China's Rio Tinto Case. Everyone Move Along....

Okay, so the title is a bit of an exaggeration, but I do think the Rio Tinto case is being blown out of proportion, at least somewhat. From my perspective (which is based on ZERO inside information and absolutely no idea whether anyone is guilty of anything or not), this matter has always been a lot more about what the Chinese government is trying to say to its own populace than what it is trying to say to foreigners.

I was just interviewed on this case and this is essentially what I had to say:

It is my understanding that China just issued its charges against the Rio Tinto employees and they have been charged with bribery and with stealing commercial secrets. The government is not bringing spying/stealing of state secrets charges. The talk of bringing state secrets charges made foreign investors very nervous because it is not clear to anybody what constitutes a state secret, especially when so many businesses are government owned. My understanding is that if there had been a trial on stealing of state secrets chrages, it would have been conducted very differently than a routine criminal trial. Most importantly, stealing state secrets can subject one to the death penalty, stealing commercial secrets cannot.

Article 219 of China's Criminal Code is the code section on stealing commercial secrets. This statute applies to thefts of commercial secrets that bring "significant loss" to those from whom the secrets were taken. The sentence for this crime is to be not more than three years or not more than seven years in an "especially serious" case. The crime itself involves taking of a commercial secret by "theft, promises of gain, threat, or other improper means. Commercial secrets is defined as technical operational information that is unknown to the public and that can bring economic gain to its rightful owner and that the owner has kept secret.

My sense all along has been that China made these arrests strictly for domestic consumption. China/Beijing/The CCP are trying to show they are in control and they have done this to assert their control over iron ore pricing and to show the populace that when it comes to corruption, nobody is above the law, not even foreigners.

Today, the prosecutor(s) announced they have enough evidence to warrant going to trial. The court must now decide whether to take the case and, if it does, there will be a trial. My guess is this highly publicized matter would never have gone this far if there were not to be a trial and that a trial will ensue.

My law firm has worked with some fine criminal lawyers in China and I suspect that the Rio Tinto employees will be working with such lawyers as well. Our experience is that the top criminal lawyers do not speak English so if any of the Rio Tinto employees are not completely fluent in Mandarin, they probably should and will be retaining fluent Mandarin Australian lawyers as well. It would actually shock me to learn that they did not already have such a top-flight legal team already in place.

For more on this, check out the following articles in which CLB blogger Steve Dickinson was interviewed:

-- New York Times: "China's Detentions of Executives Rattle Investors."
-- Wall Street Journal: "China Rio Tinto Case Risks Sending a Chill."
-- The Guardian: "Perils of doing business in a secret state."
-- Christian Science Monitor: "
Rio Tinto: Will China's detention of employees scare off foreign firms?"
-- China Economic Review: "The Rio Tinto detentions are not only a concern for miners."
-- DealBook: "China Rattles Investors With Detention of Executives."
-- China Law & Practice: "Yes, there are risks in China - get used to it."

And last, and most certainly not least, this post Steve wrote for China Law Blog about a month ago: "China's Rio Tinto Arrests. Everyone Just Move Along...."

Update: China Bystander, in its post, "Chinese Industrial Espionage In America," notes that "more than 50 people have been prosecuted in the U.S. since 2006 for allegedly transporting restricted technology, stealing trade secrets or conducting business espionage for China, according to the U.S. Justice Department."