Lubman: ‘Can foreigners do business in China without violating the law?’

2009-12-22

Great article by China law guru Stanley Lubman on the WSJ Real Time blog. The topic came up several times during my FDI law class, and of course it comes up on a regular basis when talking to clients that are unfamiliar with the China market.

Here's some of what Lubman covers in the article:

Suppose, for example, that the general manager of the joint venture in which you have invested is asked to find a job at the venture for the son of a provincial official who has some regulatory powers over it. Or suppose your Chinese partner suggests that a group of engineers ought to be sent to the U.S for training, but proposes an itinerary that indicates the group will spend more time in Las Vegas than anywhere else? Chinese laws and regulations, as well as Communist Party rules, prohibit officials from using their positions to extract benefits, including, for example, tourism. The U.S. Foreign Corrupt Practices Act prohibits giving “anything of value” to a “foreign official” with the “corrupt purpose” of obtaining business. It also permits, however, “reasonable and bona fide expenditures, such as travel and lodging expenses…of a foreign official…directly related” to promotion of products or “the execution or performance of a contract.”

Of the two examples, the travel expenses one is something with which I've had direct experience a number of times. Usually this means paying an official to attend an international conference of some kind. For lawyers, this means having an official from, for example, the Ministry of Commerce or the Patent Office, attending a meeting as the guest of a law firm.
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