Canadian winery owners face closed trial in China

ROBERT FIFE AND STEVEN CHASE

OTTAWA — The Globe and Mail

Published Friday, May 19, 2017 

 Charges of smuggling against a Canadian winery owner who has been locked up in a Chinese jail for more than a year are trumped up, his lawyers say, accusing China of criminalizing a customs dispute, one that could have far-reaching consequences for an eventual bilateral free-trade deal.

John Chang, who owns wineries in British Columbia and Ontario, will face a closed-door trial at the Shanghai High People’s Court next Friday, as will his wife, Allison Lu. Ms. Lu was released from jail in January, but is barred from leaving China and must report regularly to Chinese authorities. The couple’s Canadian passports have been seized.

China’s legal system has a 99.6-per-cent conviction rate, and the couples’ family fears Mr. Chang and Ms. Lu could receive lengthy prison sentences over what is a commercial dispute.

Read more: Shuanggui: The harsh, hidden side of China’s war on graft, and how one man disappeared into it

The legal battle casts doubt on China’s willingness to treat Canadian investors fairly – a standard foundation of any free-trade deal.

The Globe and Mail has obtained a copy of a brief prepared for the Trudeau government by the law firm Fasken Martineau – which represents the family – that takes the Canadian government to task for doing little to get Mr. Chang and his wife released.

“The arrest and continued detention of two Canadian business people and citizens, Mr. Chang and Ms. Lu, is on its face outrageous and unconscionable,” the brief says. It added the situation is urgent because Mr. Chang’s physical and mental health are deteriorating.

China has charged Mr. Chang and Ms. Lu with “smuggling of common goods” for allegedly underreporting the value of the wines they exported to China.

The trial of Ms. Lu and Mr. Chang, who has been imprisoned for more than 13 months, takes place as the federal government pursues exploratory talks on a free-trade deal with Beijing. Prime Minster Justin Trudeau has made a bilateral trade pact with China a cornerstone of Liberal foreign policy.

But Fasken Martineau argued in its presentation to the government that expanding trade with China can work only if Canadian businesses can trust Chinese authorities will treat them fairly.

“It is imperative that Canadians seeking to do business with China can do so in reliance on agreed upon rules and basic principles of justice, both substantive and procedural,” the brief stated, and noted the charges against the Canadian couple are “particularly troubling now, at a time when the government of Canada is consulting Canadians on a bilateral free trade deal with China.”

The law firm has asked International Trade Minister François-Philippe Champagne and Justice Minister Jody Wilson-Raybould to engage their Chinese counterparts to secure the immediate release of Mr. Chang from prison and to allow the couple to return to Canada “pending a resolution of the customs valuation dispute.”

David Mulroney, a former Canadian ambassador to China, said what happened to Mr. Chang reminds him of issues he encountered during his posting in Beijing.

“When I was in China, we were concerned about the disturbing tendency of local officials to transform any commercial dispute between Canadian and Chinese business partners into a criminal prosecution of the Canadian,” Mr. Mulroney said.

“We saw this as an attempt to intimidate the Canadian into making some kind of confession.”

The former diplomat says this tendency is an example of “how the playing field in China is tilted against foreign passport holders and how tenuous and conditional Chinese legal protections actually are.”

Liberal MP Omar Alghabra, the parliamentary secretary for consular issues at Global Affairs, told The Globe that Ottawa is seeking to get Mr. Chang and his wife out of China and have reached out to high-ranking Chinese officials.

“Economic cases have a different flavour than criminal cases, but they are done within our consular division in consultation with the Chinese government,” he said. “We are certainly having consultations with the Chinese government and with the family about this case.”

Mr. Alghabra said he was unable to “give any prediction of what might happen” at the couple’s trial next Friday “but we are taking this case very seriously and doing what we can to assist the family and help resolve this case.”

Fasken Martineau says this is a customs dispute, and China’s conduct is a violation of its international trade obligations under the World Trade Organization Valuation Agreement.

Under international trade law, disagreement over the valuation of imported goods is supposed to be resolved under the agreement.

Instead, China is using the state’s police power – arrest, detention and eventual prosecution – to address what is fundamentally a trade and customs dispute.

“The excessive power of China Customs to unilaterally jail the owners of a reputable Canadian business on a mere allegation of non-compliance with custom valuation rules, and to detain them in jail for more than one year without hearing or any meaningful recourse to justice, is a gross violation of personal liberty and security,” the brief said.

“In Canada, the actions of China Customs would be a clear violation of Section 9 of the Canadian Charter of Rights and Freedoms, which guarantees the right against arbitrary detainment and imprisonment.”

Dan Brock, a lawyer for Fasken Martineau, confirmed the law firm had prepared the brief for Ottawa but would provide no further comment.

Lulu Island Winery, one of three in Canada owned by Mr. Chang and Ms. Lu, said on Tuesday it hopes Ottawa can find a way to bring them home.

“We have been without our founders … for more than one year, and remain anxious for their safe return to Canada. Lulu Island denies the allegations made by the Chinese Customs Authority, and respectfully requests that China uphold its international trade obligations,” the winery said in a statement.

“As a Canadian company we have let our federal government take the lead in resolving this matter, and we patiently await progress.”

Conservative MP Gerry Ritz called Mr. Chang “a fantastic guy and a great entrepreneur” and criticized the Canadian government for not pressing hard enough to win the couple’s freedom.

“Nobody is taking it seriously. It is disconcerting,” he said. “Global Affairs is saying it is all consular and they are not going to do anything and that is unfortunate. It is a business side. It is trade. It is not criminal.”

NDP MP Nathan Cullen said the case of Mr. Chang and his wife should give the Liberal government serious pause about concluding a free-trade deal with a country that uses its judiciary to resolve commercial disputes.

“The more times China acts in aggressive ways toward people from other countries in ways that would seem to be unfair in our country, the less and less likely they will have the Canadian public onside for a trade deal,” he said. “What Trudeau is offering is that closer ties to China means greater influence with China on cases like this.”

Mr. Chang, who was born in Taiwan, was named an RBC Top 25 Canadian Immigrant award winner in 2015. He came to Canada in 2000 and built up a wine business with principal exports to the Asian market.

Since his arrest on March 25, 2016, Mr. Chang has received one visit every three months from Canadian consular officials, but the law firm said in the brief it was advised “the Government of Canada, including the Trade Commissioner Service, cannot interfere in the judicial affairs of another country.”

The wine business – with wineries in Richmond and Kelowna, B.C., and Niagara-on-the-Lake, Ont., has been run by the couple’s 23-year-old daughter Amy, in the meantime.

China’s embassy in Ottawa said it had no “specific information” about Mr. Chang’s case and that Canadians should be assured “China is a nation with rule of law and China’s law-enforcement departments handle cases strictly according to law.”