The Beijing No.1 Intermediate People's Court has released its Criminal Judgment in the case of the US geologist, Mr Xue Feng ("Mr Xue").1 Mr Xue was sentenced to eight years imprisonment for spying into intelligence and supplying intelligence and State secrets to an organisation outside China. Three Chinese citizens were also convicted of related offences.2

Overview

  1. Mr Xue obtained various resource related information, including a database of some 30,000 exploratory well sites in China, from two former classmates who worked for State Owned Enterprises ("SOEs") and then provided it to his employer, a US company (IHS Inc). This information was classified by the National Administration for the Protection of State Secrets in China ("State Secrecy Bureau") as "intelligence" and "State secrets".
  2. Mr Xue denied the charges on the basis that he did not have the requisite mental element required under PRC Criminal Law. He said that he was not aware that the information was sensitive and relied on the fact that some of the well information was about wells located outside China. He also said that this information was not treated as confidential by the petroleum industry anywhere in the world.
  3. The Court rejected Mr Xue's defence on the basis that this information was very sensitive in China. It was implied in the judgment that Mr Xue should have known that this was the case.

Facts

Mr Xue Feng was based in China working for a US company, IHS Inc, which specialises in providing information on various international industry sectors (including natural resources in China). Mr Xue was responsible for the North East Asia region. During the years of 2002 to 2007, he obtained various classes of natural resources related information from SOEs in China. The court found that this information had been classified as either "intelligence" or "State secrets" by the State Secrecy Bureau.

In terms of the division between "intelligence" and "State secrets" within this information: some 15 documents (which contain raw geological data on the Ordos Basin (Inner Mongolia) and details of a national oil company's exploration activities) were classified as "Intelligence." An exploration database containing the location of some 30,000 exploratory well sites in China was classified as a State secret.3

The Court found that the "intelligence" was taken out of mainland China by Mr Xue. He also sold the database to IHS Inc for US$228,500.

The law on State secrets and intelligence

Article 111

Mr Xue was charged under Article 111 of the PRC Criminal Law (the "Criminal Law") which provides as follows:

"Whoever steals, spies into, buys or unlawfully supplies State secrets or intelligence for an organ, organization or individual outside the territory of China shall be sentenced to fixed-term imprisonment of not less than five years but not more than 10 years; if the circumstances are especially serious, he shall be sentenced to fixed-term imprisonment of not less than 10 years or life imprisonment; if the circumstances are minor, he shall be sentenced to fixed-term imprisonment of not more than five years, criminal detention, public surveillance or deprivation of political rights."

State secrets

"State secrets" are defined in the PRC Law of Guarding State Secrets ("State secrets law") as:

"State secrets refer to the matters connected to national security and national interests, determined by statutory proceedings, and accessible only to a limited group of persons within a given period of time."4

State secrets specifically encompass matters relating to "secrets in national economic and social development" and "secrets concerning science and technology."5 The relevant secrets and intelligence in this case were likely to have been classified as such because they were "secrets in national economic and social development" (ie. the PRC's exploration data and activities in the resources sector).

Intelligence

"Intelligence" has been defined by the Supreme People's Court ("SPC") as:

"matters which relate to national security and interests and which has not been made known to the public or should have not been made known to the public in accordance with relevant regulations."6

Given that this definition uses the same test as the State secrets law (national security and national interests) it is likely that the classification of "intelligence" will generally follow the same specific categories set out in the State secrets law (i.e. secrets in national economic and social development etc).

Where a court has difficulty in determining whether a matter in fact constitutes "intelligence" the State Secrecy Bureau is responsible for advising the Court of the information's classification.7

Comment

  1. Any non-public information in China which is sourced from SOEs or the PRC Government and which relates to the resources sector has a very real potential to constitute intelligence or a State secret within the meaning of the PRC Law. If it is neither of these it may still constitute a trade secret.8
  2. The classification of all State secrets must be undertaken in accordance with the State secrets law. Notwithstanding the very broad definitions in that law, the actual information should have been classified prior to the time that the relevant offence was committed. The position in terms of the scope and timing of the classification of "intelligence" is somewhat less clear.
  3. In terms of the intentional element under Article 111, the relevant SPC Interpretation has said that a person will be criminally liable where the accused either knew or should have known that the information they were dealing with related to State security and interests.9
  4. Mr Xue's defence was that his conduct was not intentional. He relied on some wells data that had been published outside the PRC on the internet and the fact that this information is not treated as confidential within the resources sector internationally. In other words, he simply did not know the information was sensitive.
  5. The Court rejected this defence on the basis that "information and data regarding petroleum in China is very sensitive". Although it is not stated expressly in the judgment, the relevant time which the information should have been known as "sensitive" would have been the period in which the offences were committed (ie. 2002 to 2007).

Implications

  1. This is the second decision this year in which a non-PRC citizen has been convicted of offences relating to State information. The first was Stern Hu who was convicted of unlawfully obtaining trade secrets from SOEs. This was the subject of our previous e-bulletin in this area [link].
  2. This latest decision may signal an increased focus by the relevant authorities in mainland China on the manner in which foreign entities and their staff obtain information in China (and of course the type of information).
  3. Companies and individuals operating in China should therefore assess the risk both of whether the entity they are dealing with is an SOE (and can therefore classify information as State secrets or otherwise have information which may be classified as intelligence) and whether the class of information they are obtaining and possibly removing from the mainland is something that may fall within these two classes of information.
  4. If there is any risk that the information falls within either class of information, then the most prudent option is to not take custody of the information and/or remove it from mainland China.
  5. The only circumstances in which it should be taken into custody is under the terms of an appropriately drafted confidentiality agreement which clearly sets out the scope of the relevant information being received and the manner in which it may be dealt with. It should also of course never be obtained through unofficial channels.