China steels for Rio Tinto court case
By Wu Zhong,
HONG KONG - A Shanghai court began on Monday morning a
two-day trial of four employees of Anglo-Australian mining giant Rio Tinto,
including Australian national Stern Hu and three Chinese colleagues, on charges
of bribery and industrial espionage. If convicted they could each be jailed for
up to seven years for a single offence. A combined penalty could be 20 years in
Dozens of journalists gathered outside the Shanghai court, but
only a few reporters, possibly from China's state-run media, were allowed in.
The Australian consulate general in Shanghai, Tom Connor, declined to comment
before entering the court room.
Dow Jones Newswires have reported,
quoting defense lawyer Tao Wuping, that Hu
and one of the Chinese fellow employees would
plead guilty to bribe-taking. It said Hu had been charged with accepting 6
million yuan (US$961,223), while fellow defendant Liu Caikui faced charges of
taking 3 million yuan. Both would plead guilty to accepting bribes while
contesting the amounts involved, said Tao, who represents Liu.
the sentences, the highly-sensitive case has aroused wide attention and concern
outside China since Hu and his colleagues were detained by the anti-espionage
Shanghai State Security Bureau. Reportedly, they were arrested on suspected
espionage of "state secrets". Doubts and controversy have focused on whether
they would be given a fair trial.
The detention of the four came at a
sensitive time when Rio Tinto was acting as
lead negotiator for global iron ore
suppliers in price talks with Chinese steel mills - Hu was Rio Tinto's senior executive in China in charge of iron ore.
Few details of the allegations against the suspects have been made public. At
that time, Rio Tinto had also just rejected a Chinese bid to buy a US$19.5
billion stake in the miner. Naturally, suspicion arose overseas about China's
After Hu's arrest, China Daily reported that Hu had
been in close contact with a senior executive from the Shougang Group, the
sixth-largest steelmaker in China. The executive, Tan Yixin, head of Shougang's
iron ore export and import business, was arrested last July in connection with commercial
crimes, the report said.
At the time of the arrests, Rio Tinto quickly
denied any wrongdoing by the company or its staff. Australia's Prime Minister
Kevin Rudd has called throughout the executives' eight months in detention for
the case to be dealt with quickly, fairly and
In early February, the top branch of the Shanghai
People's Procuratorate announced that it had decided to prosecute the four Rio
employees - Hu, former head of Rio Tinto's Shanghai office, and his Chinese
staffers - Wang Yong, Ge Minqiang and Liu Caikui - with bribery and stealing
commercial secrets. Shanghai's No 1 Intermediate People's Court accepted the
A statement by the court said prosecutors accused the four of
"taking advantage of their position to seek profit for others, and asking for,
or illegally accepting, huge amounts of money from Chinese steel enterprises".
It said they lured the Chinese enterprises' executives with promises, or through
other illegal means, to obtain the steel companies' commercial secrets on
multiple occasions, with "extremely serious consequences" for the companies.
Last week, the Shanghai court stated that as the trial dealt with
commercial secrets it would be closed to the public and consular staff.
In response, Rudd warned China that "the world will be watching" how it
conducts the trial. Australian Foreign Minister Stephen Smith reiterated that
Australia had requested its officials be present for the entire trial, not just
the bribery proceedings, though he conceded that even in Australia there were
cases in which trials were conducted in private.
In a response, a
Chinese Foreign Ministry spokesman, Qin Gang, said China did not want the Rio
Tinto case to be politicized and negatively affect China-Australia relations.
Qin said Chinese authorities would handle the case in line with legal procedures
and consular agreements with Australia.
Two key issues are raised by the
case, apart from judgement of China's rule of law. The first is whether the case
has a political undercurrent, given that the charge was changed from "spying on
state secrets" to "stealing commercial secrets". The second is whether a
closed-door trial on "stealing commercial secrets" is acceptable.
Contrary to overseas opinion, many analysts in China believe the change
in the charge represents progress in China towards an improved rule of law.
China's Law for Protection of State Secrets, effective since 1989, has a
broad and vague definition of "state secrets" (even now the National People's
Congress is considering a major revision). The "state secret" that may be
relevant to the Rio case is "secret affairs regarding national economy and
According to the Shanghai court statement, Hu and
the other three were prosecuted for luring executives from Chinese enterprises
with promises, or through other illegal means, to obtain the steel companies'
According to Chinese media reports, they worked hard
to obtain the tactics that the state-owned steelmaker and iron ore importers
were going to use in fraught price negotiations with Rio Tinto, giving the
latter an upper hand.
This, according to an article in August 2009 on
the official website of the State Administration for Protection of State
Secrets, by a retired official, cost China a total of about 700 billion yuan in
The allegation outraged the Chinese public and there were
calls for Hu to be given the death penalty to teach "national traitors" a good
lesson. (Hu is a naturalized Australian national but a Chinese-born citizen).
"Under such circumstances, the change of the charge to 'stealing
commercial secrets', which has lesser punishment, marks progress toward the rule
of law. China now adopts a market economy in which a state-owned enterprise, big
as it may be, is regarded as a commercial company. It would be ridiculous to
include policies and decisions of such a company as 'state secrets'," a
sociology researcher with the Chinese Academy of Social Sciences (CASS) in
In regard to the second issue, a retired law professor at
Nankai University in Tianjin laughs at overseas concerns over a closed-door
trial related to "stealing commercial secrets".
"I think overseas
companies in China should be very happy with such an arrangement. China for them
is a foreign land, and they have more 'commercial secrets' to protect. Without
this stipulation, a domestic firm could easily sue a foreign-invested company
and force it to reveal its 'commercial secrets' in court. Would it like it?" he
asks. According to China's Civil Procedure Law, a trial can be held behind
closed doors if it involves state secrets, privacy or commercial secrets.
A case is hand is Google, the US Internet
search engine giant. Google has threatened to close its China operation -
Google.cn. Chinese authorities have warned that its pullout must follow Chinese
legal procedures. Among others, Google may have to deal with a number of
lawsuits against violation of intellectual property
At the end of last year, a Beijing court began to deal
with a lawsuit filed by a female Chinese writer, whose pen name was Mian Mian,
against Google.cn for including her works in Google Books. Google.cn required
that the trial be closed to the public, citing protection of its "commercial
"Like Google, China's state-owned steelmakers have their
'commercial secrets' to protect. One must not assume that because they are
state-owned they must be completely naked in business operations," said the
retired law professor at Nankai University.
He said the charge in Hu's
case should not be disputed. "Chinese law has strict stipulations on [being
charged for] taking and offering bribes, so much so that [the law] has been
criticized for protecting corrupt officials. Without hard evidence, authorities
would not easily charge someone with bribery. Not to mention that Stern Hu is a
Hu may have been unlucky enough to be caught
red-handed or with hard evidence. "In fact, it is a known 'secret' in China that
executives offer bribes to officials to get their businesses going or exploit
their positions to take bribes. But so far few have been caught and dealt with
by the law."
Chinese analysts also reject as a bluff the prospect of
Hu's case, whatever sentence he may receive, having a serious, negative effects
on Sino-Australian ties or Chinese firms' relations with Rio Tinto.
October, three months after Hu's arrest, foreign minister Smith said relations
with China were back to "business as usual". The countries held high-level
defense talks that month and China has signed several natural-resources deals.
In early February, Rio Tinto appointed Ian Bauert as its new China
operations chief to replace Hu. Bauert set up the company's first China office
more than 25 years ago and speaks fluent Chinese.
Last Friday, after the
trial of Hu was announced, Rio Tinto Group, parent of Canada's Alcan, signed a
US$1.35 billion pact with Chinalco under which the Chinese metals conglomerate
will help develop Rio's massive iron ore reserves in Guinea, West Africa.
Coincidentally, Tom Albanese, chief executive officer of Rio Tinto
group, said at a forum in Beijing on Monday that his company's relations with
China were "long-term and very important". Rio Tinto would strive for rebuilding
and strengthening its relations with China, according to Xinhua News Agency.
This suggests Hu's is an individual case within China's legal
jurisdiction. "The days that a foreigner could enjoy 'extra-territoriality' went
long ago, after the founding of the People's Republic of China [in 1949]. Hu did
what he did on the soil of China, hence he is subject to Chinese law. And what
he did, according to the prosecution, is common criminal offences. You can
criticize the imperfection of China's rule of law and demand improvement, but
when you are in the country, you still have to abide by it," the retired law