Issues to Consider Before Discovering Electronically Stored Information in China

Vol. 41 No. 4

By

Yangyang “Travis” Li (yli@shb.com) is an attorney with Shook, Hardy & Bacon in Kansas City, Missouri. He practices in the areas of patent prosecution and litigation. This article is not intended to be a complete or an up-to-date analysis of e-discovery laws in China. Only registered PRC lawyers can interpret and offer advice regarding Chinese laws.

Commercial litigation is becoming increasingly transnational and complex, making document production ever more burdensome and voluminous. Documents subject to legal holds are often stored electronically on servers and hard drives across the globe. When a client decides to discover electronically stored information (“e-discovery”) in China, the diligent lawyer should be aware of the following two issues, among others.

 

Privacy Issues

Privacy issues can arise during e-discovery due to the possibility of producing personal information regarding employees or customers. It is customary and accepted for Chinese employees to store personal information such as vacation pictures or social networking data on employer-provided computers.

China currently has no national legal framework to address privacy concerns. However, privacy is quickly gaining currency as a topic of legal significance and many local and regulatory entities have taken the initiative to close the gap. The 2006 Amendment to the People’s Republic of China (“PRC”) Criminal Law criminalizes certain types of collection and disclosure of personal information. Privacy became a right for the first time upon the promulgation of the 2010 PRC Tort Liability Law, which creates a private cause of action for civil damages. Since 2010, several employees have successfully taken legal action against their employers for unauthorized taking of personal information from their work computers.

To reduce the risk of litigation, employers would be advised to obtain informed, specific consent from employees before proceeding with e-discovery of documents that might contain personal information.

State Security Issues

E-discovery may also implicate the Law on Guarding State Secrets, which defines the categories of information that are covered under the umbrella term of “state secrets.” The 2010 Amendment to the Law on Guarding State Secrets is broad in scope and unpredictable in application. Several employees of Western firms have been prosecuted under this law, resulting in imprisonment and fines. Joint ventures with state-owned firms are particularly at risk of violating state secrecy laws. In addition, the risks to employers are compounded when e-discovery involves transferring documents out of China. Employers should avoid violating state secrecy laws by securing governmental clearance or having a PRC law firm review the data before they are processed or transferred outside of China.


In Conclusion

Privacy and state secrecy laws in China are creating new and significant risks to employers as transborder discovery of electronic data becomes more common. Proposed legislative drafts are in the works that could result in even greater regulation of e-discovery in China. Therefore, it is wise to exercise heightened scrutiny and caution when processing and transferring electronically stored information in China.

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