Chinese Law Prof Blog

SEC vs. Deloitte: Chinese law aspects

US securities regulators have been engaged in a long struggle to obtain the workpapers of auditors of Chinese companies listed in the US, and last month the SEC initiated administrative proceedings against the Chinese affiliates of five big accounting firms (NYT story, plus useful background, here.)

In related proceedings, the SEC subpoenaed documents from Deloitte Touche Tohmatsu CPA, Ltd. (DTTC), the Chinese auditors of Longtop Financial Technologies, a Chinese company whose financial statements were apparently less than totally accurate.

DTTC has been fighting the subpoena on the grounds that it is liable to punishment under Chinese law if it provides the documents the SEC is seeking. Below are links to relevant court filings that look at the Chinese law issues here. I produced an expert witness declaration in support of the SEC's position in this matter and so my own views are stated there. The expert witness declarations in support of DTTC's position were produced by my colleagues (and as it happens my good friends) Prof. Tang Xin of Tsinghua University Faculty of Law and Prof. James Feinerman of Georgetown University Law School.

• DTTC's brief in opposition to the subpoena (April 11, 2012)
  • Tang declaration
  • Feinerman declaration
• SEC's brief in reply to DTTC's brief (Dec. 3, 2012)
  • Clarke declaration
• Regulation 29 (This is a key document relevant to the Chinese law issues and discussed in the filings)

CSRC to relax rules on Chinese companies listing in Hong Kong

Caixin and other media report that the China Securities Regulatory Commission plans to drop its requirement that Chinese companies listing in Hong Kong meet certain size criteria: 400 million yuan in net assets, an offering size of US$50 million, and 60 million yuan in profits in the year before listing. This is in line with what I've heard is the CSRC's intention to move away from merit regulation and toward US-style disclosure regulation.

It's not clear to me why it was ever the CSRC's business to worry about overseas listings by Chinese companies. The shareholder-protection concerns are surely the business of the overseas jurisdictions, not China, and the foreign-ownership concerns, if any, would apply to all Chinese companies, not just ones with stock market listings, and so should be handled by the Ministry of Commerce. In any case, however, this is a step forward in Chinese business law and, I hope, another blow to the cult of bigness that dominates official thinking about corporate law.

It's also good news for the Chinese economy. To the extent that economic activity requires organizations like corporations to undertake it, anything that makes corporations run better is good for economic activity. And generally, flexibility in corporate organizational law is good. (I'll just leave it at that, since this is not the place for an extended discussion of the proper balance between mandatory and default rules in corporate law.) My pet theory of barriers to innovation in China is that problems with intellectual property law and enforcement are only part of the story. Another part is that problems with corporate organizational law - essentially, its rigidity, obsession with bigness, and supreme confidence that legislators know what's good for business better than business people do - prevent entrepreneurs from designing the type of business entity that can get their ideas funded. Thus, anything that removes barriers to small businesses getting funding - and lowering the threshold to listing in Hong Kong does that - is good.

I think it's problems in Chinese corporate law that explain why we still see round-tripping of investment (Chinese money going offshore and then returning to China dressed up as foreign investment) even though the regime of special preferences for foreign investors has more or less disappeared. People aren't going offshore to take advantage of tax preferences. They're going offshore to take advantage of foreign organizational law, which allows them to do things that Chinese corporate law doesn't. Think about the complex set of claims on a pre-IPO start-up in the US. To get funding from different kinds of people with different goals and different risk preferences, that company will probably have had to cook up different classes of preferred and common stock, with different conversion rights, rights to board seats, rights to profits, veto rights over particular corporate actions, etc. That kind of structuring is completely impossible under Chinese corporate law, which (for example) doesn't even provide for preferred stock.

Allowing smaller Chinese companies to list in Hong Kong does not, of course, reduce any of the rigidity problems in Chinese corporate law, but it's a step forward toward more flexibility in general.

Transition of railway security apparatus to civilian control completed

The Global Times reports the completion of a process started in 2004 whereby the railway system lost its special system of courts. prosecutors, and police. This marks an important milestone in China's transition to being what we might call a normal modern state. Some people may cavil at the use of a value-laden term like "normal". What I mean is a state where the administration of law and the use of force is relatively centralized and rationalized, instead of being wielded by a variety of duchies and baronies answerable in practice to nobody but themselves. We've seen this in the gradual switch - now virtually complete - in the administration of people on the basis of where they live instead of where they work. The system of railway courts has been an anachronism for a long time, but somehow has managed to persist. As it seemed to produce a lot more scandals than justice in recent years, it won't be missed.

Congressional-Executive Commission on China issues annual report

It's been a busy month for me, so I'm only getting around to reporting this now. Here's the link.

The Wen family fortune and Party disciplinary rules

Here’s an interesting twist to the recent New York Times story on the family fortune of Wen Jiabao. (I blogged about it here.) The story at no point accuses Wen or his family members of doing anything illegal. But what about Party disciplinary rules? Here there may be a problem, even though (as I’ll explain) it’s because the rules as written are arguably tighter than is reasonable.

The bottom line is that Wen appears to be in violation of a Party rule requiring senior officials to prevent their close relatives from engaging in business in areas (geographical or subject-matter) under their jurisdiction or, failing that, to resign. Since Wen is the premier, all of China falls within his geographical jurisdiction, and pretty much all areas of business would be within his subject-matter jurisdiction as well. This, of course, means that his close relatives can’t engage in any business in or even relating to China at all. I don’t claim that this is a reasonable or practical result, or that it was intended by those who wrote the rule, but that’s how I read it. My reasoning is below.

In 1997, the Party promulgated a set of disciplinary rules called the “Chinese Communist Party Several Principles on Clean Administration of Government by Party Member Leading Cadres (for Trial Implementation)” (中国共产党党员领导干部廉洁从政若干准则（试行）) (the “1997 Principles”). Article 5 of the 1997 Principles states:

The spouse, children, and spouses of children of leading cadres at or above the level of province (ministry) may not personally engage in business, set up enterprises or work in a wholly foreign-owned enterprise within the region and the subject-matter scope of that leading cadre’s jurisdiction. 省（部）级以上领导干部的配偶、子女及其配偶，不准在该领导干部管辖的地区及管辖的业务范围个人经商办企业和在外商独资企业任职。

Obviously, there are many questions here.

• In terms of substance, what does it mean to “engage in business” or “set up enterprises”? The term I’ve translated as “set up” is particularly vague; it just means “do” in a general sense, so it’s overly restrictive to interpret it as just meaning “to establish” in some formal way. Perhaps “to be involved in” is better.
• Does the term “personally” qualify the forbidden activity in any important way? Is it OK to do it through proxies?
• In terms of logical structure, are “engage in business”, “set up enterprises”, and “work in a wholly foreign-owned enterprise” three distinct activities, each of which is prohibited? Or does the lack of a serial comma between “engage in business” and “set up enterprises” suggest that the meaning is ““engage in business by setting up enterprises”? I believe three distinct activities are covered here. In other places – indeed, in Art. 2 of this very regulation – we see a serial comma between “engage in business” and “set up enterprises”, making it likely that they are intended to be distinct activities and that the absence of a serial comma here is just a mistake or is otherwise insignificant. On the other hand, we could also read them as a single activity that essentially captures the idea of investing and getting profits as opposed to simply being a company employee.
• Is the prohibition only against activities that satisfy both criteria of being in the leading cadre’s geographic and subject-matter jurisdiction? I believe this would be a silly interpretation; I translated the relevant conjunction as “and” instead of “or” only to avoid hiding the possible problem, but the correct English translation would be “or”. The grammar of Chinese Party rules is just not so strictly logical as the grammar of English legislation. Clearly what is intended is that where the leading cadre jurisdiction is defined by region, the relatives can’t do business there, and when it’s defined by subject-matter, the relatives can’t do business in that field.
• What’s the enforcement mechanism?

Later the same year, the Party issued a set of implementing measures (《中国共产党党员领导干部廉洁从政若干准则试行》实施办法) (the “1997 Measures”). These explain some of the concepts of Article 5 of the 1997 Principles.

• “Personally” “engage in business” and “set up enterprises”: Art. 31 of the 1997 Measures refers you back to Art. 10, which defines what it means for the leaders themselves to “personally” “engage in business” and “set up enterprises” (also forbidden under Art. 2 of the 1997 Principles). Art. 10 states that this means “to engage in business and set up enterprises with one’s sole investment, to engage in business and set up enterprises in joint venture, joint stock, cooperative, or partnership form, or to engage in business and set up enterprises oneself through subcontracting, leasing, being hired, or other forms.” (个人独资经商办企业，与他人合资、合股、合作、合伙经商办企业，私自以承包、租赁、受聘等方式经商办企业。) It seems clear here that “engage in business” and “set up enterprises” are just general terms that should not be read too strictly. Very possibly, however, the idea of “setting up enterprises” is there as a way of implying that equity ownership is the key to what’s forbidden, and that merely being the employee of an enterprise without a significant interest in its profits is not forbidden.
• The enforcement mechanism is spelled out in Art. 31 of the 1997 Measures: if you can’t get your relatives to stop doing the forbidden things, then resign or ask for a re-assignment. (拒不纠正的，领导干部应当辞去现任职务或者由组织上调整其职务.) Moreover, the matter should be handled in accordance with Art. 88 of Party’s Regulations on Disciplinary Punishments (纪律处分条例). In the linked version of these regulations, Art. 88 is about retired cadres, so perhaps there has been a subsequent renumbering; I’m not positive the cross-reference is still correct.

In subsequent years, the Party issued further clarification of the forbidden activities of the spouse, children, and spouses of children of leading cadres at or above the level of province or ministry (hereinafter, “Covered Relatives”):

• In 1998, a “Supplementary Rule” provided that Covered Relatives could not work for the foreign side in joint ventures.
• In 2000, an “Interpretation” of a different rule defined “personally engage in business and set up enterprises” as ”engaging by oneself or together with others in a private economic organization; personally serving in a senior management position in a private economic organization; personally engaging in compensated social middleman services; personally registering companies outside of mainland China and then returning to the mainland to engage in economic activities; etc.” (个人经办或与他人合办私营经济组织；个人受聘担任私营经济组织的高级职务；个人进行有偿社会中介活动；个人在国（境）外注册公司后回国（境）从事经营活动等。) This Interpretation is worth looking at because it also spells out in detail a number of substantive prohibitions applicable to the close relatives of senior leaders. Interestingly, the Interpretation does not by its terms apply to officials such as Wen who are above the ministry level.

In 2010, a new version of the 1997 Principles (the “2010 Principles”) was issued and the old version superseded. The nepotism provision in the 2010 Principles, also in Art. 5, makes a key change: the senior official is no longer presumed to control, and made responsible for, the activities of his relatives. Instead, he is required not to help them out in their business activities. But he is not required to resign simply because they are engaging in business in areas that might be within his jurisdiction. It’s not clear whether the 2000 Interpretation noted above survives; it’s about the activities of relatives of senior officials that conflict with the public interest and significantly overlaps the 1997 Principles. Thus, the following conclusions apply only to things that happened before 2010.

Here are a few conclusions we can draw from all this – and remember the qualification I just made about timing.

• The 1997 Principles cover no activities by Wen’s mother or siblings.
• The 1997 Principles cover only activities by Wen himself, his spouse, his son, and his son’s spouse.
• These statements from the NYT story describe activities by Winston Wen that, if they occurred before 2010, would be covered by the 1997 Principles:
  • “The couple’s only son sold a technology company he started to the family of Hong Kong’s richest man, Li Ka-shing, for $10 million, and used another investment vehicle to establish New Horizon Capital, now one of China’s biggest private equity firms, with partners like the government of Singapore, according to records and interviews with bankers.”
  • “Winston Wen and his wife, moreover, have stakes in the technology industry and an electric company, as well as an indirect stake in Union Mobile Pay, the government-backed online payment platform.”
  • “Winston Wen’s earliest venture, an Internet data services provider called Unihub Global, was founded in 2000 with $2 million in start-up capital, according to Hong Kong and Beijing corporate filings.”
  • “[Winston Wen] made an even bolder move in 2005, by pushing into private equity when he formed New Horizon Capital with a group of Chinese-born classmates from Northwestern.”
• I can’t find in the article a statement about Wen’s wife that unambiguously indicates a violation of the 1997 Principles. Many of the investments attributed to her seem in fact to have been made by entities of which she was an executive, not necessarily an owner. Of course, she may have been in a position to extract benefits by means of her position just like any other official in a government agency or state-owned enterprise, but that’s not a per se violation of the rule I’m discussing here.

The Wen family fortune and the denial

Lawyers purporting to speak on behalf of the family of Wen Jiabao (and I have no reason to doubt that they do) have issued a statement challenging certain aspects of the blockbuster expose recently published in the New York Times [English|Chinese]. Although the headline of the Times's report on the statement is "Chinese Premier’s Family Disputes Article on Riches," in fact the statement disputes remarkably little.

Let's look at what it says:

I. The so-called “hidden riches” of Wen Jiabao’s family members in the New York Times’ report does not exist.

This is way too vague to constitute a denial of anything.

II. Some of Wen Jiabao’s family members have not engaged in business activities. Some were engaged in business activities, but they did not carry out any illegal business activity. They do not hold shares of any companies.

(1) Well, of course some of Wen's family members have not engaged in business. The Times did not claim they all had. Thus, no dispute. (2) The Times article did not claim anyone had done anything illegal. Again, nothing to dispute. (3) Are they saying that no members of Wen's immediate family hold any shares in any companies? There is of course nothing wrong with anyone owning stock in some company. This part of the statement is, however, a genuine dispute, since the article does assert that "Mr. Wen’s relatives accumulated shares in banks, jewelers, tourist resorts, telecommunications companies and infrastructure projects". Maybe there is some "it depends on what the meaning of 'is' is" going on around the difference between "relatives" and "family members". But it would be hard to claim that his mother is not a family member, and the article did assert that she owns shares. OK, one genuine dispute here.

III. The mother of Wen Jiabao, except receiving salary/pension according to the regulation, has never had any income or property.

Another genuine dispute. This flatly contradicts what the article asserts.

IV. Wen Jiabao has never played any role in the business activities of his family members, still less has he allowed his family members’ business activities to have any influence on his formulation and execution of policies.

No dispute here; the article does not make this claim.

V. Other relatives of Wen Jiabao and the “friends” and “colleagues” of those relative are responsible for all their own business activities.

This is almost true by definition. Again, it doesn't contradict anything the article says.

All in all, then, the lawyers' statement really challenges only one specific assertion - that Wen's mother is a multi-millionaire - and one general assertion - that several of his relatives own shares in various corporations. It may be that in many cases it is literally true that the relatives don't own shares in companies; instead, they may hold interests in partnerships or some other entity that doesn't have shares, and the entities in turn hold the corporate shares. But I wonder whether you can go through life as a wealthy person and not own any shares in any companies.

 

Blast from the past: Supreme People's Court and Supreme People's Procuracy repeal several pre-1980 rules

In a society as fast-changing as China's, rules can quickly become obsolete. But the system can rarely get around to repealing or updating them in time. The pragmatic response to this problem has been simply to ignore the outdated rules when they get in the way. But this response does, of course, have a cost in damage to the culture of legality. Thus, institutions still try from time to time to identify and purge from the system old and obsolete rules. The latest attempt at this was published jointly by the Supreme People's Court and the Supreme People's Procuracy on Sept. 29, 2012. Interestingly, it was approved by the SPP last December, but not by the SPC until last June. And it wasn't promulgated until this month. I don't know the reason for all this delay.

The abolished regulations range in time from 1956 to 1979. Most are abolished because the subject matter they deal with no longer exists - for example, crimes of counterrevolution or hooliganism. I suspect (without any real evidence, I admit) that nobody was implementing these rules any more anyway, so this is likely just a housekeeping operation and won't bring about any change in practice.

Prof. Margaret Lewis on the new Criminal Procedure Law

Here are Part 1 and Part 2 of an interview with Margaret Lewis, an expert on Chinese criminal law and procedure, on the new Criminal Procedure Law.

The Bo Xilai/Gu Kailai pot gets stirred some more

The latest bombshell from China is a blog post from Wang Xuemei, a forensic doctor at the Supreme People's Procuratorate, who claims that the prosecution's story of Neil Heywood being poisoned by cyanide can't be correct. (Unfortunately, I don't know enough about cyanide poisoning to assess her story.) Here's the news report in the Guardian.

None of this can necessarily be taken at face value. Wang may have her own agenda; some speculate that this is part of an effort to defend Bo Xilai. She blames it all on a Svengali-like Wang Lijun leading the weak-minded Gu Kailai down the path to perdition, and speculates that Neil Heywood was actually suffocated with a pillow. She ends by asking, "Who benefited from Heywood's death?"

Compensation for work-related injuries in China

Here's a report by the Hong Kong-based China Labour Bulletin. CLB is the vehicle for exiled June 4th labor activist Han Dongfang and does great work.

Can Wang Lijun get off on a technicality?

Sure—when pigs fly. That was just to get your attention. But there is indeed an interesting technical flaw in one of the charges against him. (If you can’t wait, see my third point below.)

Xinhua has reported [Chinese | English] that Wang Lijun, the ex-Chongqing police chief and former ally of Bo Xilai until their spectacular split led to Wang’s flight to the US consulate in Chengdu, will be charged with perversion of the law for private purposes (徇私枉法), defection (叛逃), abuse of power (滥用职权) (presumably Article 391 of the Criminal Law, although there are other possibilities), and taking bribes (受贿).

The crime of defection is set forth in Article 109 of the Criminal Law:

国家机关工作人员在履行公务期间，擅离岗位，叛逃境外或者在境外叛逃的，危害中华人民共和国国家安全的，处五年以下有期徒刑、拘役、管制或者剥夺政治权利；情节严重的，处五年以上十年以下有期徒刑。When personnel of state organs, during the period when they are performing public duties, leave their post without permission and defect to beyond the border or defect while beyond the border, thereby endangering the state security of the People’s Republic of China, they shall be punished by fixed-term imprisonment, detention, control, or the deprivation of political rights. Where the circumstances are serious, the punishment shall be from five to ten years of fixed-term imprisonment.

掌握国家秘密的国家工作人员叛逃境外或者在境外叛逃的，依照前款的规定从重处罚。When personnel of state organs who are in possession of state secrets defect to beyond the border or defect while beyond the border, they shall be given a relatively heavy punishment under the terms of the preceding paragraph.

There are a number of interesting points to make about this rule. First, remarkably enough, defection is not defined either here or, as far as a quick bit of research reveals, anywhere else in the Chinese legal system. It apparently involves going abroad or staying abroad without permission, and is a crime that can be committed only by state personnel while they are performing public duties. I’m not sure how the latter restrictive condition works – does it mean simply during the period of their employment? What if it happens while they are on vacation? What the actual prohibited act is, though, remains unclear. Is it simply going or staying abroad without permission? We can’t bring our understanding of the word “defect” to bear here, because of course that’s just a handy translation people use for the Chinese term pantao 叛逃. Whether it’s a correct translation should be the conclusion of an analysis, not its starting point.

Second, the prescribed punishment for defection is surprisingly (to me, anyway) light: up to five years in most cases, and not more than ten years even in serious cases where you possess state secrets. Note, however, that revealing state secrets is separately punishable by up to fifteen years’ imprisonment in especially serious cases (Article 111). On the other hand—and this is very interesting—Wang has not been charged with revealing state secrets. In a more transparent system, you might chalk this up to the government’s reluctance to produce evidence about those secrets, but I’m not sure that’s the answer in China. There can hardly be any question that if Wang opened his mouth in the US consulate, he probably is guilty of this crime. After all, the ambit of “state secrets” in China is extremely broad; Zheng Enchong was found guilty of transmitting state secrets abroad when the item in question was a publicly available Chinese newspaper article.

The crimes of perversion of the law, abuse of power, and bribe-taking are respectively punishable by a maximum of 15 years in especially serious cases, 7 years in especially serious cases, and death in especially serious cases. In each case, however, substantially lower punishments of at most a few years’ imprisonment are also possible. What will be interesting to see is whether fleeing to a foreign consulate and revealing at best highly embarrassing and at worst highly damaging secrets is deemed to be less threatening to the state than, say, drafting a political manifesto, for which Liu Xiaobo received an 11-year sentence.

Third—and here’s the interesting technicality—Wang Lijun did not violate the statute on defection as written. Whatever “defection” might mean, there’s no question that it must involve the element of “beyond the border”. (The particular term used, 境外 jingwai, refers to areas beyond the borders of mainland China, that is, all foreign countries plus Hong Kong, Macao, and Taiwan.) Wang Lijun never went beyond the borders of mainland China; contrary to what is commonly supposed, the area occupied by foreign diplomatic missions is not foreign soil but remains Chinese territory. I have no doubt that this is simply a legislative oversight, and that the legislators would have included foreign diplomatic missions had they thought about it. And I would not label as unreasonable an intent-oriented interpretation of the statute as including foreign diplomatic missions. But it’s important to note that this problem exists, even if it’s by no means insoluble. I wonder whether the prosecuting authorities will notice it and, if so, how they will deal with it.

New report on abuse of psychiatry in China

The organization China Human Rights Defenders has just published a report on abuse of involuntary psychiatric commitment in China. Here's a summary from The Daily Beast.

As far as I know, the most recent full-scale treatment of this issue is Robin Munro's path-breaking China's Psychiatric Inquisition: Dissent, Psychiatry and the Law in Post-1949 China (London: Wildy, Simmonds and Hill, 2006). I have a blog post about it and the controversy his work engendered here. (Bottom line: Munro 1, critics 0.)

Involuntary commitment is an area desperately in need of legal standards. The abuses that occur now can't be blamed on authorities flouting or bending existing law. They don't need to bother; the existing legal regime pretty much gives them carte blanche to involuntarily commit anyone by just saying it's necessary.

Without some standards, I have an uneasy feeling that if current efforts to abolish re-education through labor in its current form succeed, we'll suddenly - through the operation of a kind of Law of Conservation of Police Discretion - see an increase in the number of supposedly crazy people needing commitment.

My CNN op-ed on the Gu Kailai trial

Now that the verdict is out, here's my slightly updated CNN op-ed on the whole thing.

Where Gu Kailai will likely spend her time: China's Club Fed

Here's a profile of Qincheng (秦城) Prison, where high-ranking prisoners stay and where the cognoscenti figure Gu Kailai will go (assuming she's not spirited off to a nice tropical island somewhere).

How much time will Gu Kailai actually have to serve under Chinese law?

Gu Kailai has been sentenced to death with a two-year suspension. Under Art. 50 of the Criminal Law, if she commits no new intentional crimes while in prison, that sentence will be commuted after two years to life imprisonment. It can even be commuted to 25 years’ imprisonment if she “genuinely demonstrates major merit” (确有重大立功表现). And further reductions are possible after the initial commutation.

Under Art. 78 of the Criminal Law and a 2011 Supreme People’s Court directive, those sentenced to life imprisonment or a term of years (including as a result of a commuted death sentence) may have their sentences reduced for good behavior (that's my own term; Chinese law speaks of showing repentance or establishing merit) during their imprisonment. And various forms of good behavior are listed, including (in the 2011 SPC directive) paying compensation. Presumably that will not be a problem for Gu.

But there are limits: Art. 78 of the Criminal Law states that a death sentence commuted to life imprisonment may under no circumstances be reduced to less than 25 years of actual time served, and a death sentence commuted to 25 years’ imprisonment may under no circumstances be reduced to less than 20 years of actual time served, in each case counting from the date of the original commutation. And even less is possible: in its 2011 directive, the Supreme People’s Court simply overrode the Criminal Law and stated that a commuted sentence could ultimately be reduced to as little as 15 years of actual time served. [ADDITION: A colleague also points out the intriguing possibilities of medical parole even earlier after just 9 years of actual time served: see this post from Dui Hua Foundation.]

I can’t resist digressing here to point out that the 2011 SPC directive is pretty remarkable: only a few months before, on February 5, 2011, the National People’s Congress Standing Committee had passed an amendment to the Criminal Law, effective May 1, that specifically established the 25/20-year rule. Yet on Nov. 21, 2011, the Supreme People’s Court passed its directive (effective July 1, 2012) overriding this rule. Needless to say, the SPC has absolutely no authority to directly contradict NPC legislation in this way. They can’t even claim, as is often done, that the existing rule was out of date and simply needed to be changed.

 

Does it matter that Xinhua called the evidence against Gu Kailai “irrefutable”?

There have been some rumblings in the press about Xinhua having declared the evidence against Gu Kailai “irrefutable” before she even went to trial. The implication of these comments seems (at least to me) to be that Xinhua’s declaring the evidence irrefutable before the trial somehow indicates that the fix was in.

Now, just to be clear about this, I am not disputing the point that the verdict is a foregone conclusion. It will come out on Monday, and I don’t think I’m going out on a limb to predict that she will be found guilty. But it’s important to point out that the Chinese system is designed to prevent cases about which there is any uncertainty about the evidence from getting to the trial stage in the first place. Weak cases are supposed to be sent back for more investigation or else dismissed. That design is not necessarily inconsistent with producing a just result.

In other words, if everyone involved in the investigation and prosecution of the Gu case did their jobs in an utterly impartial, objective, and highly competent way, Xinhua—and indeed any observer—would be justified in concluding that the evidence must be pretty strong. Therefore, we can’t take Xinhua’s statement as prima facie evidence that the whole proceedings are biased. Sure, China’s conviction rate is incredibly high: from 1997 through 2005, only 0.66% of criminal defendants upon whom judgment was pronounced were found innocent. The acquittal rate in South Korea, however, is even lower: 0.5%. In Japan, it’s below 1%. (I’ve blogged on this here, with a note on US acquittal rates as well.) That might be because a lot of innocent people get convicted in South Korea and Japan, but it might also be because prosecutorial incentives are such that prosecutors don’t want to bring cases with the remotest chance of losing.

China is not, of course, South Korea or Japan, the biggest difference (relevant to this discussion) being that judges in South Korea and Japan have much more independence. Judges in China are subject to the same political leadership—the local Party Political-Legal Commission—as prosecutors and police. Still, the point remains that when the system functions as it is formally supposed to—a way that is by no means unique in the world, inherently unfair, or confined to single-party dictatorships—we would still expect to see a very high conviction rate.

Gu Kailai verdict scheduled for August 20th; my op-ed

The Hefei Intermediate People's Court will announce the verdict in the Gu Kailai trial at 9 a.m. (local time) on August 20th.

In the meantime, here's an op-ed on the trial that I've published on CNN's site. Please note that it does not even attempt to deal with the problems in the official narrative, and I take no responsibility for the title. Contrary to what some of the commentators seem to think, it's not an argument that Gu has been railroaded.

Lawyers complain about re-education through labor

Here's a report (in Chinese) about an open letter submitted by ten lawyers to the Ministry of Justice and the Ministry of Public Security proposing changes in the system of Re-education Through Labor (劳动教养) (RETL). This follows on the heels of the Tang Hui incident, where a woman was sentenced to RETL for petitioning too persistently about the case of her daughter, who at age 11 had been kidnapped, raped, and forced into prostitution. (She felt the perpetrators, with police collusion, had been inadequately punished.) After her case was publicized, she was released following an online outcry. (Post hoc ergo propter hoc? You be the judge.)

In the Sun Zhigang case, after the death of a young man in a Custody and Repatriation center in 2003, three young legal scholars famously wrote to the National People's Congress urging that the long-controversial system of C&R be abolished for unconstitutionality. It was indeed abolished (although not necessarily as a direct result) shortly afterwards. Could Tang Hui be the Sun Zhigang of RETL? Or does someone need to actually die in this system first?

Random thoughts on the Gu Kailai trial

Here are some more or less random thoughts on the Gu Kailai trial. For this analysis, I’m going to rely primarily on three sources, abbreviated as follows:

1. Xinhua Report: The account of the trial published by Xinhua, China’s official news agency, on August 10^th in Chinese and on August 11^th in English.

2. Zhao Report: The account of the trial published by observer Zhao Xiangcha in Chinese here and translated by me here.

3. Court Statement: A statement from the Hefei Intermediate People’s Court read out to the press after the trial by a court official on August 9^th.

I’ll start with some random observations and then conclude with some summarizing thoughts.

Random Observations and Questions

Zhao Xiangcha. Who is Zhao Xiangcha, why was he allowed to attend the trial, and why did he feel it was fine to publish a report of the trial on line? This was a trial so sensitive that attendance was strictly controlled, and by Zhao’s own account even his pencil was confiscated. In 1980, Liu Qing was sentenced to prison for (among other things) distributing a transcript (not alleged to be inaccurate) of Wei Jingsheng’s supposedly public trial. Why was Zhao Xiangcha confident he could do this?

Why Hefei? The Xinhua Report says, “To ensure an impartial handling of the case, the Ministry of Public Security, the Supreme People's Procuratorate and the Supreme People's Court designated the Public Security Bureau of Hefei City, the People's Procuratorate of Hefei City and the Intermediate People's Court of Hefei City to carry out the investigation, prosecution and trial of the case, respectively.” It is not clear what the legal basis was for this trio of designations. I have discussed this at greater length elsewhere.

The real reason for not holding the trial in the obvious candidate location, Chongqing, can be easily guessed: too many Gu/Bo friends in the police, procuracy, and courts. But why, of all other possible places, choose Hefei? Some people say it’s because Hu Jintao has connections there; others say it’s because Supreme People’s Court president Wang Shengjun has connections there. More interesting is why these connections lead to the selection of Hefei. According to some people I’ve talked to, it’s not just because those connections make the place more reliable. After all, if the top leaders decide on a verdict, is there any court in China that’s going to defy them? No, apparently it boils down to (why didn’t we guess?) money. Wherever the investigation and trial are held, the center is going to pour a lot of money down there. This is a chance for the locals to make out like bandits. Thus, lots of places in China want to be given jurisdiction over this matter, and the place with the best connections wins. Caution: this is all just unsourced speculation.

Residential surveillance. The Xinhua Report says that Gu Kailai was put under residential surveillance (jianshi juzhu监视居住) on March 15, 2012. This raises interesting questions. My recollection is that she disappeared around this time. If she was being held in residential surveillance, where was the residence? Presumably she had residences in Chongqing and Beijing; either place is possible. But nobody knew where she was. Well, maybe she was home but just wasn’t answering the door. But if she was in Beijing or Chongqing, how could the Hefei police, who were in charge of the investigation, enforce it there? Maybe there are provisions for interjurisdictional cooperation in this kind of thing. It seems at least as likely to me, though, that she was subject to the recently legalized, but at the time illegal, practice of the police putting you under residential surveillance at their residence – some kind of guest house with bars on the windows and large guards at the door, possibly in Hefei. But this is all speculation.

Did Gu get to select her own counsel? China’s Criminal Procedure Law (Articles 32, 33) seems to promise a defendant the right to have a lawyer of her choosing, and the Xinhua Report says Gu exercised this right. But there is some reason to be skeptical. On June 10^th, Reuters quoted anonymous sources as saying that Shen Zhigeng, a Beijing lawyer experienced in defending anti-graft cases, had been hired by Gu’s family. (This is not quite the same, of course, as saying he had been hired to represent Gu in her criminal trial.) The Zhao Report says that this choice was vetoed by the authorities and that she was required to accept Jiang Min, a prominent Hefei attorney, as her lawyer. Is there any fire behind this smoke? There are two reasons for thinking that maybe there is. First, Shen was evasive when asked by reporters to confirm whether he was representing Gu.

When Reuters called Shen on Sunday, he would neither confirm nor deny he was working for Gu or her family.

"It's still not for certain. I still haven't met with her yet," Shen said, when asked if he was Gu's attorney.

"The judicial (authorities) don't allow comment on these things," he added, when pressed to explain his possible role. "Now the judicial bureau doesn't allow us to have contact with the media," he said.

It’s certainly not true that judicial authorities as a general rule don’t allow lawyers to say whether they are representing particular clients. Thus, if authorities specifically told him not to say anything about this case, that implies that he was connected with it in some way.

Second, it’s hard to understand why Gu would voluntarily have chosen Jiang Min to represent her, and easy to understand why the authorities would have chosen him. From his law-firm bio, it’s clear that he’s a solidly establishment lawyer: a vice chairman of the All-China Lawyers Association and the chairman of the Anhui Lawyers Association. On the other hand, his CV is utterly innocent of any indication of experience in criminal defense, let alone death penalty defense. I don’t even see courtroom experience of any kind. He’s a financial and commercial law expert, apparently mostly transaction-side. He may be very capable at what he does, but is this the résumé you really want in your death penalty lawyer?

“Public” trial. Contrary to what the law would seem to require, Gu did not get a public trial. Attendance was restricted to a government-selected audience. Art. 11 of the Criminal Procedure Law says that unless the law otherwise provides, all trials shall be public. There are exceptions for various kinds of cases – for example, cases involving state secrets (Art. 152). But we have seen no statement invoking any of these exceptions, and indeed the Xinhua Report declares that the trial was a public one. Obviously, if “public trial” just means “trial with a selected audience”, then it has no meaning at all. And this isn’t just me imposing my own interpretation on Chinese legal terms. Fake “public” trials of this kind are common in China, and Chinese commentators make the same point.

Failure of witnesses to appear in court. As far as we know from any of the accounts, the testimony of a number of witnesses was presented, but only one or more (the Chinese source is ambiguous) experts (jiandingren 鉴定人) appeared in court. The Chinese term here refers, I believe, to people such as the guy from the police lab who testifies about what the blood test showed. Chinese law does not in so many words actually require witnesses to show up in court, although that would be a plausible interpretation of what it does say. It requires that testimony be subject to questioning (xunwen 讯问) and confrontation (zhizheng 质证), and it’s hard to see how those rights could be properly exercised against a piece of paper read out by the prosecution. Nevertheless, the Gu trial is far from unique in this respect. One study from about a decade ago found that 85% of trial testimony was simply read aloud in the court and not subject to cross-examination. Indeed, the same study found that in 243 cases of witness testimony being read aloud in the absence of the witness, in 58 cases the name of the witness was not even revealed. No witnesses at all showed up in the Li Zhuang trial in Chongqing. While Gu Kailai may have gotten a raw deal in this sense, it was far from a uniquely raw deal.

Did she indeed confess to everything? All the reports state in various ways that Gu confessed. The Zhao Report says, “She fully admitted her acts in the case without reservation; she offered no objections.” The Xinhua Report says that she “confessed to intentional homicide”. It seems, however, that in fact she did question parts of the prosecution’s case.

Her lawyer raised a number of questions about the prosecution’s case.

• There was no proof that the poison was cyanide, and the primary symptoms of cyanide poisoning were not present. (Zhao Report)
• There were problems with the chain of custody of the blood sample. (Zhao Report, Xinhua Report)
• Heywood’s family had a history of cardiovascular disease; excessive drinking could have brought on heart failure. The level of poison found was quite low. A charge of attempted murder might be more appropriate. (Zhao Report)
• There was evidence of mysterious doings on the balcony of Heywood’s room after Gu left. Maybe somebody else was responsible. (Zhao Report)
• She should not be held totally mentally responsible. (Zhao Report)

Gu herself is said to have objected to the introduction of written testimony from Wang Lijun (Wang did not show up at trial), saying it was concocted. (Zhao Report)

Questionable aspects.

(1) When did Heywood meet the Bo family? According to the trial reports, Heywood first met Bo Guagua in England in 2003 (Zhao Report). His first contact with Gu was in 2005 (Zhao Report, Xinhua Report). This doesn’t fit with what we thought we knew before this. The general understanding was that Heywood met the Bo family when he was in Dalian, and that he subsequently helped Guagua get into Harrow. I have no way of knowing which account is true, and just want to note the contradiction here.

(2) When did Heywood threaten Guagua? According to the reports, Gu said she killed Heywood because she feared he was an active, ongoing threat to her son’s life. This doesn’t make sense to me. If her testimony is accurate, Heywood exercised some sort of coercive detention over her son Guagua at some point in an attempt to get Gu to cough up some money he felt he was owed. If this indeed occurred, it must have been when Guagua was in the UK. I haven’t been able to find any news report that specifically says when Guagua started his Master in Public Policy degree at Harvard’s Kennedy School of Government, but we know he graduated in May 2012, so it was probably in the fall of 2010. In other words, we are supposed to believe that as a result of something that happened perhaps years earlier, Gu in November of 2011 felt that a Briton living in China posed an ongoing mortal threat to her son, who had been out of England and living in Cambridge, Massachusetts for more than a year already. According to the Xinhua Report, Gu said, “During those days last November, I suffered a mental breakdown after learning that my son was in jeopardy”. Last November? The Zhao Report says this whole event took place in England. Are we now being told that this “soft detention” took place while Guagua was attending the Kennedy School in Cambridge, Massachusetts? And wasn’t Heywood in Beijing at the time? Something is missing here.

Role of the Adjudication Committee. The Court Statement, somewhat unusually, openly acknowledges the role the Adjudication Committee will play in deciding the case. The Adjudication Committee is a group of senior court officials with the power under the law to make the final decision in any case in which they may interest themselves. Its role is controversial in the Chinese legal community because, among other things, it means that cases can be decided by people who weren’t at the trial. Here, I don’t think it will make a big difference. In any case, however, we have a statement that the judges who presided will not make the final decision. (I don’t want to call it an “admission”, because a role for the AC is not inconsistent with how the system is formally supposed to function.) There’s a terrific paper by law professor HE Xin on the role of the Adjudication Committee that has just been posted on the Social Science Research Network; the author had access to a year’s worth of meeting minutes of a court’s Adjudication Committee. OK, it’s a single data point, but He does a wonderful job in using it to the fullest. Highly recommended, indeed indispensable, for understanding how China’s courts operate.

Heywood relatives and friends. The Court Statement and the Xinhua Report state that relatives and friends of Heywood attended the trial. Who were they? The Court Statement says that an attorney representing Heywood’s family spoke in relation to the criminal part of the trial, saying he would “respect the court’s just verdict.” We don’t know what else, if anything, he said.

Claim for civil compensation? As noted above, the Court Statement refers to “the criminal part” of the trial, implying that maybe there was a non-criminal part. This is quite possible: Chinese law (Criminal Procedure Law, Articles 77, 78) allows crime victims (or in this case, their next of kin) to have a civil claim for compensation heard in the same proceedings as the criminal case. Did Heywood’s family make such a claim? We have this oblique hint, plus the fact that they had an attorney there, but that’s all.

The self-confidence of someone who’s pretty sure she’s going to get away with it. I can’t help but be struck by the large crowd of people Gu assembled outside Heywood’s room on the night she poisoned him. According to the Zhao Report, after leaving Heywood dead or dying in his room, four of them – Gu, Zhang, their driver, and another personal servant of the Bo family – then left the scene, after hanging the “do not disturb” sign on the door and telling the hotel staff not to bother the guest inside, who was drunk. They don’t seem to have been too worried about the fact that Heywood would be discovered dead, and they would be the last people to have been seen with him.

Foreign citizenship? There has been speculation for some time that Gu Kailai might have foreign citizenship, and that that might explain the curious official references to her as Bogu Kailai (adding her husband’s surname to her own) – this kind of name-taking is quite rare in the PRC. But the Xinhua Report officially denies that, at least indirectly: it says she has a Beijing domicile (hukou) and is a registered lawyer. Foreigners can neither have a hukou nor be registered lawyers in China.

Overall Thoughts

Many people are asking what this trial shows about the Chinese legal system. I don’t think it shows us very much. To put it another way, we know very little of what went on behind the scenes, and what we do know does nothing to disconfirm things we thought we knew about the Chinese legal system. In short, most of us are drawing conclusions about the trial based on what we think we know about the Chinese legal system. If we want to go in the other direction – to draw conclusions about the Chinese legal system based on what we think we know about the trial – all we can say is that the trial doesn’t give us any reason to reconsider the conventional wisdom.

I predict, for example (as does everyone else) that Gu Kailai will be found guilty. Moreover, I believe that this verdict was settled beforehand at the highest level – the Standing Committee of the Politburo – and that it was impossible that anything could come out at the trial that would upset that conclusion. However, it is important to note that there is nothing in Gu’s trial or the lead-up to it that would constitute evidence for that belief. It’s other things we know about China and the way courts and the political system operate in sensitive, high-profile cases like this that constitute the evidence for my belief. I’m just applying some knowledge that I already have (or at least think I have) to make inferences about a new situation.

He Weifang on the Gu Kailai trial

Law professor He Weifang has posted the Xinhua report of the Gu Kailai trial on his blog and appended some, well, let's just say not entirely credulous comments.

Here's my translation, followed by the Chinese text of his comments. I think his title is a pun, but am not sure. I'll ask him. [AUG. 13 UPDATE: I asked, he answered. It's not a pun in the way I thought.]

An Impossible Situation [also perhaps a pun for “Protect Gu Kailai No Matter What”?]: Her hasty trial left more questions than it answered. Her motive for deciding to murder was to protect her son; is there any solid evidence that her son’s life was in danger? As she was a lawyer with rich international experience, the rational choice would have been for her to report the case to Scotland Yard. It’s absurd that she would kill someone herself. Could it be she was faced with some other threat that could not be spoken of? Who did the policemen who helped cover up the crime answer to? Moreover, Mr. Heywood apparently did not drink, and in addition was said to have already threatened Guagua. Now he was almost forced to Chongqing by Zhang and met with Guagua’s mother; it should have been as though facing with a mortal enemy. What wiles did she use to get him so thoroughly drunk? Witnesses who should have appeared in court – the most important of which were her husband and former police chief Wang Lijun – were utterly absent. None of the other relevant witnesses appeared in court, either. This kind of trial is just a show to cover up the truth. If this kind of case is not tried justly, then lies have to be used to cover up lies, leading to an impossible situation where the story doesn’t hold together and it becomes a satire of justice.

In any case, as far as the bit of the iceberg that was exposed is concerned, we can see who the real mafia in Chongqing are.

【进退维谷】对她匆忙的审判留下的疑点远多于揭露的事实。她决意杀人的起因是为保护儿子，儿子遭受生命威胁有确凿证据么？作为一个有丰富国际历练的律师，合理的选择是向苏格兰场报案，自己亲自杀人太匪夷所思。莫非是遭遇到的难以言说的其他威胁？帮助掩饰罪行的警官们听命于何人？另外，伍先生据说是不喝酒的，况且据称他已对阿瓜发出威胁，此时几乎被小张押解至红都，与瓜妈见面，本该如临大敌的。她用何等花招竟让他酩酊大醉？本来该出庭的证人——其中最重要的是其夫君和王立军前局长——压根儿不出现，其他相关证人也概不出庭，如此审判，更像是掩盖真相的把戏。这种案件，假如不是公正审理，则需要用谎言掩盖谎言，最终进退维谷，前后失据，成为对正义的讽刺。

无论如何，就揭露出来的冰山一角而言，我们也可以看到，重庆最大的黑社会究竟是什么人了。