While most compliance officers are familiar with the United States (US) Foreign Corrupt Practices Act and United Kingdom (UK) Bribery Act, the Chinese anti-bribery and anti-corruption (ABAC) regime has received less attention than its overseas counterparts. We briefly outline below China’s ABAC regime and some of its nuances.
The PRC ABAC regime is governed by a collection of laws and regulations, mainly the Criminal Law, Anti-Unfair Competition Law, the Interim Provisions on Prohibiting Commercial Bribery, as well as other rules and regulations issued by the State Council and other government authorities. Bribery offenses generally fall under two categories: “official bribery” and “commercial bribery”.
Criminal Law Bribery to State Work Personnel
The offender, either a corporation and/or an individual, commits an official bribery offense, if the offender offers property to a “State Work Personnel” (SWP) in return for an improper benefit. There are four elements that must be satisfied:
- An offer of property to a SWP;
- In return for a benefit, or for the assistance to obtain a benefit;
- The amount involved meets the required threshold or certain requisite conditions if the amount involved is below such threshold; and
- There is corrupt intent to bribe the SWP
The current threshold for corporate offenders is CNY 200,000 (approximately USD 32,000) or CNY 10,000 (approximately USD 1,600) for individual offenders. Penalties range from temporary criminal detention up to life imprisonment as well as confiscation of illegal gains.
Similar PRC Criminal Law provisions exist for offenders who bribe non-SWPs in pure commercial bribery offenses, although the elements are slightly different and the monetary thresholds are higher. However, even the PRC Criminal Law thresholds are not met, there is also an administrative offense which targets commercial bribery at an administrative level.
The Anti-Unfair Competition Law prohibits companies from offering cash and/or property through improper means for the purpose of selling and/or purchasing goods.
The Administration for Industry and Commence (AIC) is in charge of handling administrative commercial bribery matters and has broad discretionary powers to investigate and penalize in connection with such offenses. Penalties include fines, confiscation of any illegal gains, and revocation of the company’s business license.
Frequently Asked Questions
What is State Work Personnel according to PRC Criminal Law?
In the PRC, there is no specific definition of what a “government official” is. Instead, the PRC has a legal concept of State Work Personnel or “SWP” who consist of: (1) people who perform public services in the legislative, administrative, or judicial agencies or the military; (2) people who perform public services in state owned enterprises (“SOEs”), institutions, or civil organizations; (3) people assigned by the government, SOEs or institutions to non-state-owned enterprises, institutions, or civil organizations to perform public services (such as a deputy general manager of a Sino-foreign joint venture company who has been sent to the joint venture by the Chinese party which is an SOE); and (4) people who perform public services according to law. For example, positions such as “directors, managers, supervisors and cashiers” of state-owned companies who are in a position to manage or supervise the state’s assets would likely be considered as “performing a public service.” In contrast, employees whose functions do not reflect authorities’ duties and power and are related to labor and technical skills (such as salespersons and ticket office clerks) would likely not be considered “a person performing a public service.”
How do I prepare for unannounced visits by a local Chinese bureau?
In the past two years, we have seen an increase in unannounced visits by PRC government authorities. PRC law has no mandatory requirement that government officials must give notice prior to visiting a business premise. Aside from calling your lawyer immediately, you may consider adopting a “dawn raid protocol” to properly implement and train your employees to respond in an orderly and effective manner:
- Train employees to remain calm and treat the officers with courtesy and respect.
- Have a procedure in place to contact relevant individuals and develop a crisis management team.
- Implement procedures to properly identify the government officer, search warrant and/or authorization documents to ensure the matter is handled properly.
- Educate leadership on the basics of evidence preservation, proper documentation, confidentiality, making copies of seized materials, and how to communicate with the officers.
What is a current area of interest in China? What do I need to be particularly aware of?
In Q4 2014, we have seen a lot of issues with the Chinese media and journalists. The Chinese government has been cracking down on local television networks, magazines, newspapers, as well as online media. Certain journalists in state-owned media outlets have been alleged to have received bribes and/or for money in exchange to publish favorable news articles, quash stories, and/or otherwise obstruct the normal reporting of the news. If you have significant marketing and public relations departments which require large budgets for hosting, entertaining, and/or giving gifts to local Chinese journalists, and/or third-party agencies who do the same, keep abreast of these latest developments and review your company’s current practices.