China Law Blog

Apologies to Jack Nicholson.

Having grown up in a small Midwestern city, I have an inherent (and what I see as a healthy) distrust of government. Every government. Anywhere.

I was yet again reminded why when I read this excellent Wall Street Journal article on British Petroleum's recent problems in Russia, entitled, "Misreading the Kremlin Costs BP Control in Russia Venture." BP thought its getting close with key Kremlin players would protect them in Russia. Most unfortunately, for BP, however, when its key Kremlin players fell out of favor, it too fell out of favor. Russia can be particularly problematic, but other countries certainly are not immune. I have seen up close and personal how allying with government can be like playing with fire:

1. Many years ago, I was working with an American company who was on the verge of getting a huge supply contract with the Korean navy. The son of the President was setting up the deal. I knew the deal was in the trash when I saw the son on the US evening news getting into a Korean police car in handcuffs.

2. Many years ago, my law firm had a very close relationship with a Russian vice-governor. His beloved daughter was one of our paralegals and, lo and behold, company after company from this Russian province would contact my firm for international law assistance. This work dried up rather quickly when the father was axed to death.

3. Many years ago, we had a client who ran a business on Chinese military bases. The whole practice was of questionable legality, but his closeness to a high ranking military official seemed to isolate the enterprise. Then the high ranking official retired and within less than a year, our client was off all the bases and a new company was there in its place.

4. We had a Russian company as a very good client, the owner of which decided he wanted to be Governor of his province. He ran and lost, in a fairly close election. Within a year, his various companies had become greatly diminished because of constant government investigations, that appeared to have been done to keep our guy in his place and to teach him not to run for office again.

Government people come and go and when your people are gone, much or all that you have worked for goes with them. This is NOT a reason not to ally your company with government, but it sure is a reason to remain wary.

Would love to hear your China stories on this, as I am sure there are many out there.