Don't Get Caught in Red Corner

First Published in West Group's International HR Journal by Laura W. Young

China is an exciting place for foreigners to live and work as there are many opportunities for Western trained professionals to advance more rapidly than they might otherwise at home. Nevertheless, the fact that China needs to improve transparency with respect to its legal system, and judicial corruption is common, create a lingering unease. While it is unlikely that a foreign manager will face arrest for a crime in China, it is not impossible. The most likely scenarios, smuggling a small quantity of illegal drugs for personal use, involvement in a drunken brawl, are not only unlikely, they are also highly personal in nature.

However, it is also possible that a foreign manager posted to China may be arrested for a crime related to his job duties. It is even possible that he could be arrested for a crime he didn't commit, but which is imputed to him by law. In addition, there are the crimes that were legal activities only a few weeks before, such as belonging to certain organizations.

Possible Charges Against a Foreign Manager Crimes are described in the Criminal Code as well as the various subject specific codes, such as the Customs Law, the Labor Law, the Tax Law and the Security Administration Law, etc. A review of China's Criminal Code reveals the government's concern with preserving social stability. Eight of ten chapters describe crimes against national security or social stability. Only one chapter describes crimes of injury to property and persons, and only one chapter describes injury to individuals and civil rights.

There are crimes that certain types of professionals are more at risk of committing. For example, journalists need to be wary of the prohibition on purchasing, secretly gathering, or stealing, state secrets. Such a charge carries a penalty of 3-7 years in prison. Professionals such as accountants and lawyers, among others, face up to five years in prison and a fine for providing false certification of a serious nature. At this point, since foreign professionals are forbidden to act in a professional capacity in China, it would seem that they should not face such liability, although they could be charged both with the crime of the providing false certification and with acting without a professional license.

In addition to the usual crimes against property and persons, there are corporate crimes, which are crimes imputed to corporate managers. For any of these crimes committed by a corporation, the registered representative will be held personally responsible under the theory that the registered representative willingly assumed responsibility for all acts of the corporation and therefore had the power and obligation to prevent criminal acts. There are only a handful of such crimes, and most willful or negligent acts are penalized by administrative penalties against the company, not the manager. However, a manager is personally liable for offenses such as tax evasion, failure to maintain labor standards, and sales of shoddy or defective products, even if he did not personally act in the crime. These are not punishable merely by fines against the company, but by jail time served by the manager. However, the manager has to have been in a supervisory position able to prevent the criminal acts, and have failed to do so.

Additional commercial acts which incur personal criminal liability of the entity's responsible person are "false advertising of a serious nature", or "submitting a bid tender in collusion with others to harm competitors", or committing serious commercial fraud. Punishment for these types of crimes includes 2-5 years imprisonment for the manager as well as penalties of five-hundred times the illegal proceeds. Among other possibly commercial activities which might result in charges against a foreign manager are smuggling of items considered to be weapons, cultural relics, rare plants, or "smuggling for distribution pornographic materials". Sentences usually range from 3-5 years, although life imprisonment and capital punishment are possible in "serious cases". It is the sponginess of the latter language that causes the most concern.

Fortunately, such criminal charges are rare and relatively esoteric in a large country facing tremendous poverty. The fact is that unless a case has tremendous notoriety, or someone funded by a competitor pushes authorities to take action, it is very unlikely that charges would be filed or maintained for economic crimes. Nevertheless, rare does not mean impossible.

Jurisdiction

China's Criminal Code asserts jurisdiction of the People's Courts for any crimes committed in China, even if the actor was not in China when the crime was committed. As long as there was a criminal effect in China, any act committed beyond China's borders is a crime in China. Thus, a scheme to defraud Chinese investors, though enacted abroad, could be punishable in China, just as manufacture of shoddy merchandise imported to China could also be punished in China.

Access to Attorneys The rules of advocacy in China have improved greatly in recent years. Under the old Criminal law, a defendant's attorney was allowed no more than seven days to prepare for a criminal trial. Under the new Criminal Law, in effect since 1996, a defendant may hire an attorney immediately after the first session of interrogation, which means that a defense attorney may have a couple of months to investigate the facts and prepare a defense. This is of course a very short time by Western standards. Notice, the suspect is not allowed an attorney at the first interrogation. In addition, the "right to remain silent" does not exist. Silence will be deemed as stubborn resistance to authorities and only compound the appearance of guilt. More surprising to an American suspect, there is no guarantee of privacy when the defendant meets with his counsel. Permission for a private meeting may or may not be granted. After all, the Chinese system assumes an innocent party has nothing to hide, and any admissions by a guilty party should be placed on the record.

Americans like to tell lawyer jokes and complain about trouble-making attorneys, but find an American in trouble, and he expects to be able to hire a personal advocate. However, most Chinese attorneys behave quite differently from American attorneys. In general Chinese attorneys take their role as guardians of the law, and officers of the court as holding primacy over their role as personal advocate. Until the time of a trial, a Chinese attorney is limited to explaining the charges to the defendant, interviewing the defendant to discuss a defense, and conducting his own investigation into the facts of the case. The attorney cannot act as an advocate in police investigations or other official inquiries, and cannot make suggestions to police as to other avenues to pursue. After an indictment is filed, but not before, defense counsel has the right to review prosecution files and copy documents from those files in order to prepare the defense. The Western media and western education for some of China's lawyers have had some influence in strengthening the role of attorneys as personal gladiators.

Who to Contact in the Event of Trouble If you are an expatriate working in China, and face criminal charges in a work related matter, it would be expected that your employer would provide counsel to assist in your defense. A good place to start looking for counsel, especially if your employer considers the charges to be a personal matter unrelated to your employment, is the your embassy or consulate. The US embassy keeps a list of local attorneys willing to represent American nationals. The embassy also has a web-site at: http://www.usembassy-china.org.cn. The US embassy's phone number in Beijing is: (86-10) 6532-3831, and their after hours number is: (86-10) 6532-1910. The telephone numbers for the consulates are: Guangzhou: Telephone: (86-20) 8188-8911 ext.255 or (86-20) 8186-2418, and their after hours number is: (86-20) 9070-4511, and the consulate in Shanghai can be reached at: (86-21) 6433-6880, and after hours at: (86-21) 6433-3936.

Criminal Trial Procedure Detainment and Questioning While arrest requires prior approval of the public prosecutor and an arrest warrant reviewed by a court, detention by police forces does not. Detention requires no judicial review and no formal charges need be filed. There are no grounds to challenge detention except that the time limit for detention has expired. Generally, however, detention is rare unless a serious criminal act has been committed and the suspect is caught in, or immediately after, the act.

Currently, the Code of Criminal Procedure provides that generally there is a maximum of 14 days detention. After the 14 days have expired, formal charges must be filed or the suspect must be set free. However, there are circumstances in which a suspect may be held longer, including where a suspect has lied about his identity or residence. Those suspected of committing repeated crimes, or committing crimes in various locales, or forming gangs or committing conspiracy to commit crimes may be held for up to 37 days detention.

More commonly, a suspect is detained for questioning, but not held overnight. Interrogation must occur at the public prosecutor's ("Procuratorate's") office or the Public Security Ministry's office, and there must be two witnesses present during any interrogation. The aggregate period of Interrogation shall not exceed 12 hours. During the period of investigation by police or Procuratorate, evidence may be collected with a search warrant issued by the Chief Procuratorate. Such evidence collected is not shared with the suspect; prosecutors' files are confidential and not revealed to the suspect until after the indictment is filed, and trial preparations have begun. This is not dissimilar to Grand Jury proceedings in most US states.

If and when formal charges are ready to be brought, a suspect may be arrested. Any arrest must be made with an arrest warrant issued by the Procuratorate and approved by the People's Court. The investigation must be concluded after two months from the date of arrest or submission of charges. When the investigation is complete, a complaint is filed with the prosecutor. The prosecutor reviews the complaint, and usually holds 2-5 hearings to investigate the charges. The prosecutor then either dismisses the charges or brings an indictment. A decision must be made within one month after the case is sent up from the Public Security authorities.

A decision not to prosecute does not necessarily mean complete exoneration. The Procuratorate may refer a case to other government authorities to impose disciplinary sanctions, administrative penalties, or confiscation of property, depending on the details of the case. In some cases, a decision not to prosecute is based on technical grounds, such as where the statute of limitations on the crime has passed, or where there was a special executive amnesty on either the crime or the suspect, or where the crime is one which requires a victim to press charges but no victim does so, or where the crime is trivial or caused little or no danger. A decision not to prosecute must be announced publicly, although most newspapers rarely publish such results except in celebrity cases. In addition, the former defendant has the right to obtain all related files collected during the investigation

Trial China has five levels of courts, handling different dollar amounts of claims and levels of severity of crimes. When a suspect is a foreign national, his case is handled by the third level, known as the Intermediate People's Court. The case will be tried by a three-personal composed of one judge and two assessors. The judges have had legal training and passed judicial examinations, and have a relatively high level of social status, although not as high as in the US. The two assessors, sometimes also called "jurors", are professional lay persons who sit on judicial panels to act as lay persons in evaluating evidence. They do not hold the procedural power of the judge, nor are they picked from the community at large as in the U.S.

A trial is held as a series of hearings, usually three to five hearings held over the course of several months. The judges will directly question the witnesses, and control the presentation of evidence. The defendant may request the judges to summon witnesses on his behalf, or his attorney may bring cooperative witnesses to court. It is very difficult to bring hostile witnesses to court, as the judge may not be willing to issue a subpoena to that witness, or may not be willing to enforce the subpoena. The trial must be completed within six weeks of receiving the first hearing, and must issue a written opinion, including a dissenting opinion if any.

Freedom Pending Trial A suspect's employer has no right to apply for bail for the employee. However, the suspect's attorney or family can apply for bail on his behalf. Bail must be provided by a guarantor with no relationship to the defendant, who has the ability to pay the full bail, who has complete freedom of will in providing bail, and has a fixed domicile in China and a regular income. The guarantor also has an obligation to report the defendant if there is reason to suspect that the defendant will flee. If the guarantor does not report such facts, he faces a penalty and possibly criminal liability as an accessory after the fact. There are additional risks to the guarantor as well. If the defendant misbehaves during trial, such as interrupting witnesses during testimony, fabricating evidence, or colluding with other witnesses to give false testimony, the bail is placed at risk. It is anticipated that the bailee is an individual, not a bail bond company, as these don't yet exist.

Another possible alternative is Living With Surveillance. Under this arrangement, a defendant must remain at home, and cannot meet with anyone without permission from criminal authorities. In the event of serious violation of these rules, the defendant will be incarcerated pending trial. Incarceration pending trial may not exceed six months, and usually is no longer than six weeks, or the length of the trial.

Appeal Any defendant has an absolute right to one appeal. An appeal must be filed within ten days of the date the defendant receives the court's judgment. In an interesting twist showing that China does not share the US' concept of No Double Jeopardy, the Prosecutor can appeal an acquittal. An appeal is conducted as a second trial, with a complete review of the facts and law. Only rarely can a conviction be appealed to a third level, in the case of a foreigner, the Supreme Court.

Conclusion China's legal system is significantly different from the US system. However, knowledge of one's limited rights can help to ease the process of facing criminal charges. The best, but not certain, way to avoid such an unhappy fate is to follow advice of legal counsel. While a foreign manager in China is not likely to know most of China's laws, he will be held responsible to obey them. "Ignorance of the law is no defense", as Americans like to say. That is one legal concept that applies in China as well.

 
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