With the recent detention of Canadian citizens by the Chinese government, China, led by its Ministry of Foreign Affairs, is trying to show to the world what happens when you do not abide by its summons.

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This appears to be retaliation for the arrest of Huawei chief financial officer, Meng Wanzhou, in Vancouver, which provoked fury in China.

The Arrest of Huawei’s CFO Rages A War Between Three Countries!

The situation should be cause for concern – especially for those who travel frequently to China on business.

Canada and the United States have travel advisories in place that make note of China’s exit ban. Chinese authorities can place an exit ban on a person to prevent them from leaving the country.

It can relate to investigations into an individual, their family or an employer, and in criminal and civil matters, including business disputes.

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China’s Exit and Entry Administration Law (EEA Law) adopted in 2012 regulates the entry and exit of non-Chinese nationals in and out of China. Article 28 states that 

“Under any of the following circumstances, foreigners shall not be allowed to exit China:

Are involved in unsettled civil cases and are not allowed to exit China upon decision of the people’s courts;

Are in arrears of paying off labour remuneration and therefore are not allowed to exit by decision of the relevant departments under the State Council or of the people’s governments of provinces, autonomous regions or municipalities directly under the Central Government; …”

 

Most countries restrict the exit of individuals convicted of a crime and serving their punishment in prison or by other means – very few impose an exit ban on individuals involved in a civil case. 

Imagine that you are travelling in the United States and you are involved in a car crash involving multiple vehicles. You are not responsible, but the passengers in front of you sue you for damages. 

Neither the EEA Law nor the Chinese Supreme Court of Justice defines the scope of the exit ban on its application to civil cases. We should exercise caution and assume that it applies to any types of case, especially those exposed on social media that attract more attention.

As an employee, shareholder or owner of a company, you may think that there’s no need to worry as the company has its own legal status and unless the corporate veil is lifted by a judge, you should be safe.

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Regrettably, numerous cases have been reported in China whereby North Americans were forbidden to leave China because a competitor brought a lawsuit on unfounded grounds against the company they own or are a shareholder of in order to obtain a business concession or trade secret. 

This type of unfair practice is common and unfortunately, there is no way around it except by taking precautions and discussing the issues with your legal counsel. Companies should negotiate litigious matters outside China.

In the event your company has debts of any amount in China or it fails to fully pay or compensate its past or present employees, Chinese courts will lift the corporate veil in order to prevent the legal representative, directors and senior management from leaving China until the matter has been redressed. 

Be aware the Chinese courts, creditors or employees will only accept Renminbi (RMB), a non-tradable currency, adding another layer of complexity to the issue since the burden of swapping currency into RMB will fall on the defendant.

As per the travel warning of the governments of Canada: 

 

“You may not be aware that authorities have placed an exit ban on you until you try to leave the country. It is difficult to obtain information on bans from Chinese authorities. If you are unable to leave the country because of an exit ban, consult a lawyer and contact the closest office of the Government of Canada.”

No one should stop travelling, trading with or investing in China and there has been tremendous progress in the country in the past 40 years, but travellers – especially business travellers – should take note of the exit ban law that is currently in place.