Home -> Law Blog Directory -> Academic Blogs -> Law at the End of the Day

OR PHONE (866) 635-1838 for Bankruptcy Help, (866) 635-6190 for Divorce,
(866) 635-2689 for Personal Injury or (866) 635-9402 for Criminal Defense

Find a Local Lawyer

Bankruptcy (866) 635-1838
Divorce (866) 635-6190
Personal Injury (866) 635-2689
Criminal Defense (866) 635-9402

Academic

: Law at the End of the Day

China's New Secrets Law

ADVERTISEMENTS

The trial and conviction of Stern Hu has provided a global face to a difficult issue within the People's Republic of China--the ability of China to conform its secrecy culture to the demands of a global economy that increasingly prizes transparency and disclosure. The difficulties of the relationships between state secrets (essentially political in character) and commercial secrets (effectively economic in character) is particularly difficult within the Chinese system in which the clear distinctions between political and commercial activity, and between the state and non-state sectors are substantially more blurred (on practical and ideological grounds) than in the West.

This morning China's State Owned Asset Supervision and Administration Commission (??????????????) issued Guidelines defining commercial secrets as well as articulating the beginning of a policy for their management.

China issued rules Monday to protect commercial secrets at state-owned enterprises, a few weeks after four employees of Australia's Rio Tinto were jailed for industrial espionage. The rules issued by the State-Owned Assets Supervision and Administration Commission classified items such as strategic plans, financial information and resource reserves as commercial secrets. A commercial secret was defined as information unknown to the public that can bring economic benefit to state-owned companies, the agency charged with overseeing such enterprises said on its website. The rules also give the government the option to reclassify commercial secrets as state secrets, which would carry a more severe penalty if violated.

China issues rules on commercial secrets of state companies, Haaba, April 26, 2010. The tensions inherent in the new regulaitons were highlighted in the Wall Street Journal's reporting of the announcement.

However, the fresh parameters offered in a Monday statement by the state-owned Assets Supervision and Administration Commission were wide-ranging and vague, and may have done little to clarify matters.
The government mainly emphasized how companies hold responsibility. Chinese companies "should attach great importance to the protection of trade secrets," said the commission, which oversees the government's holdings in more than 120 of the country's biggest business groups.
In its 34-clause notice, the commission said secrets range from financial information to strategic plans, from technology to mergers, procurement to restructuring?virtually anything that hasn't been publicly disclosed and could hold economic value to the company.
China's government traditionally has characterized secrets in broad terms, as both commercial information that it fears undermines the interests of its corporations and as state secrets that may put the nation's sovereignty at risk. Information in foreign hands is regarded as particularly sensitive. Chinese courts have been known to convict citizens on secrets charges for mailing newspaper clippings overseas.
China's obsession with secrets was highlighted at the recent trial of the executives of Anglo-Australian miner Rio Tinto. The salesmen were detained last July on allegations of taking state secrets, and later formally arrested, tried and convicted on charges they stole commercial secrets.

James T. Areddy (Yajun Zhang contributing), China Defines Commercial Secrets, Tells Firms to Protect Them, Wall Street Journal, April 26, 2010. The guidelines are unlikely to clarify issues and even less to sharpen distinctions between commercial and political secrets. To outsiders, the state secrets and commercial secrets law might be perceived as protectionism covered by a thin veil of ideology and political necessity. While the amendments may have no immediate effects, it may provide the incentive to the adoption of parallel protectionist measures in the event of another scandal involving foreign investors. Particularly inflammatory in this respect will be the use of the discretionary power to convert a commercial secrets case into a state secrets case. The use of that power might be interpreted not merely as adjusting informational parameters to Chinese political realities. Instead it might be interpreted outside of China as a sharp leftist turn away from the ideological grounding of Deng Xiaoping's reforms and a return to an earlier form of conceiving the relationship between the state, politics, economics and information.

Much more interesting, though, will be the effects of the new secrets law on China's worldwide operations. From one perspective the secrets law has a powerful anachronistic feel--it reflects a view grounded in the idea that Chinese enterprises owe an undivided and singular loyalty to the Chinese state and its rules and that this loyalty is enforceable because such enterprises operate solely within the territory of the People's Republic. But the Go Out (???;) campaign has changed the landscape of Chinese economic operations. It is possible that though the state secrets rules were meant to be applied internally, the outside operations of both Chinese and foreign enterprises may produce a substantial pressure on the state if it is tempted to enforce the measures harshly. I note two areas of particular interest:

1. The intersection of the secrets laws with the disclosure requirements of foreign states is unexplored. It is not clear what happens if the foreign operations of a Chinese enterprise is required under the laws of the host state to discloseinformation made secret within China. That may be possible under the widening disclosurte regimes of securities lawsd of nonChinese states.

2. The intersection of the secrets law with global and international efforts to create soft governance mechanisms for business and human rights specifically and corporate social responsibility generally. Read broadly, the secrets guidelines might interfere substantially with a company's ability to comply with the human rights due diligence mechanisms at the heart of the United Nation's Protect-Respect-Remedy project. The framework put forward in 2008 by Professor John Ruggie, UN Special Representative on Business and Human Rights, is based around the three pillars of the state duty to protect human rights, the corporate duty to respect human rights, and the need for access to effective remedy mechanisms when abuses occur. It requires close cooperation between businesses and stakeholders and relies to some extent on the free movement of information about companies. The secrets law could be interpreted as a means of chilling the process of opening companies to the disclosure of necessary information.

This announcement and guidelines appeared on SASC's website and is very roughly translated below:

??????????????????????? On the issuance of the "Central Commercial Secret Protection Interim Provisions" of the notice

Published: April 26, 2010 Source:

State-owned Assets Supervision and Administration Commission documents
???[2010]41? State UNCDF [2010] 41
??????????????????????? On the issuance of the "Central Commercial Secret Protection Interim Provisions" of the notice
?????? The central enterprises:
?????????????????????????????????87????????????????????????? "Central Provisional Regulations on Protection of Commercial Secrets" is issued by the State-owned Assets Supervision and Administration Commission 87th session of the director's office through, please comply.
???? The central enterprises should attach great importance to the protection of trade secrets to speed up the implementation details of the formulation of relevant, effective protection of business interests from infringement, and promote good and fast development.
????????????????????????? State-owned Assets Supervision and Administration Commission March 25, 2010
?????????????? Central Interim Regulations on Protection of Commercial Secrets
??? ?? Chapter I General Provisions

The first is to strengthen the central business trade secret protection to protect against violations of the central business interests, according to "The People's Republic of China on Guarding State Secrets Law" and "The People's Republic of China Against Unfair Competition Act" and other laws and regulations, the enactment of this provision.
??? ? Article II The term of trade secrets, is not known to the public, can bring economic benefits for the central enterprises, with the practicality and security measures taken by the central enterprise management information and technical information.
??? ??????????????????????????????????????? Article III central business and technical information in the scope of state secrets must be protected by law in accordance with state secrets.
??? ????????????????????????????????????? Article IV central business trade secrets relating to intellectual property content, according to state laws and regulations related to intellectual property management.
??? ??? Article V central business trade secret protection, standard of law, business responsibility, prevention, focused, to facilitate the work safety policy.

??? ????? Chapter organization and responsibilities
??? ???????????????????????????????????????? Article VI of the central business trade secret protection in accordance with the unified leadership and decentralized management principles, the implementation of enterprise legal representative of the responsibility.
??? ???? Article VII of the security committee of the central business trade secret protection is the work of agencies responsible for implementing the relevant laws, regulations and rules, the implementation of higher confidentiality agencies, the work requires, of deciding the protection of trade secrets related issues.
???? Confidentiality of the central business office of the Commission as the confidentiality of the daily business offices, according to organizations responsible for education and training to protect trade secrets, confidential inspection, protection and security technology leak investigation and so on.
??? ????????????????????????????????? Article VIII of the central business office should be equipped with full confidentiality of confidential staff, responsible for trade secret protection and management.
??? ??? Article IX central business technology, law, intellectual property and other business units in accordance with the division of responsibilities within the purview of trade secrets for the protection and management.

??? ??????? Chapter III Determination of trade secrets
??? ??? Article X central enterprises according to law the business scope of protection of trade secrets, including: strategic planning, management, business model, market restructuring, merger and acquisition, property transactions, financial information, investment and financing decision-making, production purchase and sale of strategy, resources and reserves, customers information, bidding information and other business matters; design, procedures, product formulation, production technology, production methods, technical know-how and other technical information.
???? ?????? Article XI by adjusting the scope of state secrets, commercial secrets of central enterprises need to change to state secrets, according to legal procedures must be identified as state secrets.
???? ??? Article XII of the central business business secrets and security classification, confidentiality, and aware of the scope of the period, produced the matter by the development of business, leadership approval, confidential office record.
???? ????????????????????????????????????????????????????????????????????????? Article XIII of the central business business secrets shall, according to corporate disclosure of economic interests will suffer damage, identify the core business secrets, commercial secrets of ordinary levels, security classification label unification as "core business secret," "ordinary commercial secret" .
???? ?????????????????? Article XIV of the central enterprises to set their own confidential trade secret of the period. ??????????????????????????????????????? Predictable time-to-year, month, day, account, can not be foreseen time limit should be set for the "long" or "before the announcement."
???? ???????????????????????????????????? Article XV of central enterprises and confidentiality of commercial secrets shall limit has been established, should be made in the secret vector clearly marked. ???????????????????????????????? Mark by the ownership (in short or standard logo, etc.), security classification, secrecy time limit of three parts.
???? ??????????????????????? Article XVI requires strict accordance with the work of central enterprises to determine the scope of trade secret know. ??????????????????????????????? Aware of the scope should be limited to specific positions and personnel, and classified according to the degree of category management.
???? ? Article XVII trade secrets need to change the security classification, confidentiality period, aware of the scope or duration in a confidential decryption, developed by the business sector, leadership approval, confidential office record. ?????????????????? Confidentiality has expired or has been open, self-decrypting.
???? ???????????????????????????????????????????? Article XVIII commercial secrets shall, after the confidentiality period of change, should be indicated in the original location near to the new logo, to significantly dismantle the original logo. ??????????????????????????????? Decrypt confidential period, should be able to clearly identify the way marked "decrypted" message.

??? ???? Chapter IV Protection
???? ???????????????????????? Article XIX of central enterprises signed labor contracts with employees should be contained in the confidentiality clause.
??? The central business and classified staff signed confidentiality agreements, confidentiality should be clearly the content and scope of the rights and obligations of both parties, duration of the agreement, breach of contract.
??? Central enterprises should be based on the degree and the secret signing key personnel whose jobs involve non-competition agreement, the agreement should include terms of financial compensation.
???? ??? Diershitiao central business because of the work of state organs at all levels need to be with the administrative functions of institutions, social organizations to provide trade secret information, should be expressed in an appropriate manner their duty of confidentiality. ??????????????????????????????? Provide classified information, developed by the business sector, leadership approval, confidential office record.
????? ??? Article a central business consulting related to business secrets, negotiation, technology assessment, outcomes identification, cooperative development, technology transfer, joint venture shares, external audit, due diligence audit of the assets, they shall enter into confidentiality agreements with relevant parties.
????? ??? Article 2 inside and outside the central business issue involving securities, listed and the process of information disclosure of listed companies to establish and improve business secrets confidential review process, provided the relevant departments, agencies, staff confidentiality.
????? ? Article 3 major projects to strengthen the central enterprises, important negotiations, major projects of trade secret protection, the establishment of confidentiality in advance into the mechanism of national security and interests of the State shall report to appropriate authorities.
????? Twenty-four pairs of classified job more secret high level department (part) and regional, trade secret protection should be identified as vital sector (part), or classified areas, strengthen the prevention and management.
????? ??? Article 5 The central enterprises should make the business a secret vector, send and receive, transfer, use, preservation, destruction process of the implementation of controls to ensure the safety of the secret carriers.
????? ??? Article 6 of central enterprises should strengthen trade secrets related to computer information systems, office automation, communications and information facilities, equipment, confidential management of information security to protect trade secrets.
????? ??? 27th The central enterprises should be the protection of trade secrets include risk management, emergency response plans to develop leaks, enhance risk prevention capability. ?? Carrier of stolen trade secrets found, lost, out of control and so on, to take timely remedial measures, occurrence of leaks and to promptly investigate the report of the State-Security Committee.
????? ??? 28th The central enterprises should trade secret violations of the behavior of the unit, according to claim their rights and to stop infringement, to eliminate the impact of damages.
????? ??? 29th The central enterprises should ensure the confidentiality of trade secrets for the education, training, inspection, awards and confidential facilities, equipment acquisition and other work expenses.
??? ????? Rewards and Punishment Chapter
???? ???????????????????????????????????????????? The third 10 central enterprises in trade secret protection, the right made outstanding achievements or outstanding contributions to the departments and individuals, should be commended and rewarded.
????? ???????? central business trade secret leaks occurred, by the company responsible for organizing the security committee of recognized responsibility of the departments concerned, relevant departments shall be handled according to regulations.
????? ??? 32nd by the Central employees leaked or illegal use of trade secrets, a serious case or cause greater damage to the enterprise shall be investigated for legal liability. ????????????????? Suspected of a crime shall be transferred to judicial organs.

Chapter VI Supplementary Provisions
????? ???????????????????????????????????????? 33rd The central enterprises should be combined with business reality, according to the provisions of the enactment of this business to implement measures to protect trade secrets or working conditions.
????? ???????????? 34th These Regulations shall come into force the day of release.

Full post as published by Law at the End of the Day on April 26, 2010 (boomark / email).