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By Elizabeth M. Lynch, February 20, 2012

While Apple’s alleged labor abuses at its factories in China have been the talk of the press – both in the U.S. and in China – ignored has been China’s labor abuses in Africa.  But two weeks ago, Seton Hall School of Law, which is quickly establishing its China law credentials in the tri-state area, hosted a timely and informative discussion on labor abuses at Chinese state-owned copper mines in Zambia.  Like western consumers – and increasingly China’s middle class – hungry to get their hands on the newest Apple product, China, with its rapid growth, is desperate for natural and mineral resources.  Seton Hall‘s event, “Labor Abuses in Zambia’s Chinese State-owned Copper Mines,” examined the issues that arise when a country uses another to feed its insatiable hunger and raised questions about what is the legal and moral responsibility of China in its Zambian mines, the responsibility of the Zambian government to its own people, and the role of the international community, which itself hasn’t shied away from exploiting African nations in a similar manner for their own gain.  Below, James J. Baber, a first-year law student at Seton Hall, reports on the February discussion. 

To listen to the audio of the entire discussion, please click here. 
Length: 1 hour 51 minutes

China's relations with Zambia is largely about copper

Phelim Kine on Chinese Abuses of Workers’ Rights in Zambia

By James J. Baber*

On February 6, 2012, Phelim Kine, a Senior Asia Researcher for Human Rights Watch, spoke at Seton Hall Law about his experiences investigating the business practices of Chinese corporations investing in Zambia’s copper mines.  Mr. Kine presented the official Human Rights Watch (“HRW”) report “You’ll Be Fired If You Refuse”: Labor Abuses in Zambia’s Chinese State-owned Copper Mines“.  The event was hosted by Seton Hall Law Professor Margaret K. Lewis, a Public Intellectuals Program Fellow with the National Committee on US-China Relations.  Mr. Tom Kellogg, Program Director and Advisor to the President of Open Society Institute, also took part, offering commentary on the report.

The Human Rights Watch report details the persistent abuses in Chinese-run mines, including poor health and safety conditions, regular 12-hour and even 18-hour shifts involving arduous labor and anti-union activities, all in violation of Zambia’s national laws or international labor standards. The four Chinese-run copper mining companies in Zambia are subsidiaries of China Non-Ferrous Metals Mining Corporation, a state-owned enterprise under the authority of China’s highest executive body. Copper mining is the lifeblood of the Zambian economy, contributing nearly 75 percent of the country’s exports and two-thirds of the central government revenue.

The discussion focused on HRW’s concerns regarding Chinese business practices overseas. A central question is whether the Chinese government or Chinese state-owned firms are effectively “exporting” the kinds of abuses – of labor rights and rights of freedom of expression and association that occur all-too-frequently in China – to foreign countries which are targets of Chinese investment.

Mr. Kine began by speaking about labor practices in the Chinese-run copper mines in Zambia.  China has had for some time a massive presence in Africa, and the copper mines in

Zambian copper miners

Zambia are an extension of this long-term investment.  The driving force behind this modern day scramble for Africa is a desire of the Chinese government to both secure new markets and to maintain a stable flow of resources for its rapidly expanding economy.  According to Mr. Kine, despite the badly needed foreign investment and job opportunities that the Chinese investment brings to Zambia, the relationship leaves something to be desired from the Zambian workers’ perspective.  Mr. Kine stated that the conditions in some mines were found to be a “flagrant violation of both Zambian law and international law.”  HRW interviewed numerous workers to obtain first-hand information about the miners’ working conditions.  The HRW investigators uncovered various abuses of workers’ rights, ranging from the firing of workers who refused to work in hazardous areas to the manifest reluctance of the Chinese firms to provide their workers with proper safety and protective equipment.  Despite the issues and clear dangers involved, however, few of the miners quit these jobs because of the high double-digit unemployment in Zambia.  [See CIA Handbook for a review of Zambia’s economy]

In total, the HRW researchers interviewed 170 people and found three main problems: abuses of the miners’ legal rights to health and safety, violations of overtime pay requirements, and what Mr. Kine called a “pronounced anti-union sentiment” in the Chinese mines.  The miners were routinely denied access to, or left unsupplied with, personal safety equipment like protective clothing and respirators.  Mr. Kine stated that workers at the Chinese mines were also paid “one third to one sixth less than their international competitors.”  In addition, the Zambian miners were severely discouraged from associating with one of the two national unions, thereby depriving the miners of the right to associate.

After Mr. Kine concluded his initial presentation, Tom Kellogg raised additional questions and offered comments. Mr. Kellogg spoke about the common perception of the local Africans that the Zambian government encouraged the influx of Chinese investment and thus the Zambian government gave only lax scrutiny to the mines’ labor practices.

Despite the Chinese government’s history of bluntly refuting international criticism, Mr. Kellogg noted that the Chinese government is beginning to present a more evolved response to international criticism.  He specifically mentioned the detailed response of Chinese authorities with regard to the letter from HRW detailing reported issues within the mines.  Mr. Kellogg speculated on whether or not such a response would have happened five years ago.

The microphone was then returned to Mr. Kine for response.  He responded to Mr. Kellogg’s suggestion of Beijing’s possible new openness to international criticism as opposed to the traditional stonewalling.  He noted that HRW had in fact been able to speak directly with the China Nonferrous Mining Corporation in order to address alleged violations of the Zambian workers’ rights.  Mr. Kine also highlighted that all of the Zambian workers with whom HRW spoke stated that they were happy to have jobs despite complaints about the working conditions.  Zambia suffers from both high unemployment and an AIDs epidemic.  And the jobs and infrastructure provided by the Chinese companies are significant assets to the African nation.

Professor Lewis then commented that the Zambian laws regarding mining were quite good on paper but, as noted by one of the interviewees in the report, seemed to be disconnected from the reality on the ground.  Other questions revolved around whether the miners were aware of international labor laws and whether foreign consumers might play a more pronounced role in demanding better labor practices in copper mines.

Professor Lewis also commented on Beijing’s soft power push to present a new image by spreading Chinese culture through the Confucius institutes and classrooms.  The Chinese government is being more responsive to international human rights concerns, but Professor Lewis noted that the current crisis in Syria shows that Beijing is still very concerned about not being seen as promoting popular uprisings or infringing on a state’s sovereignty.

Mr. Kine then noted that the Zambian government has very limited resources at its disposal to combat the issues arising out of the Chinese-owned-and operated mine facilities.  A lack of

Workers strike at Chinese mine in Zambia

money and manpower coupled with the apparent lack of importance that the Chinese government places on human rights in its overseas endeavors is creating a very difficult situation for the Zambian miners.  However, Mr. Kine did find cause to express some hope for the future.  Recently, a Zambian government official had threatened to shut down a mine (albeit a privately invested mine, not a Chinese state-invested one) that did not conform to safety codes.  Mr. Kine thought that this action might indicate that the Zambian government will in the future be better able to provide for the safety of Zambian citizens who work in the copper mines.  Mr. Kine, in fact, called the Zambian threat to close the mine, “a shot across the bow” that may help convince the Chinese government to start toeing the line with more vigor.

The presentation concluded with a lengthy question and answer segment, in which the three experts tackled various questions both about China in general and the discussion at hand.  One questioner asked whether the Chinese companies could in fact be forced out of their mines for rampant safety violations.  Mr. Kine stated that this approach was “worth testing” because the Zambian government needs to use its leverage more directly, instead of engaging in mere fiery rhetoric. He then again referenced the renewed push by the Zambian government to assert its authority by threatening to close one of the mines.  The discussion ended on a high note, with the three presenters presenting their “wish lists” for the future of change in China.

* The author is a first-year Juris Doctor student at Seton Hall University School of Law, and received his BA in Philosophy from the University of San Francisco. Mr. Baber is a member of Seton Hall’s International Law Society.

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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, January 25, 2011

In April 2009, the Chinese government released its first  National Human Rights Action Plan (2009-2010) ostensibly to better protect the civil rights and civil liberties enshrined in the Chinese Constitution, such as the right to a fair trial, the right to question the government and the need to eliminate torture in police interrogations.  With such a bold plan, the question remains – how did China do in fulfilling the promises of its first Human Rights Action Plan. 

Human Rights Watch (“HRW”), in its recent report, “Promises Unfulfilled: An Assessment of China’s National Human Rights Action Plan,” attempts to answer that question and to explain how a country which promotes economic freedom has seen a recent regression in terms of civil liberties. 

HRW China researcher Phelim Kine will present the findings of “Promises Unfulfilled” in a discussion at Seton Hall School of Law in Newark New Jersey on February 9, 2011.  Hosted by Chinese legal expert and Seton Hall Law Professor Margaret K. Lewis and with participation from the Open Society Institute’s China Program Director, Thomas Kellogg, the discussion should prove to be an interesting conversation of an issue that was front and center at President Hu Jintao’s recent visit to the U.S.  RSVP is appreciated (http://law.shu.edu/chinahumanrights). 

And just as a shout out to HRW – their reports are pretty amazing and there are only a few other organizations that are able to produce such accurate and informative reports regarding what’s happening on the ground in China.  Phelim Kine is not to be missed!

Wednesday, February 9
1:45 p.m. – 3:45 p.m.
Seton Hall School of Law
1109 Raymond Blvd.
Newark, NJ
RSVP here: http://law.shu.edu/chinahumanrights
Directions: Seton Hall School of Law is a 5 minute walk from Newark Penn Station which is accessible from NYC via the PATH train or NJ Transit.  More specific directions can be found here – http://law.shu.edu/About/Directions.cfm