A couple of days ago, I did a post, entitled, “Defining State Secrets In China. What Stratfor Says….” In that post, I referred to a a Stratfor April 29, 2010, article, entitled, “Telecom and State Secrets” and extolled it for the job it did in helping attorneys issue spot.
In response to that post, I received an email from a long-time reader of this blog, Zhen Liu, an attorney at DLAPiper’s Beijing office. Ms. Liu’s email raised the following issues with the Stratfor article:
I saw your recommendation of STRATFOR’s China security memo, as I was going over it, I noticed a few inaccurate translation issues in the article and thought that you may be interested to know:
1. The article translated the new SASAC regulations as “Interim Rules on Commercial Secret Protection of State Enterprises”. I believe a more accurate translation should be “Interim Regulations for the Protection of Centrally Administered Enterprise Trade Secrets”. As the article noted later, the new regulations apply to centrally administered/operated SOEs, not just any SOE.
2. The more accurate and complete definition of commercial secrets under the regulations is information”unknown to the public, can bring about economic benefits to the holder, is of practical use and to which the holder has adopted measures to maintain its confidentiality”
3. Article 3 of the Regulations did not state “the operation and technical information of central enterprises are considered state secrets and must be protected as state secrets.” What it says is “any such technological information or business information that falls within the realm of “state secrets” must be treated as such according to the PRC’s state secrets laws.” I think there’s a key difference here.
Ms. Liu also provided me with the following short and very helpful write-up on China’s new state secrets laws by Sammy Fang, also of DLAPiper’s Beijing office:
After Rio Tinto – SASAC moves on commercial secrets
On 29 March 2010, the Shanghai No. 1 Intermediate People’s Court (the Court) convicted four employees of Rio Tinto of stealing commercial secrets and taking of bribes offences, and sentenced them to prison terms ranging from 7 to 14 years.
Immediately after the Court’s verdict, on 30 March 2010, the State-Owned Assets Supervision and Administration Commission (SASAC) announced that it has approved the issue of the Interim Regulations for the Protection of Trade Secrets in Centrally Administered Enterprises 《中央企业商业秘密保护暂行规定》(Regulations) with the aim of strengthening the protection of commercial secrets by SOEs under its control. The Regulations were only made available to the public on 26 April 2010. A few highlights from the Regulations:
1. It is significant that under the Regulations, “commercial secrets” is defined as technological information or business information, which is unknown to the public, can bring about economic benefits to the holder, is of practical use and to which the holder has adopted measures to maintain their confidentiality, which is similar to that stated in the PRC’s Criminal Law.
2. The Regulations specifically provides that any such technological information or business information that falls within the realm of “state secrets” must be treated as such according to the PRC’s state secrets laws. This could raise “commercial secrets” to an even more sensitive and potentially political level.
3. The Regulations require the relevant SOEs to define and confirm the range and extent of their commercial secrets that require protection, including:
• business information relating to strategic planning, restructuring and listings, mergers and acquisitions, property transactions, financial information, client information, biddings and tenders etc; and
• technological information such as designs, programmes, product formulae, production technology, production methods, technical know-how etc.
4. Some of the preventative measures that these SOEs are required to implement include:
• Requiring their counter-parties to enter into confidentiality agreements during certain negotiations and consultations involving technology transfer, equity joint venture establishment, due diligence etc; and
• The need to establish procedures to protect the disclosure of information relating to listings and issue of stock.
Given the timing of the Regulations and its wide definition of “commercial secrets” (and the fact that its definition appears to have been derived from the Criminal Law), it would be prudent for international companies to take a close look at the same, particularly companies that deal regularly with State level SOEs that are administered by SASAC. It would also come as no surprise if provincial level authorities would take SASAC’s lead and issue similar regulations aimed at provincial level SOEs in the near future.
Thank you Zhen and Sammy for helping to clarify what is going on with these regulations and for providing some additional tips for dealing with them.