SUN WUKONG China steels for Rio Tinto court case
By Wu Zhong, China Editor
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 prison.
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.
Whatever 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 "ulterior
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
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 transparently.
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 case.
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' commercial secrets.
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 past years.
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 Beijing said.
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
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 rights.
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 secrets".
"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
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 foreign national."
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.
Last 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
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 professor