- China joins growing list of nations providing criminal sanctions for bribery of foreign officials by domestic companies.
- Short on specifics, law gives prosecutors broad discretion.
- New law complements increased domestic anti-corruption enforcement.
- Evolving enforcement environment requires updating global corporate risk management.
Consistent with the requirements of the United Nations Convention against Corruption, the National People’s Congress of the People’s Republic of China (“PRC”) amended the PRC’s Criminal Law to prohibit bribery of foreign officials (“Amendment”). By amending its Criminal Law to address bribery of foreign officials, China has broadened its anti-corruption efforts beyond its own borders and joined an expanding group of nations that prohibit such conduct. The longstanding Foreign Corrupt Practices Act in the United States prohibits individuals and business entities from providing anything of value to a foreign official for purposes of obtaining or retaining business. The United Kingdom’s recent Bribery Act not only prohibits bribery of foreign officials, but also criminalizes acts of bribery related to commercial transactions. The United Kingdom recently released its much-anticipated guidance for the Bribery Act, meaning that the Act will take effect on July 1 of this year. Finally, legislation that would criminalize a variety of corrupt conduct is under consideration in a number of other countries, including Russia1 and India.2
In relevant part, the Amendment prohibits individuals and corporations from providing “money or property to any foreign party performing official duties or an official of international public organizations” for the purpose of “seeking illegitimate business benefits.”3 The Amendment, however, is brief and provides little guidance on specifics for the new law, such as the types of conduct that might be considered “bribes” and who might qualify as a “foreign official” under the new prohibition. The lack of clarity in the new regulation affords prosecutors a significant amount of discretion and the government’s enforcement priorities will determine the types of conduct that are likely to result in liability under the new law. The new Amendment is to take effect on May 1, 2011, and will apply to companies organized under PRC laws. Violations of the Amendment may result in “fines and a prison sentence of up to 10 years.”4
While some have suggested that the Amendment is likely only to be enforced against non-Chinese companies, we believe that it is more accurately viewed as an extension of the country’s recent efforts to address bribery and corruption within its own borders. These efforts have been a focus of the PRC government over the last several years and, while enforcement has sometimes appeared somewhat arbitrary, we believe the Chinese government is engaged in a serious effort to increase its anti-corruption enforcement. Premier Wen Jiabao “mapped out a series of priorities in China’s anti-graft efforts in 2011” and identified dealing with corruption by principal officials as a “‘primary task’ in 2011.”5 The prosecution and resulting prison sentences of four employees of a British-Australian mining company for bribery and theft of commercial secrets in 2010 demonstrates the significant potential liability for corrupt conduct in China.6
China’s Amendment is a further reminder that a corporation’s international activities may be subject to scrutiny by regulatory agencies in different jurisdictions. Thus, effective risk mitigation by companies must be global, accounting for anti-corruption measures under all laws of the jurisdictions that cover a business’s international operations. The recent changes in the anti-bribery laws, such as the developments in China and the United Kingdom, present an opportunity for companies to reassess their compliance efforts and update as needed internal controls, corporate policies and self-policing procedures in light of these new laws and the evolving enforcement environment.