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  • With the amended Counter-Espionage Law, China has broadened its definition of “espionage” to give information related to “national security and interests” the same protections already given to state secrets.
  • The amended law prohibits specified conduct and provides new guidance for the obligations of Chinese government agencies, entities and individuals in protecting national security.
  • While the amended law provides new guidance in several areas, further guidance is anticipated; companies with operations, employees and data in China should follow further developments closely to ensure compliance with the law.

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:

  • Activities compromising the national security of the PRC, whether committed by an espionage organization or its agent or by any other person as instigated or funded by the aforesaid or committed by such organization or agent in collusion with a domestic or overseas institution, organization or individual;
  • Joining an espionage organization or accepting a task assigned by an espionage organization or its agents, or seeking to align with an espionage organization and its agents;
  • Stealing, spying, purchasing or illegally providing any state secret, intelligence and other documents, data, materials or items related to national security, or causing a state employee to betray his or her country by instigation, inducement, coercion or bribery, which is committed by an overseas institution, organization or individual other than an espionage organization and its agent or by any other person as instigated or funded by the aforesaid or committed by a domestic institution, organization or individual in collusion with the aforesaid;
  • Cyberattack, invasion, interference, control, destruction or other activities against state agencies, secret-related entities, or critical information infrastructure, whether committed by an espionage organization or its agent or by any other person as instigated or funded by the aforesaid or committed by the aforesaid organization or agent in collusion with a domestic or overseas institution, organization or individual;
  • Indicating the attack targets to enemies; and
  • “Other espionage activities.”

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.

Security Precautions
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:

  • Establish a counter-espionage security prevention program and specify the counter-espionage responsibilities of the relevant internal departments and personnel;
  • Strengthen the education and management of counter-espionage security precautions for staff, and supervise and inspect the performance of counter-espionage security precautions by resigned personnel during the declassification period;
  • Strengthen the daily security management of secret-related matters, places, carriers, etc., and adopt counter-espionage physical prevention measures, such as isolation and reinforcement, closed management and setting up alerts; and
  • Take technical measures and other necessary measures to strengthen counter-espionage technical defenses against key departments, network facilities and information systems.

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:

  • To check the identity certificates of Chinese citizens or foreign personnel, ask relevant individuals and organizations about certain circumstances, and check the belongings of those whose identity is unknown or are suspected of espionage;
  • To inspect the electronic equipment, facilities and related procedures and tools of relevant individuals and organizations;
  • If a situation endangering national security is discovered during an inspection, to order relevant individuals and organizations to take immediate rectification measures;
  • To seal and seize electronic equipment, facilities and related procedures and tools if individuals and organizations do not or cannot rectify situations endangering national security;
  • To obtain and review relevant documents, data, materials and items necessary for carrying out counter-espionage investigations in accordance with law, in cooperation with relevant individuals and organizations;
  • To summon persons suspected of violations of the law for questioning, with a time for questioning and verification not to exceed eight hours (or 24 hours under “complicated circumstances”), subject to certain limitations;
  • To carry out the search and inspection of persons, objects and places relating to suspected espionage, to conduct inquiries into the relevant assets of persons suspected of espionage, and to seal, seize and freeze places, facilities and assets suspected of being used in connection with espionage;
  • To prevent Chinese citizens and others from leaving the country;
  • To deny entry to the PRC for overseas personnel linked to espionage;
  • To notify the relevant regulatory agencies in a timely manner to help mitigate espionage risks, including requesting that such agencies order telecommunications business operators and internet service providers to take timely measures to repair loopholes, strengthen network protection, shut down or stop the transmission of information, eliminate programs and content, suspend related services, remove related applications, close related websites and take other measures to eliminate espionage risk and save relevant records;
  • When urgent, to order directly that relevant entities fix loopholes, stop related transmissions, suspend related services and subsequently notify the relevant regulatory agencies; and
  • To open an investigation in accordance with the provisions of the Criminal Procedure Law of the PRC if the initial investigation suggests that an act of espionage is potentially a crime.

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.

Legal Penalties
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.

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