With the media recently paying so much attention to foreign (read American and British) businesspeople getting in trouble in China, my firm’s China lawyers have been getting a large number of calls lately from worried Americans based in China. These callers are asking the following kinds of questions, and we are giving the following kinds of short answers (needless to say, our long answers are much more nuanced):
1. Should I leave China? Not unless you or your company have violated Chinese law in such a way that you are at risk for going to jail. Let’s talk about whether or not that is the case…
2. But isn’t China arresting innocent foreigners? Not as far as we can tell. We do not have all of the facts we would need to answer this question with any sort of certainty, but it appears that China is going after foreigners it honestly believes have violated Chinese law. We see so many foreign companies operating in violation of Chinese law that we almost have to believe that no matter what the reason is for China’s increased crackdown against foreigners, there is no need for China to start arresting people without at least some legal basis to do so. So if you are completely innocent, you should be fine.
3. What about my D&O insurance, that will cover me won’t it? Not exactly. Those policies are designed to pay for your defense (usually) and maybe any fines with which you get it, but they don’t do a thing to help keep you out of a Chinese jail.
4. But if they come after me, I’ll have time to just leave on an airplane right? Very doubtful. First off, you probably will not have any advance notice. Second, even if you did, the odds are pretty good that China visa control would stop you at the border.
5. Is this crackdown really any worse than it’s always been? We are not sure. It feels like it China is truly getting serious this time around, but that is always hard to gauge. Nobody really knows why exactly the government has taken its enforcement to this new and higher level, but we think that it is mostly to show the populace that it is doing what it can to protect them from the rich and the powerful and the foreign. This sort of message always plays well, and so we do not believe that it will be ending at all soon.
6. What should I do to avoid going to a Chinese jail? Don’t violate the law. More importantly, make sure nobody else in your company is violating the law. Don’t assume that you know what the law is either. You really should have an audit done of your business to make sure that it is operating fully above board.
7. Am I crazy to be worried? You’d be crazy not to be worried. Your worry will lead to you and your company taking necessary steps for protection, so it’s a good thing. Just don’t worry too much, and don’t let it paralyze you. Again, it just does not seem that China is acting randomly here.
8. But what about Chinese companies, aren’t they all doing what these foreigners are getting arrested for? Yes, but so what? How will that help you?
7. Should I leave China right now? See numbers 1 and 4 above.
Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Chicago, Beijing, and Qingdao. He is also a co-editor of the China Law Blog. You can reach him by email at firstname.lastname@example.org.