the SAIC website registration for yahoo.com.cn clearly shows that the site is operated by "Beijing Yahoo Network Consulting Services Company Limited". Most likely that this is a "WFOE" wholly-owned by Yahoo Holdings (Hong Kong) Limited. The WFOE is a company incorporated in the PRC and so is subject to PRC law.

Yahoo HK is certainly not subject to PRC law; but it's subsidiary Yahoo Beijing is, and the PRC authorities no doubt made it clear (either explicitly or subtly) that if Yahoo HK did not chose to comply with their "request", they would make like rather difficult for Yahoo Beijing.

Posted by: dawanr | Sep 11, 2005 11:13:02 PM

I should have been clearer. I was referring to the chain of control from Yahoo (HK) on up -- i.e., Yahoo (HK) or any entity that exercises control over Yahoo (HK). No entity in that chain of control is subject to PRC law. I do not look below Yahoo (HK) because subsidiaries do not control parents.

As to the second point, it is not disputed (at least by me) that the PRC authorities could make life difficult for Yahoo's China operations. What is disputed is whether Yahoo (HK) had, as Yahoo has asserted, a legal obligation to turn over the information. These are different issues.

Posted by: Don Clarke | Sep 12, 2005 3:28:27 PM

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