Kidnapping in China- business people beware….
Got an upcoming business meeting in China? Excited about seeing the dragon firsthand?
Well, you may just want to make sure that the firm you work for is not in arrears with a Chinese company before you go. After all, it is rumored that China is essentially legalizing the kidnapping/detention of foreign business people.
Beijing is mulling over a law allowing for foreign nationals to be “detained” if their firm owes a Chinese company money. Unfortunately, in this sense, “detained” means little more than being kidnapped and held for ransom until the Chinese firm is satisfied.
If you think I am being melodramatic, then consider the case of American, Chip Starnes (1), for this is precisely what happened to him, and that was before the law was passed.
Concerned? You should be if you are doing business with the Chinese.
Being Held Hostage
In late June of this year, Chip Starnes was “held hostage” by the workers of his firm – Specialty Medical Supplies China – for almost one week. His Chinese employees demanded a severance payout that their colleagues had gotten, even though they were not being laid off.
These people essentially held Mr. Starnes hostage until the “ransom” was paid. Rather than condemn the illegal act, Beijing claimed that Mr. Starnes was not being held against his will. In what can only be seen as a cruel joke, Beijing officials said that he was free “to move around the work facility, he just could not leave the premises”.
At the time, legal experts were up in arms with China’s lack of regard for the law, but now have little to worry about as China is considering making this legal. Perhaps I have gotten ahead of myself and should start at the beginning.
Chip Starnes is the co-founder of a company that makes and sells medical equipment. His company had been manufacturing in China and employed over 100 people there. In order to rationalize his business, Mr. Starnes was moving his plastics division to India. Inline with this strategy, his firm laid off a few dozen Chinese employees and then paid them a generous severance package.
According to Mr. Starnes, upon hearing of the payout, those who remained employed demanded the same thing, even though they had not been severed. As they were not being let go, Specialty Medical did not offer the other employees a cash payout.
It all came to a head when Mr. Starnes was prohibited from leaving his manufacturing facility. The Chinese workers told him he could not leave until he paid the remaining employees the same amount he had given those he had laid off. Rumor has it that those who had not been severed heard that Specialty Medical Supplies was closing down and that sooner or later they too would be out of a job.
This being the case, they decided to force the issue and demand compensation. Mr. Starnes explained that he was not shuttering the plant and that they would all still be employed. His words did nothing to dissuade the workers and they refused to let him go.
Let’s be clear about this, according to Mr. Starnes’ account, he was being unlawfully held by his own employees. In fear that the firm would be closing, they demanded a “settlement” even though they still had jobs. Upon his illegal detention at his plant, the workers allegedly threatened him and refused to allow him to sleep.
At the time of his detention, the act was illegal under Chinese law.
“The 1997 Criminal Law contains a new provision punishing kidnapping for ransom by up to life imprisonment (Art. 239). The taking of debt hostages, however, is not considered a type of kidnapping for ransom. Instead, it is assimilated into unlawful detention (Art. 238) and punished by no more than three years’ imprisonment.” (2)
When is kidnapping not kidnapping?
Unfortunately, kidnapping business people is one of China’s dirty little secrets that most business people avoid divulging to corporate investors.
“When is kidnapping not kidnapping? Apparently when it’s for the purpose of getting a legitimate debt paid. This, at least, seems to be the social understanding of kidnapping in China, and there’s even legal support for it (the law falls it unlawful detention in that case). The latest case is reported in the Dongguan Times (Chinese | English): a couple can’t pay the hospital bill for the wife’s delivery of a baby, so the hospital is holding the baby hostage until the parents pay up. They’ve had it for over 100 days so far.” (3)
Returning to the Starnes case, for the sake of argument, let’s assume that the Chinese workers had kidnapped Mr. Starnes for back pay, (4) as some have claimed. Even if this were the case, the Chinese employees had no legal right to hold the him hostage.
Unfortunately for him, this is just business in China. Due to a sketchy legal system and lack of trust in the judiciary, Chinese rely on relationships, threats and often violence in order to end commercial disputes. (5)
These measures are extra-legal, however, and not condoned by Beijing. Be that as it may, the act of the Chinese employees exposes the true risks of doing business in a semi-lawless China.
Even more disconcerting is that this type of thing is not uncommon in China. As a matter of fact, things are so bad that one prominent lawyer has blogged that if you do owe a Chinese firm money, stay out of China. (6)
His point is that although the “kidnapping” is illegal per se, that may be of little consolation, as in the case of Mr. Starnes. To make matters worse, it seems as if things are getting worse, as a risk management firm has seen a “sharp increase” in hostage situations in China over the past few years. (7)