I gave a talk yesterday at a China seminar on litigating against Chinese companies. While musing about lawsuits my firm has overseen in China I remarked that I was not aware of any cases having been decided based on corruption. I then riffed on how none of our lawyers had never once been hit up for “extra” fees when registering a company or registering IP or registering anything else in China.
I then talked of how corruption in China is somewhat overrated in that China is usually ranked in the high middle of most world corruption indexes, but with respect to foreign companies, it should probably be ranked even higher. I said this because corruption involving foreigners is way lower in China than it is involving Chinese citizens.
I then mentioned how in many emerging market countries our international lawyers are often asked for extra money to “expedite” our filings, which is really code for telling us that if we do not pay this extra fee, our registration will languish in a corner for an extra six months. These countries do poorly in all country corruption rankings.
Upon further reflection, however, this domestic-foreign dichotomy is probably true in many other countries as well, as I know that to be the case in at least a few other countries as well. After the seminar, I went out with a couple of the speakers and one of them, a very experienced China consultant revealed that he too had never been hit up for a bribe.
We then talked though of how foreign companies must still be very much on guard for corruption but our focus from that point forward was on one’s own employees. We talked of examples we had seen of companies being asked to give kick-backs in buy-sell transactions and of China-based foreign companies of which we were aware whose existence pretty much depended on shady dealings.
So I am not saying corruption is not an issue for foreign companies doing business in China, as it obviously is. But when it comes to handling China’s legal formalities, our China lawyers just ain’t seeing it.
And apparently we are not alone in this.
Transparency International just came out with its 2010 Corruption Perceptions Index and China does fairly well in it (again). Denmark, New Zealand, and Singapore come out tied for least corrupt — no big surprises there. Canada is number 6, Hong Kong 13, Japan 17, the United Kingdom 20, Chile 21, and the United States 22. Maybe I am too close to see things right, but I find it difficult to believe Japan is less corrupt than the United States, but whatever. Taiwan is 33, South Korea 39, Macau 46, Malaysia 56, China and Thailand tied at 78, India 87, Indonesia 110, Mongolia and Vietnam 116, Philippines 134, and Cambodia, Russia, and Laos at 154. Overall, and based on the countries in which my law firm does a lot of work, these numbers seem pretty accurate.
What do you think? Any real surprises here?