Eyes on China as trial begins

Foreign companies that do business in China will this be watching the trial of Australian Rio Tinto Group iron-ore chief Stern Hu this week to see if politics play as big a role as the evidence, lawyers said.

The detention of Hu and colleagues Liu Caikui, Ge Minqiang and Wang Yong for allegedly stealing state secrets - later downgraded to taking bribes and infringing company secrets - sharpened the focus on a judicial system largely avoided by foreign parties because of its lack of transparency, the lawyers said.

"The trial is a kind of a prism through which you can see a lot of the problems of doing business in China," said William McCahill, the Beijing-based vice chairman of Pacific Epoch, which provides research to institutional investors. "Better business people have been aware of those all along."

Chinese judges openly say Communist Party politics influence their decisions, with Supreme People's Court President Wang Shengjun encouraging jurists in December to prioritise the "causes of the party", the "interests of the people" and "the constitution and laws."

"While we generally feel the judicial system is improving, for foreign investors it is still kind of scary," said Betty Tam, a Shanghai-based partner at UK law firm Herbert Smith who advises on foreign direct-investment issues. "The laws and regulations may not be as clear as we want them to be."

Those investors almost always prefer using arbitrators with agreed rules instead of going to court, Tam said. The four Rio Tinto defendants didn't have that option. They go on trial today in Shanghai.

Under Article 126 of the Chinese constitution, judges aren't barred from political interference, whereas it states that courts should be free from interference by administrative organs, social organisations and individuals.

"Will politics play a role? Of course it will," said Nanping Liu, co-founder of Shanghai law firm Liu & Wang.

What makes a Chinese judge "outstanding" is the ability to juggle legal and political issues simultaneously, said Li Shicheng, vice-president of the High People's Court of Sichuan province.

Foreign Ministry spokesman Qin Gang said last week that Rio Tinto is "just an individual business case" that shouldn't be "politicised."

Hu, an Australian national, and his colleagues were detained in July by Chinese authorities who said their actions harmed the nation's economic interests and security.

The defendants will be tried by the Shanghai No. 1 Intermediate People's Court, Australia's foreign affairs department said.

Proceedings related to charges of receiving bribes will be open, while those concerning allegations of infringing on commercial secrets will be closed.

- BLOOMBERG