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China is the second largest economy in the world, with a booming manufacturing sector and the world’s fastest growing consumer market. Geographically, it is a vast country and politically, its socialist market economy makes it a unique place to do business. On the one hand, there is a thriving open market that is not widely regulated. On the other, the state-owned sector dominates and onerous laws such as the State Secrets Law can be a burden for privately owned companies operating in China.

The status of China as a global economic giant combined with its complicated legal system has made it one of the newest and fastest growing ediscovery markets.

What is unique about ediscovery in China?Doing business in China comes with its own set of laws, practices and customs that often clash with foreign legal obligations. The conflict between China’s guarding of data and the demand from the United States or other countries for production make ediscovery in China a balancing act between accessing the necessary data for a case and complying with local laws.

Who uses ediscovery technologies?We recently conducted a market study in China, interviewing lawyers from eight firms and 19 corporations about how they use ediscovery. Overall, respondents reported using ediscovery

technologies and services on a wide range of cases even though there are no local rules requiring ediscovery to be carried out.

The key findings from the study were:

■■ There is a clear demand for ediscovery in China, with 96 percent of the study’s respondents (law firms and corporates combined) indicating that there is a need or may be a need to process data locally in China.

■■ Demand for ediscovery is increasing. Participating law firms noted that ediscovery is something their clients have needed to carry out between four and dozens of times a year in the past two years, and they see this trend continuing.

■■ Law firms see ediscovery vendors as the party primarily responsible for collecting, processing and producing data in review tools for use by legal teams. Companies see themselves as playing a greater role in these tasks.

China: Mastering the Ediscovery Process by Understanding the Culture

Legal System: The Chinese legal system is based primarily on the Civil Law model.

Applicable Rules:

■■ Law on Guarding State Secrets

■■ Counter-Terrorism Law of the People’s Republic of China

Ediscovery Practices: There is a clear and increasing demand for ediscovery technology in China. Local or mobile solutions are essential to avoid severe punishments for breaching state secrecy laws.

At a Glance

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What data protection and privacy laws in China impact ediscovery?China does not have a single data protection law that specifically addresses the collection, storage, transmission and processing of personal information. However, there are certain privacy laws that practitioners should be aware of before conducting ediscovery, specifically, laws concerning the regulation of information which employers are able to access without consent. As China does not formally require discovery, it is often a challenge to explain the purpose of discovery to local employees.

Even if employers can obtain information with consent, they face another hurdle; China’s State Secrets Law. This law prohibits the disclosure of information that is classified as a “state secret,” which is loosely defined as, “matters that have a vital bearing on state security and national interests and, as specified by legal procedure, are entrusted to a limited number of people for a given period of time.”1 This intentionally vague definition and broad scope provide the government with flexibility. A document can be determined to be a “state secret” at any time, even if its production was previously allowed. This law has been applied not only to national defence information but also to everyday information that most Westerners would never consider to be a “state secret.” While steps have been taken by the Chinese government to promote the appearance of transparency and deter the arbitrary invocation of the State Secrets law, what information constitutes a “state secret” is still somewhat unclear.2

When dealing with a Chinese entity in an ediscovery matter, practitioners also need to understand that the company’s data itself may actually be a “state secret.”3 Many businesses, including small businesses, are owned by the state or by those who possess political influence, making their data subject to the State Secrets law.4 What becomes more challenging for practitioners is that because what constitutes a “state secret” is so arbitrary, a document may not be classified as a “state secret” until it has already been disclosed in litigation and it is too late.5 Practitioners need to tread with caution and process data locally since unauthorized possession (even by counsel) or transmission of these secrets outside of the country can result in severe punishment. These punishments can include fines, surveillance and even life imprisonment.6

Are there any other barriers to using ediscovery technology in China?Aside from the complexities of Chinese data protection law, there are cultural, linguistic and geographical barriers to using ediscovery technology in China.

Data can be lost in translation

Mandarin, the official language of China and the most prevalent, uses two concurrent written forms; Traditional and Simplified, both of which are made up of pictorial characters. These can be problematic for ediscovery procedures. For the most accurate results practitioners need an ediscovery tool that can handle traditional and simplified Chinese characters and a Chinese speaking ediscovery consultant to run frequent quality control checks.

Data is kept within the family

China has a strong family-focused culture, and whilst hiring family members in the West is often frowned upon as being nepotistic, it is a very common practice in China. If there is an investigation, employees will often go out of their way to protect their boss, which can make data collection difficult. Practitioners need to act quickly, since it is not unheard of for employees to delete potentially incriminating data and computer forensic experts needs to know where to look as the data may not be where, or with whom, it is expected to be.

Unchartered territories

China is an enormous country, and many of the manufacturing and production plants in China are located in remote locations with no English speakers or often, no street maps.

When collecting data in these isolated locations, it is important to be as broad as possible. There is great potential for data to be deleted or the factory to be barricaded after departure so forensics teams may only have one chance to gather everything that is needed.

Ediscovery solutions that allow clients to process data in country and onsite at a company’s premises in China are essential.

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What are some examples of best practice in China?Despite the difficulties, it is possible to conduct successful ediscovery in China. Below are suggestions for practitioners in overcoming the challenges discussed.

■■ Understand secrecy, privacy and data protection laws before processing data avoid accidentally violating a regulation. Data production needs to be closely monitored to avoid inadvertent disclosure of protected information.

■■ Review responsive documents after collection and protect privileged data.

■■ By choosing an ediscovery partner with both a local presence and experience in handling cases in China, the risks and obstacles associated with removing data from the country can be mitigated.

■■ In China, much business is conducted over WeChat (a Chinese language mobile text and video messaging service), so it is very important to capture the chat logs and messages.

■■ When conducting ediscovery in China, companies must review and clear any state secrecy concerns and redact sensitive information prior to transporting it out of China. Mobile solutions can be used as a cost-efficient method of segregating and filtering out personal information, sensitive company data or privileged documents early on to protect unwanted disclosure.

REFRENCES1 Law on Guarding State Secrets (promulgated by the Standing Comm.

Nat’l People’s Cong., Sept. 5, 1988, rev’d Apr. 29, 2010, effective Oct. 1, 2010), art. 11, 2010 P.R.C. Laws 71.75 (China), http://www.hrichina.org/sites/default/files/pdfs/law/20101001-statesecretslaw-en.pdf

2 Richard Silk, China’s Secret Anti-Secrecy Act, Wall Street Journal, (Feb. 3, 2014 9:36 PM), http://blogs.wsj.com/chinarealtime/2014/02/03/chinas-secret-anti-secrecy-act/

3 See Gary J Gao, Zhong Lun, Shanghai, An Inevitable Conflict: China State Secrets Review in Cross-Border Litigation, International Bar Association, (May 11, 2016), http://www.ibanet.org/Article/Detail.aspx?ArticleUid=afea32c8-0aec-480c-a0ac-e50592ff250a (discussing when a document is potentially a state secret); Richard Wigley, China: China’s State Secrets Law and Compliance Issues for Foreign Companies, Mondaq.com (Sept. 30, 2014) (discussing the likelihood that a document may be marked as a state secret) http://www.mondaq.com/x/343186/Trade+Secrets/Chinas+State+Secrets+Law+and+compliance+issues+for+foreign+companies

4 Mark Jenkins, Et Al, FCPA Compliance in China, Fraud-magaine.com, (March 2014), http://www.fraud-magazine.com/article.aspx?id=4294982094

5 Gary J Gao, Zhong Lun, Shanghai, An Inevitable Conflict: China State Secrets Review in Cross-Border Litigation, International Bar Association, (May 11, 2016), http://www.ibanet.org/Article/Detail.aspx?ArticleUid=afea32c8-0aec-480c-a0ac-e50592ff250a

6 Willis Sautter, China Investigations: Handling State Secrets and Privacy Data, kwm.com (Sept. 10, 2015), http://www.kwm.com/en/uk/knowledge/insights/china-investigations-handling-state-secrets-and-privacy-data-20150910