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By Elizabeth M. Lynch, July 24, 2011

Birthday Wishes from Chuck Norris!

Last week marked the second anniversary of China Law & Policy’s founding – happy birthday China Law & Policy!

So how has year two been going?  One of the greatest challenges of this past year has been balancing working a full-time, non-China job with blogging.  It has not been easy and our goal of publishing at least one article a week sometimes was not met; in year two, we published 36 original blog posts.  But we continue to keep the scholarship level high, allowing for our readers to rely on the accuracy of the information in our posts.

In terms of readership, year two saw a marked growth.  China Law & Policy can now boast over 350 subscribers, over 200 Twitter followers and over 3,000 hits per month.

In year two we also experimented with Twitter, creating an automatic weekly blog post of our tweets.  We used this to recommend other articles our readership might find interesting.  In general, this Weekly Digest has not proved popular (although if your opinion differs, please let me know).  Instead, we have now have our tweets appearing in real-time on the left sidebar under “Recommended Articles.”

Our three most popular articles are more recent pieces.  By far, the overwhelming favorite article was “In Defense of Dylan in China: Come Writers and Critics Who Prophesize with Your Pen,” a critique of Maureen Dowd’s Bob Dylan in China op-ed piece.  Of more substance perhaps was our second most popular piece, “Don Clarke & Li Tiantian: Two Takes on the Jasmine Revolution in China,” comparing two pieces on the Jasmine Revolution in China.  Rounding out the top three was “Reality or Myth: China’s Rule of Law & Its Recent Assault on Lawyers,” an article alerting the world of China’s random abduction, abductions that still continue, of rights-defending lawyers.

One of my personal favorite posts was the book review of Nien Cheng’s Cultural Revolution memoir “Life & Death in Shanghai.”  Just discovering Cheng’s book was a pleasure, reading her story of survival was inspiring, but soon after the post, one of Cheng’s good friends in the U.S. emailed me to tell me that he was moved by my review.  He believed that if Cheng was still alive, she would have been happy to know that her book was still moving people.

When I created China Law & Policy, the goal was to provide a different voice to the China debate and to explain in easy to understand terms, why non-China people should care about some of the underlying issues about China’s rule of law development.  For the past few months, with the arrest, detention and abduction of rights-defending lawyers, human rights and rule of law has largely been a focus of this blog.  I will likely continue to focus on these issues as on some level, rule of law cannot be said to exist if rights-defending lawyers, those lawyers who keep the government in check, are continuously harassed.  However, in year three we will seek to cover other areas of legal development in China.

Also, to provide our readership with a more diversity of voices, in year three China Law & Policy will resume its podcast series and interview others on their thoughts of China’s legal development.

Most of all on our second anniversary, China Law & Policy would like to thank all those friends and colleagues who have continued to support our efforts.  To those who provide article ideas, edits, and challenges to some of our arguments, your advice, criticism and encouragement are always appreciated and we hope that you continue to engage us.

As always, China Law & Policy encourages readers to participate in the creation of this blog, either through writing blog posts or giving us ideas on what areas or issues to cover.  Have an idea?  An article?  Feel free to email: elynch@chinalawandpolicy.com

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By Elizabeth M. Lynch, July 3, 2011

• Great Party, but Where’s the Communism? – NYTimes.com – http://www.nytimes.com/2011/07/01/opinion/01iht-edminxin01.html?_r=1&src=tptw #
• RT @chinahearsay China Eases Rules That Irked Foreign Firms | Wall Street Journal — re: indigenous innovation http://lnkd.in/etSbAu #
• How Unequal Has Chins Become? http://www.bbc.co.uk/news/business-13945072 #
• Diageo Loves It Some Baijiu, and I Have Some Questions | China Hearsay – http://bit.ly/iM1nId @chinahearsay #
• RT @pjmooney AP’s Gillian Wong on Hu Jia and others: Freed critics not sign China is soft on dissent http://bit.ly/l2fc22 via @BostonUpdate #
• Cybersecurity in US-China relations – Adam Segal – http://t.co/3KNzASP #
• China: Lawyers for murder suspects detained under controversial law http://t.co/3KnKfy3 via @globalvoices #

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By Elizabeth M. Lynch, June 30, 2011

Getting caught for tax evasion

Originally posted on the Huffington Post

Taxes are a tricky business in any country, let alone China.  Tax codes are usually overly complicated and let’s face it, if you are making money, you can afford to hire accountants who think “creatively.”  American country singer Willie Nelson owed close to $32 million dollars in back taxes when the IRS declared one of the tax shelters his accountant was using to be in violation of the U.S. tax code (he later settled for $16 million, raising the majority of that money through the sale of his album entitled “The IRS Tapes: Who Will Buy My Memories?”); Leona Helmsey, the billionaire New York City hotel operator, served four years in prison for tax fraud (Helmsey allegedly enlightened her staff on a regular basis that “We don’t pay taxes.  Only the little people pay taxes.”); and Al Capone, mafia hitman, bootlegger and perhaps the most famous tax evader of all time, served his longest sentence, seven years, for tax evasion.

When Chinese artist and dissident Ai Weiwei was freed from police custody last Wednesday, the question was raised, most notably by Brian Lehrer in his interesting interview with Human Rights Watch’s Phelim Kine: “are you sure his detention was for being a critic of the government and not for evading taxes?”

Since his release, the Chinese government has vaguely issued more information about the investigation that landed Ai in criminal detention for the past two and a half months.  Although neither formally charged, arrested nor indicted, Chinese officials stated that Ai was held for “failure to pay a ‘huge amount’ of taxes and for willfully destroying financial documents.”  In particular, officials alleged that Ai’s company, Beijing Fake Cultural Development Ltd. failed to pay 5 million RMB (USD 770,000) and owed an additional 7.3 million RMB (USD 1.1 million) in penalties.

But the question remains, what is Ai’s individual liability for a corporation’s tax evasion?  Is he financially liable?  Can

In 2008, Ai was a Chinese government darling, designing the acclaimed Birdsnest Stadium

he be criminally prosecuted?

The answer is….you betcha,  if it is determined that Ai had some form of “direct responsibility” over Beijing Fake Cultural Development Ltd.

Article 201 of China’s Criminal Law criminalizes tax evasion (Amendment VII to the Criminal Law Amends Article 201).  Like many laws in China, the actual law is not the end all and be all.  Because China is a civil law country, often the generalities of the national law are fleshed out in various agencies’ “interpretations.”  Here, Article 201, is further defined through the “Interpretation of the Supreme People’s Court on Some Issues concerning the Specific Application of Laws in the Trial of Criminal Cases for Tax Evasion and Refusal to Pay Tax” (“SPC Interpretation”).

The SPC Interpretation further defines tax evasion as: (a) forging, altering, concealing or destroying without authorization accounting books or supporting vouchers for the accounts; (b) overstating expenses or not stating or understating income in accounting books; (c) being notified by the tax authority to file tax returns but refusing to do so; (d) filing false tax returns; and(e) after paying the tax, fraudulently regaining the tax paid through the adoption of deceptive means such as fraudulently declaring the commodities it produces or operates as export goods.

But while Article 201 and the corresponding SPC Interpretation only uses the term “taxpayer,” Article 211 of the Criminal Law clarifies liability when the taxpayer is a corporation or business unit: “Units committing offenses under Articles 201, 203, 204, 207, 208, and 209 of this section shall be punished with fines, with personnel directly in charge and other directly responsible personnel being punished according to these articles, respectively.”

Thus if Ai Weiwei is determined to be a “personnel directly in charge” (直接负责的主管人员) of the Beijing Fake Cultural Development Ltd. he could potentially be criminally and economically liable.  Ai’s family has maintained that Ai cannot be on the hook because he is not the company’s “chief executive or legal representative.”  However, the Chinese for “personnel directly in charge” is not limited to just the chief executive or legal representative; rather it is anyone in the company with management responsibility (主管人员 is better translated as executive officer).

Ai Weiwei - a directly responsible person?

Furthermore, the second category “other directly responsible personnel”(其他直接责任人员) contemplates a much broader group of people that could potentially be anyone affiliated with the company that has some type of vaguely-defined “direct responsibility” over the company.

Potentially, there could be some validity to the alleged charges against Ai for Beijing Fake Cultural Development Ltd. if the company did in fact evade taxes.  The Chinese government has yet to offer any evidence of the company’s tax evasion.  The company’s attorneys have appealed the charges of tax evasion and have requested a hearing before the Beijing Tax Bureau.

But if there is tax evasion, Ai’s liability will ultimately be determined by defining what his precise role is within the company.  According to friends and family members, Beijing Fake Cultural Development Ltd. merely dabbled in small design projects; the company was not involved in selling Ai’s work.  In fact, according to Ai’s family, it is his wife who is registered as the company’s legal representative not Ai; Ai was a mere consultant.

And while the Chinese government could potentially have a legitimate claim against Ai for the company’s tax evasion, it’s illegal detention of Ai, the fact that there is still no official indictment, the fact that the government continues to hold incommunicado the company’s accountant, the one person who could explain the company’s actual tax filings, and that the government went after Ai instead of his wife, the legal representative of the Beijing Fake Cultural Development Ltd., makes one suspect that the potential charges against Ai are a legal long-shot.  Instead, political considerations – the need to silence one of Beijing’s most vocal and well-known critics – are the real reasons behind the prosecution of Ai.  Again, the rule of law in China takes a back seat to politics and Party supremacy.

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By Elizabeth M. Lynch, June 26, 2011

• Prominent Chinese activist released – Yahoo! News – http://bit.ly/mh0KS2 #
• Amid jail releases, Chinese journalist's sentence extended – Committee to Protect Journalists – http://bit.ly/mAikIW #
• Global Time – this is actually interesting – Ai's release not to do with foreign pressure – http://bit.ly/jFcByI #
• WSJ: Jerome A. Cohen on Ai Weiwei « U.S. – Asia Law Institute – http://bit.ly/k56184#.TgN2QleOP6U.twitter #
• Top Five Reasons Why China Will Be A Hot Topic In The 2012 U.S. Presidential Election | China Hearsay – http://bit.ly/lt8eOe #
• Letter from China: Ai Weiwei, Diplomacy, and Freedom : The New Yorker – http://bit.ly/kc7ccO #
• Media libels a matter for civil courts, not officials – http://bit.ly/jMzEN3 #
• Christian Bale In Zhang Yimou Chinese Sex Worker Film – http://bit.ly/jTiJOt #

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By Elizabeth M. Lynch, June 22, 2011

Ai Weiwei

For the past three months, the world has awaited news on internationally-known artist Ai Weiwei’s unlawful detention by Chinese authorities.  Originally taken into custody on April 3, 2011, Ai’s detention has remained shrouded in rumors as the rest of the world vocally called for his release.

Although not formally arrested, on May 21, 2011, the state-run New China News Agency reported that Ai was being investigated for evading “huge amounts” of taxes through his corporation, Beijing Fake Cultural Development, Ltd.  However, no official government statement confirmed this report and no arrest warrant was issued.

Finally, this morning, Xinhua News Agency, another state-run news outlet, announced that Ai was released on bail “because of his good attitude in confessing his crimes as well as a chronic disease he suffers from.”

Unlike in the United States, bail –or in Chinese qubao huoshen (取保候审) is not freely given in China.  As Prof. Jerome Cohen points out, the term bail is perhaps a misnomer in translating the Chinese since in China “bail” can be provided at any stage in the “investigation,” even before a formal arrest or an indictment as was the situation in Ai’s case (Siweiluozi also has a good piece on the inadequacies of translating qubao huoshen as bail).

If bail is limited in China, what are the circumstances in which it is given?  Prof. Cohen rightly points out that the consideration is largely political and has little to do with rule of law – it’s a good way for the Chinese government to get out of a difficult situation when international criticism mounts (Evan Osnos also has an interesting take on the impact of international pressure on Ai’s release).  But was Xinhua’s reason for bail – good attitude and a chronic disease – a legal basis for the rare reward of bail?

As a matter of fact, there is a basis in law.  Article 60 of China’s Criminal Procedure Law (CPL) makes clear bail may be granted in those cases where the “criminal suspect or accused…should be arrested but are suffering from a serious illness….”  Ai suffers from diabetes and during his ordeal, Ai’s family repeatedly expressed his concerns about his health to the international press.  So while the Chinese government likely made a political choice to release Ai, there is in fact a veneer of legality.  But the claim of “good attitude” for bail is found nowhere in the CPL.

But what is perhaps a more interesting question, is the validity of the alleged charges of tax evasion.  Ai’s company, Beijing Fake Cultural Development, Ltd., is a limited company – how is Ai personally on the hook for the company’s tax evasion?  Presumably there would be limited liability, so how are the authorities able to attribute the company’s evasion to Ai?   On that issue, tune in later, same bat-time, same bat-channel.

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By Elizabeth M. Lynch, June 12, 2011

• Student Executed for ‘Peasant’ Murder that Outraged China – http://bit.ly/lONALV #
• Jake Colvin: The End of China's Wind Subsidy Program and the Future of Global Clean Technology Markets – http://bit.ly/kn8LoT #
• How To Really Really Investigate A Chinese Company. : China Law Blog : China Law for Business – http://bit.ly/mMEoYi #
• FT – Beijing Must Avoid Giant Pop in House Prices sia Pacific – http://m.ft.com/cms/s/0/f4afb162-8f8a-11e0-954d-00144feab49a.html #

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By Elizabeth M. Lynch, June 8, 2011

Who received the invitation to the Legal Experts Dialogue?

One would think that after a six-year hiatus, the resumption of the U.S.-China Legal Experts Dialogue would receive a little more fanfare than a cursory four-sentence press release from the Department of State (“DOS”), issued on June 6, a mere two days before the big event.

For the past two years, almost every high-level discussion between the U.S. and China has raised the issue of the Legal Experts Dialogue (“LED”), with the goal of resuming the talks (last held in 2005).  When President Obama visited China in November 2009, the two countries’ Joint Statement directly stated that “[t]he United States and China decided to convene the U.S.-China Legal Experts Dialogue at an early date.”  Ditto for the Joint Statement after President Hu’s visit to Washington, D.C. in January 2011.

It wasn’t until April 28, 2011, at the Human Rights Dialogue, that anyone provided somewhat more of a hard date.  At a press conference, Assistant Secretary of State Michael Posner announced that the U.S. and China finally agreed to convene the LED in “June 2011.”  This vague date was reiterated a few weeks later in the statement issued at the conclusion of the Strategic & Economic Dialogue.

So why the lame press release about the LED?  It’s been a priority item in the U.S.’s negotiations with China.  One would think that finally being able to achieve the goal of actually having the LED and especially of hosting it in the midst of the Chinese government’s crackdown on rights-defending lawyers, would be a feather in DOS’s cap; something that they would want the world to know about.

Why remain mum on who these “experts” are and what they will be discussing?  Instead, DOS only states that there will be “government and non-government experts” who will “explore key legal issues of mutual interest.”  Could DOS be more vague?

There are occasions when the U.S. might achieve more by pressuring China behind the scenes.  In the case of Xu Zhiyong in 2009, it looks like that approached worked.  But the LED is a completely different beast – the existence of the Dialogue has long been made public and given that there will be non-government experts, it does not appear that there will be high-level discussions here on par with Hu-Obama talks.  It sounds like it is one group of lawyers talking to another.  Given some of the issues that have sprung up in the past few months, including the assault on public interest lawyers, China’s indigenous innovation policy, various WTO cases, and the criminal trials of U.S. citizens, it would be interesting to know what is on the agenda.

But in general, I do not hold out hope that the LED will produce any earth-shattering results, if it produces results at all.  While DOS has stated that there will be “in-depth discussions and practical cooperation on the rule of law” (yeah, I don’t know what that means either), it’s basically two days of meetings among strangers with translators in between.  How much can really be achieved?

And maybe that’s why the U.S. hasn’t given the LED the credit one would think it is due.  Maybe even DOS realizes that bringing over a delegation of Chinese lawyers and legal experts for a mere two days is likely a waste of taxpayer’s money.

I do think that more open dialogue between the U.S. and China is a good thing.  But there are better ways to increase the lines of communication between the legal communities in the two nations and assist China with improving upon its commitment to a rule of law.  Identifying and inviting reform-minded Chinese lawyers to the United States for a longer period of time – anywhere between three months to a year – is a better use of money.  Through that experience, a Chinese lawyer can see how our legal system functions, see the good and the bad, interact with U.S. lawyers, and determine which aspects if any should be replicated in China.

These types of sustained contact are what can best assist China with implementing a rule of law.  A two-day conference likely cannot.  But unfortunately, we won’t really know because nothing about the LED is publicly available.

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By Elizabeth M. Lynch, June 5, 2011

• RT @chinahearsay Steptoe & Johnson: “State-Owned Enterprises” Under the FCPA http://is.gd/8nEKDV #
• A new term? China must rise to the social management challenge – GlobalTimes – http://bit.ly/l77mp8 #
• China Isn’t Manipulating Its Currency, U.S. Says – NYTimes.com – http://bit.ly/kt8NeL #
• In China, Civil Litigation Being Quietly 'Harmonized' – China Real Time Report – WSJ – http://bit.ly/jMZljC #
• The Associated Press: Protests break calm in China's Inner Mongolia area – http://bit.ly/mg3s47 #
• Putting Mongolian protests into context – GlobalTimes – http://opinion.globaltimes.cn/editorial/2011-05/660386.html #
• FT – China Steps up TV Censorship http://m.ft.com/cms/s/0/a28a4614-8ad9-11e0-b2f1-00144feab49a.html #

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By Elizabeth M. Lynch, May 30, 2011

China's Jasmine Revolution?

In February 2011, the Chinese government began a quick and widespread crackdown on Chinese rights-defending (“weiquan”) lawyers and activists, abducting many for days to months on end, some subject to torture while in government custody.  The general narrative that has emerged to explain this recent crackdown is the Chinese government’s fear that an Egypt-like democratic revolution could occur in China, overturning the Chinese Communist Party’s one-party rule.

Make no mistake these extrajudicial abductions are not permissible under Chinese criminal law and like other countries, there are laws in China that restrict the government.  Under Chinese Criminal Procedure Law (“CPL”), a detention warrant issued by a public security organ must be presented when an individual is taken into custody (CPL Art. 64); either the family members or the employer of the detained individual must be informed of the reasons for the detention within 24 hours (CPL Art. 64); the first interrogation of the detained person must be conducted within the first 24 hours (CPL Art. 65); after the first interrogation, the detained person has the right to retain a lawyer and the lawyer has a right to meet with his or her client (CPL Art. 96 – note that this provision makes it legal for the first interrogation to be conducted without a lawyer present); and after 37 days in custody, the detained individual must either be arrested or released (CPL Art. 69).  Additionally, Article 238 of the Chinese Criminal Law criminalizes any unlawful detention or deprivation of personal liberty, imposing a harsher criminal sanction on state functionaries.

So the question remains, if the Chinese government just flouts these laws, why does it bother?

Rule of Law in China?

And what does this say about its progression toward a rule of law, a progression the Chinese government maintains is its goal?

Prof. Donald Clarke of George Washington University Law School came out with a rather thought-provoking essay last Thursday, seeking to answer some of these questions, and put China’s ‘rule of law’ development in some sort of perspective.  In “China’s Jasmine Crackdown and the Legal System,” Prof. Clarke dispenses with the conventional idea that China was ever on the path toward a rule of law.  Defining a rule of law as a system “where there are meaningful restraints on the powers of government” and that “those in power cannot do simply as they please,” Prof. Clarke maintains that the Chinese government never had the intention to be held accountable; its quest toward a “rule of law” for the past 30-odd years has just been about creating government efficiencies.  In 1978, to become a successful market economy, the Chinese leadership had to create some legal system since Mao had all but dispensed with law by the end of the Cultural Revolution (1966-1976).  But while these developments in the economic-legal sphere might have the looks of a rule of law, scholars are wrong to think that it was ever the government’s intention to be held accountable under a true rule of law system.  Many of the Chinese government’s recent actions, including the crackdown on rights-defending lawyers, exemplify the leadership’s anti-commitment to a rule of law.

Rights-defending Lawyer Li Tiantian

There is something to be said for Prof. Clarke’s assessment and in many ways it is accurate: the leadership appears unwilling to allow anything it deems “political” to be handled by the legal system and this appears to explain its harsh assault the past few years on rights-defending lawyers.  It’s commitment to a “rule of law,” a commitment it repeatedly states in various US-China dialogues, seems specious if it does not allow a space for rights-defending lawyers.  But Prof. Clarke’s analysis is very top-down and doesn’t take into effect the rights-defending lawyers themselves.  And this is where the other fascinating essay from last Thursday comes into play, Li Tiantian’s blog post “I was Discharged from the Hospital” (translation courtesy of Siweiliozi’s Blog).  Li Tiantian is a Shanghai-based rights-defending lawyer, taken into custody on February 19, 2011 and held incommunicado for three months, finally released on May 24, 2011.  In a highly allegorical essay, Li Tiantian recounts her captivity:

It’s been a while since I’ve been in touch. First, let me tell you a story.

One day, a hornet worried unreasonably that a little bird would stir up its nest. (As it happened, some distant hornet nests had recently been stirred up.) The hornet grabbed the little bird and began stinging it frenziedly. Unable to bear the hornet’s stings and thinking there was no point to suffering this ordeal, the bird realized that no one would gain anything and that there was no way to change the hornet’s ways. So, the bird kneeled down to the hornet and kowtowed in order to extricate itself. The hornet, knowing that the force of justice was on the increase in the animal world, didn’t dare do anything rash to the bird and came up with a plan that would satisfy everyone. It agreed to release the little bird, but only if the bird promised: (1) not to speak of the past few months; (2) not to damage the hornet’s reputation; and (3) not to urge other animals to stir up the hornet’s nest. Finally the bird was free. (…read more here…)

Li Tiantian’s publication of this blog post soon after her release belies her commitment to any kind of silence concerning her unlawful detention.  The fact that her blog post was pulled – likely by the Chinese government – a few days later is not surprising.  But her brazenness is.  After three months in custody, unable to communicate to the outside world, and subject to heaven’s knows what, Li still feels the need to speak; still feels the need to give push back to the government.

Prof. Clarke presents a government that doesn’t want to give people like Li Tiantian any space; but Li Tiantian has no plans to give up that easily.  True that since many of the lawyers’ release, most have kept out of the spotlight, but will they continue to do so?  And how can the Chinese government expect them to?

Prof. Clarke is right to contend that the Chinese Communist Party is not interested in a “rule of law” if it means that it will contain the Party.  But after 30 years of constantly reiterating – both domestically and abroad – the idea of a rule of law, sending lawyers, judges, and academics abroad to study Western countries’ legal systems, and inviting various foreign legal NGOs to establish offices in China and work with Chinese layers, some belief in a rule of law must have permeated  society, especially for academics and rights-defending lawyers, the beneficiaries of much of China’s rule of law programs.

Prof. Clarke compares the Chinese government to a well organized army: sure there are lots of bureaucratic rules that must be followed, but those rules are not intended to be followed by the commander.  For Prof. Clarke, an army, with all the rules that help it function, is in no way a rule of law society.

But running a society is different from running an army; unquestionable allegiance to hierarchy is not naturally found in society like it is among foot soldiers in an army.  Ultimately, Prof. Clarke’s essay raises another question: while the Chinese government has little interest in rule of law, will these rights-defending lawyers succumb and just disappear?  Li Tiantian’s essay upon her release heavily implies that the answer is no and that among some in China, there is a true commitment to a greater rule of law, even if not found within the ruling party.

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By Elizabeth M. Lynch, May 29, 2011

• Baidu vs. NYC Dissidents: A Cranky Postscript | China Hearsay – http://bit.ly/kQaGoP #
• Residence status influences students sitting national exams in Beijing – GlobalTimes – http://bit.ly/jiYQbL #