The Eight Amendment of the PRC Criminal Law (the "Amendment"), recently adopted by the Standing Committee of the National People's Congress of the People's Republic of China, adds a paragraph to article 164 that prohibits giving money or property to an official of a foreign government or international public organisation with the purpose to obtain unjustified commercial benefits. Violation of the amended article may result in fines and incarceration of up to ten years. The Amendment took effect on 1 May 2011.
The Amendment applies to both PRC citizens and any company incorporated in China ("PRC Company"), including foreign-invested companies. According to articles 6 and 30 of the PRC Criminal Law, a crime committed by a PRC Company is considered to have been committed within the PRC's territory when either the act or the consequence of a crime takes place within the territory of the PRC. Therefore, in theory the bribery of foreign officials by a PRC Company taking place outside the territory of the PRC with the purpose to seek 'unjustified commercial benefits' in the PRC's territory may violate the Amendment.
The Amendment is part of a broad anti-corruption campaign by the PRC government and China's first law addressing cross-border bribery. The Amendment brings China's regulations in line with its obligations under the United Nations Convention against Corruption. Other jurisdictions preceded China, including the United Kingdom's with its Bribery Act and the United States with its Foreign Corrupt Practices Act. The Amendment does, however, give rise to questions regarding its scope as it does not clarify important terms such as 'unjustified commercial benefits' and ‘foreign official'. This wide scope provides Chinese prosecutors with wide discretion to enact the PRC government's policies. Future court interpretation is expected to determine the exact scope of the Amendment.
The Amendment's cross-border effect as well as its broad scope makes it important for PRC companies to pay attention to their world-wide risk management.