In a recent Inside Counsel article, we explored the eDiscovery climate in China and some of the most important differences between the Chinese and U.S. legal systems. There is an increased interest in China and the legal considerations surrounding doing business with Chinese organizations, which we also covered on this Inside Counsel webcast.
Five highlights from this series include:
1. Conflicting Corporate Cultures- In general, business in China is done in a way that relies heavily on relationships. This can easily cause a conflict of interest for organizations and put them at risk for violations under the FCPA and UK Bribery Act. The concept that “relationships are gold” or Guanxi is crucial to conducting successful business in China. However, a fine line exists for organizations, necessitating a need for strong local counsel and guidance. Moreover, Chinese businesses don't share the same definitions the Western world does for concepts like: information governance, legal hold or privacy.
2. FCPA and the UK Bribery Act- Both of these regulations are very troublesome for those doing business in China, yet necessary for regulating white-collar crime. In order to do business in China one must walk a fine line developing close relationships, without going too far and participating in bribery or other illegal acts. There are increased levels of prosecution under both of these statutes as businesses globalize.
3. Drastically Different Legal Systems- The Chinese legal system is very different than those of common law jurisdictions. China’s legal system is based on civil law and there is no requirement for formal pre-litigation discovery. For this reason, litigants may find it very difficult to successfully procure discovery from Chinese parties. Chinese companies have been historically slow to cooperate with U.S. regulatory bodies and many discovery requests in civil litigation can take up to a year for a response. A copy of our eDiscovery passport on China can be found here, along with other important countries.
4. State Secrets- In addition to the differences between common and civil law jurisdictions, China has strict laws protecting state secrets. Anything deemed a state secret would not be discoverable, and an attempt to remove state secrets from China could result in criminal prosecution. The definition of a state secret under People’s Republic of China law includes a wide range of information and is more ambiguous than Western definitions about national security (for example, the Chinese definitions are less defined than those in the U.S. Patriot Act). Politically sensitive data is susceptible to the government’s scrutiny and protection, regardless of whether it is possessed by PRC citizens or officials working for foreign corporations- there is no distinction or exception for civil discovery.
5. Globalization- Finally, it is no secret that the world has become one huge marketplace. The rapid proliferation of information creation as well as the clashing of disparate legal systems creates real discovery challenges. However, there are also abundant opportunities for lawyers that become specialized in the Asia Pacific region today. Lawyers that are particularly adept in eDiscovery and Asia will flourish for years to come.