Balancing U.S. Discovery Requirements with the Chinese Data Protection Laws

In recent years, China has been building up its legal framework for data protection through a series of legislative actions (collectively, Chinese Data Protection Laws). For example, the Law on Guarding State Secrets (GSSL) prohibits carrying or delivering any storage medium of state secrets out of mainland China without the Chinese authorities’ approval. GSSL (amended in 2024), at art. 28(5). The Cybersecurity Law (CSL) requires a security assessment before personal information and “important data” collected and produced by “critical information infrastructure operators” and stored within mainland China are provided to entities outside mainland China. CSL (2016), at art. 37. The Data Security Law (DSL) prohibits providing data stored within mainland China to foreign judicial or law enforcement authorities without the Chinese authorities’ approval. DSL (2021), at art. 36. And the Personal Information Protection Law (PIPL) prohibits personal information processors from providing personal information stored within mainland China to foreign judicial or law enforcement authorities without the Chinese authorities’ approval. PIPL (2021), at art. 41.

The broad scope and sometimes ambiguous language of the Chinese Data Protection Laws complicate U.S. discovery involving China-based litigants and/or data. Under U.S. law, the Chinese Data Protection Laws are treated as foreign “blocking statutes” because they obstruct the disclosure of information. See Société Nationale Industrielle Aérospatiale v. U.S. Dist. Ct. for the S. Dist. of Iowa, 482 U.S. 522, 565 (1987). U.S. courts address litigants’ resistance to discovery based on foreign blocking statutes through a two-step process: (1) true conflict analysis and (2) comity analysis. See, e.g., Maxwell Commc’n Corp. by Homan v. Société Générale (In re Maxwell Commc’n Corp.), 93 F.3d 1036, 1049 (2d Cir. 1996) (citing Aérospatiale, 482 U.S. at 555 (Blackmun, J., dissenting) (existence of a true conflict is a “threshold question”)).

Step 1: True Conflict Analysis

Generally, the party resisting discovery must show “sufficient particularity and specificity” to establish that the requested disclosure would indeed be obstructed by the relevant Chinese Data Protection Laws. See Wultz v. Bank of China Ltd., 298 F.R.D. 91, 96 (S.D.N.Y. 2014).

In this regard, some U.S. courts have rejected the argument that the disclosure at issue would violate Chinese law and have ordered the disclosure of China-based evidence, noting a lack of true conflict between Chinese law and the discovery requirements under U.S. law. See, e.g., Cadence Design Sys. v. Syntronic AB, No. 21-cv-03610-SI, 2022 U.S. Dist. LEXIS 112275 (N.D. Cal. June 24, 2022) (holding the PIPL does not prohibit compliance with a U.S. court order because the responding party’s discovery obligations create a cognizable legal obligation sufficient to invoke the exception of Article 13 of the PIPL, which allows disclosure without the individual employees’ consent required under Article 39 thereof); Owen v. Elastos Found., 343 F.R.D. 268 (S.D.N.Y. 2023) (similar holding regarding the PIPL); see also Autodesk, Inc. v. ZWCAD Software Co., No. 5:14-cv-01409-EJD, 2015 U.S. Dist. LEXIS 39695 (N.D. Cal. Mar. 27, 2015) (rejecting defendant’s argument that the source code at issue may be or contain state secret information prohibited from exporting from China without the government’s permission under the GSSL, noting that defendant failed to show that production necessarily implicates this prohibition and that “Chinese companies may not avoid producing documents in United States litigation by citing to broad concerns that liability may be imposed under ‘unclear’ or ‘amorphous’ Chinese laws”); Meggitt (Orange Cnty.), Inc. v. Nie Yongzhong, No. SACV 13-0239-DOC (DFMx), 2015 U.S. Dist. LEXIS 52462 (C.D. Cal. Apr. 21, 2015) (similar holding regarding the GSSL).

Step 2: Comity Analysis

If a true conflict is established, U.S. courts conduct a “comity” analysis, originally weighing the five factors set forth in the Restatement (Third) of Foreign Relations Law (1987) and Aérospatiale. Later, the U.S. Court of Appeals for the Second Circuit added two more factors in Gucci America, Inc. v. Weixing Li, making the comity analysis a seven-factor analysis. 768 F.3d 122 (2d Cir. 2014).

First three factors. The first three factors are (1) the importance to the investigation or litigation of the documents or other information requested, (2) the degree of specificity of the request, and (3) whether the information originated in the United States. Aérospatiale, 482 U.S. at 544 n.28. Often, a party seeking discovery can relatively easily make the case that these three factors are in its favor.

The other factors are more complicated.

Fourth factor. The fourth factor is the availability of alternative means of securing the information. “If the information sought can easily be obtained elsewhere, there is little or no reason to require a party to violate foreign law.” Milliken & Co. v. Bank of China, 758 F. Supp. 2d 238, 240 (S.D.N.Y. 2010) (internal citation omitted); Wultz v. Bank of China Ltd., 910 F. Supp. 2d 548, 558 (S.D.N.Y. 2012) (quoting Milliken (internal citation omitted). In Milliken and Wultz, the U.S. District Court for the Southern District of New York concluded that seeking discovery from Chinese entities through the Hague Convention process is not only time-consuming but also reliant upon Chinese authorities’ approval, which proves uncertain and therefore not a reasonable alternative means to obtain discovery. See, e.g., Wultz, 910 F. Supp. 2d at 558. But see Tiffany (NJ) LLC v. Qi Andrew, 276 F.R.D. 143 (S.D.N.Y. 2011) (noting that the Hague Convention process, while likely not ideal, is not futile).

With the promulgation of the Chinese Data Protection Laws, arguably the Hague Convention process will less likely constitute an alternative means of securing the information. This is because under Chinese law, after the Department of Justice receives the discovery request through the Hague Convention process, the request will need to be approved before a Chinese court or a Chinese attorney it authorizes can gather the requested information for the receiving Chinese government agency to respond. See Ministry of Just. of the People’s Republic of China (last visited Nov. 16, 2024). If the production of the requested information to be used in U.S. litigation is subject to restrictions or even prohibitions by the Chinese Data Protection Laws, it is possible that the receiving agency, the reviewing agency, the Chinese court, and/or any other Chinese government agencies involved in the Hague Convention process will sua sponte reject the discovery request. Of note, we have not seen any real-life examples in this regard since the promulgation of the Chinese Data Protection Laws.

Fifth factor. The fifth factor is the balance between the interests of the United States and the interests of the country where the information is located. The U.S. Supreme Court observed that the United States has an “overriding interest in the ‘just, speedy, and inexpensive determination’ of litigation,” Aérospatiale, 482 U.S. at 543, and that “[t]he blocking statute . . . is relevant to the court’s particularized comity analysis only to the extent that its terms and its enforcement identify the nature of the sovereign interests in nondisclosure of specific kinds of material.” Id. at 544 n.29.

The U.S. Court of Appeals for the Ninth Circuit considered this to be “the most important factor” and noted that in assessing the strength of China’s interests, courts are to consider expressions of interest by the foreign state, the significance of disclosure in the regulation of the activity in question, and indications of the foreign state’s concern for confidentiality prior to the controversy. Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1476 (9th Cir. 1992); see also In re Valsartan, Losartan & Irbesartan Prods. Liab. Litig., MDL No. 19-2875(RBK/KW), 2021 U.S. Dist. LEXIS 159783 (D.N.J. Aug. 12, 2021) (partially granted defendant’s motion for a protective order, holding that with regard to three documents at issue created by an organ of the Chinese government, the interests of China preponderate and weigh against compelling disclosure; noting that as to the other documents, there is no expression from the Chinese government that disclosure would imperil state security or any national interest).

Sixth factor. The sixth factor is the difficulty of compliance. In examining the hardship on the party from whom compliance is sought, courts look at the likelihood that enforcement of the foreign law will be successful. Strauss v. Credit Lyonnais, S.A., 249 F.R.D. 429, 430 (E.D.N.Y. 2008); see also Milliken, 758 F. Supp. 2d at 249 (holding that bank failed to sufficiently show hardship in compliance with Chinese law, noting that the possibility that it will suffer hardship in complying with the discovery order is speculative at best); Tiffany, 276 F.R.D. 143 (denying plaintiff’s motion to compel disclosure where defendant banks show examples that regulations have been used to the detriment of banks in the past, and that potentially harsh sanctions are applicable).

Seventh factor. Finally, the seventh factor is whether the party resisting disclosure is acting in good faith. Courts evaluate the conduct and representations of the resisting party. For example, in Motorola Solutions, Inc. v. Hyter Communications Corp., the court viewed the delay in raising concerns about the Chinese Data Protection Laws and the failure to mention pending permissions as indicative of bad faith. No. 1:17-cv-01972, 2023 U.S. Dist. LEXIS 1748 (N.D. Ill. Jan. 5, 2023).

Concluding Advice

To date, there have not been many cases where a U.S. litigant succeeded in resisting discovery demands for disclosing China-based information merely by citing the Chinese Data Protection Laws. However, counsel should note that although the Chinese Data Protection Laws do not categorically prohibit data export, they often impose requirements that must be met before the export of information out of mainland China can proceed. U.S. litigants should consider advising the requesting party and the court about the time needed to meet these requirements.