In my last update in my “Doing Business With China” series, I discussed how little Chinese companies and in particular China itself, respects the intellectual property of Western companies.
I promised that in my next edition, I would examine some of those so-called “laws” in China that are allegedly supposed to protect foreign companies that come in to do business in China. This article is my fulfillment of that promise.
Big business, whether through ignorance or hope, insists that China has a plethora of well reasoned laws. Thus, they continue, if and when things go sour, we can rely on the judiciary and legal system to sort it all out.
Our shareholders needn’t worry, China is a safe haven for business.
The reality is that China’s legal system is a concoction of poorly made laws, lax enforcement and a weak judiciary.
“Chinese law” has been called an oxymoron by many. Looking more closely at their IPR protections, one does have to wonder.
Although China has a constitution and host of laws all drafted with the assistance of the international community, its validity must be called into question by the country’s own actions.
Such glaring examples as the right to freedom of speech (article 35 PRC constitution) (150), religion (article 36) (151), and peaceful assembly (article 35 PRC constitution) (152) are ‘protected rights’, but most often they are not observed. Lu Xiaobo, is a dramatic example of this.
Poorly Made Laws
Actually, China is ruled by three distinct types of laws.
Firstly, there are the 'official laws' – the ones the best and brightest from around the world helped to craft.
Secondly there are the spur of the moment laws (153), the ones that only a single party without need to consult things like a pesky constituency, can enjoy.
And lastly there are the 'unwritten' or 'hidden rules' that can often supersede the rest (154).
It could be that what I see here in China as a disparate patchwork of norms and 'laws', which to me are as murky as the Beijing air, is another one of those 'Chinese mysteries' that I will never figure out.
But fear not, for you will probably never hear the truth about all of that mess, at least not from any mainstream, corporate-run media source.
While attending a class at the most prestigious institution for judges in China, I asked a professor for a pithy yet insightful power-point presentation about changes and court cases in recent Chinese law.
It shed some light on key legal cases and their implication, “I am sorry,” he said. “I cannot give you this. The information contained on these slides cannot be passed out to the students. I can merely show them in class but will not be responsible for handing them out.”
The reason for his apprehension was that this professor was under house arrest, due to his political views. As such, his actions were monitored and limited. The man so feared for his safety that he refused to share with us anything that could prove he was divulging Chinese 'secrets'.
Even the professors at this hallowed school of higher education were adroit at deflecting our questions as they frequently apologized and said that this question or that was beyond the scope of the class, and thus they could not give us an answer.
In light of this fact, maybe it is not the fault of those foreign companies operating in China. After all, how could they possibly know that China was a veritable legal smorgasbord where one picks and chooses the laws they will obey?
The counterpoint to this argument is that China's legal problems are merely a symptom of a country in flux, one that is still developing.
“If you consider that as recently as a generation ago, China did not have any trial lawyers or a criminal law, the country has come a long way in establishing a legal system.” (155)
Yes, China has come a long way since the Mao'ist days where the first Universities to be gutted where those dedicated to the practice of litigation (156).
As far as the good chairman was concerned, law schools were unnecessary. For when he spoke, his word was law. And for the most part, he was right, for virtually all laws in effect in China today have been rewritten or crafted over the past thirty years.
The reason for this was is fairly obvious - in a system of state ownership, there was little use for a robust legal system. And in the interim, rights that we take for granted in the West have very slowly been enacted as law in China.
As an example, it was not until 2007 (157) that China had a recognized right to personal real property that was easily transferred, despite its consideration in 2002 (158).
I guess we should not demand too much from the Chinese legal professionals so early. Then again, a minimal level of proficiency would be nice.
What corporations really don't want you to know, however, is that in the wake of the opening up of China's legal system, the system is actually filled with under-qualified (159) PRC military officials with no real legal experience.
Boston Power Trusts China's Laws
I wonder how much trust a company like Boston Power (160) has in China's legal system. Surely they must know that as of 2003, only ".. 40 percent of Chinese judges had earned a 4-year University degree.. a 21 percent increase since 1998" (161)
It's true. As of 2003, only 40% of Chinese judges had earned a proper four-year degree, not to mention seven years of college as ours do?
This may explain the intricacies of the legal profession in China. Worse yet, these men and women could potentially be handling sophisticated cases dealing with intellectual property laws in cases involving international trade.
Surely this has to be wrong.
How can Boston Power expect adequate legal representation in a country where the legal staff is so poorly trained?
Sadly enough it is true. Count yourself lucky if these 'leaders of Chinese justice' near your location in China have achieved a degree, for depending on where you are in China, rendering yourself to the mercy of the court system is akin to 'legal roulette'.
An example of this would be the fact that in Shandong, the judiciary is highly qualified (162). However, places like this are in the minority.
In Lanzhou, for example, only 23% of the judges held a bachelor's degree or higher (163), and in other areas that percentage drops to less than four percent. And if you do wind up in such a place, it is likely that the 'courthouse' may appear more like a cubicle than what you may be expecting.
In the less developed regions where much of the outsourcing of low-paid labor occurs, what we could call a proper legal proceeding never really occurs.
"Some of the courtrooms are not even courtrooms: tiny offices or basement rooms without a judge’s bench or jury box... Nearly three-quarters of the judges are not lawyers, and many – truck drivers, sewer workers or laborers – have scant grasp of the most basic legal principles. Some never got through high school, and at least one went no further than grade school…" (164)
And if that is not enough to make you fearful of Chinese courts, then consider that for three-quarters of all Chinese justices that are not lawyers, they receive six days of initial training.
And far from being an all out assault on judicial know-how, the entire process ends with the administration of a True and False test. The test is so simple that not one candidate had failed, as of a few years ago (165).
The last thing I would bet my business on is a judge who passed a true or false pop quiz to get his judicial credentials.
And even though the Chinese are looking to improve their judiciary (166) through 'training', the system is glutted with a combination of youthful judges with little to no experience, and those who received their position from their communist party credentials.
GM Learned About Chinese Law the Hard Way
Do you suppose GM learned this first hand when they lost an IPR suit against China's Chery Automobile Company?
Chery produced a QQ that seemed identical to a GM counterpart (167). Unfortunately for GM, they lost the suit.
I wonder if the quality of the judiciary had anything to do with this?
I just have to wonder that if a company like GM, with all those high powered lawyers, end up blowing a slam dunk case like this, then how can Applied Materials (169) expect to protect their trade secrets as they enter the Chinese market?
Perhaps they do not know how prevalent corruption and bribery is among Chinese attorneys and judges? (170)
Who knows - maybe I am making too much about the court system, for according to Jean Chrétien and Paul Martin in reference to China's legal system:
"Those who hear the case do not make the judgment, and those who make the judgment do not hear the case."
The implication is that the decisions taken by the courts actually come from "judicial committees" (171) made up of communist party members. And all that is left for the judges to do is rubber stamp a per-ordained decision (172).
A fundamental problem is that the courts are under the leadership (173) of the communist party (174). And if this is not enough to make you blink, remember that all Chinese lawyers must pledge a loyalty to the party (175), a thing they do not take lightly in China.
Its a good thing that I am not calling the shots in America, for it would appear that the odds are stacked against us if we trade with China.
The judiciary is weak, and unqualified to handle some of the finer points of law. Aside from having party loyalty, they seem to offer little in terms of legal value to the judicial process.
But then again, having the backing of the single party - the only law making body - can be considered a virtue can't it?
Think of it like this. Sure, the communists may really be as bad as it appears from their actions, and sure we were brought up thinking of them as the enemy, but imagine the freedom that companies like Fruit of the Loom and Goodrich really have while attempting to do business in China under these conditions.
When compared to other countries rife with democracy, China offers direct access to the only game in town. Rather than worry about whether the next leader will be a Republican or Democrat, the only worry about doing business in China is how long the regime will maintain its power.
How refreshing it must be to know that in a one-party state, considerations like two-party political infighting, or the emergence of an annoying third party, are never a consideration.
Yes - that's sarcasm.
References & Image Credits:
150 - Wikipedia.com
151 - Chinese Culture
152 - Wikipedia.com
153 - Devenny, on file with current author "In addition to this, the Communist party of China abolished all of her predecessors rules which, left a substantial legal vacuum that ultimately had to be filled by whatever authoritative materials decision makers had at hand, including Party newspaper editorials, policy documents, and leaders' speeches..."
154 - NPR.org
155 - Devenny on file with current author
156 - Devenny on file with author
157 - Passed in 2007
158 - First published for consideration
159 - Devenny from Peerenbm on file with current author
160 - Smart Planet
161 - Cecc.gov
162 - Devenny on file from Peerenboom with current author.
163 - Devenny Ibid
164 - Devenny ibid
165 - SSRN.com
166 - In order to improve their judiciary China sent over 200,000 judges for professional training from 1997-2002
167 - China Daily
168 - Facts and Details
169 - NY Times
170 - Joaag.com
171 - Jean Chrétien and Paul Martin, “THE CHINESE “JUDICIAL SYSTEM”: A FAIRY TALE OF BEIJING
172 - ZHONG JIANHUA* & YU GUANGHUA, ESTABLISHING THE TRUTH ON FACTS: HAS THE CHINESE CIVIL PROCESS ACHIEVED THIS GOAL?
173 - ZHONG JIANHUA* & YU GUANGHUA, ESTABLISHING THE TRUTH ON FACTS: HAS THE CHINESE CIVIL PROCESS ACHIEVED THIS GOAL?
174 - Jean Chrétien and Paul Martin, id
175 - ZHONG JIANHUA* & YU GUANGHUA, ESTABLISHING THE TRUTH ON FACTS: HAS THE CHINESE CIVIL PROCESS ACHIEVED THIS GOAL?
176 - No More Chinese Communist Party
177 - Rare Metal Blog