In September 2014, the Changsha People’s Court in China issued a judgment and fined GSK (China) Investment Co., Ltd. RMB 3 billion for offering bribes to non-state functionaries. Five senior executives were imprisoned for two to three years with a suspended sentence of three to four years. This case drew great attention and was the first one, since China’s Reform and Opening up, where a multinational enterprise was found liable for criminal liabilities for offering commercial bribes in China. It also resulted in China’s largest ever corporate fine for commercial bribe crimes. The GSK case is not the only indication of China’s more frequent punishment of commercial bribes. Since 2013, China has taken various actions against commercial bribes, including legislation, policies and litigation: all indicating a much firmer approach to anti-corruption enforcement. These are strong signals that China is likely to continue this stance into the future.
Systematic Actions Against Commercial Bribes
Central Government’s Implementation Of Anti-Corruption Works
At the end of 2012, the new Central Government, at the start of their tenure, sought “to reinforce restrictions and supervisions on rights, to restrain powers by the cage of regulations, to set up a disciplinary, prevention and guarantee mechanism to ensure that people do not dare to, are not able to and cannot easily commit corruptions.” The Central Government, through various meetings, successively took action to implement this strong anti-corruption policy.
On August 27, 2013, in a meeting presided over by General Secretary of the Communist Party of China (“CPC”) Central Committee Xi Jinping, “A 2013-2017 work plan for establishing and improving the system for punishing and preventing corruptions” was approved, which showed that China was prepared for a long-term battle against corruption.
On November 12, 2013, the Third Plenary Session of the Eighteenth Central Committee of the CPC passed a “Decision on Major Issues concerning Comprehensively Deepening Reforms”, which sought “to make and improve laws and regulations on combatting corruption and promoting integrity, to improve laws and regulations relating to corruption prevention and punishment, preventing and managing risks to clean government, avoiding conflict of interests, leading officials required to submit report about relevant personal matters and any assignment avoidance, to experiment with publicizing personal information of newly appointed officials and to improve democratic and legal supervision as well as supervision through public opinions, and apply and regulate Internet supervision”.
On October 23, 2014, the Eighteenth Central Committee of the CPC held its Fourth Session, which examined the “rule of law” for the first time since Chinese Reform and Opening up. The Fourth Session passed a “Decision on Major Issues concerning Comprehensively Advancing the Rule of Law”, which expressly sought “to strengthen national anti-corruption legislation, establish more effective punishment and make it harder for individuals to derive benefit from corrupt behaviour . This Decision also emphasized the “to improve the legal mechanism in punishing crimes of corruption and to expand the definition of the crime of corruption to include properties and other interests in properties”, which was the result of the implementation of long-term anti-corruption policy at the highest level (i.e.: a decision made by a session of the CPC Central Committee).
Intensive Supervisions From The CPC’s Central Inspection Teams
Since May 2013, the Central Committee of the CPC has sent five rounds of central inspection teams: over the course of 2013&2014, these teams encouraged disclosures via text messages for the first time. The inspection teams operated across China and covered all industries including energy, finance, food, education, manufacturing and telecoms. The inspection team enquiries were quickly successful, using whistle-blowing techniques, six government officials at the provincial level were investigated. The extensive powers& active pursuit of corruption by the inspection teams has resulted in a significant nationwide anti-corruption effect It is very likely that the Central Committee of the CPC will ensure regular supervision from inspection teams as regular events.
New Changes in Chinese Criminal Law Against Commercial Bribes
Pursuant to the Central Government’s anti-corruption policy, there are various changes in Chinese Criminal Law which pertain to the punishment for corruption.
Reinforcing Investigation And Punishment Against Crimes Of Corruption
In early November 2014, the Central Government approved the establishment of a new anti-corruption bureau. The head of this new anti-corruption bureau is a full-time member of the procuratorial committee at the vice-ministerial level. This new bureau reorganizes powers, optimizes functions and supervises the discipline of the inspection departments, and bureaus of corruption prevention.
Increasing Efforts In Punishing Crimes Of Offering Bribes
Chinese judicial practice placed great focus on the crime of taking bribes but much lesser attention was laid to taking bribes. For example, in Chinese criminal law, those convicted of the crime of offering bribes received lighter punishments than those convicted of taking bribes. This was also true in judicial practice, where it was also possible to escape conviction or punishment altogether if the wrongdoer helped with enquiries into the crime of taking bribe. This is no longer true China is enacting more legislation and activity enforcing the laws against crimes of offering bribes as well.
First, there have been various changes in the ninth amendment to Chinese Criminal Law (draft) (“Draft Amendment”) published on November 3, 2014. One of the most important changes in the Draft Amendment is to increase the punishment for the crimes of offering bribes, including the imposition of property-related punishments and narrowing down the availability of mitigating circumstances to lessen a punishment. If the Draft Amendment is finally approved and comes into effect, it will no longer be the case that wrongdoers offering bribes would be free from punishment simply by co-operating with investigations against crimes of taking bribes.
Secondly, current judicial practice shows a trend of punishing those convicted of offering bribes. The GSK case is a perfect example of a successful prosecution of the company and individuals offering bribes where both the company and individuals charged did not escape punishment despite cooperating with investigations.
Thirdly, the People’s Supreme Procuratorate established a nationwide archive of bribery crimes inquires. This inquiry system recorded companies guilty of offering bribes and became a “blacklist”. The People’s Supreme Procuratorate further improved the system by issuing “Provisions on Inquiry of Archives of Crime of Offering Bribes” on February 6, 2013, which stated that the People’s Procuratorate should collect and record information about various crimes of offering bribes. Once recorded in the system the information was not able to be altered or deleted unless judgments were overruled or any mistakes or omissions were discovered. The archive system is open to public scrutiny which in turn may adversely affect that company’s reputation.
Enhancing International Co-Operation Against Corruption
China has actively looked for international co-operation against corruption. The APEC Beijing meeting held in November 2014 was one of the great opportunities China had to enhance international co-operation. During the meeting, 21 members announced an anti-corruption proclamation and set up a transnational network of anti-corruption enforcement. The Chinese Ministry of Public Security also launched a “Fox Hunt 2014 operation” to trace economic fugitives and to confiscate their illegal benefits. By December 4 2014, 428 fugitives had been arrested in 60 counties. The enhanced level of international co-operation proved to deter corruption and, to a certain extent, limited access to funds and properties obtained through corruption.
The Focus On Punishing the Offer of Bribes in Certain Industries
China also focused on punishing the offer of bribes in certain industries, which are considered particularly vulnerable. For example, on December 25, 2014 the National Health and Family Planning Commission issued “Provisions on the Establishment of Adverse Records of Commercial Bribes in the Medicine Purchase and Sales Industry” which improved the mechanism of recording of commercial bribes and stepped further in fighting against commercial bribes in the medicine purchase and sales industry.
The purpose of the said provisions was to require medical institutions to make and retain additional records, to standardize acts of medical and health institutions in purchasing medicine, medical equipment and medical consumables, and to curb illegal transactions and crack down on commercial bribes. Compared to the original records mechanism, the new provisions made several improvements: first, adverse findings/decisions released by the administrative departments of health and family planning at the provincial level on its website would be reprinted on the website of the National Health and Family Planning Commission for government affairs. Secondly, the updated records covered both administrative penalties and criminal punishments. Thirdly, medical and health institutions are now required to sign an agreement on incorruptible purchase and sales, when signing any contract with respect to the purchase of medicine, medical equipment and medical consumables with the medical production and operation companies and their agents. Fourthly, the new said provisions imposed heavier administrative penalties. Medical and health institutions are also required to submit to the health and family planning administrative department in the list of medicine production and operation companies and agents that are prosecuted for criminal and administrative liabilities involving commercial briberies to its staff in a timely manner. Finally, after a company is listed in local bribery & corruption records, public medical institutions or medical and health institutions in the province are not permitted to make any purchase from the company for two years. If a company is listed in these records twice in five years, all public medical institutions or medical and health institutions all over the country are not permitted to purchase any medicine, medical equipment or medical consumables from that company within two years.
As at November 2014, 26 provinces, cities or districts have implemented of the records mechanism in their local medicine purchase and sales industry. The effect is to largely restrain commercial bribes in the medicine purchase and sales industry across China. Given the mechanism’s great effect on eliminating commercial bribes, it is possible that the records mechanism would be carried out in other industries as well.
China’s increasing willingness to punish the offer and acceptance of commercial bribes is apparent in several aspects, including the new trend of punishing crimes of offering bribes, the enactment of a “blacklist” and the nationwide implementation of the records mechanism. All the above highlight to both domestic and multinational companies China’s determination in fighting against corruption. To ensure smooth business operations in China, companies should look into their operations in a timely manner, update compliance mechanisms and avoid risks of being involved in commercial bribes.