Four employees of the British-Australian company Rio Tinto have been given jail sentences for bribery and stealing commercial secrets by Shanghai’s No. 1 People’s Court on March 24 2010.  Australian National, Hu received ten years, and three Chinese colleagues received jail sentences of fourteen, eight and seven years. During the three day trial all four men pleaded guilty to accepting bribes but disputed the $13M they were charged in taking as kickbacks.  Mining giant Rio Tinto stood by its employees for many months, but immediately reacted to the verdict by firing all four of them.

Twice the Australian Prime Minister, Kevin Rudd cautioned the Chinese that “the world will be watching” the Rio Tinto trial, apparently insinuating that it should be showcase of transparency in legal process. The hearing was not open to the public. Australian Foreign Minister, Stephen Smith stated: “On any measure this is a tough sentence”. China is Australia’s largest trading partner. Bilateral resource transactions have insulated Australia from the global recession. The Rio Tinto four were detained in Shanghai last July in the midst of heated negotiations on iron ore pricing.

Take Away

• Once cases reach court in China there is usually little redress.  Companies should take preventative measures by training foreign staff about the way of doing business in China.  The rules are different to those at home.  Political influence is critical.  What is considered a trade secret in China, may be transparently available information in your home country.
• Forewarn local employees about what you expect of their business conduct in China. Larger companies have independent ethics officers and telephone hotlines to offer on the spot advice (see www.boeing.com under ‘Ethics’ then ‘Code of Conduct’) on everything from business gratuities to relationships with suppliers.
• Educate employees on the ‘bigger picture’ on pricing pressure (China/India), stock purchases by Chinese companies and bilateral political relations between China and your company’s country of origin. Every foreign company is an Embassy abroad. Every foreign CEO an Ambassador. Staff will be expected to act accordingly.