Rio ‘bribery’ case shakes foreign groups

Nothing concentrates the mind of a foreign executive in China quite so effectively as hearing that four employees of a powerful multinational company have been accused of spying in a case that involves commercial negotiations.

So news of the detention of four employees of Rio Tinto, the Anglo-Australian miner, has spooked multinational mining groups and anyone who does business with the notoriously murky Chinese iron ore and steel industries. But it has also made foreign executives in other industries – even the squeaky clean ones – think twice about their business methods.Rio on Friday denied Chinese press reports that its employees bribed Chinese steel mill executives to steal state secrets about iron ore. The Chinese foreign ministry has accused Rio employees of spying, but they have left it to the state-owned media to explain that they mean bribing officials of the country’s strategic steel industry to reveal sensitive information. That data would allow Rio to figure out China’s bottom line in annual iron ore contract pricing negotiations, which are currently deadlocked.

China, as the world’s largest importer of iron ore, thinks it should have a greater say in how iron ore is priced. Instead, it has seen itself outmanoeuvred by Rio, which led this year’s negotiations on behalf of the miners. China is likely to end up paying substantially more for its iron ore as a result.

Then, only days after contract talks broke down, China shocked the world by detaining Rio employees. No official charges have been laid, but Australian officials have said Rio is accused of bribery.

What makes the case unusual is that China has made use of its broad state secrets law, which Nicholas Bequelin, China researcher with Human Rights Watch, in Hong Kong, calls a “drift net which can catch virtually any commercial information”.

Determining the rights and wrongs of the case is impossible without more information. “We don’t know the evidence in this case and we may never know the evidence, even when the case is finished,” says Jerome Cohen, an expert on Chinese law at New York University.

Detainees in such cases are often denied access to counsel for months. Often no witnesses appear at trials, which are closed to the public and media, and even family members or consular representatives may not be allowed to attend, he says. “And, of course, the decision and sentence in such cases is generally guided by political leaders, not the judges who conduct the trial hearing or even the court’s adjudication committee.” link.....