HOW TO HANDLE GOVERNMENT
ENFORCEMENT ACTIONS IN CHINA
By: Amy L. Sommers and Cecillia Y. Dai
Given increasing government enforcement activities in China which impact various industries and involve
several different government agencies such as the State Administration of Industry and Commerce,
the National Development and Reform Commission and local counterparts at the district, municipal, or
provincial level, companies operating in China must prepare for enforcement officers appearing at their
reception desks, asking questions, requesting documents, and even presenting search warrants.
Companies should develop a plan to respond to such enforce-
• Doors requiring security clearance should separate
ment actions and should train their employees regarding that
the operating/sales areas from the entry and reception
plan so that any contact with law enforcement is handled
areas and should remain locked and closed;
professionally and does not violate privacy and other rights of
the company or its employees. In this regard, the attorney-client privilege is a much more limited concept under People’s
Republic of China law than under common law practice in
other countries. However, an enforcement action commenced
in China could become relevant to enforcement actions in
other countries, such as the UK or U.S. It is thus important
for a company in China to handle a response to a Chinese
enforcement action in a manner intended to preserve the
confidential nature of any information disclosed to preserve
as much as possible protections that may exist over that
information under other countries’ laws. Accordingly, busi-
• Company policies regarding document storage/security
should address the eventuality that a regulator may
seize documents left on desks of sales/researchers/
engineers/administrators;
• Consider instructing first responders to notify
employees to place documents/records in secured
storage and use “clean desks” when regulators arrive
at the premises.
Training:
• Front-line staff (such as receptionists, legal counsel,
nesses must be prepared to address a Chinese government
and designated response teams) should be trained to
investigation or enforcement action in a manner designed to
respond to access and information requests made by
best protect the international interests of the business.
regulatory officials;
Below are some practical recommendations and guidance on
• On a regular basis, companies should conduct
preparing for and responding to government-related investi-
regular mock inspections following the attached
gations and, in particular, handling an on-site investigation.
inspection readiness checklist and assess their
employees’ performance.
PREPARATION IS CRUCIAL
Companies should address their readiness for a government
investigation from various perspectives, including:
• L ayout of the physical environment;
• T
raining of first responders;
• D
esignating communications path; and
• Identifying a Crisis Response Team or other
crisis responders.
Communications Plan:
• A designated responder who is authorized to speak to
regulators should be identified;
• R
eceptionists and “office ayis” (coffee/tea attendants)
should receive concise and clear instructions indicating
who is the designated responder and who besides that
person should be notified in the event of an official visit;
• They should be trained on what to say and not to say
to media inquiries;
Physical environment:
• Reception/meeting areas should be physically separate
and segregated from operating/sales areas;
How to Handle Government Enforcement Actions in China
• They are responsible for providing regulators respectful
hospitality while the appropriate company personnel
are notified of the investigation/visit/inspection.
1
Crisis Response Team:
• A Crisis Response Team, should be formed and trained
to address regulatory visits;
• A Crisis Response Team typically should consist of the
country manager (and potentially other management
• Invoke document security measures as consistent
with company policy.
• “Reasonable cooperation” with the enforcement:
Provide reasonable cooperation to officials upon
request. When cooperating with an on-site inspection:
with relevant expertise), general counsel, compliance
- Be calm and polite;
personnel, external legal counsel, IT management,
- Do not refuse admission to officials or keep them
finance personnel, a PR/media spokesperson, and
government relations personnel;
• On-site personnel should be provided with a list
identifying members of the Crisis Response Team
and should be trained to notify and involve the Crisis
Response Team as soon as an official contact is made.
MANAGING THE FIRST 24 HOURS
OF AN INSPECTION
Stage 1 – When the government officials arrive
• First contact: Employees first making contact
with regulators should notify the company’s First
Responders and/or Crisis Response Team if they
exist. If not, they should notify legal department, their
immediate line manager, and the general manager.
Unless specified in the company’s communications
protocol, they should not notify anyone else unless or
until otherwise instructed to do so by the responsible
people. Note: Formation of a Crisis Response Team
is highly recommended. It usually includes members
from the IT, legal, finance, and management teams.
• Review and confirm official documentation: Verify
officials’ ID cards and authorization documents and
waiting for undue lengths of time;
- Immediately summon the First Responder, Crisis
Response Team or other designated officials, as
per Company policy;
- Answer questions succinctly and directly, but do
not volunteer new information;
- Provide documents when requested;
- Keep records of all the documents/materials/items
copied or seized by officials (with electronic copies/
photos of such documents/materials/items);
- Label all the documentation containing the company’s secrets with clear notices indicating the same;
- Ensure the officials are accompanied at all times
during their inspection;
- Do not behave in a non-cooperative manner or
attempt to obstruct the inspection/enforcement; and
- Ensure that any records prepared by the inspecting officials and shown to you are accurate and
never sign anything that is inaccurate.
• Create a list of documents/materials/items copied
and/or seized by officials
• Request officials sign a copy of the list of
make photocopies; note the nature of the investigation
documents/materials/items copied and/or seized
(routine or non-routine), the nature of the allegation,
after the inspection is completed.
and any reference made by government agencies to
any specific facts/circumstances; the number and
behavior of the officials at the site; or the tone of the
officials on the phone.
Stage 3 – 24 hours after the inspection
• Summarize the inspection: Legal staff should
review any documents seized interview staff who
• Direct authorities to neutral meeting space and offer
spoke with regulators and identify any additional
hospitality: Invite the attending officials to wait in a
facts or documents that should be offered to the
meeting room until the company’s responsible people
government to supplement, correct, or modify
arrive and offer tea, coffee, etc., to the officials; make
previously provided information.
sure the doors/access points from the reception area
to the operating areas remain locked and secured.
Stage 2 – During the on-site enforcement
• Relevant internal stakeholders should be briefed:
Regional in-house counsel and external counsel if
considered appropriate.
• Staff notification: Send a reminder to all employees
that an inspection is taking place and request nonrelevant employees to stay at their work place to avoid
interrupting the inspection.
How to Handle Government Enforcement Actions in China
2
INSPECTION READINESS CHECKLIST
(in the event of an on-site inspection by authorities)
Name:____________________________________________________________ Date:____________________________________________________
Location:____________________________________________ Organization:__________________________________________________________
Notes:_______________________________________________________________________________________________________________________
EVENT
ACCESS
OFFICE SECURITY
ITEM
Was the front door to main office closed?
Yes
No
Were the doors to the office areas
closed/not accessible?
Yes
No
Did you sign the visitor logbook?
Yes
No
Did the office staff request proof of identity?
Yes
No
Did you ask the reason for the visit
and for authorization?
Yes
No
Did you place visitors in the visitor
waiting area?
CHALLENGE
ASSESSMENT
Did the employee photocopy proof
of identity?
Yes
No
Yes
No
Did you insist on going directly to
the offices
Yes
No
Who did employee call within the company?
Yes
No
Legal? Compliance? Managing
Director?
Yes
No
Did they provide a meeting room with a
phone, fax, and photocopier in the immediate vicinity? (are they supposed to?)
Yes
No
Did they ask to use a personal
office?
Yes
No
Was there a company employee with visitors
at all times?
Yes
No
What was the name(s)?
Yes
No
Was there one company employee who
managed the event?
Yes
No
Did any employee give lengthy
explanations, volunteer information, or provide personal opinions?
Yes
No
Did a company employee record requests
or take notes?
Yes
No
Did visitors request original documents?
DOCUMENTS
ASSESSMENT
Yes
No
Where any documents destroyed or hidden?
Yes
No
Was any employee to sign any document
or statement?
Yes
No
Were screensavers in use?
Yes
No
Did visitors collect any documents on desks?
Yes
No
Did they: (1) Request a document
with legal privilege? (2) Take an
original document?
Did the company take an extra
copy of any document provided?
COMMENTS
Yes
No
Did the company employee remain
calm and friendly?
OTHER COMMENTS:_______________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
How to Handle Government Enforcement Actions in China
3
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