Caught between a rock and a hard place: Dealing with blocking statutes when conducting investigations in Asia

Synopsis

Dealing with “blocking statutes” has become the harsh reality for multinational corporates when conducting cross-border investigations. These statutes may apply to a corporate by virtue of their “home” jurisdiction (ie where they are incorporated or have their principal place of business), where the investigation takes place, or even where pieces of evidence may be located. In this piece, we examine how blocking statutes are relevant to the conduct of investigations in Asia, including through their application and consequences for violation, and practical steps that companies may adopt to tackle challenges posed by such pieces of legislation.

Article

“Blocking statutes” (as they are commonly referred to) are pieces of legislation enacted by governments to limit the sharing and transfer of information and documents provided to foreign authorities by another jurisdiction’s nationals, companies, or even foreign companies operating in that jurisdiction.   

While cooperation between regulators has grown significantly, there is still significant scope for conflict as between the interests of regulators from different countries. There may also be differing motivations regarding one country’s desire to restrict disclosure of what it might see as sensitive information. Companies can find themselves caught between aggressive requests for disclosure from one side and the prospect of serious sanction if they comply.

These statutes often vary in form and substance. For example, France has its Statute No. 68-678 of 1968 (French Blocking Statute), and China has several statutes of varying effect including the International Criminal Judicial Assistance Law (ICJAL) enacted in 2018, as well as the more recently enacted Data Security Law (DSL) and the Personal Information Protection Law (PIPL).

The French Blocking Statute makes it mandatory for foreign authorities to use available judicial channels to request information or documents located in France, and prohibits French individuals or directors from communicating information and documents with foreign authorities that may infringe French interests (eg security or economic). On the other hand, China’s ICJAL, which also reinforces that evidence collection should be done through “government-to-government” channels, requires approval from the Chinese government before individuals and companies may disclose evidence or provide overseas criminal enforcement authorities access to witnesses. The DSL and PIPL also contain restrictions on the ability of companies operating in China (including multinationals) to transfer certain types of data out of China.

Consequences of violating such statutes vary from imprisonment for individuals, to stiff financial penalties, and even the suspension of the violating company’s operations or business licenses.

It's therefore imperative for companies which may potentially be subject to such blocking statutes to make it an active consideration throughout an investigation, whether that's a regulatory or internal investigation. The following practical steps may be adopted:

• Establish a crisis management group including legal advisors – legal, compliance, and even business teams need to know how and when to respond to a local regulator, and if doing so may violate relevant blocking statutes. The decision-making process for this should be steered by senior employees with visibility on the problem at hand while keeping in mind other considerations eg legal privilege.
• Scoping an investigation early and thoroughly to understand individuals and entities involved or implicated, including their seniority, potential proximity to / knowledge of conduct in question, and geographic location. What are the legal and commercial risks involved for the company and its local operations?
• Properly understanding the nature and scope of requests from regulators – is the request in question mandatory (eg a court-issued subpoena) or a mere invitation? It's important to recognize that even if a request is voluntary, non-compliance may be deemed as evasive by regulators.
• Analyzing the relevant blocking statute and considering if steps must be adopted in the jurisdiction the blocking statute originates from. For example, an amendment to the French Blocking Statute this year requires notification to the relevant French government department when companies or nationals receive foreign information requests (eg from a foreign regulator). 

Our team in Asia has experience managing issues including dealing with blocking statutes in the context of cross-border investigations, especially when they involve certain challenging markets in Asia. It's important that practical steps be adopted from the outset of an investigation to avoid encountering significant hurdles in the process later.