April 27, 2010 / 6:04 AM / 7 years ago

China defines commercial secrets after Rio Tinto trial

* State secrets draft law codifies what a secret is

* State assets body defines commercial secrets after trial

* Telecoms, Internet firms must give access to information

By Lucy Hornby

BEIJING, April 27 (Reuters) - China has issued definitions of what constitutes commercial secrets for its hundreds of state-owned firms, in line with a draft law that also requires telecommunications and Internet operators to give authorities access to information sent through their networks.

The draft is part of an effort to codify what is a secret in China, after a trial of four Rio Tinto (RIO.AX)(RIO.L) employees drew international attention to the country's vague secrets laws. Those laws have long concern human rights advocates.

Regulations on commercial secrets issued by the State-Owned Assets Supervision and Administration Commission were dated March 25, the day after the trial of Rio Tinto's Shanghai-based iron ore managers. They were published late on Monday.

The Rio employees' detentions and trial alarmed both Chinese and foreign investors because of the lack of definition in China of what makes up state or commercial secrets.

The issue is of particular concern to business because state-owned enterprises, which dominate many industrial sectors, are both competitive listed entities and an integral part of the state-directed economic model China imported from the Soviet Union.

Negotiations with those firms can therefore easily touch on matters that the Chinese state deems of national interest.

Commercial secrets for state-owned firms include information related to strategic plans, management, mergers, equity trades, stock market listings, reserves, production, procurement and sales strategy, financing and finances, negotiations, joint venture investments and technology transfers, according to the notice posted on SASAC's website late on Monday.

The regulations prevent information from being secret forever by requiring the company to set a time limit when it classifies information as either "core commercial secret" or "standard commercial secret".

"NATIONAL SECURITY"

SASAC published its regulations after China's legislature reviewed for a third time an amendment to the Law on Guarding State Secrets, which China has been updating to include information sent through modern communication networks.

Legal and rights advocates contend the ruling Communist Party uses secrets laws to prosecute critics and people who reveal information embarrassing to the party or powerful individuals.

"According to the draft, a State secret is defined as information concerning national security and interests that, if released, would harm the country's security and interests," the China Daily said on Tuesday.

The requirement for communications and Internet firms to reveal information applies to Chinese and foreign firms, it said.

The four Rio employees, including Australian citizen Stern Hu, were jailed for accepting bribes and infringing commercial secrets during tense negotiations over iron ore prices in 2009.

Rio Tinto promptly fired the four for "deplorable behaviour" but cleared itself in an internal audit of any wrongdoing.

The commercial secrets portion of the trial was closed, even to Australian diplomats, despite consular agreements, and defence lawyers were reluctant to talk about it.

According to a text of the Rio Tinto verdict, published by The Australian newspaper, the commercial secrets obtained by the four included discussions at meetings of the China Iron and Steel Association attended by numerous steel mill executives, and production cuts by Shougang Corp in Beijing which the defence countered had been published in Chinese newspapers.

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