The US federal court ruled that China's secrecy laws are insufficient as a basis for refusing to provide relevant documents in evidence disclosure

LABEL： One Belt One Road International LegalBusiness , Dispute Resolution and Litigation ,

background

At No 4: In the case of 13-cv-01895 (E.D. Mo. Sept. 27, 2024) ("Ruling"), the United States District Court for the Eastern District of Missouri heard the question of whether another country's secrecy laws could prevent the disclosure of evidence in US judicial proceedings. Specifically, the plaintiff has submitted a motion requesting the court to compel the defendant to respond to its request for disclosure of evidence regarding the sales information of the product accused of infringing the plaintiff's patent. When opposing the plaintiff's motion, the defendant requested a protective order to be issued under the Chinese Confidentiality Law, prohibiting the provision of such information. The defendant argues that the court should issue a protective order in accordance with China's Confidentiality Law, as providing information in response to the plaintiff's request for evidence disclosure may expose them to extensive sanctions under China's recently enacted Anti Espionage Law. The defendant relies on a statement from a Chinese lawyer and a letter from the local commerce bureau as a basis. The regional court noted that it had previously rejected claims based on China's Data Security Law, Cybersecurity Law, and Personal Information Protection Law requesting the court to issue protection orders, and reached a similar conclusion that the threat of sanctions under the Anti Espionage Law was speculative. Therefore, the court ruled in favor of the plaintiff's compulsory motion and rejected the defendant's request for a protective order.
The regional court believes that the defendant's argument regarding the threat of sanctions under China's Anti Espionage Law is speculative

Before hearing the dispute between the two parties regarding China's Anti Espionage Law, the regional court first summarized its previous findings on China's Data Security Law, Cybersecurity Law, and Personal Information Protection Law, and collectively referred to them as the "Confidentiality Law" (see page 7 of the ruling). The court summarized its previous findings as follows:

The significant interest of the United States in defending the rights of American plaintiffs through fair, prompt, and low-cost litigation in court outweighs the interest of China in enforcing its confidentiality laws; And the defendants are only speculating that if they comply with the request for evidence disclosure, they may face sanctions or penalties.

Refer to page 7 of the ruling (referencing the previous ruling dated January 20, 2023).

Subsequently, the regional court reviewed the arguments put forward by both parties based on China's Anti Espionage Law, which came into effect in July 2023 and was implemented after the previous ruling was issued. The court acknowledged that "China's newly promulgated Anti Espionage Law imposes additional restrictions on information sharing," but rejected the defendant's argument that the penalties they face under the new law are "extremely broad," to the extent that they require the court to issue a protective order (see ruling on page 8). The court subsequently analyzed the evidence relied upon by the defendant and found that their claim of facing sanctions was too speculative.

Regarding the evidence, the regional court first examined a statement submitted by a Chinese lawyer in support of the defendant's request for a protective order. The court found that the statement was insufficient as it failed to "discuss the newly enacted Anti Espionage Law" and did not provide any analysis on possible sanctions under the law (see page 8 of the ruling). Next, the court reviewed the letter submitted by the defendant to the local commerce bureau, which explained that the defendant "should comply with China's data security laws". However, the court held that the letter did not prove that sanctions were likely to occur or was only speculative, as "the letter did not provide the possibility of potential consequences for violating the Espionage Act" (see ruling on page 8).

After reviewing the facts of the case, the district court further examined the applicability of the United States disclosure rules in the case. The court concluded that the submitted evidence "is merely speculation that the defendant may be punished under Chinese law for providing the requested information." (See pages 8-9 of the ruling). The court cited multiple rulings from other regional courts, explaining that "Chinese litigants often attempt to circumvent the disclosure requirements of American courts by arguing that multiple Chinese laws hinder their compliance with regulations, but courts typically reject this argument and enforce the provisions of the Federal Rules of Civil Procedure related to disclosure of evidence." (See page 9 of the ruling). The court specifically pointed out that the defendant failed to "cite [any] case to demonstrate that individuals or entities in China have been sanctioned under Chinese privacy laws for complying with the Federal Civil Procedure Rules of the United States courts. In the end, the court did not agree with the defendant's argument that they were caught in a dilemma of "either complying with the plaintiff's request for disclosure of evidence and facing Chinese sanctions, or refusing to comply... and facing the risk of sanctions by this court" due to uncontrollable factors. The court explained that "no one forced the defendant to sell products in the US market," and that the defendant "chose to do so, knowing that it may place them within the jurisdiction of US courts and subject them to applicable rules there." (See ruling on page 9).
Conclusion and Experience

The ruling suggests that US courts may not prevent the disclosure of evidence due to vague claims that the party providing the materials may face sanctions under China's anti espionage or privacy laws. However, the opinion of the regional court suggests that the court may be more accepting of the defendant's more specific arguments, namely why providing relevant information is likely to be sanctioned under certain specific provisions of China's Anti Espionage Law or Confidentiality Law. For example, the court specifically pointed out that the Chinese lawyer's statement failed to specify the specific reasons or basis for the defendant's possible sanctions under the Anti Espionage Law. Similarly, the court noted that the letter from the local commerce bureau only stated that Chinese companies must comply with the Anti Espionage Law, but did not clarify how or why providing relevant materials would expose the defendant to sanctions. In short, US courts are unlikely to accept speculative arguments that could lead to sanctions solely based on China's anti espionage and privacy laws. When making such claims, if the company can clarify specific concerns about relevant laws through evidence such as statements from Chinese lawyers or letters from local commerce bureaus, thereby proving that concerns about potential harm are not just speculation but are indeed possible, then such claims will be more likely to succeed.