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China strengthens classification of state and commercial secrets


12 May 2010

But foreign companies little wiser as to what information will be off limits  

  • Recent developments in the law concerning the protection of state and commercial secrets by Chinese authorities and enterprises promise a more strictly regulated approach to classification, with more precise classification and labelling standards and the transfer of greater authority over classification decisions to higher levels within the administrative regime.

  • Regrettably, neither of these two recent developments provides any greater clarity or limits with respect to the range of information and material caught by commercial and state secrets definitions.

  • Companies operating in the PRC should ensure that they maintain a comprehensive suite of internal compliance policies in order to prevent exposure to administrative and criminal penalties.

One of the key legacies of the conviction in March 2010 of Stern Hu and several of his former colleagues at the Australian mining giant Rio Tinto is a distinct feeling of apprehension amongst the foreign business community as to the risk of criminal liability for possessing and obtaining certain types of sensitive information. Over the past nine months, the arrest and eventual jailing of the Rio Tinto employees have brought two controversial aspects of the PRC legal system under the microscope: the PRC state secrets regime and laws concerning commercial secrets.

Against the backdrop of this widespread concern, the last few weeks have seen significant developments in each of the legal areas implicated in the Rio affair. On 26 April 2010, the State Assets Supervision and Administration Commission (SASAC) issued its Interim Provisions for the Protection of Commercial Secrets by State-owned Enterprises under the Administration of the Central Government (the Interim Provisions). Then, on 29 April 2010, the Standing Committee of the National People's Congress passed its long-awaited amendment of the PRC Law on the Protection of State Secrets (the State Secrets Law). These new rules aim for clearer identification and greater consistency in the handling of classified information, and a more precise delineation of the authority of different levels within the administrative hierarchy to determine what is classified. Nevertheless, for those seeking more predictable standards as to what information will be classified by relevant workplaces in China, the new rules do not appreciably narrow or clarify the definitions contained under existing laws and regulations. Companies and individuals in China will therefore need to maintain a strong suite of internal compliance policies in order to protect themselves from exposure to criminal and administrative penalties.

Please visit our "China strengthens classification of state and commercial secrets, but foreign companies little wiser as to what information will be off limits" for the full story.


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