The State-owned Assets Supervision and Administration Commission (SASAC) has issued regulations on commercial secrets at state-owned enterprises (SOEs). The regulations are dated 25 March, the day after the trial of employees of mining giant Rio Tinto who famously fell foul of existing state secrets rules.
The regulations may help to clarify the difference between state secrets and commercial secrets when dealing with state-owned enterprises.
A commercial secret is defined in article 2 of the new regulations (the Protection of Commercial Secrets of Central State-Owned Enterprises Tentative Regulations) as “operational and technical information which is unknown to the public, which can bring economic benefits to a central SOE (CSOE), can be practically used by the CSOE and is already subject to the protection measures of the CSOE”.
Under Article 10, SASAC further classifies as commercial secrets information relating to strategic plans, management, mergers, equity trades, stock market listings, reserves, production, procurement and sales strategy, financing and finances, negotiations, joint venture investments and technology transfers.
The regulations prevent information from being secret in perpetuity by requiring the company to set a time limit when it classifies information as either a “core commercial secret” or “standard commercial secret”. They also give the government the option to reclassify commercial secrets as state secrets, which would carry a heavier penalty if violated.
“Our view is that part of the rationale behind this circular is to show that a secret held by an SOE is not necessarily a state secret,” says Nicolas Groffman, a partner at Mallesons Stephen Jaques in Beijing. As a matter of law, this is not the case, because separate legislation on state secrets has not yet been amended to take into account the overlap with commercial secrets.
“From the perspective of drafting, the circular has not fully clarified the definition of commercial secret,” says Groffman. “What it has done, however, is to remind practitioners that not all ‘secret’ information held by SOEs is a state secret.
“This is good news for those who might inadvertently find themselves in possession of secret documents belonging to SOEs, because the penalties for misuse of state secrets are much more serious
than those for misuse of commercial secrets.”
State Council redefines secrets
Hard on the heels of SASAC’s regulations on commercial secrets, the Standing Committee of the National People’s Congress has amended the PRC State Secrets Law. The new version of the law will take effect on 1 October 2010.
The amendments, announced on 29 April, seek to reinforce protection of state secrets and to balance citizens’ rights to access information. The definition of state secrets has been narrowed considerably from the all-encompassing scope that formed the basis of this law since 1988, “which is cheering news”, in Groffman’s view.
“The government clearly wants to reassure ordinary people that access to information is a recognized right,” he comments.
The revised law has not changed the provision in article 2 that a state secret is a “matter that has a vital bearing on state security and national interests and, as specified by legal procedure, is entrusted to a limited number of people for a given period of time”. However, it has added more words to article 9 providing that to be a state secret, the matter concerned must be “information concerning state security and national interests which, if leaked, would damage state security and interests in the areas of politics, economics and national defence”.
“In our view, this narrows the scope of application significantly, which is a positive sign,” says Groffman.
Not everyone agrees with this assessment. Professor Jerome Cohen, co-director of New York University’s US-Asia Law Institute, and Jeremy Daum of the Institute of Chinese and International Studies, Yunnan Normal University argue in a recent paper that “the purported narrowing of the vast scope of information that can be designated secret…is more apparent than real”.
Also on the negative side, the redrafted law requires internet and telecommunications companies to inform on users who share state secrets. This “will cause a headache for foreign-invested telecoms companies in China,” according to Groffman.
“Highly criticized provisions restricting freedom of expression do require internet companies to co-operate in investigating state secrets cases, reporting suspected improper information disclosures and deleting material if requested by authorities. Yet, existing regulations already created similar obligations for an even broader range of information,” argue Cohen and Daum.
