Wednesday, October 29, 2014
The text of the decision passed by the Fourth Plenum on Oct. 23rd, entitled “Decision on Several Important Issues Regarding the All-Around Promotion of Ruling the State According to Law,” has finally been released [Chinese | English]. As expected, it offers more detail than did the Communiqué released earlier, but I don’t see anything here that would require a fundamental revision of the preliminary assessments that observers (including me) made after reading the Communiqué. Even though those assessments were varied, my sense is that whatever you thought the Communiqué indicated, your opinion will be reinforced, or at least not overturned, by your reading of the Decision.
The big-picture summary is that the Decision contemplates no fundamental reform in the relationship between the legal system and the Party. It is clear that institutionally speaking, the Party will remain above the law. At the same time, the Decision does contemplate some genuinely meaningful (and in my opinion positive) reforms. It also has a lot of stuff that might look meaningful but isn’t. I’ll explain below. Please note that I wrote this under a lot of time pressure, so it is not as well organized as it might be. Conclusions are tentative.
1. Party first, law second
My impression (which I have not taken the time to verify) is that whenever the Party and the law appear in the same sentence, the Party comes first. Certainly it comes first in some important places.
(a) Section 1 of the Decision lists several important principles that must be upheld in order to achieve the goal of ruling the state according to law. The first: leadership of the Party.
(b) Section 6 states that judges should be loyal to four things: the Party, the state, the people, and the law. Notice which comes last. Grammatically speaking, of course, there is no reason why this sentence could not be interpreted as giving all elements equal value; in any list, something has to come first. But we know that in a document like this, nothing – not even a comma – is accidental. The elements of this list come in the order they do for a reason.
(c ) The “Three Supremes” (三个至上) long associated with former Supreme People’s Court president Wang Shengjun (a man on whose CV not a single day of legal education appears), are resurrected in the same section. Legal system personnel should give highest priority to the cause of the Party, the interests of the people, and the constitution and laws – again, listed in that order. Lawyers must support the Party’s leadership and party cells in law firms should step up their activities.
In addition, obedience of officials to law is presented throughout as a kind of internal Party policy goal: this is something that Party members should do, and officials will even be scored on it (Section 7, Subsection 3). Those who have a “special privilege” mentality will be criticized and educated, and if necessary removed from office. But because the Decision contemplates no changes in the relationship between the legal system and the Party, the system in which powerful officials can override law if they wish to remains comfortably in place. The Decision just wants them to wish to override it less often.
2. Meaningful reforms: major
(a) The Decision calls for some significant reforms in the system for managing judges.
(i) First, it says that judicial tenure should be protected; judges should be removed from their posts only for legal reasons and in accordance with legal procedures. It’s hard to know exactly what this means; at present, as a formal matter, local people’s congresses have the right to appoint senior judges in a court, and there’s nothing in the law to suggest they can’t replace them as they please. In any case, no more detail is provided, so we’ll put this aside for now.
(ii) A very important reform in my view is the proposal (Section 6, Subsection 1) to establish essentially a career civil-service model for the judiciary. Junior judges should be selected by provincial-level courts and should start their careers in basic-level courts. They will then be promoted to higher-level courts based on their ability. The Decision does not actually specify who will do the promoting, although it would make sense for this power to be in the hands of the provincial-level courts as well. The same principle applies to procurators. This reform is significant precisely because such a model does not exist now. Courts are still making their way out of the work-unit (单位 danwei) model. The main (or at least, an important) way to become a senior judge at a high-level court is to start out as a junior judge at a high-level court – presumably by graduating with excellent grades from a famous law school. There is not now a good system for identifying promising judges at lower levels and promoting them to different courts at higher levels.
(b) The Decision also calls for some significant reforms in the court system, both apparently designed to address the problem of local protectionism. Because courts at a given administrative level are in practice answerable to local political authority at that level (which has power over appointments and finances), they tend to protect any party that local political authority wants to protect – for example, prominent local businesses. The Chinese legal community has long viewed this as a problem and proposed various ways of addressing it.
(i) The Supreme People’s Court is to establish “circuit tribunals” (巡回法庭 xunhui fating) each with jurisdiction over several provinces, to try cases involving more than one province. Note that this proposal does not involve setting up another layer of courts. The institutions in question are tribunals, meaning they are simply branches of the SPC. A decision of such a tribunal would be a decision of the SPC. A model for this currently exists in basic-level people’s courts, which can establish “people’s tribunals” (人民法庭 renmin fating) that exist in, or travel to, areas physically distant from the court’s location. The decisions of such tribunals are decisions of the court itself.
(ii) There is another, different proposal to establish another layer of courts that will cross jurisdictional boundaries, again to try cases that are in some sense cross-jurisdictional. Such a proposal would require legislative and possibly constitutional amendments. The Decision gives it only a sentence, so we know basically nothing about how this proposal might be carried out.
Note that in both cases, the institutions involved (whether tribunal or court) are intended to hear only a particular kind of case: cross-jurisdictional cases. They do not appear intended to solve in a general way the problem caused by the dependence of courts on political power at the same administrative level.
3. Meaningful reforms: minor
(a) The Decision calls for breaking the link between amounts received by a government agency in fines and confiscations and that agency’s (or, presumably, its officials’) interests. The reasons for (and merit of) this are obvious. In fact, it’s a reform that has already been carried out, at least to some degree, in a number of sectors. (I just wish the U.S. government would adopt the same principle in its civil forfeiture laws.)
(b) The Decision calls for control over personnel and finances of state auditing organs to be centralized up to the provincial level. This is presumably to provide auditing bodies with more independence from local officials, who might pressure them to look the other way during their investigations.
(c) The Decision calls for reforms in the case docketing (立案 li'an) system. Any court system needs a gate-keeping procedure to weed out non-meritorious suits before they get very far. The problem with China’s current system is that in practice, courts can avoid hearing troublesome cases (for example, cases where no matter what they do they’ll be criticized) by simply refusing to docket them (i.e., refusing to accept the case filing). While such a refusal can be appealed, courts can get around this by simply refusing to refuse; they don’t issue a decision rejecting the filing, but instead just do nothing. The Decision calls for reforming this by (it seems) removing the discretion of courts to refuse cases. Instead of a system where courts can review filings for docketability (and thus have the power to reject the filings), we will get a system of “case registration” (立案登记制 li’an dengji zhi). But if so, the system will still have to come up with some way of filtering out frivolous and otherwise utterly no-hope cases without having to do a proper hearing on the merits.
(d) The Decision has some welcome language on civil rights. It specifies the principle of the presumption of innocence (疑罪从无 yi zui cong wu: literally, something like “when there is doubt about the crime, err on the side of finding no crime”). It also endorses the principle of exclusion of unlawfully gathered evidence. I put both these items in the “meaningful but minor” category because I don’t want to say they’re meaningless, but at the same time we have heard this before and problems persist.
(e) The Decision endorses an Anglo-American type jury! At present, China has a system of so-called “people’s assessors” (人民陪审员 renmin peishenyuan): lay people who in certain cases sit alongside judges and have (in theory, although of course not in practice) exactly equivalent decision-making power over the case. It’s just a vote at the end. Thus, it’s not appropriate to call them a jury, even if they functioned exactly as they are supposed to in theory, instead of (as seems to be the case in practice) as decorative extras. But the Decision calls for the gradual implementation of a system whereby assessors will decide only issues of fact (did A actually call B a stinker?), not issues of law (assuming A called B a stinker, is B entitled to damages for hurt feelings?). This is exactly how the Anglo-American jury is supposed to function.
I group this with the minor reforms because although it would be major if actually implemented, I’m not confident that it will get very far. I should also say that it’s not unambiguously positive. Just because it resembles the Anglo-American jury doesn’t automatically mean it’s a great thing. I’m undecided on this one.
3. Meaningless feel-good language
The Decision gives a shout-out to innumerable Good Things, from constraining state power to increasing legal aid. Typically, it calls for strengthening or increasing something that is already there. Consider how often the following verbs appear:
No. of occurrences
jianquan (健全 strengthen)
wanshan (完善 perfect)
tigao (提高 raise or increase)
It would be otiose to go through them all. I would instead propose that the burden be on those who assert in any particular case that this language means something to point to the specific institutional reform that accompanies it. If there is none, then we can only wait and see. Talk is cheap. Something may come of the promise and something may not. Here are a few examples.
(a) The Decision calls for strengthening the system of constitutional review of legislation. There is such a system in place now, but it appears to be utterly non-functional. The Decision does not propose a fundamentally different way of ensuring that legislation and government actions conform to the constitution. It essentially calls for maintaining the current system of (potential) top-down review, but doing it better.
(b) The Decision makes a bow to the concept of limited government in several places, but typically only in general terms. The institutional changes that would actually accomplish this do not appear. An important principle is declared in Section 3, Subsection 1: administrative organs cannot act without specific legislatively delegated authority. This seems pretty good, and in general might be laudable, except that it is profoundly unrealistic. Emergencies happen. It might be better to establish the principle that administrative organs must act within certain bounds or according to certain principles (set forth, for example, in the constitution or a statute). Here as elsewhere, we see the idea that while the actions of state officials need to be controlled, that control should be internal to the system and not achieved through external constraints.
(c) The Decision denounces attempts by leading officials to interfere with court cases, and calls for the establishment of a system for keeping track of such attempts. But the same system of incentives that now makes judges responsive to such attempts is going to make them reluctant to record and report on them. Moreover, the same Decision elsewhere (Section 7, Subsection 1) stresses the importance of the Legal-Political Committee, a Party body that exists at various administrative levels, and calls for the Party organization in political-legal bodies (which includes courts) to report important matters to the local Party committee. Given what we know about how China operates now, I think it’s fair to ask for very, very strong evidence before believing that powerful officials will no longer be able to interfere in cases that interest them. Does anyone really believe that Bo Xilai’s case was decided solely by the judges who presided at the trial, or that Zhou Yongkang’s case will not be decided by the Standing Committee of the Politburo?
4. Dogs that didn’t bark
Curiously unmentioned in both the Communiqué and the Decision is an important reform mooted at last year’s Third Plenum: the centralization up to the provincial level of court finances and personnel appointments. This reform, designed to counter local protectionism, is apparently already being tried out on a pilot basis in Shanghai and perhaps other places. It’s odd not to see it mentioned here. [UPDATE, Oct. 29, 5:30 pm EDT: This reform is popular among legal academics but controversial among judges. There are at least two reasons for this. First, judges fear that a more hierarchical system of authority in general will increase the power of court leaders over them. Second, judges in prosperous areas fear that putting court finances under a higher adminstrative authority (i.e., the province) will mean a unified salary scale for all judges under that authority. Judges in poor areas might get more, but judges in rich areas will get less. Or so they fear. In any case, the absence of language about this may well be evidence that this reform has stalled.]
A welcome (to me) absence in the Decision is language downplaying legal professionalism and touting closeness to the masses, praising the Ma Xiwu adjudication style, etc. We have seen a lot of this language in recent years (for a thorough analysis, see Carl Minzner’s “China’s Turn Against Law” and Ben Liebman's "A Return to Populist Legality? Historical Legacies and Legal Reform"), so it’s a bit surprising not to see it here. There is a moderately troubling line endorsing the move of “qualified” military officials into the ranks of legal system personnel; it doesn’t exactly support the much-criticized practice of retired military officers simply donning judicial robes, but the drafters of the Decision cannot have been unaware of this background.
[UPDATE, Oct. 29, 3 p.m. EDT: It occurs to me that this fits well into a professionalization model, but not very well into the story of deprofessionalization, populism, and China-turns-against-law that we see in the work of Carl Minzner and Ben Liebman (a story that I generally agree with). In addition, it suggests a greater role for court decisions as sources of legal authority and not just one-off judgments as between two disputing parties. If a court decision is just a one-off judgment unrelated to anything else the legal system does, then it doesn't much matter if untrained lay people decide legal questions as well as factual ones. But if a court decision constitutes legal authority to any degree, then you want to control who's making that decision and how they make it. This reform, if carried out, makes it more possible for court decisions to have precedential value.]
5. Objectionable items
While I am disappointed (but not surprised) at the continued invocation of the need for the Party to control everything, many and perhaps most of the specific reforms endorsed in the Decision are positive. But not all. Take the problem of judges being too responsive to media pressure. This is a real problem: sometimes the media will take a particular view of a case, and the actual facts get completely lost in the dominant narrative. But why do judges feel pressure to satisfy the media? The media does not pay their salaries; the public doesn’t even know their names. The reason is institutional: they are getting phone calls from their political superiors, who are getting phone calls from their political superiors, and everyone is barking, “What the hell is going on down there in your jurisdiction? Make this fuss go away!” Chinese officials lose favor in the eyes of their superiors when there’s a commotion in their jurisdiction; the superiors don’t care about the merits. But instead of addressing this problem, the Decision takes the easy way out: let’s control media reporting (Section 4, Subsection 6).
This policy has to be seen in the context of recent rules severely restricting the ability of lawyers to comment on cases they are handling; it’s part and parcel of a general crackdown on information regarding court cases. Since getting your case into court was one of the few ways remaining for marginalized people to have a legitimate way of getting press coverage (the press can’t report on a demonstration, for example, but can report on a court case), the policy represents a further closing, not an opening.
Sunday, October 26, 2014
The International Society for Chinese Law & History has a feature on its (terrific) website called the Chinese Legal Documents Series. Here's what it's all about:
This special series invites researchers to introduce a document from their own collections, provide a translation, and discuss what these texts might be used to study. Our goal is to showcase the research of members, offer a small corpus of legal texts for the training of students, and give readers a wide view of what the study of Chinese legal history looks like.
An introduction to the series, as well as the first post in it, are here.
Thursday, October 23, 2014
You can’t call something a disappointment if your hopes weren’t high to begin with. And that sums up the official communiqué of the just-completed Fourth Plenum of the Chinese Communist Party’s Central Committee, a meeting dedicated to discussing the legal system and its place in China’s political order.
The official term for the plenum’s topic was “yi fa zhi guo”, variously translatable as “governing according to law,” “rule of law,” and “rule by law.” Few observers expected radical proposals – for example, institutional changes that would make the Party itself more accountable to legal norms – and the communiqué confirms these low expectations. For the most part, the communiqué is long on platitudes and short on specifics. (To be fair, that’s common in documents like this; specifics may be in the Fourth Plenum’s official resolution, which has not yet been released.)
Still, the communiqué does contain meaningful reform proposals that are specific enough to constitute an agenda. For example, it endorses the idea of courts whose jurisdiction will span current administrative boundaries as a way of reducing local protectionism; at present, judges at a given administrative level owe their positions and salary to political power at the same level, and thus are inclined to follow orders where local interests are concerned. Puzzlingly, it fails to mention another reform with the same object that was proposed at last November’s Third Plenum: putting all courts below the Supreme People’s Court under the control of provincial (and not lower) authorities. This reform does not challenge the principle of Party supremacy and is just a way of making authoritarianism work better. It is a bad sign for the leadership’s program if even this has run into obstacles.
The communiqué also endorses the idea of giving public prosecutors jurisdiction to bring public interest suits outside the criminal sphere – for example, suits against polluters. This liberalization must be understood, however, against a background of policy that severely disfavors – sometimes with intimidation and jail sentences – private parties who attempt to implement social policy goals through litigation. In the view of the Chinese state, determining and implementing social policy is the government’s business, not the citizens’.
One intriguing proposal is to “make the trial the center” of litigation. In other words, matters litigated should be decided at the trial itself, not before the trial in opaque, out-of-court processes. At least in criminal trials, this would be a major change from the current practice, where a case typically does not get to the trial stage unless the authorities, including the court, are satisfied as to the defendant’s guilt. (The current conviction rate is over 99%.) A process of guilt determination is not necessarily unfair, of course, simply because it happens before a proceeding labeled “trial,” but make no mistake about it: the trial is at present more the effect than the cause of that determination.
Finally, the communiqué endorses the strengthening of a constitutional review and interpretation mechanism. As a practical matter no such mechanism currently functions; the constitution is, legally speaking, almost a dead letter. But the communiqué uses verbs such as “strengthen” (jianquan) and “perfect” (wanshan), implying that such a mechanism is already in place, and just needs to work better. It is hard to avoid the conclusion, then, that major changes to the role of the constitution in the legal and political system aren’t in the cards.
This is about as earth-shaking as the communiqué gets. There are other proposals – reduce the incidence of powerful officials interfering in cases, increase transparency, reduce corruption in courts – but they are mom-and-apple-pie goals that are neither specific nor new.
Lest anyone get the wrong idea from even its modest reform proposals, the communiqué takes care to stress, at length and in several places, that the leadership of the Party over all aspects of the legal system is to continue as an absolutely unquestionable and unshakeable principle. Indeed, the communiqué calls for strengthening Party leadership in a number of areas, although this is likely just rote and meaningless language; it is hard to see how Party leadership over the legal system could be further strengthened beyond what it already is. And in language reminiscent of the famous “Three Supremes” which judges a few years ago were asked to observe – the supremacy of the Party’s mission, the people’s interests, and the law – the communiqué declares the policy goal of developing a corps of judges who will be loyal to the Party, the state, the people, and the law. Nothing is accidental in the language of a Party communiqué, and the word order here is no exception. As always, the Party comes first.
Friday, October 3, 2014
Budget Law revisions tighten, not loosen, central government's control over local government bond issues
Recent amendments to the Budget Law have been reported as liberalizing the regime for local government bond issuance, but it doesn’t look that way to me.
For a long time, local governments in China have generally not been allowed to issue bonds. In order to finance projects such as infrastructure construction, therefore, they have turned to what are called local government financing vehicles (LGFVs): companies established and wholly owned by local governments that raise money through bank loans and bond issues. These LGFVs have some serious debt problems, as has been noted in many places, and those debt problems are generally viewed as local government debt even though local governments are typically not on the hook as a legal matter.
Many have proposed that local governments should be allowed to issue bonds directly, and that letting them do so would somehow alleviate the problems of LGFV debt. It has never been clear to me exactly why this should be so—infrastructure projects that don’t pay off when financed through LGFVs are not going to be more profitable when financed through direct local government bond issues—but that’s tangential to the purpose of this post, which is to discuss recent relevant amendments to the Budget Law regarding local government bonds.
The 1994 Budget Law (Art. 28) stated clearly that local governments could not issue bonds unless there was a statute or State Council rule stating otherwise. No statute ever gave this permission. Only in 2011 did the State Council first provide the explicit permission required by law for four local governments (Shanghai, Zhejiang, Guangdong, and Shenzhen) to issue bonds directly, and in 2013 the provincial governments of Shandong and Jiangsu were granted permission to issue bonds.
The Budget Law was revised on Aug. 31, 2014, with the revisions to be effective on Jan. 1, 2015. The revisions relating to local government bonds (now in Article 35) have been reported as liberalizing the rules. For example, a Bloomberg report is headlined, “China to allow local governments to sell bonds directly.” The rating agency Fitch welcomed the amendments as “formalising long-running proposals to enable local governments to issue debt directly for the first time.”
But how much have things really changed?
Under the previous Budget Law, local governments at any level could not issue bonds unless explicitly authorized by statute or by the State Council. Under the revised Budget Law, that condition is still in place. Bonds may be issued only by local governments authorized by the State Council. In fact, the revisions tighten the conditions in two ways: first, only local governments at the provincial level may issue bonds. Second, bond issues may be used only to finance public utility projects and not to finance commercial projects; neither limitation was in the original Budget Law.
In short, the revisions don’t allow local governments to do something they could not do before. State Council permission is still required, and in fact the terms upon which the State Council may grant permission have been tightened, not loosened.
UPDATE, Oct. 4, 2014: It occurs to me that I should add a clarification here: tightened standards don't necessarily mean few or no local government bond issues. Very possibly the revisions and the publicity around them are a sign that the State Council intends to change its cautious approach and grant permission liberally. But it's still up to the State Council's discretion, as before, and indeed the State Council has lost the discretion it had before the revisions to allow cities (such as Shenzhen) to issue bonds.
Monday, September 29, 2014
Tuesday, September 23, 2014
I suppose I shouldn't be shocked any more by this kind of thing, but I think I was not alone even among cynics in being taken aback by the harshness of the life sentence imposed on Ilham Tohti, a professor in Beijing of Uighur ethnicity, on charges of separatism. In an orgy of vindictiveness, the authorities, in addition to the gross mistreatment in detention and the sentence itself, extended punishment to his family by confiscating all his (and his wife's, under China's laws of marital property) assets, thus reducing them to penury.
Even if you think separatism is a heinous crime, the charges in this case were utterly bogus: Ilham ("Tohti" is his father's name, not a surname) is well known as someone who does not support independence for Xinjiang. I have met him and talked about these very issues. He does support more genuine autonomy for Xinjiang and for less repressive policies toward Uighurs. He has criticized the government. (These points are all true of a number of Han Chinese, too, but they have not been thrown into jail.) Apparently that was enough.
As many people have pointed out, jailing and intimidating Ilham and moderates like him is just about exactly the most counter-productive path on could imagine for the Chinese government to follow. They don't want moderate Uighurs; do they prefer radicals?
Sunday, September 21, 2014
If you're following Hong Kong politics, you'll know that the pan-democrats in Hong Kong are upset about the Chinese central government's idea of how to interpret its promise of "universal suffrage" in the next election for Chief Executive: everyone will get to vote, all right, but the choice of candidates will be limited to two or three approved by a Beijing-controlled nominating committee. Just by coincidence I ran across a 3rd Circuit case today in which the court discussed this kind of democracy in the context of elections to a corporate board of directors:
We rest our holding as well on the common sense notion that the unadorned right to cast a ballot in a contest for office, a vehicle for participatory decisionmaking and the exercise of choice, is meaningless without the right to participate in selecting the contestants. As the nominating process circumscribes the range of the choice to be made, it is a fundamental and outcome-determinative step in the election of officeholders. To allow for voting while maintaining a closed candidate selection process thus renders the former an empty exercise. This is as true in the corporate suffrage contest as it is in civic elections, where federal law recognizes that access to the candidate selection process is a component of constitutionally-mandated voting rights.
Note how the court (along with everyone else in the world other than the Chinese government) viewed the principle as obvious in the political context; it was just clarifying that the same principle applied in the corporate context as well.
Tuesday, September 9, 2014
US Chamber of Commerce releases report on (actually, indictment of) Chinese competition law enforcement
I just finished reading the U.S. Chamber of Commerce’s indictment of Chinese antitrust enforcement that was made public yesterday. [Text | NY Times story] It’s very well done – quite detailed and terrifically sourced. My congratulations to the anonymous authors for great research.
The main complaint is twofold: First, that what I have called “enforcement” isn’t really enforcement of law as such; it’s more in the nature of case-by-case extortion having very little to do with whether laws were actually violated. After all, if that were the concern, why is the National Development and Reform Commission (which seems to be the main culprit here) warning targets that they had better just do what they’re told and not call in their lawyers? Second, that “enforcement” is biased against foreigners. The report points out that in MOFCOM’s review of mergers, only 7.6% of the transactions reviewed were domestic-to-domestic; a huge number of domestic transactions that should have been reported were not, and MOFCOM was not doing anything to punish the companies that didn’t report. Moreover, all the cases in which MOFCOM had blocked a transaction or imposed conditions on its proceeding involved at least one foreign company. (Hats off to my friends Lester Ross and Kenneth Zhou of WilmerHale’s Beijing office, whose research is responsible for this information.)
The report makes a good case in showing that something more than just inexperience by the regulators or whining by sore-loser foreign companies is going on here. It does that by showing that China is an outlier in three ways. First, many of its practices are unique and not reflected in international practice. Second, the practices that the report complains about are not observed in other countries that also have new antitrust regimes administered by inexperienced officials. Third, China’s regulators have not joined the International Competition Network, the international club of antimonopoly regulators, even though it has joined similar bodies in the areas of banking, insurance, and securities.
I have to say that in a few places the report seems to be reaching a bit in its arguments. For example, the presence in Article 1 of the Antimonopoly Law of language talking about the “healthy development of the socialist market economy” is taken as sinister evidence of the improper integration of industrial policy into competition policy. This kind of language is compatible with just about any economic policy or lack of policy and to my mind is basically just meaningless fluff.
Second, the report suggests that China’s antitrust policy (as actually implemented) violates its WTO obligations. With the caveat that I’m not really a WTO expert, I think this argument is extremely weak. The report simply gets its facts wrong when it says (p. 6) that China made a WTO commitment via the section of the Working Party Report that says, “The representative of China noted that the Government of China encouraged fair competition and was against unfair competition of all kinds.” Not only is that language way too weak and general to support a concrete commitment—it’s not even phrased as a commitment—but it appears in Para. 65 of the Working Party Report, which is not one of the paragraphs incorporated by reference as a commitment in the final Protocol of Accession. It’s the Protocol of Accession as well as all the WTO agreements, and not the Working Party Report, that tells you what China’s commitments are.
The report also notes (in a footnote) the existence of Para. 203 of the Working Party Report, which was incorporated by reference into the Protocol of Accession. That paragraph says, inter alia, “Permission to invest, import licences, quotas and tariff rate quotas would be granted without regard to the existence of competing Chinese domestic suppliers.” To the extent that antitrust policy blocks investment by foreign companies in order to protect Chinese domestic suppliers, then it’s a violation of this commitment. Since this is a stronger argument, it might have been better to highlight it in the text and relegate the much weaker argument about Para. 65 to the footnote.
Finally, the report injects a nice bit of comedy into the subject by showing what happened to the supposedly confidential submissions of InterDigital to the NDRC during the latter’s investigation of the former: they ended up on Chinese television! If you look in the upper right hand corner of the document shown at 0:20 in the clip and in the screen shot below, you can see the characters 保密文件 (confidential document). I don’t think any lawyer working with foreign clients dealing with Chinese regulators believes confidential submissions will really stay confidential and not get leaked to competitors, but we never had this kind of smoking gun before to validate the belief conclusively. Actually, this is not just a smoking gun; we are watching the gun actually being fired. Hats off to the intrepid researcher who found this broadcast and noticed this outrageous and irresponsible leak.
Saturday, August 23, 2014
I recently came across an open letter to Xi Jinping published in April 2014 in the medical journal Transplantation on behalf of The Transplantation Society. The letter notes with approval the government's adoption of new policies. "Nonetheless," it continues, "TTS remains skeptical about the enforcement of Chinese government’s policy and law. Chinese media report that even as the new program is being piloted, it has already been infiltrated by persons driven by the same corrupt practices who have assumed authority for the distribution of organs."
Here's the link.
Thursday, August 21, 2014
Rachel Stern at Berkeley and PhD student Tobias Smith have done the community a great service in not just putting together a list of key primary source documents in Chinese law and where they can be found, but also uploading the texts themselves. The documents range from the Qianlong Emperor's famous haughty memo to King George III in 1793 to the equally famous (in its own way) 1967 People's Daily editorial, "In Praise of Lawlessness" to the infamous Document No. 9 of 2013, a key document in the current crackdown on heterodox thinking.
Here are the links:
Monday, August 18, 2014
Yes, there really is an on-line game (also available in downloadable form) about protecting your IP in China - brought to you by the European Commission's China IPR SME Helpdesk. It's available here.
HT to the China Law Blog, which has a post on it here.
Tuesday, August 12, 2014
I have now had time to read quickly through the transcript of the trial of Peter Humphrey and his wife and business partner Yu Yingzeng as posted on the Shanghai No. 1 Intermediate Court’s weibo feed, and have a few observations that may be of interest. First, some caveats:
- There is no way of knowing if the transcript represents everything that happened in court during the trial.
- These are very preliminary comments. I have not seen the indictment or any other prosecution arguments, the defense brief, or the judgment. The trial took place on August 8th and an oral judgment was delivered that very day. A written judgment was promised within five days and that five-day period is not up yet. Thus, these comments are based entirely on the transcript. I hope to have better informed comments when I have seen more materials from the trial and after I’ve done a little more background research.
- When I say “Humphrey”, I will usually mean Humphrey and Yu.
- Certain issues were apparently discussed by the parties and perhaps disposed of in pre-trial proceedings.
- I do not know all the matters that the defense had to take into consideration in deciding on its strategy. Thus, if I seem to raise questions about the defense’s strategy, that’s all they are: questions. They are not informed assertions that the defense did something wrong. A case like Humphrey’s is extremely sensitive and all kinds of things might have been going on behind the scenes.
Now for the comments:
1. The main defense lawyer for Humphrey, who did most of the talking among all the defense lawyers during the trial (Yu had separate lawyers), was Zhai Jian (翟建) of the Shanghai branch of the Dacheng Law Firm. By coincidence, I met Zhai in December 2012 at a conference in Hainan. He represented Yang Jia (杨佳), the Shanghai man who slashed several police officers to death in a Shanghai police station in 2008, in Yang’s unsuccessful death sentence appeal.
2. Humphrey seems to have been charged with both unlawfully receiving personal information about citizens and unlawfully supplying it. The facts necessary to support these charges are quite different and need to be discussed separately. They were not rigorously distinguished in the hearing as reflected in the transcript.
3. It’s not completely clear that the section of the Criminal Law Humphrey was charged with violating, Art. 253, was even intended to apply to people like him or his company, China Whys. Here is the part of Art. 253 under which he was charged; it was added to the Criminal Law in 2009. I have added paragraph numbers.
 Any staff member of a state organ or an entity in such a field as finance, telecommunications, transportation, education or medical treatment who, in violation of state provisions, sells or illegally provides to others personal information on citizens that was obtained during the organ’s or entity’s performance of duties or provision of services, shall, if the circumstances are serious, be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and/or be fined.
 Whoever illegally obtains the aforesaid information by stealing or any other means shall, if the circumstances are serious, be punished under the preceding paragraph.
 Where an entity commits either of the crimes described in the preceding two paragraphs, it shall be fined, and the person in charge who is directly responsible and other directly responsible persons shall be punished under the applicable paragraph.
It seems clear that this rule is aimed at cases where an organization legitimately obtains information about citizens in the course of its functions, and employees then sell this information to others behind the organization’s back. That’s Paragraph 3, in any case, and it applies to suppliers of information. Although the prosecution made much of Humphrey being a supplier of personal information (to his clients), it seems quite a stretch to apply Paragraph 3 to him. The organization of which he was a staff member was his own company; he can’t be said to have misappropriated information from China Whys.
What about Paragraph 4? Note that while Paragraph 4 applies to receivers of information, it is still limited to the type of information referred to in Paragraph 3: information obtained by some organization in the course of performing its functions. Thus, it does not apply to all cases in which someone illegally obtains personal information. For example, if I break into your house and steal your address book, that could well be deemed obtaining personal information about citizens through illegal means, but it’s not “the aforesaid information”.
It is possible that Humphrey obtained some personal information through illegal means, but the transcript shows no effort by the prosecution to show that it was in the category of information “obtained during the organ’s or entity’s performance of duties or provision of services”.
In 2013, the Supreme People’s Court, the Supreme People’s Procuracy, and the Ministry of Public Security issued a joint notice about this particular crime, but it doesn’t change the above analysis. If anything, it underscores the point that the revised Art. 253 was about something quite different from what Humphrey was doing. It was about the problem of employees of various institutions that hold a lot of personal information selling that information on a massive scale to middlemen, who would then resell it to “illegal” investigative companies for purposes such as “illegal” debt collection. (I don’t know where the line between legal and illegal is in the above cases.)
Duan Wanjin, a lawyer for Humphrey, in fact argued that the source of the information did not meet the requirements of the law; I don’t think the prosecution addressed this.
4. The defendants argued that in many cases, the acts in question were carried out not by them but by independent third parties they had hired, and that they did not know, nor have reason to know, what methods those third parties may have used. In fact, they argued, at least in some cases they had reason to believe the methods were lawful. The prosecution did not really address this argument.
5. The most disturbing aspect of the proceedings is the almost complete lack of attention paid to a critical element of the crime with which Humphrey was charged: the element of illegality in the collection of information. Basically, there was very little disagreement about the facts in this case, so it’s disappointing that so much of the trial—well over half—was devoted to establishing things that weren’t really in question. The critical question is what the legal effect of those facts should be.
For example, the prosecution devoted some time to establishing that China Whys’ projects had code names. What this has to do with the charges was not made clear. The prosecution also apparently thought the following facts needed to be established and were important:
- The defendants or their agents had hired people to watch a target. (Note that as far as the evidence showed, the watching involved someone sitting outside the target’s office for three hours.)
- The defendants had “monitored” (监控) people. (No evidence was introduced on this point; the defense’s response was that the prosecution got this idea from a misunderstanding of the term “monitoring” used in China Whys’ reports, where it simply meant things like tracking news about a company or individual.)
- The defendants had hired a non-mainland (境外) company to engage in following and monitoring targets. (This was part of the prosecution’s legal argument and was not supported by any evidence introduced in the factual part of the trial.)
- The defendants or their agents had bought and sold information.
- The defendants or their agents had pretended to be relatives or clients of various people when seeking information.
- The defendants had an illegal purpose in collecting the information. (The prosecution didn’t say what that purpose was; the defense argued out that their purpose was to conduct their business and was not illegal.)
The prosecution did not, however, make any argument or cite any authority in support of its assertion that these methods were illegal. Nevertheless, the court seems to have taken it for granted that these methods are indeed illegal. This is of tremendous significance. If buying and selling cell phone numbers is illegal, for example, then millions of individuals and companies in China are criminals. A friend of mine regularly receives calls from Baidu trying to sell her higher placement in search results; they presumably got her number, and that of millions of other citizens, from a seller of cell phone numbers. Is Baidu going to be next in the dock?
6. The response of the defense to this issue of illegality of methods seemed ambivalent. In some places in the transcript, it argued that what the defendants did was to pay for investigative services, which is not prohibited by law. Thus, the requirement of illegality of method was not met.
Elsewhere, though, the defense made what to me seem to be astonishing concessions. Zhai Jian states, “The acts of the defendants in this case are unlawful, because neither individuals nor commercial entities have the right to obtain citizens’ personal information about their families, their entering and leaving the country, and their mobile phone communications via the method of paying for it.” He goes on to say that in pre-trial conferences with the defendants, he has ascertained that in their own countries, information on entering and leaving the country as well as mobile phone communications are considered strictly private, and “therefore the defendants’ collecting of such information is unlawful.”
This argument seems questionable in a number of respects. First and most obviously, what other countries do cannot determine Chinese law, although obviously it bears on whether the defendants thought they were doing something wrong. Second, this statement conflates the issue of what counts as personal/private information with the issue of whether collecting it is unlawful. Art. 253 criminalizes only the unlawful collection of citizens’ personal information, so deciding that something should be considered personal information does not end the inquiry into criminal liability.
Third, and most important, Zhai is as silent as the prosecution on the source for his statement about the applicable law. It is sometimes said in jest that in China, everything not specifically permitted is forbidden, but this really is nothing more than a jest. No legal system could possibly function this way. Chinese law does not specifically permit any of the million actions we take every day, from brushing our teeth to watching Korean soap operas; this does not make us criminals. A statement that it is unlawful to do something needs support. Again, if Zhai and the prosecution are right about this, China is awash in criminals whose offenses are far worse than those of Peter Humphrey.
7. Even if all the factual predicates for the crime are present, it’s not clear that they rise to the level of criminality under the Criminal Law. This is because Chinese criminal law has a general rule (Art. 13) that an act is not a crime where “the circumstances are clearly minor and the harm is not great” (情节显著轻微危害不大). In addition, both Paragraph 3 and Paragraph 4 explicitly contain a requirement of serious circumstances. Humphrey’s lawyers argued that this requirement was not met; the prosecution argued that it was. The relevant facts apparently involve how many items of personal information were obtained, the purpose for which they were obtained, whether the defendants made a lot of money, and the general social danger of their activities.
Sometimes the Supreme People’s Court will come up with an interpretation of what constitutes “serious circumstances” in particular crimes. Unfortunately, there is no such interpretation or other official guidance available here. Thus, the issue of what facts count and how they count gets argued pretty much just by assertion. Here’s a rough breakdown of the arguments:
Amount of information obtained
As many as 256 items!
Only 256 items!
To make money
1. Of course to make money; we were a business.
2. Contribution to anti-corruption efforts. In about 90% of the cases we investigated, initial suspicions turned out to be accurate.
Amount of money made
“Huge” (citing gross revenues)
You can’t look at gross revenues; you have to deduct costs.
What kind of society would it be if people could be watched and followed 24 hours a day, with secret photos taken of them? (There’s an obvious snarky answer, but the defense wisely did not make it.)
There was actually very little personal information taken, that which was taken was not all passed on to clients in reports, and that which was passed on was not used for bad purposes. The defense also noted (as do I) that some of the prosecution’s claims had no foundation in any evidence they brought before the court. There was, for example, a single instance of following someone. Someone was stationed outside the target’s office for three hours. That’s it, at least as far as the prosecution’s evidence showed. No evidence of secret photo-taking of people was introduced.
One way of getting at the issue is to look at other cases, especially cases from the same jurisdiction, to see what kinds of facts resulted in prosecution and sentencing. Humphrey’s lead attorney, Zhai Jian, pointed out that he had previously handled a case involving the same charges; the defendant had appropriated several million items of personal information and yet got just a suspended sentence. Although the number of items of personal information taken is not and should not be the sole criterion for prosecution and sentencing, I thought it would still be useful to see what other Shanghai cases look like and asked an RA to look at the twenty most recent Shanghai cases on this issue in a Chinese legal database. (I have not yet personally looked at these cases because for various reasons I can’t access the full text of the database at the moment.)
The results – and I stress that these are preliminary and may tell only a partial story –suggest that a case of prosecution and sentencing for 256 items of personal information is, to put it mildly, an outlier. Here are the first seven instances:
# of items
Fine of 3,000 yuan
1 year in prison plus a fine of 10,000 yuan
18 months in prison plus a fine of 5,000 yuan
14 months in prison plus a fine of 4,000 yuan
8 months in prison plus a fine of 5,000 yuan
1 year in prison plus a fine of 5,000 yuan
18 months in prison plus a fine of 30,000 yuan
No doubt the facts of each case are different, but I think the general picture is clear. In all but one (see below) of the cases in my sample of 20, the number of items was at least 4 digits; in six of twenty, it was in 6 digits; in two cases, it was several million (the defendants in each case got a suspended sentence of a year and 18 months respectively, plus a small fine). At the very least, I think the burden is now on those who would assert that this case is not an outlier and possibly a case of selective prosecution. (The one exception is a puzzling case where only 6 items of information were involved; I haven’t yet seen the full text of the judgment, but would guess that the facts must be very unusual.)
8. Yu Yingzeng observed that given the way Chinese police operate, companies wanting to act against corrupt employees have no choice but to use services like theirs. Police will not investigate without evidence, so you have to get evidence before going to the police. But now evidence-gathering is being made illegal. Yu compared the situation to that of having to catch a thief yourself because the police won’t act without evidence, and then you get charged with violating the thief’s rights.
9. Conclusion: To wrap up, there are at least two disturbing aspects about this case. One is that at least on the basis of my very superficial review of recent cases in Shanghai, the facts in this case don’t seem to justify the prosecution and certainly not the sentence. (Of course, a closer look at this and other cases might upset this conclusion.) The second is that this case does nothing to clarify an absolutely critical issue for anyone that collects or uses business information: what counts as an illegal method of collection? The issue was never properly joined, and so there was no discussion of broader principles or policies, let alone specific statutes and regulations, that might help us figure out this question.
10. Let me just repeat that these are very preliminary observations. I haven’t even seen the text of the judgment yet, and I may have overlooked something in the transcript.
What with the government's crackdown on just about everyone (with the exception of Certain People's Relatives), the well-prepared citizen and visitor will certainly want to read Stanley Lubman's timely explanation of the various rubrics - legal, semi-legal,and illegal - under which various authorities in China can lock you up.
Friday, August 8, 2014
Here’s an interesting article about the problem (at least it’s so perceived) of Chinese citizens who take out foreign citizenship but don’t tell the Chinese authorities about it.
As the article correctly points out, under China’s Nationality Law, when you voluntarily take out citizenship in a foreign country, you automatically lose your Chinese citizenship. No need to apply; no need to receive permission. If you keep your Chinese passport and don’t tell the Chinese government about your foreign citizenship, that doesn’t mean you’re still a Chinese citizen.
I thought it worth a brief blog post because this subject often comes up, and is often misunderstood, when former PRC citizens who have become foreign citizens get into legal trouble in China. Chinese authorities consistently misrepresented Chinese nationality law, for example, when Huseyincan Celil, a former PRC citizen who had voluntarily taken out Canadian citizenship, was seized in Uzbekistan and extradited to China to face trial.
British corporate investigator Peter Humphrey and his wife and business partner Yu Yingzeng were sentenced on August 8th to 30 months and two years in prison respectively on charges of illegally obtaining personal information about Chinese citizens. I hope to have some commentary up shortly, but first I want to read the trial transcript, which was posted by the Shanghai No. 1 Intermediate People's Court on its Weibo site. I've collected all 31 entries (they are graphic files in jpg and png format) and put them in a zip file, available here.
Monday, August 4, 2014
The Sinica podcast is an interview show with different guests each time, conducted by long-time Beijing residents Kaiser Kuo, Jeremy Goldkorn, and David Moser. In the latest episode, the hosts and I discuss the rule of law in China. If you share my doubts about the usefulness of abstract discussions of the rule of law, don't be put off by the title - we actually just discuss a lot of recent law-related topics, such as the investigation of Zhou Yongkang. Here's the link: http://www.popupchinese.com/lessons/sinica/the-rule-of-law-in-china.
Tuesday, July 29, 2014
I was struck by the following passage in this NYT story:
"The victory of the aggressors was a humiliation for the Chinese nation,” Chu Yimin, a People’s Liberation Army general and political commissar, said in an interview published on Monday in Study Times, a party newspaper. “The wounds are increasingly healed over, but the scars remain, and what we need most of all nowadays is to awaken an intense sense of humiliation, so that we never forget the humiliation of our country and military, and turn knowledge of this into courage.
Really? This is what China needs more than anything else? Holy cow. It seems to me we have seen this movie before. The language is more bombastic, but the basic idea is the same.
What might have been done with the peace treaty of Versailles!
How could this instrument of boundless extortion and shameful abasement have become, in the hands of a willing government, a means of whipping up national passions to the boiling point! How, by means of the genial propagandistic utilization of these sadistic atrocities, could a people's indifference be raised to indignation, and indignation to the most blazing anger!
How every one of these points could have been burned into the brain and feeling of this nation until, finally, in the heads of sixty million men and women the same sense of shame and the same hate would have become a single fiery sea of flames, out of whose glow a steely will would have risen and a cry forced itself: We want arms once more!
Monday, July 28, 2014
Tuesday, July 15, 2014
Monday, July 14, 2014