Implementing and Integrating China's Amended Secrets Law--Official Views and Objectives

I recently wrote to briefly describe China's move toward a new Secrets Law.  Larry Catá Backer, China's New Secrets Law, Law at the End of the Day, April 26, 2010.  I suggested the tension inherent in the new approach--pitting an older Cultural Revolutionist view of the integration of political and economic orders subsumed within a nationalist political understanding, with the disclosure and transparency requirement of globalized business culture.   I also suggested that the administrative malleability of the notion of secret--leaving its characterization to administrative officials to be decided post hoc providers a level of uncertainty that might impede global business.  I wondered whether the new law would put Chinese companies operating abroad in a difficult situation.  And I suggested the potential conflict between the possible thrust of the Secrets Law and global movement towards  corporate social responsibility and the incorporation of human rights elements into basic corporate behavior.  Yet, it is also clear that every state must protect its political secrets.  All states also must provide an institutional, mechanism for the protection against theft--whether of real, personal or intangible property.  The protection of rights to information is an especially important.  What is unclear is whether state and business secrets may be conflated as easily as the recent Chinese provide.  

Others have taken a different view:

Law experts also said the draft is effective in reducing the scope of State secrets, defining expiration dates for confidentiality of files and holding a person liable for any secret release.
"Items that laws or administrative ordinances stipulated to be open to the public, should be made open," according to a newly added stipulation in the latest amendment.
"It draws a clear line distinguishing what is a confidential secret and what is not," said Ma [Huaide, a law professor of China University of Political Science and Law], adding government transparency will be promoted accordingly.

Wang Huazhong and Wang Xing, Police to work with phone, Internet providers, China Daily, April 27, 2010.

What is clear is that "Telecom operators and Internet service providers must cooperate with public security and State security authorities on investigations of possible State secret leaks, according to a draft law. The law in effect furhter engages businesses in stabilizing national security, experts said." Id.  As the Wall Street Journal Reported: "At a news conference Thursday, Sun Zhenping, a senior official in the legislature's legislative-affairs commission, said Internet operators wouldn't be expected "to monitor every piece of information, but only to report the most obvious ones that are suspected of disclosing state secrets." He didn't elaborate." Skye Canaves, Bejing Revises Law on State Secrets, The Wall Street Journal, April 29, 2010.

 

Clearer still is the public focus of the Secrets Law Changes--the use of electronic communication to foster political unrest, especially in sensitive autonomous regions.

Officials have blamed phone text messages as a tool for criminals to instigate the deadly July 5 riot last year in Northwest China's Xinjiang Uygur autonomous region.

"We now have more media carrying information, rather than just the paper documents of the past. Without cooperation from network carriers and service providers, authorities alone could not collect evidence or sort out the cases," said Ma Huaide, a law professor of China University of Political Science and Law.

He also stressed that although operators are obliged to cooperate with investigations, "they cannot intercept or misuse information not in question".

Some insiders of telecom and Internet service providers on Monday expressed their concerns about possible abuses of power, while admitting the cooperation would be effective in tackling crime and fraud.

Wang Yuquan, a senior consultant from research firm Frost & Sullivan, believes that in the past telecom operators had not been given a clear legal obligation and therefore did not act as they should have. They have indirectly assisted the growth of crime, he said.

However, independent telecom expert Xiang Ligang said: "Operators should serve no more than providing an information-sharing platform or a channel. Identifying what is a State secret is complicated in practice. Parties other than police who mishandle information would easily breach users' privacy."

Wang Huazhong and Wang Xing, Police to work with phone, Internet providers, China Daily, April 27, 2010.  Iran, perhaps, provides an object lesson in the utility of electronic communication t level the playing field between the state apparatus and dissident forces in their ability to marshal forces.  "Forget CNN or any of the major American "news" networks. If you want to get the latest on the opposition protests in Iran, you should be reading blogs, watching YouTube or following Twitter updates from Tehran, minute-by-minute. " Ari Berman, Iran's Twitter Revolution, The Nation, Blogs, The Notion, June 15, 2009.  And the ability of foreign states to enhance that electronic communication power is also well known.  "The State Department asked social-networking site Twitter to delay scheduled maintenance earlier this week to avoid disrupting communications among tech-savvy Iranian citizens as they took to the streets to protest Friday's reelection of President Mahmoud Ahmadinejad. "  Evgeny Morozov, Iran Elections:  A Twitter Revolution?, The Washington Post, June 17, 2009.

Lastly, the revisions might represent an effort to centralize the control of the determination of what are state or commercial secrets.  "Flora Sapio, a lecturer on Chinese law at Istituto Universitario Orientale in Naples, Italy, said the state-secrets-law amendment also restricts the ability of lower-level authorities to classify information as state secrets, and therefore appears to be "an attempt to centralize control of state secrets." She said amendment is "an old piece of legislation is being brought up to date according to the needs of an authoritarian regime.""  Skye Canaves, Bejing Revises Law on State Secrets, The Wall Street Journal, April 29, 2010.  But the definition of both state and commercial secrets remain vague enough that virtually any piece of information may be determined ot be such--and to be so determined after the fact (that is after information has been disclosed.  Worse, people accused of violating the lawbmay not be able to defend against the charges to any effect.  ""Chinese prosecutors never publicly detailed what information the men—who were later fired by Rio Tinto—possessed. When they were sentenced, the judge said the secrets primarily involved how much Chinese steelmakers were willing to pay for iron ore, information executives at other companies considered routine market intelligence. James T. Areddy (Yajun Zhang contributing),  China Defines Commercial Secrets, Tells Firms to Protect Them, Wall Street Journal,  April 26, 2010.  

 

In any event, what is clear is that information in China belongs to the state.  Whether classified as commercial or state secret, information may be disclosed and used only to the extent permitted by the state.  And the state retains the right to characterize the information and the effects of its use without permission.  That is a very different framework from that developing elsewhere, where  the presumption is the inverse of that in China.  It is this foundational difference in view that will make translating business and political culture between China and its business partners more difficult in the coming years.  And it will pose the greatest problem for Chinese enterprises operating outside of China, that will be subject to its internal information culture as well as the obligation to conform to the information culture of host states.  For now, however, "the answer appears to be that obtaining almost any information from a Chinese enterprise poses some risk." John Garnaut, Chinese Define What is a Secret, Business Day, April 28, 2010.

 

Arizona, Mexico and Global Politics in Migration

The control of national borders has become a more complicated affair with globalization.  It is increasingly hard to justify a system in which capital can move freely across borders but labor cannot, and in which there is a unbreakable link between economic and political rights.  I have  the nature of some fo thes etensions before.  See, e.g., Larry Catá Backer, The Values of Free Movement: Lessons for Globalization From the E.U.’s Experience With Free Movement of Capital and Labor, Law at the End of the Day, Oct. 29, 2006; Larry Catá Backer, China and the New (Old) Citizenship: Overseas Chinese, "Soft" Citizenship and the Homeland, Law at the End of the Day, Sept. 27, 2007;  Larry Catá Backer, Amalgamating Global Labor on the Model of Global Capital: A Challenge to the ILO Framework, Law at the End of the Day, April 28, 2007.

These tensions show up in a variety of ways.  The most recent involves two neighboring jurisdictions, the State of Arizona and the United States of Mexico.  Each, in its own way has been seeking to take advantage in unregulated markets in labor and global human rights sensibilities centering on the human dignity rights of migrants. 

On the one hand, Mexico has severely criticized the State of Arizona for recent legislation providing broad powers to its police forces to control migration.

Mexican President Felipe Calderon has warned that relations with Arizona would suffer and that his country would use all means at its disposal to defend its people.
Under the new rules, those unable to show that they are legally allowed in the US could be given six-month jail sentences and fined $2,500 (about £1,600).
The law was signed by Arizona Republican Governor Jan Brewer, who said it "protects every American citizen". 

Mexico warns citizens over new Arizona immigration law, BBC News Online, April 27, 2010.  On the other hand, Mexico itself has become the object of intense scrutiny over its own conduct with respect to migrants within its national borders.   Amnesty International, Report:  Invisible Victims: Migrants on the Move in Mexico, AMR 41/014/2010, published April 28, 2010. The Report is also available in Spanish as: VÍCTIMAS INVISIBLES MIGRANTES EN MOVIMIENTO EN MÉXICO.

For a sense of the reaction by academics and civil society elements within the United States to the new Arizona legislation, see the valuable commentaries in the excellent blog--Nuestras Voces Latinas to which I contribute. For a discussion of the dueling criticisms of Arizona and Mexico, see Larry Catá Backer, Collateral Attacks: Amnesty International and Undocumented Immigration in and Through Mexico, Nuestras Voces Latinas, April 29, 2010. 

China's New Secrets Law

The trial and conviction of Stern Hu has provided a global face to a difficult issue within the People's Republic of China--the ability of China to conform its secrecy culture to the demands of a global economy that increasingly prizes transparency and disclosure.   The difficulties of the relationships between state secrets (essentially political in character) and commercial secrets (effectively economic in character) is particularly difficult within the Chinese system in which the clear distinctions between political and commercial activity, and between the state and non-state sectors are substantially more blurred (on practical and ideological grounds) than in the West.

This morning China's State Owned Asset Supervision and Administration Commission (国务院国有资产监督管理委员会) issued Guidelines defining commercial secrets as well as articulating the beginning of a policy for their management.  

China issued rules Monday to protect commercial secrets at state-owned enterprises, a few weeks after four employees of Australia's Rio Tinto were jailed for industrial espionage. The rules issued by the State-Owned Assets Supervision and Administration Commission classified items such as strategic plans, financial information and resource reserves as commercial secrets. A commercial secret was defined as information unknown to the public that can bring economic benefit to state-owned companies, the agency charged with overseeing such enterprises said on its website. The rules also give the government the option to reclassify commercial secrets as state secrets, which would carry a more severe penalty if violated.

China issues rules on commercial secrets of state companies, Haaba, April 26, 2010.  The tensions inherent in the new regulations were highlighted in the Wall Street Journal's reporting of the announcement.

However, the fresh parameters offered in a Monday statement by the state-owned Assets Supervision and Administration Commission were wide-ranging and vague, and may have done little to clarify matters.
The government mainly emphasized how companies hold responsibility. Chinese companies "should attach great importance to the protection of trade secrets," said the commission, which oversees the government's holdings in more than 120 of the country's biggest business groups.
In its 34-clause notice, the commission said secrets range from financial information to strategic plans, from technology to mergers, procurement to restructuring—virtually anything that hasn't been publicly disclosed and could hold economic value to the company.
China's government traditionally has characterized secrets in broad terms, as both commercial information that it fears undermines the interests of its corporations and as state secrets that may put the nation's sovereignty at risk. Information in foreign hands is regarded as particularly sensitive. Chinese courts have been known to convict citizens on secrets charges for mailing newspaper clippings overseas.
China's obsession with secrets was highlighted at the recent trial of the executives of Anglo-Australian miner Rio Tinto. The salesmen were detained last July on allegations of taking state secrets, and later formally arrested, tried and convicted on charges they stole commercial secrets.

James T. Areddy (Yajun Zhang contributing),  China Defines Commercial Secrets, Tells Firms to Protect Them, Wall Street Journal,  April 26, 2010.  The guidelines are unlikely to clarify issues and even less to sharpen distinctions between commercial and political secrets.  To outsiders, the state secrets and commercial secrets law might be perceived as protectionism covered by a thin veil of ideology and political necessity.  While the amendments may have no immediate effects, it may provide the incentive to the adoption of parallel protectionist measures in the event of another scandal involving foreign investors.  Particularly inflammatory in this respect will be the use of the discretionary power to convert a commercial secrets case into a state secrets case.  The use of that power might be interpreted not merely as adjusting informational parameters to Chinese political realities.  Instead it might be interpreted outside of China as a sharp leftist turn away from the ideological grounding of Deng Xiaoping's reforms and a return to an earlier form of conceiving the relationship between the state, politics, economics and information.

Much more interesting, though, will be the effects of the new secrets law on China's worldwide operations.  From one perspective the secrets law has a powerful anachronistic feel--it reflects a view grounded  in the idea that Chinese enterprises owe an undivided and singular loyalty to the Chinese state and its rules and that this loyalty is enforceable because such enterprises operate solely within the territory of the People's Republic.  But the Go Out (走出去;) campaign has changed the landscape of Chinese economic operations.  It is possible that though the state secrets rules were meant to be applied internally, the outside operations of both Chinese and foreign enterprises may produce a substantial pressure on the state if it is tempted to enforce the measures harshly.  I note two areas of particular interest:

1.  The intersection of the secrets laws with the disclosure requirements of foreign states is unexplored.  It is not clear what happens if the foreign operations of a Chinese enterprise is required under the laws of the host state to disclose information made secret within China.  That may be possible under the widening disclosure regimes of securities laws of non Chinese states.

2.  The intersection of the secrets law with global and international efforts to create soft governance mechanisms for business and human rights specifically and corporate social responsibility generally.   Read broadly, the secrets guidelines might interfere substantially with a company's ability to comply with the human rights due diligence mechanisms at the heart of the United Nation's Protect-Respect-Remedy project. The framework put forward in 2008 by Professor John Ruggie, UN Special Representative on Business and Human Rights, is based around the three pillars of the state duty to protect human rights, the corporate duty to respect human rights, and the need for access to effective remedy mechanisms when abuses occur.  It requires close cooperation between businesses and stakeholders and relies to some extent on the free movement of information about companies.  The secrets law could be interpreted as a means of chilling the process of opening companies to the disclosure of necessary information.

 

This announcement and guidelines appeared on SASC's website.  Below is a very rough translation as well as the original in Chinese.

On the issuance of the "Central Commercial Secret Protection Interim Provisions" of the notice

Published: April 26, 2010 Source:

State-owned Assets Supervision and Administration Commission documents 国资发[2010]41号 State UNCDF [2010] 41 关于印发《中央企业商业秘密保护暂行规定》的通知 On the issuance of the "Central Commercial Secret Protection Interim Provisions" of the notice 各中央企业： The central enterprises: 《中央企业商业秘密保护暂行规定》已经国务院国有资产监督管理委员会第87次主任办公会议审议通过，现印发给你们，请遵照执行。 "Central Provisional Regulations on Protection of Commercial Secrets" is issued by the State-owned Assets Supervision and Administration Commission 87th session of the director's office through,  please comply. 各中央企业要高度重视商业秘密保护工作，加快研究制订相关实施细则，切实保障企业利益不受侵害，促进企业又好又快发展。 The central enterprises should attach great importance to the protection of trade secrets to speed up the implementation details of the formulation of relevant, effective protection of business interests from infringement, and promote good and fast development. 国务院国有资产监督管理委员会二〇一〇年三月二十五日 State-owned Assets Supervision and Administration Commission March 25, 2010 中央企业商业秘密保护暂行规定 Central Interim Regulations on Protection of Commercial Secrets 第一章  总则 Chapter I General Provisions The first is to strengthen the central business trade secret protection to protect against violations of the central business interests, according to "The People's Republic of China on Guarding State Secrets Law" and "The People's Republic of China Against Unfair Competition Act" and other laws and regulations, the enactment of this provision. 第二条  本规定所称的商业秘密，是指不为公众所知悉、能为中央企业带来经济利益、具有实用性并经中央企业采取保密措施的经营信息和技术信息。 Article II The term of trade secrets, is not known to the public, can bring economic benefits for the central enterprises, with the practicality and security measures taken by the central enterprise management information and technical information. 第三条  中央企业经营信息和技术信息中属于国家秘密范围的，必须依法按照国家秘密进行保护。 Article III central business and technical information in the scope of state secrets must be protected by law in accordance with state secrets. 第四条  中央企业商业秘密中涉及知识产权内容的，按国家知识产权有关法律法规进行管理。 Article IV central business trade secrets relating to intellectual property content, according to state laws and regulations related to intellectual property management. 第五条  中央企业商业秘密保护工作，实行依法规范、企业负责、预防为主、突出重点、便利工作、保障安全的方针。 Article V central business trade secret protection, standard of law, business responsibility, prevention, focused, to facilitate the work safety policy. 第二章  机构与职责 Chapter organization and responsibilities 第六条  中央企业商业秘密保护工作按照统一领导、分级管理的原则，实行企业法定代表人负责制。 Article VI of the central business trade secret protection in accordance with the unified leadership and decentralized management principles, the implementation of enterprise legal representative of the responsibility. 第七条  各中央企业保密委员会是商业秘密保护工作的工作机构，负责贯彻国家有关法律、法规和规章，落实上级保密机构、部门的工作要求，研究决定企业商业秘密保护工作的相关事项。 Article VII of the security committee of the central business trade secret protection is the work of agencies responsible for implementing the relevant laws, regulations and rules, the implementation of higher confidentiality agencies, the work requires, of deciding the protection of trade secrets related issues. 各中央企业保密办公室作为本企业保密委员会的日常办事机构，负责依法组织开展商业秘密保护教育培训、保密检查、保密技术防护和泄密事件查处等工作。 Confidentiality of the central business office of the Commission as the confidentiality of the daily business offices, according to organizations responsible for education and training to protect trade secrets, confidential inspection, protection and security technology leak investigation and so on. 第八条  中央企业保密办公室应当配备专职保密工作人员，负责商业秘密保护管理。 Article VIII of the central business office should be equipped with full confidentiality of confidential staff, responsible for trade secret protection and management. 第九条  中央企业科技、法律、知识产权等业务部门按照职责分工，负责职责范围内商业秘密的保护和管理工作。 Article IX central business technology, law, intellectual property and other business units in accordance with the division of responsibilities within the purview of trade secrets for the protection and management. 第三章  商业秘密的确定 Chapter III Determination of trade secrets 第十条  中央企业依法确定本企业商业秘密的保护范围，主要包括：战略规划、管理方法、商业模式、改制上市、并购重组、产权交易、财务信息、投融资决策、产购销策略、资源储备、客户信息、招投标事项等经营信息；设计、程序、产品配方、制作工艺、制作方法、技术诀窍等技术信息。 Article X central enterprises according to law the business scope of protection of trade secrets, including: strategic planning, management, business model, market restructuring, merger and acquisition, property transactions, financial information, investment and financing decision-making, production purchase and sale of strategy, resources and reserves, customers information, bidding information and other business matters; design, procedures, product formulation, production technology, production methods, technical know-how and other technical information. 第十一条  因国家秘密范围调整，中央企业商业秘密需要变更为国家秘密的，必须依法定程序将其确定为国家秘密。 Article XI by adjusting the scope of state secrets, commercial secrets of central enterprises need to change to state secrets, according to legal procedures must be identified as state secrets. 第十二条  中央企业商业秘密及其密级、保密期限和知悉范围，由产生该事项的业务部门拟定，主管领导审批，保密办公室备案。 Article XII of the central business business secrets and security classification, confidentiality, and aware of the scope of the period, produced the matter by the development of business, leadership approval, confidential office record. 第十三条  中央企业商业秘密的密级，根据泄露会使企业的经济利益遭受损害的程度，确定为核心商业秘密、普通商业秘密两级，密级标注统一为“核心商密”、“普通商密”。 Article XIII of the central business business secrets shall, according to corporate disclosure of economic interests will suffer damage, identify the core business secrets, commercial secrets of ordinary levels, security classification label unification as "core business secret," "ordinary commercial secret" . 第十四条  中央企业自行设定商业秘密的保密期限。 Article XIV of the central enterprises to set their own confidential trade secret of the period. 可以预见时限的以年、月、日计，不可以预见时限的应当定为“长期”或者“公布前”。 Predictable time-to-year, month, day, account, can not be foreseen time limit should be set for the "long" or "before the announcement." 第十五条  中央企业商业秘密的密级和保密期限一经确定，应当在秘密载体上作出明显标志。 Article XV of central enterprises and confidentiality of commercial secrets shall limit has been established, should be made in the secret vector clearly marked. 标志由权属（单位规范简称或者标识等）、密级、保密期限三部分组成。 Mark by the ownership (in short or standard logo, etc.), security classification, secrecy time limit of three parts. 第十六条  中央企业根据工作需要严格确定商业秘密知悉范围。 Article XVI requires strict accordance with the work of central enterprises to determine the scope of trade secret know. 知悉范围应当限定到具体岗位和人员，并按照涉密程度实行分类管理。 Aware of the scope should be limited to specific positions and personnel, and classified according to the degree of category management. 第十七条  商业秘密需变更密级、保密期限、知悉范围或者在保密期限内解密的，由业务部门拟定，主管领导审批，保密办公室备案。 Article XVII trade secrets need to change the security classification, confidentiality period, aware of the scope or duration in a confidential decryption, developed by the business sector, leadership approval, confidential office record. 保密期限已满或者已公开的，自行解密。 Confidentiality has expired or has been open, self-decrypting. 第十八条  商业秘密的密级、保密期限变更后，应当在原标明位置的附近作出新标志，原标志以明显方式废除。 Article XVIII commercial secrets shall, after the confidentiality period of change, should be indicated in the original location near to the new logo, to significantly dismantle the original logo. 保密期限内解密的，应当以能够明显识别的方式标明“解密”的字样。 Decrypt confidential period, should be able to clearly identify the way marked "decrypted" message. 第四章  保护措施 Chapter IV Protection 第十九条  中央企业与员工签订的劳动合同中应当含有保密条款。 Article XIX of central enterprises signed labor contracts with employees should be contained in the confidentiality clause. 中央企业与涉密人员签订的保密协议中，应当明确保密内容和范围、双方的权利与义务、协议期限、违约责任。 The central business and classified staff signed confidentiality agreements, confidentiality should be clearly the content and scope of the rights and obligations of both parties, duration of the agreement, breach of contract. 中央企业应当根据涉密程度等与核心涉密人员签订竞业限制协议，协议中应当包含经济补偿条款。 Central enterprises should be based on the degree and the secret signing key personnel whose jobs involve non-competition agreement, the agreement should include terms of financial compensation. 第二十条  中央企业因工作需要向各级国家机关，具有行政管理职能的事业单位、社会团体等提供商业秘密资料，应当以适当方式向其明示保密义务。 Diershitiao central business because of the work of state organs at all levels need to be with the administrative functions of institutions, social organizations to provide trade secret information, should be expressed in an appropriate manner their duty of confidentiality. 所提供涉密资料，由业务部门拟定，主管领导审批，保密办公室备案。 Provide classified information, developed by the business sector, leadership approval, confidential office record. 第二十一条  中央企业涉及商业秘密的咨询、谈判、技术评审、成果鉴定、合作开发、技术转让、合资入股、外部审计、尽职调查、清产核资等活动，应当与相关方签订保密协议。 Article a central business consulting related to business secrets, negotiation, technology assessment, outcomes identification, cooperative development, technology transfer, joint venture shares, external audit, due diligence audit of the assets, they shall enter into confidentiality agreements with relevant parties. 第二十二条  中央企业在涉及境内外发行证券、上市及上市公司信息披露过程中，要建立和完善商业秘密保密审查程序，规定相关部门、机构、人员的保密义务。 Article 2 inside and outside the central business issue involving securities, listed and the process of information disclosure of listed companies to establish and improve business secrets confidential review process, provided the relevant departments, agencies, staff confidentiality. 第二十三条  加强中央企业重点工程、重要谈判、重大项目的商业秘密保护，建立保密工作先期进入机制，关系国家安全和利益的应当向国家有关部门报告。 Article 3 major projects to strengthen the central enterprises, important negotiations, major projects of trade secret protection, the establishment of confidentiality in advance into the mechanism of national security and interests of the State shall report to appropriate authorities. 第二十四条  对涉密岗位较多、涉密等级较高的部门（部位）及区域，应当确定为商业秘密保护要害部门（部位）或者涉密区域，加强防范与管理。 Twenty-four pairs of classified job more secret high level department (part) and regional, trade secret protection should be identified as vital sector (part), or classified areas, strengthen the prevention and management. 第二十五条  中央企业应当对商业秘密载体的制作、收发、传递、使用、保存、销毁等过程实施控制，确保秘密载体安全。 Article 5 The central enterprises should make the business a secret vector, send and receive, transfer, use, preservation, destruction process of the implementation of controls to ensure the safety of the secret carriers. 第二十六条  中央企业应当加强涉及商业秘密的计算机信息系统、通讯及办公自动化等信息设施、设备的保密管理，保障商业秘密信息安全。 Article 6 of central enterprises should strengthen trade secrets related to computer information systems, office automation, communications and information facilities, equipment, confidential management of information security to protect trade secrets. 第二十七条  中央企业应当将商业秘密保护工作纳入风险管理，制定泄密事件应急处置预案，增强风险防范能力。 27th The central enterprises should be the protection of trade secrets include risk management, emergency response plans to develop leaks, enhance risk prevention capability. 发现商业秘密载体被盗、遗失、失控等事件，要及时采取补救措施，发生泄密事件要及时查处并报告国务院国资委保密委员会。 Carrier of stolen trade secrets found, lost, out of control and so on, to take timely remedial measures, occurrence of leaks and to promptly investigate the report of the State-Security Committee. 第二十八条  中央企业应当对侵犯本单位商业秘密的行为，依法主张权利，要求停止侵权，消除影响，赔偿损失。 28th The central enterprises should trade secret violations of the behavior of the unit, according to claim their rights and to stop infringement, to eliminate the impact of damages. 第二十九条  中央企业应当保证用于商业秘密保密教育、培训、检查、奖励及保密设施、设备购置等工作的经费。 29th The central enterprises should ensure the confidentiality of trade secrets for the education, training, inspection, awards and confidential facilities, equipment acquisition and other work expenses. 第五章  奖励与惩处 Rewards and Punishment Chapter 第三十条  中央企业在商业秘密保护工作中，对成绩显著或作出突出贡献的部门和个人，应当给予表彰和奖励。 The third 10 central enterprises in trade secret protection, the right made outstanding achievements or outstanding contributions to the departments and individuals, should be commended and rewarded. 第三十一条  中央企业发生商业秘密泄密事件，由本企业保密委员会负责组织有关部门认定责任，相关部门依法依规进行处理。第三十一条 central business trade secret leaks occurred, by the company responsible for organizing the security committee of recognized responsibility of the departments concerned, relevant departments shall be handled according to regulations. 第三十二条  中央企业员工泄露或者非法使用商业秘密，情节较重或者给企业造成较大损失的，应当依法追究相关法律责任。 32nd by the Central employees leaked or illegal use of trade secrets, a serious case or cause greater damage to the enterprise shall be investigated for legal liability. 涉嫌犯罪的，依法移送司法机关处理。 Suspected of a crime shall be transferred to judicial organs. Chapter VI Supplementary Provisions 第三十三条  中央企业应当结合企业实际，依据本规定制定本企业商业秘密保护实施办法或者工作细则。 33rd The central enterprises should be combined with business reality, according to the provisions of the enactment of this business to implement measures to protect trade secrets or working conditions. 第三十四条  本规定自发布之日起施行。 34th These Regulations shall come into force the day of release. 中央企业商业秘密保护暂行规定 第一章  总则 第一条  为加强中央企业商业秘密保护工作，保障中央企业利益不受侵害，根据《中华人民共和国保守国家秘密法》和《中华人民共和国反不正当竞争法》等法律法规，制定本规定。 第二条  本规定所称的商业秘密，是指不为公众所知悉、能为中央企业带来经济利益、具有实用性并经中央企业采取保密措施的经营信息和技术信息。 第三条  中央企业经营信息和技术信息中属于国家秘密范围的，必须依法按照国家秘密进行保护。 第四条  中央企业商业秘密中涉及知识产权内容的，按国家知识产权有关法律法规进行管理。 第五条  中央企业商业秘密保护工作，实行依法规范、企业负责、预防为主、突出重点、便利工作、保障安全的方针。 第二章  机构与职责 第六条  中央企业商业秘密保护工作按照统一领导、分级管理的原则，实行企业法定代表人负责制。 第七条  各中央企业保密委员会是商业秘密保护工作的工作机构，负责贯彻国家有关法律、法规和规章，落实上级保密机构、部门的工作要求，研究决定企业商业秘密保护工作的相关事项。 各中央企业保密办公室作为本企业保密委员会的日常办事机构，负责依法组织开展商业秘密保护教育培训、保密检查、保密技术防护和泄密事件查处等工作。 第八条  中央企业保密办公室应当配备专职保密工作人员，负责商业秘密保护管理。 第九条  中央企业科技、法律、知识产权等业务部门按照职责分工，负责职责范围内商业秘密的保护和管理工作。 第三章  商业秘密的确定 第十条  中央企业依法确定本企业商业秘密的保护范围，主要包括：战略规划、管理方法、商业模式、改制上市、并购重组、产权交易、财务信息、投融资决策、产购销策略、资源储备、客户信息、招投标事项等经营信息；设计、程序、产品配方、制作工艺、制作方法、技术诀窍等技术信息。 第十一条  因国家秘密范围调整，中央企业商业秘密需要变更为国家秘密的，必须依法定程序将其确定为国家秘密。 第十二条  中央企业商业秘密及其密级、保密期限和知悉范围，由产生该事项的业务部门拟定，主管领导审批，保密办公室备案。 第十三条  中央企业商业秘密的密级，根据泄露会使企业的经济利益遭受损害的程度，确定为核心商业秘密、普通商业秘密两级，密级标注统一为“核心商密”、“普通商密”。 第十四条  中央企业自行设定商业秘密的保密期限。可以预见时限的以年、月、日计，不可以预见时限的应当定为“长期”或者“公布前”。 第十五条  中央企业商业秘密的密级和保密期限一经确定，应当在秘密载体上作出明显标志。标志由权属（单位规范简称或者标识等）、密级、保密期限三部分组成。 第十六条  中央企业根据工作需要严格确定商业秘密知悉范围。知悉范围应当限定到具体岗位和人员，并按照涉密程度实行分类管理。 第十七条  商业秘密需变更密级、保密期限、知悉范围或者在保密期限内解密的，由业务部门拟定，主管领导审批，保密办公室备案。保密期限已满或者已公开的，自行解密。 第十八条  商业秘密的密级、保密期限变更后，应当在原标明位置的附近作出新标志，原标志以明显方式废除。保密期限内解密的，应当以能够明显识别的方式标明“解密”的字样。 第四章  保护措施 第十九条  中央企业与员工签订的劳动合同中应当含有保密条款。 中央企业与涉密人员签订的保密协议中，应当明确保密内容和范围、双方的权利与义务、协议期限、违约责任。 中央企业应当根据涉密程度等与核心涉密人员签订竞业限制协议，协议中应当包含经济补偿条款。 第二十条  中央企业因工作需要向各级国家机关，具有行政管理职能的事业单位、社会团体等提供商业秘密资料，应当以适当方式向其明示保密义务。所提供涉密资料，由业务部门拟定，主管领导审批，保密办公室备案。 第二十一条  中央企业涉及商业秘密的咨询、谈判、技术评审、成果鉴定、合作开发、技术转让、合资入股、外部审计、尽职调查、清产核资等活动，应当与相关方签订保密协议。 第二十二条  中央企业在涉及境内外发行证券、上市及上市公司信息披露过程中，要建立和完善商业秘密保密审查程序，规定相关部门、机构、人员的保密义务。 第二十三条  加强中央企业重点工程、重要谈判、重大项目的商业秘密保护，建立保密工作先期进入机制，关系国家安全和利益的应当向国家有关部门报告。 第二十四条  对涉密岗位较多、涉密等级较高的部门（部位）及区域，应当确定为商业秘密保护要害部门（部位）或者涉密区域，加强防范与管理。 第二十五条  中央企业应当对商业秘密载体的制作、收发、传递、使用、保存、销毁等过程实施控制，确保秘密载体安全。 第二十六条  中央企业应当加强涉及商业秘密的计算机信息系统、通讯及办公自动化等信息设施、设备的保密管理，保障商业秘密信息安全。 第二十七条  中央企业应当将商业秘密保护工作纳入风险管理，制定泄密事件应急处置预案，增强风险防范能力。发现商业秘密载体被盗、遗失、失控等事件，要及时采取补救措施，发生泄密事件要及时查处并报告国务院国资委保密委员会。 第二十八条  中央企业应当对侵犯本单位商业秘密的行为，依法主张权利，要求停止侵权，消除影响，赔偿损失。 第二十九条  中央企业应当保证用于商业秘密保密教育、培训、检查、奖励及保密设施、设备购置等工作的经费。 第五章  奖励与惩处 第三十条  中央企业在商业秘密保护工作中，对成绩显著或作出突出贡献的部门和个人，应当给予表彰和奖励。 第三十一条  中央企业发生商业秘密泄密事件，由本企业保密委员会负责组织有关部门认定责任，相关部门依法依规进行处理。 第三十二条  中央企业员工泄露或者非法使用商业秘密，情节较重或者给企业造成较大损失的，应当依法追究相关法律责任。涉嫌犯罪的，依法移送司法机关处理。 第六章  附则 第三十三条  中央企业应当结合企业实际，依据本规定制定本企业商业秘密保护实施办法或者工作细则。 第三十四条  本规定自发布之日起施行。

Charles Chernor Jalloh on the International Criminal Court, Darfur and the African Union

On April 5, 2010, the Penn State Law School's Human Rights Law Society and its Alternative Dispute Resolution Society sponsored a seminar  Symposium - "Retribution, Reconciliation, Reparation: Perspectives on Justice for Darfur."  

I provided  a contextual introduction to the issues raised by an international criminal court system in general and its application to the Sudanese situation in particular.  My focus was on issues of complementarity--the use of the ICC as a supplemental judicial device--and the difficulties of conforming thast notion with the ICC's implementation.  I also suggested the difficulties of legitimating the ICC within a framework grounded in prosecutorial discretion.  My remarks reflected earlier work.  See Larry Catá Backer, Ruminations XI: The Criminalizaton of Politics and the Judicial forms of Warfare, Law at the End of the Day, February 11, 2009,  and Larry Catá Backer, On the Conviction of Sadam Hussein, Law at the End of the Day, Nov. 6, 2006.

The seminar featured Charles Chernor Jalloh, Assistant Professor of Law at the University of Pittsburgh School of Law who also served for a time as the Legal Advisor to the Office of the Principal Defender (OPD) in the Special Court for Sierra Leone.  Professor Jalloh has thoughtfully suggested a basis for skepticism about the International Criminal Court system among African states.  Charles C., Jalloh, Regionalizing International Criminal Law? (July 1, 2009). International Criminal Law Review, Vol. 9, p. 445, 2009 (suggesting that Africa’s sensitive historical experience with foreign interventions, including the slave trade and colonialism, the international criminal justice regime anchored on the ICC may be undermined, or perhaps even falter, if it is perceived as having a biased, politicized or insensitive application to a single region of the world).   Professor Jalloh suggested that the African Union High Level Panel Report on Darfur, chaired by former South African President Thabo Mbeki, could provide a useful “multi-layered” framework for the prosecution of international crimes committed in Darfur. Under this framework, legitimated national courts might prosecute  low level perpetrators of atrocities, and African Union-United Nations hybrid court could try the “middle management.”  The International Criminal Court's activities should be reserved only for pursuing the political and military leaders bearing greatest responsibility.

Professor Jalloh's remarks and my introduction are available on video and may be accessed here: 

Spring Symposium: "Retribution, Reconciliation, Reparation: Perspectives on Justice in Darfur" WEBCAST.

And Speaking of the American Power-Money Narrative. . . . .

The 2007 financial collapse has produced a tremendous opportunity to add new chapters to the American narrative of power-money.  Much of that narrative speaks to corruption.  Americans tend to like their corruption sexually explicit.   See Larry Catá Backer, Sex, Money and Family: On the Cultural Battle Lines of Corruption in the United States and China, Law at the End of the Day, April 24, 2010.  But the sort of sexual corruption that tends to taint the ability of governmental actors to do their duty corrupts the objects of its gatekeeping.  This appears to be the case especially for the SEC in the context of the financial collapse.  

 

But Americans also seem to like their narratives of foundational sexual perversions  (that is, of sexual corruption as an intensifier and source of moral, political and economic corruption) tarted up with an oppression that is class based.  The perversity fo the rich is an important element of the justificatory narrative of state management of popular excesses.  Mae Kuykendall has suggested another set of American narrative tropes in connection with the related story of the corruption of Goldman Sachs,  an object of SEC scrutiny, and its complicity in bringing about the 2007 Financial Collapse.  See, Mae Kuykendall, Goldman Sachs and the Grassy Knoll, Conglomerate, April 19, 2010.

Sex, Money and Family: On the Cultural Battle Lines of Corruption in the United States and China

It is always interesting to compare national approaches to corruption.  These approaches sometimes provide a window on what is most acutely felt within national ruling elites as necessary markers of behavior self-control to manage the opinions of the masses.  They also provide insight into the cultural machinery that forms the foundation for the choices made. Two recent stories, one form China and the other from the United States, underline both the importance of reinforcing narratives of appropriate elite behavior and the cultural framework for choosing the type of behavior narratives to emphasize.  Both deal with issues of money, the management of the state apparatus and the obligations of public servants.  Both emphasize purity and responsibility narratives.  Both target corruption.  Yet while the Chinese narrative conflates family corruption with fiscal dissipation and disharmony, the American narrative conflates sexual perversion (moral dissipation) with dereliction of duty and the corruption of the state's role as guardian of economic harmony.     

1.  The Chinese Narrative.  In a recent story widely distributed in China and abroad, the "Communist Party of China ordered its senior officials yesterday to report any change in their marital status and whether immediate family members are living overseas in the latest stab at tackling corruption. The order came during a meeting of the Political Bureau of the CPC Central Committee." Party wants info on spouses, income, Shanghai Daily, April 24, 2010.  

The Party ordered its leading officials at all levels to report change of spouses, whereabouts of their spouses and children if they have moved abroad, personal income, housing and investment of their family, in line with a new regulation. The regulation appears designed to prevent officials from hiding illicit income in the bank accounts of spouses, former spouses or other close family members. Party organizations at all levels were ordered to strengthen management and supervision of leading officials. Leading officials at all levels were told to honestly report relevant matters.

Id. The connection between personal corruption and corruption of fidelity to the state is emphasized.  Just as personal corruption perverts the family unit, converting it into the organization of a criminal enterprise, so it also perverts the relationship of the individual to Party and State. "There have been many scandals in past years involving corrupt officials, or their family members, fleeing abroad with ill-gotten gains. According to Ministry of Commerce statistics, some 4,000 corrupt officials ferreted about US$50 billion out of the country since economic reforms began in 1978 through 2003." Id. The result is disharmony within the family that is then reflected in disharmony between the family and the state, to the great harm of all family members and all citizens of the state. "China's anti-graft chief He Guoqiang yesterday urged the country's discipline inspection and supervision authorities to improve their capabilities and to win public trust." Id. Corruption thus imperils not just the State but the leadership  (lingdao (领导)) role of the party under the Constitution. "Highly aware of the grave reality of widespread corruption, the ruling CPC last September issued a decision on Party building, saying problems and corruption among Party members "have seriously affected the consolidation of the Party's governing status and the realization of its governing mission." . . .  "Corruption from within is the major threat to the ruling party during peacetime," wrote Shao Jingjun, research fellow with the CCDI research section, in the latest edition of "Qiushi" magazine."  China acts on corruption to address public concern, China.org.cn, Feb. 25, 2010.

Not only does this activity corrupt family, state and Party, but it suggests  a sort of treason as well.  It is not for nothing that the story-narrative emphasizes that such acts of corruption result in the corrupt Party members betraying Party and state by fleeing to another country.  "In 2008, Pang Jiayu, former mayor and Party chief of Baoji in Northwest China’s Shaanxi province from 1997 to 1999, was accused of allowing substandard pipes to be used and sentenced to 12 years imprisonment for corruption.But Pang’s wife and son had emigrated to Canada in 2002, causing great concern in the public over corrupt officials relocating their “dirty money” abroad." Xie Yu, Govt wants a better view of 'naked officials' to help prevent corruption, China Daily, Feb. 24, 2010.  And thus the need to manage officials whose families are put in a position where the temptations of corruption are most present.  Party governing elites have suggested an approach to managing the behavior of individuals abroad  who are connected to Party officials. "The meeting also deliberated on a tentative regulation on the management of officials whose family members have all gone abroad." Party wants info on spouses, income, Shanghai Daily, April 24, 2010.  The state has emphasized this connection with a new term, the naked official.  "The National Bureau of Corruption Prevention and the Ministry of Supervision jointly listed supervision over so-called “naked officials” as a key task. The term “naked official” was selected as one of China’s top 10 buzzwords of 2009 by Chinese linguists. It refers to officials whose family members have moved overseas, while they themselves work in the country alone, usually with the other country’s visa in hand."  Xie Yu, Govt wants a better view of 'naked officials' to help prevent corruption, China Daily, Feb. 24, 2010.

And the approach to solution has a cultural-narrative quality as well.  "He, head of the Party Central Commission for Discipline Inspection, said constant efforts must be made in ideological education, professional training and institution building. The authorities must refrain from abusing their powers for illicit gains and handle legal cases in accordance with discipline and law, and must not leak the information of petitions or whistle-blowers, He said." Id.  Indeed, the State has gone to some effort to offer narratives of such corruption, and of the efforts by officials to control these individuals.  See, Sonny Shiu Hing LO, Ethical Governance and Anti-Corruption in Greater China: A Comparison of Mainland China, Hong Kong and Macao, Canadian Political Science Association Papers  (2006).

The past few months have witnessed an unprecedented crackdown on corrupt government officials. Huang Songyou, former vice president of the Supreme People's Court, received a life sentence in January for embezzlement and taking bribes amounting to 3.9 million yuan (574,000 U.S. dollars) in exchange for favorable court rulings. Huang was the first top judicial official convicted on corruption charges. Some ten days later, Yu Renlu, former vice chief of the Civil Aviation Administration was sacked and kicked out of the Chinese Communist Party (CPC) for "serious violations of discipline and law." Yu was found to have used his position to benefit other people in return for "large sums" of bribes, a statement jointly issued by the CPC's Central Commission for Discipline Inspection (CCDI) and the Ministry of Supervision said. His case has been referred to prosecutors. In February, a key figure in the high profile mob trials in southwest China's Chongqing municipality stood trial. Wen Qiang, former deputy police chief and director of the justice bureau in Chongqing, was accused of rape, taking more than 15 million yuan (2.2 million dollars) in bribes to protect criminal gangs, and possessing a huge amount of unexplainable assets. The massive 8-month anti-gang crackdown in Chongqing revealed judicial corruption, with 200 judicial and public security officials implicated, noted former Chongqing mayor Wang Hongju.

China acts on corruption to address public concern, China.org.cn, Feb. 25, 2010. And the connection between corruption and the foreign is strong.  Kunming Strives to Curb Overseas trips on public Expense of Party and Government Cadres, Source：National Bureau of Corruption Prevention of China Time：2008-11-05 16:20. Treated as an ethical issue with political effects, the Communist Party has "issued a code of ethics for CPC cadres to follow Tuesday to ensure clean practice in their work and prevent corruption. The guidelines specify 52 unacceptable practices with respect to CPC leaders and cadres of various levels, including accepting cash or financial instruments as gifts, and using their influence to benefit their spouses, children or "special concerned persons" with regards to their employment, stock trading or business."   Chinese Communist Party issues code of ethics to ensure clean governance, English.news.cn 2010-02-23 18:19:23 The traditional state-culture narrative, the deep relationship between kinship-Party-State, is thus reinforced through the construction of the contextual realities of corruption. 

2.  The American Narrative.  The American narrative is more straightforward and in  keeping with American cultural norm tropes, more salacious.  In a recently released summary report, the U.S. Office of the Inspector General concluded that a small number of employees of the Securities and Exchange Commission used the networks and machinery provided to them by their employer, the United States government, to access sexually explicit material.   SUMMARY OF PORNOGRAPHY-RELATED INVESTIGATIONS CONDUCTED BY THE SECURITIES AND EXCHANGE COMMISSION OFFICE OF INSPECTOR GENERAL . This report, then picked up by  elite outlets of the American media, quickly became something of a different story--a morality tale in which  sexual  corruption was conflated with moral corruption in a way that contributed to the perversion of the political system contributing in turn to the global economic crisis that began sometime in 2007.  In one deliciously naughty version, produced by CNN, an important source of information management for middle income Americans, it was reported

As the country was sinking into its worst financial crisis in more than 70 years, Security and Exchange Commission employees and contractors cruised porn sites and viewed sexually explicit pictures using government computers, according to an agency report obtained by CNN. "During the past five years, the SEC OIG (Office of Inspector General) substantiated that 33 SEC employees and or contractors violated Commission rules and policies, as well as the government-wide Standards of Ethical Conduct, by viewing pornographic, sexually explicit or sexually suggestive images using government computer resources and official time," said a summary of the investigation by the inspector general's office.

Report: SEC staffers watched porn as economy crashed, CNN Politics, April 23, 2010. The New York Daily News version is equally enlightening:

At the SEC, all they thought about was SEX. The country's top financial watchdogs turned out to be horndogs who spent hours gawking at porn Web sites as the economy teetered on the brink, according to a memo released Thursday night. The shocking findings include Securities and Exchange Commission senior staffers using government computers to browse for booty and an accountant who tried to access the raunchy sites 16,000 times in one month. Their titillating pastime was discovered during 33 probes of employees looking at explicit images in the past five years, said the memo obtained by The Associated Press.

Leo Standora,  While economy crumbled, top financial watchdogs at SEC surfed for porn on Internet: memo, New York Daily News, April 23, 2010. A more tempered version explained:  

Dozens of Securities and Exchange Commission staff members used government computers in the past five years to access and download pornographic images, according to a summary prepared by the agency's watchdog. Most of the reported incidents have occurred in the 2 1/2 years since the global financial meltdown began, according to the SEC's inspector general. According to a summary requested by Sen. Charles E. Grassley (R-Iowa), SEC Inspector General H. David Kotz investigated 33 employees and contractors for illegal computer usage. The agency has around 3,800 staffers. Three incidents were reported this year. Ten occurred in 2009, 16 in 2008, two in 2007 and one each in 2006 and 2005. 

Ed O'Keefe, Report says 33 SEC staff members viewed pornography at work, The Washington Post, April 23, 2010.  Still, others could not help but publish some of the prurient details:

The memo was written by SEC Inspector General David Kotz in response to a request from Sen. Charles Grassley, R-Iowa. It summarizes past inspector general probes and reports some shocking findings:
• A senior attorney at the SEC's Washington headquarters spent up to eight hours a day looking at and downloading pornography. When he ran out of hard drive space, he burned the files to CDs or DVDs, which he kept in boxes around his office. He agreed to resign, an earlier watchdog report said.
 • An accountant was blocked more than 16,000 times in a month from visiting websites classified as "Sex" or "Pornography." Yet he still managed to amass a collection of "very graphic" material on his hard drive by using Google images to bypass the SEC's internal filter, according to an earlier report from the inspector general. The accountant refused to testify in his defense, and received a 14-day suspension.
 Id.

Daniel Wagner, GOP ramps up attacks on SEC over porn surfing, Yahoo News,  April 23, 2010.  This version then indirectly suggests a crude calculus: "The number of cases jumped from two in 2007 to 16 in 2008. The cracks in the financial system emerged in mid-2007 and spread into full-blown panic by the fall of 2008." Id.

But sexual "perversion" was not the only item throw into this stew pot of corruption.  Money provided a bit of spice.  "More than half of the workers made between $99,000 and $223,000. All the cases took place over the past five years."  Report: SEC staffers watched porn as economy crashed, CNN Politics, supra.  In another version, it was rendered this way: "Seventeen of the employees were "at a senior level," earning salaries of up to $222,418." Daniel Wagner, GOP ramps up attacks on SEC over porn surfing, supra.

Put together, this narrative assumed a more momentous form.  It was transformed from the story of individuals misusing their company computers and internet connections.  "The discovery of an employee surfing the Internet for porn is nothing new, whether in a federal agency or a private entity. But the SEC revelations sparked a broader question about how well federal agencies block such activity."  Ed O'Keefe, Report says 33 SEC staff members viewed pornography at work, supra.   But it appears that the quesiton raised was broader than that.

"It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation's economy to the brink of collapse," said Rep. Darrell Issa. The Republican is the ranking member of the House Committee on Oversight and Government Reform.
"This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority," he said. "Inexplicably, rather than exercise its existing regulatory enforcement authority, SEC officials were preoccupied with other distractions."

Report: SEC staffers watched porn as economy crashed, CNN Politics, supra.  Others chimed in: on the issue "Former SEC spokesman Michael Robinson said he shares the public's outrage about SEC staffers who enjoyed porn on the taxpayer dime when they were supposed to be keeping the markets safe. "That kind of behavior is just intolerable and atrocious," said Robinson, now with Levick Strategic Communications. He said he expects the head of the SEC, Mary Schapiro and her team, are "very focused on" the issue."  Daniel Wagner, GOP ramps up attacks on SEC over porn surfing, supra.

The character of the narrative, and its utility as a basis for policy discussion now becomes clear. Sexual corruption serves as a proxy for or perhaps as an intensifier of other misconduct.  This conflation, culturally driven in the West, and generally amalgamated with political concerns, expressed as policy or law, runs deep in American culture.  See, Larry Catá Backer,  Emasculated Men, Effeminate Law in the United States, Zimbabwe and Malaysia. Yale Journal of Law & Feminism, Vol. 17, No. 1, 2005.  Sexual corruption serves as both explanation and cause of violations of the public trust. Thus, the "question now becomes what happens to all of those SEC auditors, attorneys and other (often highly paid) officials who managed to violate the public trust by using their work time to watch porn; subvert investigations; and otherwise ignore the warning signs of financial fraud that they were paid to investigate?"  Kathy Kristof, SEC: Porn, Ponzi Schemes and Accountability, CBS MoneyWatch.com, April 23, 2010.  It also provides a moral connection between sexual lapses and lapses of duty--of fidelity to the state and the important duty to which they were entrusted--at great public expense.   ""It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation's economy to the brink of collapse," said Rep. Darrell Issa, R-Calif., who sits on the House Committee on Oversight and Government Reform."  SEC staffers watched porn, not Wall Street, UPI.com, April 23, 2010.  The economic collapse of 2007 is thus reduced to the indulgence of an uncontrolled and deviant sexual lustiness that corroded the the public duty of the individuals even as it  contributed to their moral dissipation.

In both the American and Chinese narratives, then, moral corruption intensifies political corruption.  Dissipation of the sort that threatens the state--bribery in China and professional conduct in the United States--is evidence of personal dissipation.  Such dissipation is understood in culturally significant forms--family and loyalty in China and sexual misconduct in the United States.  In both societies, ""Corruption is more often than not the result of abuse of power," says Ma Huaide, vice president of the University of Political Science and Law. He believes that effective prevention and punishment of corruption depends on the improvement of laws that restrict and regulate power, as well as their implementation. "  China acts on corruption to address public concern, China.org.cn, Feb. 25, 2010. But the causes and responses arise and are met in culturally specific ways.


 
 

 

The World Bank Group's Supra Sovereign Wealth Fund?

It was only a matter of time.  The power of private capital and capital markets,now free of the constraints of the state system, has proven to be the new frontier for the cultivation of power across state lines.    In a world founded on principles of economic globalization, states have found it as useful to project power through private markets as they had traditionally projected power in more conventional fashion.  See Larry Catá Backer, Changes in the Norwegian Sovereign Wealth Fund Ethical Guidelines and Active Ownership, Law at the End of the Day, April 5,  2010.

But the power of private equities markets, and more importantly, the leverage possible through well planned programs of investments in the enterprises of foreign states, is as tempting a field of power for supra national entities as it is for states.  Enter the World Bank Group.  The World Bank Group's International Finance Corporation has noted

Private equity is becoming an increasingly important sector globally, particularly in the United States and Europe, but also in emerging markets. In fact, the past year was a remarkable one for emerging markets private equity: fundraising for the asset class tripled, driven largely by a strong rise in exits and cash returned to international investors. The numbers were up for all regions.

Perhaps even more telling, the picture that is taking shape today is fundamentally different from before: private equity in emerging markets is no longer considered an exotic asset class. Private equity professionals are breaking down the borders of investing, recognizing that globalization is transforming the private equity business.

International Finance Corporation, Private Equity and Investment Funds, Overview.  The relationship between political leverage and private investment is not lost on the IFC.  "Over the past 20 years, IFC's experience has shown that there is a strong relationship between fund performance and development impact, and that the quality of the fund manager is the main driver of performance." Id.   That impact, of course, is compounded where it can be leveraged; and there may no greater leverage than a number of sovereign wealth funds combining their assets within a greater supra-national wealth fund.

And so it comes as no surprise that  the World Bank's President, Robert Zoelleck, recently touted the creation of such a supra-national wealth fund, housed naturally enough, within the institutional structures of the World Bank itself.  

As the World Bank tries to rebuild after a global economic crisis that arguably boosted its reputation but left it strapped financially, the agency will get support from a new quarter: sovereign wealth funds.
Under a program announced last week, state-owned investment vehicles from South Korea, Azerbaijan, Netherlands and Saudi Arabia have agreed to invest $600 million in a bank-sponsored equity fund for less-developed countries.
The investment is not large on a global scale. But it opens a new pool of capital that World Bank President Robert B. Zoellick said could prove to be important in creating a new "architecture" for the post-crisis global economy.
Sovereign wealth funds are established by countries with trade surpluses from manufacturing or petroleum exports and used to invest in projects, typically ones in developed countries or emerging markets. The crisis, Zoellick said, showed investors that there are no havens and helped them become open to the idea of teaming with the World Bank on investments in Africa, the Caribbean and Latin America. 

Howard Schneider, World Bank gets help from sovereign wealth funds to invest in developing nations, The Washington Post, April 18, 2010.  There you have it.  The implications of ethical investment (Norway) and sovereign investment (China) have advanced to another level.  Now we encounter an important experiment--one clothed in the most appealing of limited and wholesome purposes. Is it possible to leverage the power of sovereign wealth funds through amalgamation;what is the value added of such amalgamation under the direction or control of a supra national entity? I once suggested that the European Union's approach to the regulation of state investment articulated in its "golden share cases" might provide a useful framework for approaching an understanding of sovereign investment activity (and consequently approaches to regulation of such investing in host states). See Larry Catá Backer, The Private Law of Public Law: Public Authorities as Shareholders, Golden Shares, Sovereign Wealth Funds, and the Public Law Element in Private Choice of Law. Tulane Law Review, Vol. 82: 1801-1868 (2008).

From these cases, the form of a relevant jurisprudence has emerged. States are free to engage in market activities for their own account with respect to which the private law of such transactions would apply. However, because States never lose their public character, market transactions involving state actors and corporations chartered domestically appear to be presumptively regulatory in nature. Because states can or might regulate their position as shareholders, any state activity involving domestic corporations appears to be treated as direct or indirect regulation, or regulation in effect. As a consequence, such activity, to the extent it might affect the willingness or ease of transactions in those shares by nationals of other Member States, would violate the fundamental right to free movement of capital enshrined in the EC Treaty. . . .  Completing this analysis was the framework of public private equal treatment written into European Competition Law in the form of the state aids provisions of the EC Treaty. These suggested the same result as the golden share cases—a presumption that states did not act to maximize profit (and thus their private activity was public in character). The presumption could be overcome only where a state could convince the Commission that its actions were private in form and fact. Using the language of the state aid cases, this would require a showing that the state was investing “under normal market economy conditions.”

Left unanswered, however, was whether these ideas could apply when the state acted purely as a private party or engaged in private economic (investment) activity in another Member State. To that end, the opinions of the Advocates General in those golden share cases might prove useful. In particular, Advocate General Colomer’s suggestion of the relevance of article 295 EC and Advocate General Maduro’s sophisticated construction of a theory of the public character of state private transactions suggested a framework for analyzing the choice of law. The implication of these approaches is that the private law of corporate investment must be divided into a private and public component. The ordinary rules of private transactions in shares might not apply when a state purchases stock, and seeks to assert the rights of a shareholder. When a state engages in that activity, it is presumptively engaging in regulatory activity indirectly and public law must apply (in the case of Member States, the overriding law of the EC Treaty). The reason advanced is both deceptively simple and troubling—because a state can never duplicate the internal construction of a private entity, it can never act to maximize its welfare. Instead, as a political body, it must necessarily act to maximize its political capital. As a consequence, it cannot participate in the market in the same way as a private individual.

Id., at 1865-1866.  Yet consensus has been moving in the opposite direction.  The Santiago Principles make clear that, having appropriately adopted the forms of private activity, host states ought to refrain from any protective regulation, even where the investment activity might acquire a sovereign character.  The idea of indirect regulatory effect does npt appear relevant.  Yet both appear more likely at the supra national level when sovereign wealth funds combine their resources and operate under the direction of the leadership of a joint enterprise subject only to collective control.  Yet the possibility must also be considered that one way to reduce the risk of sovereign investing is to remove control of investment decisions from the sovereigns and move it to a collective decision maker--like the organs of the World Bank Group.  That idea, after all, was one of the founding insights of the European Union itself--to move control over the basic material of war, coal and steel, from the control of the French and the Germans, to the control of the European Coal and Steel Community.  Perhaps this is a template worth expanding.