Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Lesson Learned From Rio Tinto Convictions: Doing Business in China Is Like Walking In The Dark

Many North American business people (and business people from the far corners of the Earth) go into China with blinders on. They see the money signs in front of them and do not look for the dangers.

The convictions on March 29, 2010 of the 4 Rio Tinto employees highlights how foreign offices may also be blind to the activities of their people in China. After the few days of the trial and the open court sentencing, Rio Tinto said the evidence presented in court showed "beyond doubt" that the four had accepted bribes.

Not much was said about the stealing commercial secrets charges. Stephen Smith, the Australian foreign minister, said the closure to the outside world of the commercial secrets part of the trial (as opposed to the part-dealing with the bribery allegations) left "serious unanswered questions". He is correct - We do not know what was considered to be the stealing of commercial secrets. Nobody can be sure what under Chinese law constitutes a commercial secret. As a result, we cannot advise our clients what behaviour to avoid.

Based on discussions with a few Chinese lawyers, I have been informed that the sharing of the target price for iron ore purchases by the Chinese steel officials to the Rio Tinto employees would have been an important commercial secret because Rio Tinto's bargaining position would have improved with such knowledge. I have also been informed that if an official from a Chinese steel company told the Rio Tinto employees of information they received from government sources about strategic plans, that would constitute the taking of a commercial secret.

These activities would be normal in North American business negotiations in order to reach an agreement. If normal negotiation strategies in an important business negotiation may constitute stealing commercial secrets, not knowing where is the line means that one walks in the dark and risks crossing the line.

Now, due to the Rio Tinto case, foreign businesses in China should take steps to learn about Chinese law. The Rio Tinto saga demonstrates that walking in the dark may be costly to one's reputation, costly to one's future interests, and could put employees in Chinese jails for a long time. Working with experienced counsel may shed some light of the subject so that the company and its representatives can avoid the dangers that come with business activities in China.

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