Archive | 7:50 pm

That Chinese Venture Could Be Your Last

9 Feb

That sarcastic swipe at Beijing that includes summary judgment and execution for the most human offense has a basis in Chinese criminal law.

Every year, China approves 25,000 or more foreign owned businesses in China. Many of these businesses engage in manufacturing in China and an increasing number sell their products in China. It is simply a fact of life that manufacturing and sale of products can result in damages to the public and to consumers. Modern businesses attempt to reduce such damage to a minimum, but even in the best of situations, damage can occur. In the West, liability for such damage is usually resolved within a well-developed system of private tort law. Foreign managers in China normally assume the same is true in China and that they will never be held personally responsible for damages caused by the company.

The San Lu case shows this is not true. Under the Chinese system, causing damage can be a crime, and the person who is responsible for the damage can be held criminally liable. This is true even when the manager had no direct involvement in the activity that caused the damage. A manager whose duties included supervision of the specific activity can be held liable even if the manager had no actual knowledge of the criminal acts. The treatment of the San Lu defendants illustrates this principal. The defendants were the Chairman of the Board and three general managers of the group company. The crime was committed by a subsidiary company over which none of the defendants had direct management control. However, the lower level managers who actually committed the crimes were not prosecuted. Instead, the senior managers of San Lu were prosecuted and convicted. They are now facing life imprisonment or death for actions that they did direct and over which they may have had no control.

This all sounds very acceptable in a relative way, where a legal system on an alien planet evolves in a different way from a human society modeled on America’s. Until, that is, one faces this dilemma: “Is the financial benefit to the company worth the potential for an involuntary stay in a Chinese prison, or worse?” It’s the Wild Wild East!

Some of these situations seem a bit hard to control so maybe foreign managers should have a light bag packed somewhere at home/at the office and know the best exit strategy. I have no affiliation with them but there are companies in the region who specialize in emergency evacuation.

I wonder what the legal penalties would be for aiding and abetting?

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