On April 26, 2023, the Standing Committee of the National People’s Congress of the People’s Republic of China (PRC) passed an amended Counter-Espionage Law. These changes constitute the first amendments to the Counter-Espionage Law since its introduction in November 2014. The amended law will come into effect on July 1, 2023.
This alert summarizes key provisions of the amended Counter-Espionage Law.
Types of Espionage Activities
The amended Counter-Espionage Law defines “espionage” to include the following conduct:
The amended Counter-Espionage Law also applies to conduct by espionage organizations and their agents against third countries within the territory of the PRC, or which use PRC citizens, organizations or “other conditions,” and which endanger the national security of the PRC.
Previously, the Counter-Espionage Law provided that all PRC state agencies, armed forces, political parties, public groups, enterprises and organizations have the obligation to prevent espionage and maintain national security. The law also provided that all PRC citizens and organizations should support and assist in counter-espionage work.
The amended Counter-Espionage Law supplements the prior guidance, explaining the obligations of PRC government agencies and entities in more detail. Of particular significance, the amended law calls for the state to establish an administrative system for “key counter-espionage and security entities.” Although these entities are not defined specifically—and the scope of their duties is not explained in detail—the law requires all such entities to adopt the following measures:
Investigation and Enforcement
The amended Counter-Espionage Law designates the PRC state security agencies (i.e., Ministry of State Security and its local counterparts) as the primary counter-espionage authorities. In carrying out counter-espionage investigation and enforcement work, the amended law provides state security agencies with the following powers, among others, dependent in certain cases on the presentation of appropriate documentation (work certificates) and/or the approval of the relevant state security organ:
Protective and Supervision Provisions
While the amended Counter-Espionage Law includes many enforcement-related provisions, it also includes provisions aimed at protecting the lawful rights and interests of PRC citizens and organizations. For example, the amended law provides that information collected by state security agencies and their staff in performing counter-espionage duties may be used solely for counter-espionage work. State secrets, work secrets, commercial secrets and personal information acquired by government agencies and staff during counter-espionage investigations are to be kept confidential. Any individual or organization has the right to report and accuse the state security agencies and their staff of exceeding their powers, abusing their powers and other illegal acts to the higher state security agencies or supervisory agencies, people’s procuratorates and other relevant departments. In addition, the investigation, seizure and freezing of assets, as well as bans on exiting or entering China, are subject to certain procedural requirements and limitations—and restrictions are to be lifted if and when national security risks are eliminated.
Violations of the amended law can include criminal prosecution and civil penalties.
Potential civil penalties for individuals include warnings, administrative detention for up to 15 days, fines up to RMB50,000 (~USD $7,200) where espionage does not result in illegal income exceeding that amount, and fines between one to five times illegal income in excess of RMB50,000. The same penalties apply to individuals who provide support or assistance, or who harbor or cover up, the espionage activities of others. Deportation of foreign individuals is also permitted, and deported individuals may not enter the PRC for 10 years following deportation.
Potential civil penalties for entities include warnings, fines up to RMB500,000 (~USD $72,000) where espionage does not result in illegal income exceeding that amount, and fines between one to five times illegal income in excess of RMB500,000. Responsible executives and personnel are subject to the individual penalties described above.
The recent amendments to the Counter-Espionage Law represent a significant development for companies and individuals doing business in and with China. Given the significance of the amendments and the potential severity of legal violations, such companies should familiarize themselves with the amended law and closely follow its implementation and further development.