Litigation fever hits China

China is catching litigation fever. Not that victims of pollution or faulty consumer products have begin dragging companies into court, or predatory law firms are launching class action lawsuits on flimsy pretexts. Yet. Instead, a free—lance enforcer is launching a lawsuit against a foreign—owned company for the offense of indicating Taiwan as a separate political entity on its map of global operations. Monetary damages are being sought.

China, which just celebrated the anniversary of its revolution yesterday, is extremely touchy about references to Taiwan as anything other than an integral part of China. Of course, the island does have a separate government, but it is Mainland dogma that Taiwan is an inseparable part of China. There are reasons behind its extreme sensitivity.

In the course of its long history, China has been subject to regime disintegration a number of times. This is the basis for what historians call the dynastic cycle, a fact of Chinese history of which every ruler must be conscious. Over a period of centuries, a dynasty is established, flourishes, becomes corrupt, ingrown and ineffective, and then portions of the state break away, signaling the end of the rule of of (for example) the Ming, Ch'ing, T'ang, or Chou Dynasty. A period of chaos usually ensues before another ruler emerges and consolidates the state. That chaos, with its attendant death, civil war, and destruction of important facilities (canals, and levees in particular), is rightly feared.

China is unique among nations in the length of its history and in the historical size of the of its empire. Rome's empire at its height is the only thing in the West which can compare to the size of the Emperor's domain in good portions of the historic dynastic cycle. But the Roman Empire came and went. China endured.

Beijing's modern mandarins must fear that history does indeed come in cycles, rather than progress in a "scientific" Marxist dialectic. They have discarded so much of Marxism that nobody has any particular reason to embrace dialectical materialism. That must be why they react so strongly to anything suggesting Taiwan has an independent government and nationhood. Such admission of a breakaway is seen as a sign of dynastic disintegration

This time around, however, it is a professor at prestigious Fudan University in Shanghai who is acting as enforcer, not the outraged protests of Foreign Ministry officials, or the bluster of official news agencies. The official Xinhua News Agency reports:

    A Shanghai Fudan University professor has filed a lawsuit that accuses Deloitte Touche Tohmatsu — a branch of one of the world's biggest four accounting firms —— of listing Taiwan on its website as a separate nation.

    The action, filed on August 30 at the Huangpu District Court in Shanghai, finds Professor Xie Baisan claiming Deloitte has violated the spirit of the Chinese Anti—Secession Law, approved by the National People's Congress in March of 2005.

    Professor Xie, a renowned finance and securities scholar at Fudan University, is asking Deloitte for an apology "to all the Chinese people" and compensation of 100,000 yuan for "spiritual" damages.

    According to China's Anti—Secession Law, Article 2, there is only one China in the world. Both the mainland and Taiwan belong to one China, and China's sovereignty and territorial integrity brook no division; with Taiwan as part of China.

    As the first foreign—funded accounting firm to open in China, Deloitte has been operating in China for about 20 years with more than 4,000 employees. The firm has more than 1,000 Chinese employees on its payroll.

    It is inexcusable for such a professional accounting firm to make such a mistake, the professor said, adding "I don't think they just did it by chance.'

    A Deloitte official explained the firm was simply attempting to make it easier for its customers to locate its locations by placing the two areas in the "Global Site Selector" column on its website home page. However, except for Taiwan, in the column they didn't place Hong Kong, Macao and other Chinese cities, where they do run their business.

We shall see how the Chinese judicial system handles this lawsuit. At a minimum, it is a sign to all foreign investors with facilities in China that they must toe the party line on Taiwan. But if website content becomes the ground for successful lawsuits in Chinese courts, then investors in China must be aware that they are getting a lot more than access to production and markets when they do business there.

India, which enforces no such orthodoxy on investors, must be watching this development with anticipation, along with Brazil, Mexico, and many other places in the world competing with China for foreign investment.

Development of an indpendent and fair judiciary is a key step in building a modern economy. There are no secure property rights and contracts without the courts to enforce them. This case on Taiwan is a signal to the rest of the world about how China's juduciary is developing. Even if the MSM fails to take notice, risk assesment professionals will.

Thomas Lifson is the editor and publisher of The American Thinker.