Dealing with Legal Grey Areas (and Selective Enforcement) in China

Brian (Zhou) Chen, General Counsel Greater China, KONE Corporation, China

China’s laws are increasingly well-developed and in many areas comparable to those of Western countries. But in practice, there remain large gaps between what the laws say and how they are enforced, especially at the local level. Selective and/or conflicting enforcement of such laws depends not only on the particular region and industry, but also on the practical needs of this dynamic country – one which is striving to achieve high standards of legal compliance without slowing the economic engine needed to drive growth. Chinese companies have long experience in managing these grey areas of the law. However, for most large multinational corporations (MNCs), this is a chronic vexation as business heads and their legal advisors try to properly balance risk, compliance and business realities. This especially given that most MNCs perceive a higher risk of enforcement than smaller and/or domestic competitors. As in-house counsel, we often need to play the traffic cop and insist on full compliance with the written law. However, we also find ourselves giving the green light (or at least a blinking yellow) to certain grey zone activities. How to do this without the risk being the fall guy? This article explores some typical examples of “grey area” issues in China and suggests a practical approach in analyzing them, and in determining the border between compliance and over-compliance. It also offers some bright line rules on where not to cross the line, and how ethical consistency of approach and education of stake-holders are key factors to success.

Brian Chen is the Head of Legal for KONE companies in the Greater China region and a member of the regional leadership team. He leads the legal department of 7 attorneys and looks after all legal affairs of KONE operations in the Greater China region. Prior to joining KONE, Mr. Chen served as the Regional General Counsel for Chrysler companies in the Asia Pacific region. Before moving in-house, Mr. Chen practiced with Morrison & Foerster and Jones Day, two US based leading international law firms, respectively, as well as Jun He Law Offices, a top Chinese law firm. Mr. Chen received his LL. B. from the East China University of Political Science & Law in Shanghai, and received his LL. M. from the Columbia University School of Law in the city of New York, where he was a Harlan Fiske Stone Scholar. Mr. Chen is admitted to practice in the State of New York and is also qualified to practice in China.