Why Did DOJ Indict the Chinese Military Officers?

By Jack Goldsmith
Tuesday, May 20, 2014, 6:55 AM

Why did the USG indict Chinese military officers for cybertheft?  It knows that there is no practical chance of convictions (because, among other reasons, the defendants will never appear in the United States).  It knows that mere indictments are unlikely to slow China's corporate cyber-espionage, and thus might make even more obvious the fecklessness of USG policies in this area.  And it knows that yesterday’s indictment runs the the risk of retaliatory indictments against U.S. officials (which will be equally difficult to enforce), and the risk of serious diplomatic fallout (which has already begun).

And yet the government did it anyway.  Why?  Probably because it feels it needs to demonstrate credibly to several audiences, at home and abroad, that it is fed up with current levels of corporate cybertheft.  As former NSA and CIA Director Michael Hayden said to David Sanger in the NYT, “It’s a risky course of action, but prior to this we were in stasis.”  One might respond that stasis is preferable to meaningless acts that invite harmful retaliation.  But yesterday’s indictment is not meaningless, even if no conviction results, because it demonstrates USG seriousness about the issue by showing that the USG is willing to raise the stakes.  On this view, a sharp legal or diplomatic reaction to the indictments by China serves USG policy aims, for such a (foreseeable) reaction will show that the United States is willing to take steps against Chinese corporate cybertheft that incur costs to itself, and thus that the USG might take even more aggressive costly steps than yesterday (such as ones suggested in this WSJ editorial) in the future.  Until yesterday, the USG complaints against China’s cyber-snooping were nothing but talk.  It might seem like naming names in an indictment that cannot result in conviction is just talk as well.  But yesterday’s step clearly (and predictably, and thus purposefully) offended the Chinese in a way that prior talk did not, and to that extent it shows that the USG is somewhat more serious about this issue, and might retaliate further regardless of the costs to itself.

Viewed in this (admittedly charitable) way, the indictments can be seen as a calculated escalation of pressure designed to demonstrate  United States’ resolve to clamp down on corporate cybertheft.  This strategy can only work, I think, if the United States is willing to maintain resolve by continuing to ratchet up the stakes, and if the various costs the United States is willing to impose on China at some point outweigh the benefits to China of its current levels and types of cybertheft.  I am skeptical that the USG will in fact continue to ratchet up the stakes to a degree that will make it irrational for China to continue on its current course, because doing so can quickly become very costly to many U.S. interests, and because China's bounty from cybertheft is so great that it can absorb quite a lot of USG retaliation in any event.  In this light, an alternate interpretation of yesterday’s events is that the USG is simply trying to get corporate America off its back by showing that it is doing something about China’s corporate cyber-snooping, and that it has no intention of raising the stakes of public confrontation beyond unenforceable indictments.  Assuaging domestic audiences was certainly part of the point of the indictment  (and a sharp reaction from China strengthens the USG against these audiences as well, by making the new step seem significant).  We will see whether it was the only point.

A few other reactions to the indictment:

    • The thrust of David Sanger’s story is that the line the United States is attempting to draw between (a) corporate cyber-espionage for economic advantage (not OK in the U.S. view) and (b) all other forms of cyber-espionage, including espionage of corporations for purposes other than economic advantage (OK in the US view), is not a line that is widely accepted by other nations.  Perhaps the indictment also aims to bolster this (self-serving) distinction, though it is easy to see, in light of stories like Sanger’s, how it might have the opposite effect.  Moreover, as Marcy Wheeler points out, some elements of the indictment concern cyber-snooping in connection with trade disputes, which at least sounds a lot like the kind of cyber-snooping on firms that the United States does.
    • Attorney General Holder claimed yesterday that “[t]his Administration will not tolerate actions by any nation that seeks to illegally sabotage American companies and undermine the integrity of fair competition in the operation of the free market” (my emphasis).  I will believe this when we see indictments against French officials
    • AAG for National Security John Carlin said yesterday that “State actors engaged in cyber espionage for economic advantage are not immune from the law just because they hack under the shadow of their country’s flag” (my emphasis).  I am pretty sure that Carlin was not thinking about sovereign immunity or official immunity for individual state actors.  But if the United States ever did actually get its hands on the defendants, interesting questions would arise about whether the Chinese military officers warranted immunity from prosecution under the U.S. domestic law that incorporates these international immunities.  The answer at the end of the day would probably be “no,” but there are tricky questions here, and the courts are all over the place on the issue of immunity for foreign state actors in criminal prosecutions.  John Balzano has a good introduction to these issues here.
    • And speaking of issues that would arise if the USG ever got the defendants in the country, it seems like it would be hugely difficult to prove the charges in yesterday’s indictment, consistent with the normal rules of proof in a criminal trial, without revealing quite a lot about how the USG spies on the Chinese government.  (I think this even though the indictment piggy-backs a bit on work done by Mandiant.)   The indictment asserts many detailed facts, but proving those facts would be very tricky.