A Live 90-Minute Audio Conference with Interactive...

CLICK ON EACH FILE IN THE LEFT HAND COLUMN TO SEE INDIVIDUAL PRESENTATIONS.

If no column is present: click Bookmarks or Pages on the left side of the window.

If no icons are present: Click View, select Navigational Panels, and chose either Bookmarks or Pages.

If you need assistance or to register for the audio portion, please call Strafford customer service at 800-926-7926 ext. 10

Foreign Corrupt Practices Act in ChinaCompliance Strategies Given China’s Unique

Cultural and Governmental Intricaciespresents

Today's panel features:Kyle A. Wombolt, Partner, Goodwin Procter, Central, Hong Kong

Nathan G. Bush, Partner, O'Melveny & Myers, Beijing, ChinaAmy L. Sommers, National Partner, Squire Sanders & Dempsey, Shanghai, China

Thursday, September 3, 2009

The conference begins at:1 pm Eastern12 pm Central

11 am Mountain10 am Pacific

The audio portion of this conference will be accessible by telephone only. Please refer to the dial in instructions emailed to registrants to access the audio portion of the conference.

A Live 90-Minute Audio Conference with Interactive Q&A

The Foreign Corrupt Practices Act In China

Kyle WomboltSecurities Enforcement and FCPA [email protected]

September 3, 2009

2

Conducting Business In China

• Operating and investing in China differs markedly from doing the same in the U.S.– English vs. Mandarin– Different forms of government– Different legal systems

• Higher levels of corruption– Red tape– China ranked #72 on 2008 Transparency International

Corruption Perceptions Index– Tied with Mexico

• Most U.S. businesses operating in China face corruption-related issues on a regular basis

3

Increased Enforcement Activity

• DOJ and SEC enforcement actions more than doubled since 2000

• Companies are paying significant fines• Individuals are going to jail• Companies operating in China have been, and will continue

to be, impacted• An understanding of the FCPA is critical

4

FCPA Basics: Two Types Of Provisions

• Anti-bribery provision– Prohibits giving or offering anything of value to foreign

government, political party or international organization official for the purpose of influencing the official to assist in obtaining business

• Books and records provisions– Require accurate and honest record keeping and effective

internal controls, including records that would reveal, and controls that would prevent, bribery

5

Defining A Bribe

• The FCPA prohibits a “corrupt” payment or offer of money or anything of value to any foreign government official in order to obtain or retain business– A payment is corrupt if it is made with intent to induce a

foreign official to violate his or her lawful duty or to secure an improper advantage

– Need not be to obtain a specific contract• Payment need not be made; liability exists even if offered,

promised or authorized

6

Defining A Bribe: Value

• Anything of value can be a bribe– Cash or cash equivalents– Tangible and intangible property– Promise of future payment or employment– Training or education– Entertainment

• The amount involved is irrelevant• If a payment is requested by a foreign official it likely has

value to the official; thus, a charitable contribution or a “good works” contribution purported to be for the benefit of the community may constitute a bribe if requested by a government official and made with corrupt intent

7

Defining A Bribe:Whom Is It Illegal To Bribe?

• Government employees – Includes employees of any department or agency of the

government• Example: tax collectors/revenue agents/customs

officials– Includes employees of government-sponsored

commercial ventures and other government-owned business

• Example: employees of China Telecom, CNOOC and other state-controlled companies; doctors at state-run hospitals

• Political party employees and candidates for political office• Public international organization employees• Rank, level, or title is irrelevant

8

Defining A Bribe: Exception For Facilitating Payments

• There is no violation of the FCPA if a payment is within the statutory exception for facilitating payments– Applies to expediting payments to low-level government

officials– Payment must be to secure a “routine governmental

action”

9

Defining A Bribe: Exception For Facilitating Payments (cont’d)

• “Routine governmental action” includes action which is ordinarily and commonly performed by a foreign official in:– Obtaining permits or licenses, processing governmental

papers, providing police protection, etc.• If official exercises discretion or payment results in new

business it will not fall within the exception• Facilitating payments must be accurately recorded as such

in the company’s books and records

10

Defining A Bribe: Affirmative Defenses

• Payment permitted by written laws of foreign country– China has no such law

• Reasonable and bona fide expenditures, such as travel and lodging, related to– the execution or performance of a contract with the

government; or– the promotion or demonstration of products or services

11

Liability For Acts Of Third Parties

• The FCPA prohibits direct payments to foreign officials, as well as payments to a third-party while “knowing” that a portion of the payment will be passed on to a foreign official

• A person’s state of mind is “knowing” if he or she has a firm belief that circumstances exist or that a result is substantially certain to occur

• Taking a “head in the sand” approach will result in a violation

12

Liability For Acts Of Third Parties (cont’d)

• In China, it is common for U.S. companies to conduct business with and through local agents, consultants, partners or other intermediaries. Doing this requires extreme caution

• Companies must conduct due diligence to ensure that third parties will not make payments in violation of the FCPA

• If an issue arises, government may contend that absence of due diligence demonstrates that company put its “head in the sand”

13

Reach Of The FCPA In China: Who Is Subject To The Act?

• U.S. issuers– Issuers are companies whose securities are registered in the

U.S. or are required to file periodic reports with the SEC• Domestic concerns

– U.S. citizens– Business entities having their principal place of business in

the U.S. or organized under the laws of any state

14

Reach Of The FCPA In China: Who Is Subject To The Act?

(cont’d)

• Employees and agents of issuers and domestic concerns– If employee or agent is a foreign national acting outside

the U.S., they must use some means or instrumentality of interstate commerce in furtherance of the bribe

– U.S. persons are subject to the FCPA regardless of whether they use some means or instrumentality of interstate commerce in furtherance of the bribe

• Any person or entity, regardless of nationality, who commits an act in furtherance of a bribe while in U.S. territory

Chinese Anti-bribery Rules: Implications for FCPA Compliance

Nate Bush, Partner, [email protected]

September 2009

2

Intersections of FCPA & Local Anti-bribery Rules

• Affirmative Defense to Anti-Bribery Provisions– “Payment, gift, offer, or promise of anything of value” was

“lawful under the written laws and regulations” of the recipient’s country

– Affirmative defense relies on written law not local custom or prevailing practice

• Liability under the books & records provisions may arise from failure to record accurately payments in violation of local anti-bribery laws.– including commercial bribes paid to private parties rather

than foreign officials, political parties, party officials, or candidates.

3

China’s Other Red Flag

72/180200872/180200770 / 163200678 / 15200571 / 145200466 / 133200359 / 102200257 / 912001China's RankYear

Transparency International Corruption Perceptions

Index

•Corruption costs China estimated 0.5% -13.2 % of annual GDP.•AMCHAM polls routinely report material impact on US business

4

Administrative & Criminal Investigations

• Criminal Prosecutions• From 2003 to 2007, Supreme People’s Procuratorate investigated

19,963 criminal commercial bribery cases involving government officials with a total value of RMB3.42 billion.

• Administrative Investigations• From August 2005 to August 2007 courts, party disciplinary and

administrative authorities handled 31,119 commercial bribery cases with a total value at RMB 7.079 billion.

• From January to November 2008, authorities in China handled 14,727 commercial bribery cases with a total value at RMB3.256 billion.

• From January to October of 2008, the courts handled 1,158 offering bribery cases.

• From January 2007 to June 2008, AICs handled 9,630 commercial bribery cases with a total value of RMB2.87 million.

• In the first quarter of 2009, ACIs handled 584 commercial bribery cases.

5

Internal Party Disciplinary Proceedings

• Concluded 852,000 cases from July 2003 to December 2008.

• Punished 881,000 CPC members

• 24,718 cases involving CPC members referred for criminal prosecution.

• From November 2007 to December 2008, party disciplinary authorities handled 140,000 cases, punished 150,000 officials and around 800 officials referred for criminal prosecution.

6

Social & Economic Factors

• Chinese social and commercial traditions• Personal connections• Gift giving and entertainment as legitimate demonstrations of

hospitality and courtesy• Personal relationships as legitimate proxy for relationships

between institutions• “Face” from outward evidence of success

• Pressures of current social and economic climate• Turbulent past & uncertain future• Unprecedented commercial opportunities• Widespread expectations of graft

7

Institutional Factors

• Polycentric Legal/Political System• Administrative traditions favor discretion over predictability• Opaque policymaking and enforcement process• Decentralization

• Legacy of Central Planning• Blurring lines between public and commercial functions• Prevalence of government ownership in key sectors• Sporadic and often informal state intervention in market

• Recipe for Rent-Seeking:• Underpaid officials• with discretionary licensing & approval authority• over broad range of lucrative commercial activity• under weak administrative & judicial discipline• when everyone else is getting rich

8

Frequent Bribery Vehicles

• Kickbacks – Red Envelopes, Gift Cards, & Coupons• Fraudulent Reimbursement & the Fungible Fapiao• Tangible Gifts - Antiques, Jewelry, Condos, Cars• Consumables – Maotai, Marlboros, & Mooncakes with “extras”• Valuable Favors – School Admissions, Pretextual Visa Invitations• Entertainment on Demand• Sham “Training” & “Inspection”• Diverted Rebates & Off the Books Expense Accounts• Third-Party Payment Arrangements• Agents, Consultants, Finders, and Fixers• Design Institutes• Negotiation Fees• Strawmen & Dummy Companies

9

Opinions of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Laws in Hearing Cases of Accepting Bribes (July 8, 2007)

• Notes prevalent methods for concealing bribes, including:– Selling/buying real estate, cars, or other property at prices

“obviously” much lower/higher than fair market value– providing securities in exchange for no consideration;– inclusion in investment without any capital contribution;– providing profits from a company or investment which are

artificially high or disproportionate to capital contribution;– bribes through gambling (i.e., letting the official win);– bribes through third parties– bribes deferring payment until after official leaves office.

10

• Criminal Penalties• PRC Criminal Code (1997, amended 2006)• Supreme People’s Court Interpretations on Corporate

Crimes (1995) • Administrative Penalties

• Anti-Unfair Competition Law (1993)• Provisional Regulations on Prohibition of Commercial

Bribery (1996)• Regulation on Punishment of Civil Servants of Administrative

Organs (2007)• Implementing rules on combating commercial bribery issued

by various governmental agencies• Disciplinary Penalties for Chinese Communist Party

Members• CPC Regulations on Disciplinary Penalties (2004)

China’s Anti-bribery Rules

11

• Administrative Investigation & Enforcement• State Administration for Industry and Commerce (AIC)

• Government Supervision & Oversight• Ministry of Supervision• Internal Audit & Supervision Departments

• Criminal Investigation• Public Security Bureau (“PSB”)

• CCP Discipline• Central Commission for Discipline Inspection (CCDI)

• Prosecution & Adjudication• People’s Procuratorate• Criminal Tribunals of People’s Courts

Chinese Anti-bribery Enforcement Agencies

12

Criminal Bribery of State Personnel PRC Criminal Code, Art. 389 prohibits:

• Giving “money or property” to “state functionaries” for “purpose of securing illegitimate benefits”; OR

• Giving to “state functionaries” in “commercial activities,” a “relatively large” amount of “money or property” OR rebates or service fees in violation of government rules

• EXCEPTION: Payments made due to extortion by government official if no illegitimate benefits are received.

• NEW TREND: “Money or property” includes intangible benefits with quantifiable value.

13

• State Personnel =• “all personnel of state organs”• “personnel engaged in public service in state-owned

corporations, enterprises, institutions, and people's organizations”

• “personnel assigned by state organs, state-owned corporations, enterprises, and institutions to engage in public service in non-state-owned corporations, enterprises, institutions, and social organizations”

• “other working personnel engaged in public service according to the law.”

• Narrower than FCPA definition of Foreign Official

Definition of State Personnel

14

• Illegitimate Benefits ≈ Illegal Benefits

• Defined to include “benefits violating laws, regulations, state policies or administrative rules issued by departments under theState Council” or

• “assistance or favors provided by state personnel in violation oflaws, regulations, state policies or administrative rules issued by departments under the State Council.”

• State Personnel prohibited from accepting bribes to secure any benefits—whether legitimate or illegitimate (PRC Criminal Code Art. 385)

Illegitimate Benefits

15

Criminal Commercial Bribery PRC Criminal Code, Art. 164 prohibits:

• Giving a “relatively large” or “huge” amount of “money or property”

• to any employee of a company, enterprise, or other entity• for the purpose of securing improper benefits

• “Relatively large” and “Huge” values affect prison terms• Local standard • Shanghai: “relatively large” - RMB15,000 to RMB50,000

“huge” - above RMB50,000

16

• Supreme People's Procuratorate Guidelines call for criminal prosecution of the following cases:– Bribes by individuals of individuals exceeding RMB10,000 or of

entities exceeding RMB 100,000– Bribes by entities exceeding RMB 200,000– Bribes of any amount which

• are offered with the intent of seeking illegitimate benefits • are offered to more than three people; • are offered to CCP or government officials, judicial

personnel, or administrative personnel with law enforcement responsibilities; or

• cause material losses to state or social interests.

Prosecutorial Guidelines

17

Criminal Penalties for Bribery

• Penalties for Individuals• Fines• Criminal detention• Imprisonment

– Life imprisonment for “especially serious” cases• Confiscation of personal property

• Penalties for Entities• Fines• Criminal detention or imprisonment of the person in charge

(legal representative)

18

General Commercial Bribery Rules

• Commercial Bribery prohibited by Article 8 of Anti-Unfair Competition Law and Commercial Bribery Rules.– Giving “valuable items” or (e.g., cash and tangible

property)– resorting to “other means” (other “benefits”, including

intangibles)– to bribe an individual or an entity– in buying or purchasing goods or services

• EXCEPTION for “small presents given for promotional purposes according to business practices.”

19

Bribing Entities

– Chinese law prohibits bribing “entities” as well as individuals

– Tension with U.S. notions of bribery– Reflects legislative attitudes towards competition early in

reform period (1993) and concerns for tax evasion– Improperly documented or off-the-books rebates,

discounts, and commissions considered commercial bribery!

– Multiple “model cases” involve off-the-books payments between entities—no benefits to any individuals

20

Administrative Penalties for Commercial Bribery

• Administrative Penalties for Individuals and Entities– Fines ranging from RMB10,000 to RMB200,000.– Confiscation of illicit proceeds, if any.– Serious cases referred for criminal prosecution– Exposure to litigation for damages by injured parties under

the Anti-Unfair Competition Law

21

Party Disciplinary Rules

• CCP members subject to separate party rules prohibiting most corrupt practices

• 1995 “Gift Rules” govern disposition of gifts received “in China.”– Must refuse or surrender

• Any gift which is likely to affect fair performance of official duties.”

• Any gift of “cash, securities, gold, silver or jewellery which they fail to refuse from contacts in China (except from relatives or friends), regardless of its value.”

• Any other gift (except from relatives or friends) valued at more than 200 RMB.

• Any other gifts (except from relatives or friends) exceeding 600 RMB in value from same source in year.

• 200 RMB limit memorialized in numerous local party rules-Not Updated

22

Recent Enforcement Initiatives

• New ‘Central Leading Committee on Combating Commercial Bribery’ established in Sept. 2005

• New “National Corruption Prevention Bureau” in Sept. 2007• Certain Opinions on Combating Commercial Bribery in Feb.

2006• Whistle-blower hotlines & website (promptly crashed…).• Black list of violators• Publication of typical cases• Feb. 2009 amendment of Criminal Code to reach acceptance of

bribes by “close relatives of state personnel” and “people who have close relationships with state personnel.”

• Fallout from CCI Settlement

23

New Standards in SOE’s

• Several Provisions Regarding Non-Corrupt Practices of Leaders of State-owned Enterprises (Chinese Communist Party Central Committee & State Council, July 12, 2009)– Applicable to leaders of state-owned enterprises– Prohibits various acts of public waste, abuse of power,

conflict of interest, and corruption– Restricts interaction with company after leaving office– SOE’s to implement stricter compliance programs

• Basic Standard for Enterprise Internal Control, (Ministry of Finance, CSRC, National Audit Office, CBRC, and CIRC, effective July 1, 2009)– “China SOX” standard for internal controls Listed companies

should disclose annual self-assessment report;

24

Target Industries

• Primary– engineering construction– real estate– medical devices &

pharmaceuticals– government procurement – natural resources

Secondary– banking– securities– commercial insurance – publishing – sport – telecommunications– electricity – quality inspection – environmental protection

25

Thank You!

Nathan BushO'Melveny & Myers LLP

Yin Tai Center, Office Tower, FL 372 Jianguomenwai Avenue

Chaoyang DistrictBeijing, 100022 P.R.C.Tel: + 8610-6563-4207Fax: + 8610-6563-4201

[email protected]

美国翰宇国际律师事务所

Foreign Corrupt Practices Act in ChinaCompliance Strategies Given China's Unique Cultural and Governmental Intricacies

Best practices for mitigating risk

Amy L. SommersShanghai

September 3, 2009

2翰宇FCPA Compliance in China Teleconference

III. Best Practices for Mitigating Risk

Monitoring

Compliance Program

Internal Controls

Education/training

Due Diligence

Steps if misconduct is suspected


A. Monitoring

Think about monitoring both as direct oversight for behavior that is clearly forbidden (e.g., gifts of red envelopes to tax officials) and as an awareness of where there might hidden bribes (e.g., an SOE customer has a grand opening ceremony and asks for a cash contribution of several thousands in cash to buy a balloon bouquet – is this legitimate or a bribe?).

Monitoring is perhaps the most difficult of the ‘best practices’ because it requires consistent vigilance.


A. Monitoring (cont.)

Monitoring means affirmatively asking questions and/or checking data/reports.

Ideally, monitoring should involve collaboration between the finance/accounting departments and the legal/compliance departments.

A key focus should be on processes, e.g., how do orders come in/get booked/billed/payment made?

Checks should be recurring at regular intervals so that a baseline is established and deviations can be observed.


B. Compliance Program

The DOJ has advised the expected elements of a rigorous compliance program in an Opinion Procedure Release, including:

• Adoption of a corporate code of conduct against violating FCPA & foreign anti-bribery laws – with standards/ policies/procedures for directors/officers/employees and third party ‘partners’ to comply.

• Assignment of one or more officers responsible to ensure implementation and to report to Audit Committee.

• Regular training on compliance for directors/officers/employees/third parties.

• Annual certifications of compliance by same persons.

• Centrally maintained Standard Language Agreements.

o All deviations from standard language to be approved by appropriate level.


B. Compliance Program (cont.)

• Implementation of a reporting system (e.g., ‘helpline’) for employees/others to reported suspected violation of company compliance code/criminal conduct.

• Code of Conduct and Training – (translated).

• Clear procedures for prudently identifying reliable third party business partners.

• Confirmation of large transactions with End Users, Agents, and Employees involved.

• Use of financial/accounting procedures to ensure internal accounting controls.

• Independent counsel/auditor audits every three years.

http://www.usdoj.gov/criminal/fraud/fcpa/opinion/2004/0402.html


C. Internal Controls

1. Eliminating deceptive record-keeping

An impediment is the degree to which cash is still used to effect payments.

Most significant area of risk seems to be in entertainment.

Entertainment potentially problematic in several ways:

• entertainment is real, but excessively lavish;

• entertainment expense is distorted (visit a tea house/bar and get $1,000 bill, with majority kick-backed by restaurant to official);

• bribes are recorded as ‘entertainment expenses’


C. Internal Controls (cont.)

1. Eliminating deceptive record-keeping (cont.):

Third-party agency/consulting fees another area where bribes are often concealed

Developing appropriate monitoring of processes for using agents/consults can help lessen risk of improper payments being recorded.



2. Accounting Controls A challenge arises from the use of standard, pre-printed forms of invoice,which can be used interchangeably

This partly explains the need both for good training and rigorous oversight, particularly of sales and purchasing functions


C. Internal Controls (cont.)

2. Accounting controls

Uncovering collusion by an accountant with sales (such as by approving false entertainment expenses) or purchasing team members (such as approving improper agent’s fees or grossing up PO amounts) can be difficult.

Outside auditors may uncover the deception, but the best hope may lie in use of investigative monitoring discussed above, where business processes are analyzed from an accounting/legal/compliance perspective.


C. Internal Controls – Accounting Controls

Best to avoid use of: Manual Journal Entries and/or those lacking support. Generic/un-descriptive account names and activity. Suspense account activity or large un-reconciled account balances. False or incomplete invoices and mischaracterization of payments. Falsified or “mislabeled” records. Supporting documents do not support the category in which

payment is recorded. Unrecorded (“Off the Books”) transactions. Payments to different vendors/suppliers that share same address.



2. Accounting controls

Where a facilitating payment has been made – whether in accordance with company policy or otherwise – the accountants should be directed to record it as a ‘facilitating payment’, regardless of whether it was originally characterized as some other kind of payment.


D. Education/Training

1. Guidelines for gifts, travel and entertainment of ‘government officials’

Generally advisable to have a single standard for both ‘private’ and ‘official’ entertaining • Legitimate “token” memento vs. valuable item (often concealed as a memento,

such as a gold coin)

• NYT on gifts of Gucci, LV: “For Bribing Officials, Chinese Give the Best”

Some clients prefer to set a fixed limit on what can be spent per meal/gift/entertainment others prefer a process for approval; key is to follow whatever rule is set.

When in doubt, ask: would giver or recipient be embarrassed if gift disclosed? If answer yes, rethink. Would gift/entertainment pass the relevant “newspaper test”?


D. Education/Training (cont.)

1. Guidelines for gifts, travel and entertainment of ‘government officials’ (cont.)

Important to have standard policies, not only to guide your employees, but also because they can be used as an “out”

Demands for travel expenses, home renovation, pre-paid membership cards, cash-equivalent coupons, etc – PRC Supreme Court interpretation now addresses these intangible benefits and says they are improper (scholarships? internships? Not explicitly answered)


D. Education/training (cont’d)

2. Of employees

Absolutely vital to pursuing compliance.

Also, should a DOJ investigation commence, useful as a defense to establish company acted reasonably to ensure compliant practices.

One of the factors working against Siemens was the gap between the compliance program they had on paper and how the business actually run – training lessens risks of gaps.


D. Education/training (cont.)

3. Of business partners

Common in China for foreign-invested companies to do business through a variety of ‘partners’: JV partners, agents, distributors.

Some of these parties are interfacing with gov’t agencies (e.g., to get regulatory approvals); some are seeking to sell/distribute products.

These parties know ‘bribes’ are illegal, but might not realize other behavior could be construed as improper (e.g., flying an SOE customer to inspect a factory in Southern China and to play golf – all expenses paid). Need to make the restrictions applicable under FCPA explicit.



4. Culturally sensitive training

Even where team members are good English speakers, conducting training in Mandarin or using bilingual training if group includes Westerners is advisable to ensure full comprehension and avoid claims of having misunderstood if problems arise in the future.

Contextually relevant training in China: • explains rules under FCPA and under PRC laws/regulations;

• uses examples involving PRC companies/facts;

• A PRC national is the or one of the trainers, providing a common cultural point of reference, which may make attendees feel more comfortable asking questions or posing ‘hypotheticals’



From the PRC perspective, the way that corruption is framed as a “China problem” when a number of cases involving China actually involve wrongdoing by non-Chinese parties is a sensitive issue:• E.g., Lucent, Morgan Stanley – these involved actions by non-

Chinese

• Lesson: avoid structuring training/compliance as a being directed only to Chinese employees.

• And, training can be a great ‘monitoring’ tool – be prepared to act on what is gleaned by the trainer.


E. Due Diligence

FCPA-focused due diligence procedures should be used in all of the following contexts:

• partner or transaction diligence > focus: is partner a gov’tofficial? Does transaction involve improper payments/offers?

• key hires (e.g., country manager, sales manager) > focus: does candidate ‘get’ compliance? Skeletons in closet? Strong relationships with officials a positive, if they are truly strong and don’t require improper benefits to maintain them

• third parties (agents/consultants) > focus: do they have relevant technical/industry expertise or are they a shield for an official to get cash?


E. Due Diligence (cont.)

Due Diligence with Third Parties.

• Negotiate contractual access to their books and records, along with audit rights and periodically exercise these rights.

• Include reps and warranties language re: FCPA/anti-corruption compliance in the joint venture and third party agreements.

• Provide indemnification rights along with termination clauses inthe third party agreements for FCPA/anti-bribery violations.

• Distribute your FCPA/anti-corruption policy to third parties and obtain certificates of compliance on a periodic basis.

• Document the services being performed by third parties.


F. Steps if Misconduct is Suspected

Violation Response Plan – Early Actions: Suspend document retention policy: no information to be destroyed. Secure the assets/evidence and suspend access (physical and

electronic). Consider the legal privileges. Do you investigate with in-house counsel or outside counsel

(credibility of findings in eyes of DOJ). Assess potential exposure in PRC and reputational risk. Notify and secure investigative/legal resources (e.g., forensic

auditors, security consultants)


F. Steps if Misconduct is Suspected (cont.)

Despite history of whistle-blowing in Communist China, hierarchy/ face concerns can act as disincentives against disclosure. Less senior personnel can find it difficult to disclose facts challenging their superiors & causing loss of face (or retaliation).

Be aware that PRC authorities not likely to honor claim of legal privilege for information discovered in internal investigation.

If the PRC government demands information from counsel, unlikelythat counsel could successfully claim the information is privileged or that the confidentiality required by the Lawyers Law would be interpreted by any State authority to mean confidentiality vis-a-vis the State itself.


F. Steps if Misconduct is Suspected (cont.)

Current PRC privacy laws do not regulate the export of personal data.

The draft Personal Information Protection Law may prohibit an employer from exporting employee personal data if (a) the personal information involves national security and other major national interests, (b) it is required by international law obligations undertaken by the Chinese government; and (c) the country or region receiving the personal information is unable to provide adequate legal protection for personal information.


Thank you for participating!

Biographical information:

Amy L. Sommers’ strong skills in corporate structuring, governance and operations issues in China make her a valued resource to the clients she counsels. A former China of the China Committee of the American Bar Association’s Section of International Law, Ms. Sommers is a frequent speaker and commentator on China issues. Her involvement in China goes back over 25 years, when she first started studying Mandarin, later developing deep appreciation of China’s history, politics, culture and legal system. Her clients benefit from her ability to bring these insights to bear on their strategic China projects. Ms. Sommers is the recipient of the 2007 award for Professional Excellence from the Expatriate Professional Women’s Society of Shanghai. She is the current Chair of the Real Estate Committee of the American Chamber of Commerce – Shanghai. The Shanghai Financial Arbitration Centre has appointed her one of only 14 foreign arbitrators asked to serve the Centre.


Copyright Notice:

All rights, including copyright, in these materials are owned by Squire, Sanders & Dempsey L.L.P. and may only be used for personal/non-commercial purposes. Reproduction is subject to prior permission from, and attribution to, Squire, Sanders & Dempsey L.L.P.

For further inquiries, please contact Amy L. Sommers: [email protected]

A Live 90-Minute Audio Conference with Interactive...

Documents

Transcript of A Live 90-Minute Audio Conference with Interactive...