Interview: U.S. judge's "contempt of court" ruling unwarranted, worrisome: Chinese banker

A U.S. judge's recent decision to hold Bank of China (BOC) in contempt of court for failing to disclose client account records in a counterfeit lawsuit is unwarranted and lamentable, which may set a bad example and hurt investors' faith in the U.S. legal system, a senior executive of the bank in the United States has said.

"In its more than three decades of operations in the United States, BOC has always strictly abided by U.S. laws and financial regulations, and has fully cooperated with the court in the Gucci case," Xu Chen, president and CEO of BOC USA, told Xinhua in a recent exclusive interview here. "The judge has gone too far to request BOC headquarters and domestic branches back in China disclose client information even in clear violation of China's bank secrecy laws."

Last week, U.S. District Judge Richard Sullivan ruled in a Manhattan court that BOC was in contempt for defying subpoenas from luxury goods maker Gucci to request account records located in China, which the brand said belong to alleged Chinese sellers of counterfeit luxury goods.

According to media reports, Gucci also urged the judge to fine BOC 12 million U.S. dollars as compensation for damages it said were caused by the alleged counterfeiters. Sullivan has reportedly determined a specific monetary penalty on Tuesday, saying that he will impose a daily fine of 50,000 dollars against BOC starting on Dec. 8 unless the bank complies with subpoena requests for the records.

Xu argued that in accordance with U.S. laws and regulations and in compliance with the U.S. court request, BOC USA has previously provided the plaintiff with all related information.

However, BOC USA has no access to any account information back in China, while BOC headquarters in Beijing as well as its domestic branches are not allowed by Chinese laws to disclose client account information to foreign entities, Xu said.

According to Chinese laws, courts in other countries do not have jurisdiction to order Chinese banks to produce any document within Chinese territory.

Xu said that BOC has always supported efforts to fight intellectual property infringements and trademark violations. Actually, the bank terminated the domestic accounts of the alleged counterfeiters shortly after Gucci launched the lawsuit in 2010.

But such a move led to a lawsuit against the bank from the affected clients, and a Chinese court ruled that BOC had no right to terminate the accounts since there was no proof of illegal activities of the clients in China. BOC appealed twice but still lost the case.

BOC has decided to appeal against the Sullivan ruling to the Second Circuit of the United States Court of Appeals. The bank "has not been accused of wrongdoing and is not a defendant in this case," said a statement from BOC's counsel.

Xu said that he was puzzled why Gucci chose to file the counterfeit lawsuit at a U.S. court rather than go to a court in China, which would make evidence collection and law enforcement much easier.

Gucci could also have satisfied its request through existing international treaties, such as the Hague Convention, which has helped resolve bilateral legal disputes in similar cases in the United States, but the company also rejected that option, the banker said.

"I think that pushing the innocent BOC into a legal corner of either breaking the Chinese law or paying a heavy U.S. penalty won't help solve the problem, but will only complicate the situation," he said.

The banker also expressed the concern that the Gucci case ruling, once established, would set a bad example for similar cases in the future and dampen Chinese businesses' enthusiasm for investing in the United States.

"Many Chinese investors believe the United States has an open and fair legal system, which is a key factor in good business environments," he said. "Now they might start to worry that they could also get caught in a legal dilemma because of the 'unlimited jurisdiction' sought by some U.S. courts."

According to a report by Rhodium Group, a U.S. research firm, Chinese companies completed more than 9 billion dollars of foreign direct investment in the United States in the first three quarters of 2015. With more than 8 billion dollars of pending transactions, total investment is likely to exceed 10 billion dollars for the third year in a row.

Legal experts here believe that with more and more Chinese companies coming to the United States, legal conflicts are unavoidable, and differences between the two countries' legal systems are becoming a major issue of concern.

While the governments of both countries are holding regular dialogues and working on a bilateral investment treaty, certain mechanisms should be established to address such legal differences and guarantee equal and fair treatment for businesses from both sides, they said. Endi