China's new law on judicial assistance in criminal matters will impact investigations

The People's Republic of China recently enacted a new law that will impact foreign authorities, corporations and individuals involved in overseas criminal enforcement actions. The Law on International Judicial Assistance in Criminal Matters allows Chinese authorities to block requests for documents, testimony and assets requested in international criminal investigations.

The law introduces new procedures governing how and when assistance should be provided with approval from a "Chinese competent authority" (eg the National Supervisory Commission, the Supreme People's Court, the People's Procuratorate, Ministries of National and Public Security) required before a Chinese entity or individual provides assistance to a foreign body or person.

The law's stated goal is simultaneously to curb corruption and stem extra-territorial claims by foreign authorities, some of whom approach Chinese counterparts/contacts direct for evidence. The law acts as a break on this practice and allows China to screen requests and withhold its consent. For jurisdictions where treaties are already in place (like the UK, US and 39 others), there may be little change as similar procedures already apply. But for jurisdictions without a treaty in place, or where informal practices have evolved in lieu of treaty provisions, this creates a new procedural hurdle in the context of criminal investigations.

What is judicial assistance?

The law is limited to criminal matters and spans the service of documents, taking of documentary and witness evidence, search and seizure, confiscation of illegal gains and transfer of convicted persons.

Procedure laid down by the new law

Formal requests and relevant materials must be submitted to the correct foreign affairs body stipulated in the law, which screens requests and, where valid, transfers them to the competent authority for review and approval. Case-handling authorities process requests approved and referred to them by competent authorities.

This will naturally slow down the exchange of evidence and information. In addition, some interpretation may be required where a treaty already exists and its terms divert from the new law, as both are stated under the new law to apply.

Grounds for refusal

These include:

• where the underlying act pertaining to the request does not constitute a crime under Chinese law
• there is ongoing or completed proceedings in China in relation to the matter
• the claim is time limited
• the request concerns political or military crimes
• ethnic, racial religious, gender or political issues underpin the request or the persons concerned are at risk of being treated unfairly as a result
• there is no substantive connection between the assistance requested and the subject matter of the case
• the sovereignty, security or public interests of China could be harmed through the request

These grounds are all open to interpretation and it will be interesting to see how they are invoked in practice.

What proceedings are excluded?

Civil and commercial matters are excluded from the new law. Internal investigations are also unlikely to be covered, such that information or evidence sought in China by foreign companies in the context of an internal investigation is outside the jurisdiction of the new law. Internal investigations can become external in nature, for example if foreign criminal law enforcement or prosecutorial agencies become involved. This would bring the matter back within the purview of the new law should requests for assistance later be made in China.

Comment

In practice, what international authorities expect from a corporate investigation, and what the corporate can do and provide in accordance with Chinese law, are often at odds. We see this in the context of data privacy, state secrets and evidence. In practice, this can lead to tension between complying with Chinese law and demonstrating co-operation for leniency, deferred prosecution or declination overseas. The new law is a further reminder on the limits of obtaining evidence in China and the procedural hurdles to be negotiated in multijurisdictional criminal investigations.