CHINA ESQUIRE

I wanted to do a quick plug (and yes, I know that China Law Blog did one last month) for TRACE International’s BRIBEline.  Both because I was asked by the folks at TRACE International and because I find the idea of an online watchdog site to be very intriguing.

Here is how TRACE is plugging their services:

TRACE launched a website that allows anonymous and secure reporting of bribe demands.  BRIBEline, available at www.bribeline.org, is a secure, multi-lingual website through which companies and individuals can anonymously report the bribe demands they receive. Making a report on BRIBEline is quick and easy. The online survey is available in Chinese and 20 other languages. Completing the survey involves answering no more than ten multiple-choice questions. No names are requested or collected, the individual is not asked if the bribe was paid, and reports made to BRIBEline are not used for investigations or prosecutions.

So what’s the point of such a service?

we hope to get a grip on what groups are demanding bribes, where they are demanding them, and under what circumstances.  Astonishingly, there is no other source collecting this data, and the World Bank (which has endorsed BRIBELine and has a link to the site on their web site) stresses the importance of such data.

Sounds like a cool concept to me.  Especially since I had a string of posts covering some topics on the FCPA (Foreign Corrupt Practices Act) which makes bribery to a foreign government official illegal.  Remember: people who work at Chinese SOE’s may very well count as government officials, and so bribes to them are illegal.

Because I am for straight and honest business, I think what TRACE is doing also serves as a deterrence for Chinese businesses to engage in taking bribes.  Sure, it won’t end the practice, but at this point, anything helps.  Really.

American Conference Institute is hosting a conference focusing on the Foreign Corrupt Practices Act (FCPA) entitled “China Summit on Anticorruption”. The 2 day conference takes place in Shanghai on July 15-16, 2008 at the Shanghai Intercontinental Pudong. (I wish I could be there, but I will be on a family vacation then) I don’t think the FCPA is anything new to MNC’s and companies doing business in China–at least, it really shouldn’t be–given the amount of corruption and bribery that is the subject of many China business anecdotes. (I also have a post about it here)

Here is ACI’s description of the program:

Corruption is a serious problem in China’s rapidly developing economy. China’s leaders have recognized this problem and adopted increasingly aggressive policies to deal with it. According to Chinese authorities, tens of thousands of corruption allegations against Chinese officials are investigated each year, and offenders are prosecuted or otherwise disciplined. China has also begun vigorously enforcing commercial bribery laws in its private sector. Foreign companies operating in China are thus faced with a rapidly evolving domestic anti-corruption compliance environment.

FCPA compliance is especially challenging in China, where government regulation of the economy remains rigorous and state-owned enterprises continue to dominate many sectors. These difficulties are reflected in recent FCPA prosecutions. Several published cases in recent years – Lucent, Schnitzer Steel, York International, Diagnostic Products – have focused on activities in China, and many pending investigations reportedly also involve compliance issues in China.

The faculty includes Stephen Maloy (General Counsel – Asia Pacific, GE), Ma Wen (Head of the National Bureau of Corruption Prevention - Beijing), Mark Mendelsohn (Deputy Chief, Fraud Section Criminal Division, USDOJ), and a host of Chinese and American attorneys. This is a sampling: Wu Wei (King & Wood - Beijing), Richard M. Tollan (Mayer Brown JSM - Hong Kong), Amy L. Sommers (Squire, Sanders & Dempsey - Shanghai), and Robert J. Bittman (White & Case - Washington), just to name a few.

The conference will attempt to cover:

* Creating a code of conduct that matters in China
* Overcoming cultural and legal challenges in rolling out an anti-corruption compliance program
* Working with state-owned enterprises (SOEs)
* What kinds of gifts are acceptable and in what instances?
* Due diligence: best practices for third party relationships in China
* Who is a “government official” in China?
* Conducting internal investigations in China

Registration can be found here. It looks to be a promising program.

Okay, I am about to post another potential fire starter.  Everyone has heard about China’s human rights record.  You’d have to be deaf and blind to not hear it in the west, or probably in China as well.  CNN recently did an article about Amnesty International’s annual report, and some of the results are predictable:

Irene Khan, Amnesty’s secretary-general, said that in particular, “the human-rights flash points in Darfur, Zimbabwe, Gaza, Iraq and Myanmar demand immediate attention.”

The report, the group said, “reveals a world riven by inequality, scarred by discrimination and distorted by political repression.”

According to its count, people are tortured or subject to other ill treatment in at least 81 countries, face unfair trials in at least 54 countries and are not allowed to express themselves freely in at least 77 countries.

Of the 150 countries and regions listed in the report, Amnesty paid particular attention to China, the host of this summer’s Olympic Games.

This is nothing really new.  If you don’t know about Darfur, you probably haven’t been following last year’s “Genocide Olympics” rhetoric.  This, however, was the fascinating part.  (and don’t get me wrong, I am a Chinese-American with deep loyalties to both nations, and as an American trained attorney, I have a particular attachment to the U.S. Constitution and the system–this is not America bashing)

Amnesty also criticized the death penalty in the United States, where 42 people were executed last year. It noted New Jersey’s decision in December to abolish the death penalty made it the first U.S. state in more than 40 years to do away with executions.

As it has in previous annual reports, Amnesty criticized the detention of hundreds of foreign nationals at the U.S. naval base at Guantanamo Bay, Cuba.

“The USA must close Guantanamo detention camp and secret detention centers, prosecute the detainees under fair trial standards or release them, and unequivocally reject the use of torture and ill-treatment,” Amnesty said.

In fact, more is written on the United States than any other country listed in the report. Asked about that at a press conference Tuesday, Khan said, “We certainly devote a lot of time to Sudan, to China, to Zimbabwe and other countries. But we look to the U.S. to provide leadership around the world. Governments around the world look to the United States as a role model for their own behavior.”

Wow.  America got the lion’s share of Amnesty’s annual report about human rights violations?!  Well, it does seem patently unfair given that the U.S. probably has overall one of the best human rights records in all of history.  Even if you hate America, I think you can at least agree that this is pretty good in this regard.

But at the same time, its somewhat justifiable.  The world leader on human rights, which often brings these charges against nations, gets skewered for potential hypocrisy.   Interesting situation indeed.  What does everyone else think?

I’ve posted on various FCPA conferences here from time to time, and of course, have been meaning to post something about this for some time now. (much of it due to Jeff Brauer’s blog, which is pretty derogatory, but highlights the FCPA in many of his posts) Ironically, here in America, it isn’t something I hear too much about aside from conferences here and there. The Foreign Corrupt Practices Act makes it illegal for a person or company to make a payment to a foreign official for the purpose of obtaining or retaining business. And yes, it also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the U.S.

Well, the Recorder ran an article ( here, login required) last week entitled, “Seven Awaiting Sentencing for Foreign Bribes”:

Self is one of seven defendants across the country who have pleaded guilty and await sentencing for violations of the [FCPA] . . . . The last individual defendant to be sentences was Steven Lynwood Head in California’s Southern District last September; he got six month in prison. In Self’s case, the government agreed to a guideline range that would put his prison sentence at eight months.

The government’s FCPA unit began by targeting companies, and now has focused on individuals to obtain tougher penalties . . . . “It raises the profile of the enforcement program, and it’s the kind of thing that executives around the world read about, and react to . . .” The Justice Department brought 10 actions against individuals last year, which is the same number it brought in 2005 and 2006 combined . . . .

So what is it that Martin Self, a British defense official, did?

The former president of Pacific Consolidated Industries, Self admitted that he approved a marketing contract for the relative of an employee with the [UK] Ministry of Defence, which results in more than $70,000 in payments. But the relative did no work. Instead, the money was meant to procure contracts for Pacific.

Self “failed to make a reasonable investigation of the true facts and deliberately avoided learning the true facts.”

He made small bribes totaling $70k and the government is going after him? That sounds like small fries compared to horror stories I’ve heard about for businesses that have gone into China and approved much more than that. Thankfully, my Chinese clients have never done such a thing. Nor should any attorney advise his or her client to approve of using bribes. It is bad business, it is asking for the Chinese government to crack down on your client’s business (if it is a foreign company, given China’s propensity to enforce laws against foreigners), and you may be asking for jailtime here in the U.S.

Dan Harris some time back thought along the same lines,

A covered company can be held liable for payments made on its behalf by agents or distributors.

In countries like China, where so many of the largest companies are state-owned, the chance of a “business” payment violating the FCPA is great.

One of the things I have always found troubling about Westerners doing business in emerging market countries is that they sometimes take an almost perverse pride in discussing payoffs to government officials. It is as though their having paid a bribe is a symbol of their international sophistication and insider knowledge. Yet, countless times when I am told of the bribe, I know the very same thing could almost certainly have been accomplished without a bribe.

I had another post a few months back about cheating and bribing because “everybody else does it” entitled, “ What do American Steroids Have to Do with Business? Everything.”

Yes, I recognize the reality that sometimes a bribe to a certain local official would make your process easier. You might get your approvals for real estate faster, or whatever else. Heck, you may even bribe the judge in your case to get a favorable ruling. Don’t do it. Your (or your client’s) integrity in doing international business is not worth taking shortcuts… especially you have to do jail time for it.

China has been trying to crack down on intellectual property violations for some time now. (a friend of mine used to do this sort of stuff for a living and he has some exciting stories) That being said, it seems that to the west (and not just America), China can never win. It’s IP enforcement is never good enough. And so we constantly hear “China’s IPR violations blah blah blah…” Let’s just think about this for a moment in light of articles like these.

The AP recently published an article entitled “China defends anti-piracy efforts” ( h/t to China Digital Times):

Officials defended China’s efforts to stop rampant copying of movies and other goods, saying Thursday that 4,322 people were convicted of product piracy last year and promising special efforts to protect Olympics-related trademarks.

China is the world’s biggest source of illegally copied goods and trade groups say violations are growing despite increased penalties and repeated crackdowns. The illicit trade is fueling tensions with Washington, which has filed a World Trade Organization case over Beijing’s failure to stamp it out.

In an annual report, the agency said authorities seized nearly 76 million pirated movies, software discs and other goods last year and shut down 13,170 piracy-oriented businesses.

Yi said courts convicted 4,322 people of product piracy, though he said he did not know what penalties they received.

Officials said they are making special efforts to prevent unlicensed use of Olympics-related logos and other property ahead of the Beijing Summer Games in August.

Yes, it may be the largest source of the world’s IP violations–copyright, trademark, and probably even patent too–but we’re talking about numbers here. China has over 1 billion people. Let’s multiply the rampant amount of Kazaa and Torrent downloading the United States by over 3 times and see how much the numbers look as scary. Or think about other nations which are much smaller. I am sorry to say this, but IP violations are a fact of life in many cases. And to continue to say that China isn’t trying can only be frustrating to the Chinese government and borders on being a falsehood. Sure, the government could always do more. But it’s doing something. 76 million discs and 4,000+ convictions is nothing to sneeze at. Especially where the West has accused China of being a lawless society–well, you try to convict 4,000+ people of IP law violations in a lawless society and see how you do.

So who is fueling a lot of this? Let’s continue with the article:

Chinese markets are awash in illegally copied goods ranging from software and Hollywood movies to designer clothes, sports equipment and medications. Industry groups say Chinese and foreign companies lose tens of billions of dollars a year in potential sales to piracy.

Washington filed a WTO complaint in April 2007 accusing Beijing of violating its trade commitments by failing to stop product piracy.

Film studios have won lawsuits against pirate DVD vendors and have begun filing cases against Web sites accused of allowing downloads of unlicensed movies.

But some 93 percent of DVDs sold in China are unlicensed, according to the Motion Picture Association, which represents Hollywood studios. Many are sold openly on sidewalks in Beijing and other major cities.

In a report last year, the Business Software Alliance said 82 percent of software used in China is pirated, thought it said that rate was down from more than 90 percent in earlier years.

So we have the MPAA and the BSA involved. These are clearly special interest groups. And trust me, they are good at embellishing the truth with alleged facts and figures. The BSA claims that software publishers have lost billions and billions of dollars due to software piracy worldwide. Really? I don’t think so. Because if people couldn’t pirate your product, they wouldn’t buy it at all. It’s too expensive for most people outside of certain industrialized nations. In fact, I am willing to believe that software companies in places like China benefit because they have a virtual monopoly through piracy. And in the end, businesses will begin to pay for the software as the US retains its role as a sock puppet for the BSA.

The MPAA too. Only the MPAA would have the audacity to sue ordinary citizens for downloading movies. Well, they did. Yes, it got the message across. Did it stop the decline in movie attendance? No. You have DVDs to thank for that. (which people actually purchase… and many times, people purchase after seeing a pirated version and they like the movie enough to own it)

I am not anti-IP law. I am anti-MPAA and anti-BSA though. These are 2 organizations that I wish would just go away.

Software piracy has dropped by about ten percent in recent years. 10 percent… in a nation of 1 billion plus people? That’s amazing. And especially with the Chinese view of the law (China Law Blog did a beautiful post on this comparing the Chinese v. American view of the law), that is really amazing. Let’s give credit where it is due: the Chinese government is doing an excellent job in starting to enforce IPRs. Yes, there is always much more to do. But we are talking about stemming a flood. (or drinking from a fire hydrant) It will take a LONG time before IP is as highly regarded as it is in America. (though we in America actually despite IP wonks) But for now, can we just applaud the government’s efforts?

Charlie McElwee posted the other day about the Ministry of Environmental Protection ( MEP), and what the new head of the MEP has been saying. I thought it interesting but wanted to think about it for a day or two before I made any comments. His post:

The new Minister of the Ministry of Environmental Protection, who was the old Minister of SEPA, Zhou Shengxian, announced yesterday that setting up a law enforcement system of “iron and steel” is at the top of his agenda. A China Daily article reports as follows:

“The new ministry will have greater authority to crack down on environmental crime, and we will expand our enforcement and surveillance teams,” he said.

Regular meetings, and joint enforcement, surveillance and information sharing systems will be set up not only among environmental protection departments of all levels, but also with law enforcement and judicial bodies, Zhou said.

I’m not sure where the new authority Minister Zhou refers to is coming from, but the words are encouraging.

I would agree that this could be very encouraging news: the new MEP is ready to crack down on environmental crimes. And note in the article that Zhou Shengxian did say he wanted to work with judicial bodies. This means that China is about to get serious about environmental regulation and law.

I think China’s new candor about its environmental needs and policy is a breath of fresh air. For example, the government officials in charge of the Three Gorges Dam finally admitted that this dam has the potential for environmental disaster. (see article here, h/t to CDT) I think this sort of candor will help fuel the rise of environmental regulation in China. The laws have been on the books, but now it seems like there are governmental directives to clean up China’s environment.

So is the rule of law about to grow through this new-found initiative? Maybe. If China cracks down on violators equally, then I think the rule of law will grow through this. Improved enforcement and applied at all levels, especially against Chinese companies, will help people learn to respect the law and submit to it. And hopefully in the long run, appreciate it too.

Why am I skeptical? Because China’s enforcement, aside from some enforcement against Chinese companies like SEPA’s interference with companies trying to go public and have their IPO’s, has largely targeted foreign companies for environmental violations and crimes. Yes, it is unfair. But unfortunately, that’s the track record so far. If China continues to do this, then I am not sure rule of law will get very far though the MEP stance is encouraging and sounds good. China must crack down on both foreign and domestic companies if its wants to get anywhere: both in the rule of law context, and also trying to curb environmental problems down the line. It is the only way.

Will China do it? Maybe not. But for your clients, the foreign MNC’s who have Chinese operations, make sure that you are complying with all environmental regulations. I have a feeling that if you do not, this new motivated MEP will be knocking on your door.

UPDATE: Charlie added some more about MEP enforcement here.  This actually may be worth another post on my part over the weekend…

Xinhua recently reported that there is an 80% increase in the number of lawyers in Parliament–a total of 22 lawyers at the top level and over 800 at lower levels. That’s not too bad actually, though still a minority. It does represent an interesting shift from the technocracy of the previous higher leadership in China, but I will leave that open for comment.

An excerpt of the article reads:

The number of lawyers participating in China’s current term of parliament and top political advisory body reached 22, an increase of 80 percent over the previous term, said Yu Ning, chairman of the All China Lawyers Association (ACLA).

“The increase is in line with the development of modern society and a result of China’s progress in building a society ruled by law,” Yu said.

National legislators and advisors include deputies to the National People’s Congress (NPC) and members of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC).

According to the ACLA, more than 800 lawyers now serve as deputies to people’s congresses at various levels across the country.

Yu said lawyers have extensive contact with all sectors of society and learn about the public interests and appeals. They are able to express views on behalf of the masses based on their professional knowledge.

Han Deyun, a lawyer with the Chongqing-based Suotong Lawyer Office, has just begun his second five-year term as an NPC deputy, or national legislator. He said that as China’s objective of governing by law becomes more clear-cut, there will be more scope for lawyers to better perform their duties as lawmakers and political advisors.

Han once taught law at the Southwest University of Political Science and Law. In 1995, he left teaching and became a lawyer. Currently, he provides legal consultation to governmental departments and companies.

The reason why I thought this was significant was for rule of law purposes. If the legislators are increasingly lawyers, then the laws that are passed in China will and should (hopefully) be better in their quality, scope, uniformity, and yes, limitations. Which means that the laws will (hopefully) be more trustworthy over time. I note that historically, half of the United States Congress has been comprised of lawyers. If you see this as negative, then I apologize. But what does that mean? It means that a lot of congressional members understand the law–and how to write good ones. In California, most of the notorious and poorly written laws are propositions that are pushed by the voters. (and often become the responsibility of the courts to strike and re-write)

Yes, this has its downsides. It means that sneaky Parliament members can write in all of the self-benefitting provisions they want. (think U.S. Congressional earmarking) It means that Parliament can write laws that apply generally, but with clever loopholes for the educated to manipulate.

But on the whole, for the benefit of society, I think it is a good thing for people who are well versed and trained in the law to be writing the laws. It seems rather obvious when I say it. It will take a long time for the rule of law to take hold in China, but this is another step towards that goal.

China Retail News reported last week on that a number of large corporations, including Coca-Cola, Nestle, and Pepsi, are calling on the Chinese government for unified food safety standards. The article says:

In a seminar held by China National Food Industry Association for discussing the draft of Food Hygiene Law, thirty food enterprises, including Coca Cola, Pepsi, Nestle, Wuliangye, Yili, Guangming and Yanjing Beer, called for the launching of unified food safety standards.

With regards to the food safety situation, China has already started to enact a Food Hygiene Law and has made positive progress. An anonymous representative of a company told First Financial Daily that it would be a great challenge for big food enterprises if their food safety is not improved.

Ma Yong, vice secretary general of China National Food Industry Association, says that at present, national, local and company standards are implemented at the same time, which causes confusion in the supervision of food safety. Therefore, enterprises suggest launching unified food safety standards and unified testing standards.

In the wake of so many faux pas for products safety internationally, I am not terribly surprised at this development. We’ve seen the gamut of interesting developments: China’s SFDA passing the buck here, Companies like Toys ‘R Us doing their own safety inspections here, and straight-up boycotts by those like Trader Joe’s here. And of course, China has not been immune to food safety issues domestically.

It’s about time that the companies jointly urged the government to act in such a way. (I assume that such standards would be domestic and of course, have some ramifications for international trade as well)

Now the hard question is this: will it happen? I just don’t see it happening soon. To have Chinese national, local and company standards converging? There are enough problems between the Chinese central government and the local provinces not getting along and the power struggle between them. That would be hard enough as is. And won’t happen in the near future. There is just no way. But to also get private companies on board with a joint government effort? Wow. Call me a cynic, but not anytime soon. Yes, perhaps in the future, but I really don’t see this one happening in the next 2-3 years, maybe even 5 years.

Just my 2 cents.

Here is an encouraging story about how the Chinese Supreme People’s Court has been rejecting a number of death sentences that have been dealt out by lower courts. It could be more encouraging if you are against capital punishment (as so many Americans are), but if you consider the effect on the Chinese legal and judicial system, I believe it already is.

From Reuters (and h/t to China Digital Times):

China’s top court has rejected 15 percent of death sentences handed by lower courts, citing poor evidence and procedural errors under new rules, but a top judge said the death penalty will remain in place for a long time.

China keeps secret the number of prisoners it executes, but international human rights observers have no doubt it judicially kills more than any other country — with estimates of executions somewhere between 1,000 and 12,000 a year in recent times.

But from the start of 2007, China’s Supreme People’s Court took back power of final approval on death penalties, relinquished to provincial high courts in the 1980s, and promised to apply the ultimate punishment more carefully.

In a rare glimpse into how the new rule is working, the president of the top court’s criminal law chamber, Huang Ermei, said that in 2007 it rejected 15 percent of death sentences passed by lower courts, according to the China News Service on Saturday. She gave no hint of the overall number of executions.

Huang said the rejections were due to “unclear facts, insufficient evidence, inappropriate determination of punishment and unlawful procedures.”

She also said 2007 was the first year that the number of prisoners who received “death penalties with reprieve” — that convert into long prison terms after two years unless the convict offends again — was more than the number outright executed.

Huang did not say how many of the prisoners whose death sentences were rejected were then freed or given jail sentences.

Again, this is very encouraging news because it shows a number of things. First, higher Chinese courts are recognizing that lower courts do need improvement. What was cited? “[U]nclear facts, insufficient evidence, inappropriate determination of punishment and unlawful procedures.” It means the Chinese judiciary, as fallible as it may be, is improving. It can now recognize, at least at the higher levels, that judges do rule upon poor factual evidence and apply improper procedural law. So we have a marked improvement as 15% is quite a bit.

Second, it means the increase in the rule of law. Procedural law, which I hated in law school (but have come to deeply appreciate as a practitioner), actually has authority in China–at least, among the higher courts. Chinese courts will hopefully continue to honor and improve in their application of procedural law. Note that the Supreme People’s Court wants apply the punishment more carefully.

Finally, and this is more qualitative and sentimental, the Chinese high court is taking a role that is more akin to our high courts. The California Supreme Court regularly deals with death penalty appeals, though I believe it only overturns about 10% of those cases. Knowing that the Chinese Supreme Court is doing so, and rejecting 15% of the death penalties, gives me a deep sense of hope that the judicial system in China will one day be quite respectable.

So yes, the government is secretive as to how many executions take place. That could improve. But if this is one step at a time, this is quite a big one.

China Law Blog recently did a post about the revised edition of Guidance Catalogue for Overseas Investment Industries. However, what caught my eye was Bill Dodson’s response at This is China! because he saw the revisions as being a codification of what has already been happening with Chinese local governments restricting investment. (which is wonderful news because China has a long way to go to clean up its act environmentally)

I won’t comment as I think Bill’s post says it all:

At the local levels of government at which I work - second- through fourth-tier cities - officials have been talking for the past year-and-a-half about no longer accepting polluting and labor-intensive industries; eg, textile and chemical processing. The revision to the Catalog of Overseas Investment really just codifies what was already happening in wealthier Economic Development Zones (EDZs): a movement away from unpopular and energy-intensive industries. Fourth-tier and fifth-tier cities are more open to the light industries cited in the Catalog revision, especially the further inland one goes into China.

The shadowy Adjustment Catalog of 2005 that Steve refers to has been the proverbial writing on the wall for the EDZs that have been denying license renewals and business approvals these past two years for industries that no longer fit in the resource- and environmental-imprint China is trying to create over the next twenty years. There are dozens of those sorts of EDZs now throughout Jiangsu Province (especially after last year’s algal bloom in Lake Tai), and around the cities that are positioning themselves as IT-, BPO and R&D hubs.

As well, most of the kinds of companies affected in the catalog are the tens of thousands of Asian SMEs that we’ve all been reading about and seeing closing shop in Guangdong Province (Taiwanese and Hong Kong companies), and in Shandong Province (South Korean companies). Remember, they’re “foreign” too, and haven’t contributed much to the overall evolution of Chinese industry and society beyond sopping farmers from the fields and workers from shuttered State-Owned Enterprises. Now, many of those former employees are finding the work pays less than what they now have in their counties and towns - and even fields.

Do I think the announcement radically changes the shape of FDI flowing into China’s second- through fourth-tier (what I call “x-tier”) cities from Western countries? No. But the revision to the Catalog of Overseas Investment certainly gives EDZs more guidance in what kinds of investments to deny. However, it certainly behooves Western companies to check the sources ahead of time should they stumble upon a more devolved x-tier location that chooses to ignore the Catalogs and encourages a Western investment that actually contravenes national-level policy. Should policy winds change and suddenly the x-tier EDZ has to confess it’s sins, the Western company will find when it loses its investment that ignorance is no defense in China.

All good advice.

Only mild coverage on the blogosphere about the EU and American proceedings against China regarding financial news and the “Xinhua Rule”, which was pretty surprising since China’s loss at the WTO regarding the auto parts rules was such a big deal. (though it was the first loss China suffered at the WTO)

Let me start with some details about the WTO action. From an article at the International Herald Tribune ( h/t to Donald Clarke):

In an escalation of trade disputes with China, the Bush administration joined with the European Union on Monday in filing a complaint with the World Trade Organization to protest China’s requirement that foreign financial news services operate through a government-designated distributor.

The action would affect Dow Jones, Reuters, Bloomberg and other foreign suppliers of stock prices and other financial information. It followed months of negotiations by the United States to get China to lift its requirement that these suppliers distribute their data and news reports through Xinhua, the official Chinese news agency.

“China’s restrictive treatment of outside suppliers of financial information services places U.S. and other foreign suppliers at a serious competitive disadvantage,” said Susan Schwab, the U.S. trade envoy. “We have raised this matter with China repeatedly, yet the problem has not been resolved.”

Schwab said that since Chinese regulations bar foreign financial information suppliers from directly soliciting customers for their services, they are in effect required to develop new customers only going through a major Chinese competitor.

So the EU and American action was filed earlier this week–on 3/3/2008 to be precise. Now what I had expected was that the Chinese government would fly off the handle, accuse the EU and America of being preposterous and out of line, and deny everything. Or put the blame on someone else. That has been the Chinese way of dealing with negative attention in almost all ways. (think SARS or even Heparin)

Imagine my surprise when the Chinese government doesn’t cry wolf and instead responds in a civil manner. From the Financial Times ( h/t to CDT):

China’s commerce ministry on Tuesday reacted in unusually mild fashion to a World Trade Organisation action brought by the European Union and US over Beijing’s regulation of financial news and information.

In its response to the EU and US requests for consultation, the first step of a formal complaint, the commerce ministry said China would look into the issue and handle it according to WTO dispute resolution procedures.

“As a WTO member, China respects other members’ choices,” the ministry said in a statement. Officials declined to comment further.

The statement’s conciliatory tone will fuel hopes that a deal can be reached on the Xinhua rules, which have not been enforced but are seen by international news agencies such as Reuters, Bloomberg and Dow Jones as a potential threat to their China operations.

Maybe hell has frozen over. Anyways, this move on China’s part was definitely a surprise. But perhaps it signals some things in my mind: 1) China has accepted that the WTO process will mean some painful changes for it after the auto parts loss. China’s ascension to the WTO was a big deal and I think it is now owning up to the consequences of this decision.

2) China is now willing to sit down at the table in a more diplomatic means to resolve disputes. Do not interpret this as a sign of weakness. I don’t believe it is. That China is now willing to sit down and talk out issues in favor of resolution is in my mind a show of more maturity and strength in the realm of international diplomacy and international relations. China isn’t going to bend over backwards, but it won’t try to deny everything anymore. It will entertain discussions on the world’s terms. But that means that China may be willing to start similar dialogue with the world as well.

3) Perhaps this is more a move that goes along with the Olympics since everyone is focused on China’s abuses of this and that. China just wants to avoid more of the limelight if it can. Granted, that’s a more cynical view, and not my own, but I wanted to throw it out there.

Just received news that the Practising Law Institute (PLI) is hosting a CLE program on the FCPA entitled “The Foreign Corrupt Practices Act 2008: Coping with Heightened Enforcement Risks”. (Coming to San Francisco on 4/16/2008 with live webcast)

It looks pretty interesting since there will be an emphasis on implementing real-world compliance programs and risk management for third party relationships and acquisitions. The FCPA has been on my mind because of this blog, which is an entertaining read, but also a good cautionary tale for all who would do business in China and use Chinese law firms. (see e.g., Lucent a while back) How can you protect your client from getting nailed under the FCPA if you do business with the wrong business… or even worse, the wrong law firm?

Here is some information from PLI:

The past few years have seen a dramatic increase in the number of FCPA investigations and enforcement actions as well as record penalties and settlements. Sarbanes-Oxley and the enactment of similar FCPA laws by the OECD countries, strengthened export control laws and heightened scrutiny of cross-border transactions have opened the door to a much greater risk to U.S. companies and their foreign subsidiaries. As U.S. companies continue to expand their markets and operations overseas, potential exposure to the FCPA increases, and the growing trend of FCPA enforcement will continue as the SEC and DOJ continue to make the FCPA a priority. In many cases, FCPA risks can be managed if you know how. This program, taught by a faculty of leading practitioners and government regulators, will give you the background and tools you need to spot the issues early, develop workable risk management processes and implement effective compliance programs.

What You Will Learn

• Overview of the FCPA - past and present - and its potential impact on your clients
• Comprehensive update on enforcement trends and their implications for U.S. and foreign companies
• How to manage risk in various third-party relationships and acquisitions
• Practical tips on establishing an effective FCPA compliance program
• Strategies for creating a successful compliance culture
• Best practices for conducting due diligence to minimize FCPA exposure
• The nuts and bolts of conducting an FCPA internal investigation
• Insights and practical advice from government enforcement officials and leading defense practitioners during a roundtable discussion of hypothetical cases

The faculty promises to be pretty good, including well known lawyers Brad Brian of Munger Tolles & Olson and Douglas Young of Farella Braun & Martel, among others.