The anti-corruption landscape in China was in a process of transformation during 2016, with the issue of the Draft Amendments to the PRC Anti-Unfair Competition Law in February, and the release of the Supreme People's Court's judicial interpretations on bribery offences in April.
Draft Amendments to the PRC Anti-Unfair Competition Law ("Proposed Amendments")
On 25 February 2016, the State Council issued the Proposed Amendments for public consultation. The Proposed Amendments seek to clarify the offence of commercial bribery and the powers of investigation of the various enforcement authorities, and to increase the penalties for commercial bribery:
- The Proposed Amendments give a definition of commercial bribery - business operators offering or undertaking to offer economic benefits to counterparties or any third party which may influence the transaction so as to induce them to offer transaction opportunities or competitive advantages to the business operators. Businesses should be alert to the following inferences which can be drawn from this new definition:
(i) Commercial bribery does not require actual payment. A promise to pay would suffice.
(ii) A company offering economic benefits to a person with whom the company has no business relationship can also constitute commercial bribery if that person is in a position to influence transactions involving the company.
(iii) A corrupt intent behind the conduct of payment must be shown.
- The Proposed Amendments add a new prohibition against offering economic benefits without truthfully recording the same in contracts and accounting documents. In light of this provision, businesses are reminded to practise accurate book-keeping to record all payments made.
- Under the Proposed Amendments, an employer would be liable for commercial bribery committed by its employees, unless it can be proved that the employee accept bribes against the interests of the employer.
- Violation of the anti-commercial bribery provision under the Proposed Amendments will attract a fine of 10% to 30% of the "illicit turnover".
The public consultation period for the Proposed Amendments is now closed. The next step is for the State Council to prepare a bill and submit it to the Standing Committee of the National People's Congress for deliberation and voting.
Judicial Interpretations concerning the Application of Law in Handling Criminal Cases involving Corruption and Bribery ("Interpretations")
The Supreme People's Court's Interpretations were released on 18 April 2016 and took immediate effect. The Interpretations clarify provisions in the PRC Criminal Law on anti-corruption by:
(i) giving examples of the type of property which may constitute bribes;
(ii) setting out the monetary thresholds for different levels of bribery offences;
(iii) listing the circumstances that constitute aggravating factors and mitigating factors; and
(iv) providing for a range of fines for bribery convictions.
The takeaway message – bracing for the toughening law
The pro-active stance of the Chinese legislative and judicial bodies confirms the Chinese government's determination to crackdown on bribery. While it may take months or years before the Proposed Amendments become enforceable law in China, we foresee the likelihood of a new wave of enforcement against commercial bribery once the Proposed Amendments are adopted. Businesses in China should keep their compliance programmes under review and make sure they are being properly implemented.