On November 20, 2008, the Supreme People’s Court (SPC) and the Supreme People’s Procuratorate (SPP) jointly issued the Opinions on Several Issues Concerning Application of the Law in Handling Criminal Cases of Commercial Bribery. The Opinions, which clarify several key issues, demonstrate the Chinese government’s determination to curb commercial bribery. The sixth amendment to the Criminal Law of the PRC (Amendment 6), passed in June 2006, serves as the legal basis to expand criminal liability for commercial bribery.
The Opinions Emphasize the Range of Commercial Bribery
In the very first article, the Opinions list the eight crimes that constitute commercial bribery under the Criminal Law:
- Acceptance of a bribe by a non-state functionary;
- Offering of a bribe to a non-state functionary;
- Acceptance of a bribe;
- Acceptance of a bribe by an entity;
- Offering of a bribe;
- Offering of a bribe to an entity;
- Act of serving as an intermediary in a bribe; and
- Offering of a bribe by an entity.
The Opinions Define “Other Entities” and the “Personnel of Corporations, Business Entities or Other Entities”
With respect to commercial bribery involving non-state functionaries, Amendment 6 expands the definition of “non-state functionaries” from “personnel of companies and business entities” to “personnel of companies, business entities and other entities.” However, Amendment 6 does not define the scope of “other entities.” The Opinions address this ambiguity, and clarify that “other entities” include not only permanent organizations like public-service institutions, social associations, villagers’ groups and urban residents’ groups, but also non-permanent organizations like organizing committees and project contracting teams.
According to the Opinions, the definition of “personnel of corporations, business entities and other entities” also includes non-state functionaries in state-owned companies, enterprises, and other state-owned organizations.
The Opinions Nail Down Criminal Liability of Commercial Bribery in Certain Fields
Public outcry over commercial bribery has been much stronger in some fields than in others. This is due, in part, to varying media coverage. For example, Xinhua reported that in 2008 China cracked down on 6,227 cases of commercial bribery involving RMB1.65 billion. Of these cases, 726 involved the sale of medical supplies and 216 involved the procurement of construction projects. Procurement in the education sector has also drawn considerable criticism in the media.
Given the public outcry, it is not surprising that the Opinions specifically address commercial bribery activities in the pharmaceutical, construction and education sectors. These activities are as follows:
- First, a state functionary who works in a medical institution is guilty of the crime of accepting bribes if he or she demands or receives property from sellers of medical products, devices or materials in exchange for promoting the sellers’ interests. If a non-state functionary commits a similar act and if the property involved is of significant value, then he or she is guilty of the crime of accepting bribes by a non-state functionary.
- Second, a medical professional who works in a medical institution is guilty of the crime of accepting bribes by a non-state functionary if (1) he or she uses his or her prescription power to promote the interests of the sellers of medical products, devices or materials; (2) he or she illegally accepts property from sellers; and (3) the property involved is of significant value.
- Third, an employee of a school or other educational institution is guilty of commercial bribery if, during the purchase of teaching supplies or other school-related materials, he or she demands or receives property from sellers in exchange for promoting their interests. If the employee is a state functionary, then he or she will be prosecuted for the crime of accepting bribes; if the employee is not a state functionary, and if the property involved is of significant value, then he or she will be prosecuted for the crime of accepting bribes by a non-state functionary.
- Fourth, a teacher of a school or other educational institution is guilty of the crime of accepting bribes by a non-state functionary if (1) he or she illegally accepts property from a seller of teaching supplies, facilities or other school-related materials (such as school uniforms); (2) takes advantage of his or her position as a teacher to seek benefits for the seller; and (3) the property involved is of significant value.
- Fifth, if during the procurement process, a member of a bid evaluation committee, a negotiation team or a price inquiry group demands or illegally accepts property from any other person in exchange for promoting the interests of that person, and if the property involved is of significant value, then he or she will be prosecuted for the crime of accepting bribes by a nonstate functionary. If the member is a representative of a state authority or state-owned entity, he or she is guilty of the crime of accepting bribes.
The Opinions Expand the Scope of “Property” and “Seeking Illegitimate Interest”
As the Chinese economy has developed, so has the range and complexity of briberies used to grease the wheels of business. Direct cash payments are no longer the only form of bribery. Rather, bribery can take many forms, including interior decorations, membership cards, vouchers and travel expenses. The Opinions recognize this fact, and broaden the definition of bribery to include any kind of property with a cash value. The value of the bribe is determined by the actual costs and expenses paid.
For a person who accepts a bribe in the form of a bank card, the value of the bribe is the total amount of the deposit, regardless of whether or not the recipient actually withdraws any money. If the recipient overdrafts and the person who offered the bribe is responsible for repayment, then the overdraft amount also counts toward the value of the bribe.
SPC and SPP previously defined “seeking illegitimate interest” in a circular on handling bribery cases, but China’s economic development and the concurrent proliferation of ways to obtain unfair advantages quickly made the old definition obsolete. In order to better guide judges and prosecutors in bribery cases, the Opinions expand the scope of the phrase “seeking illegitimate interest” to cover the following activities:
- Offering a bribe to obtain benefits that violate relevant laws or rules; and
- Offering a bribe on the condition that the recipient violates relevant laws or rules to secure benefits or interests for the offeror. For example, giving property to someone involved in a government procurement process in order to secure a competitive advantage in violation of the principle of fairness constitutes “seeking illegitimate interest.”
The Opinions List Points to Consider When Distinguishing Bribery from Gifts
- As is the case in many countries, business etiquette in China involves exchanging modest gifts in the course of business dealings. Thus, it is extremely important for courts to be able to distinguish between gifts and bribery. The Opinions list the following points to help courts in this regard. The courts should consider:
- The context of the offering and acceptance of property, including the nature of the relationship between the two parties;
- The value of the property exchanged;
- The reason, timing and method for the offering and acceptance of property, and whether or not the offeror requested that the recipient use his or her position to advance the offeror’s interests; and
- Whether or not the recipient used his or her position to seek an unfair advantage for the offeror.
The Opinions Provide Guidance for Assessment of Conviction and Punishment in Certain Commercial Bribery Cases
Under the Opinions, if a non-state functionary colludes with a state functionary to receive bribes, their criminal liabilities will be determined by the specific circumstances of their acts. For example,
- If they use the state functionary’s position to gain benefits for other people, they will be prosecuted for the crime of accepting bribes;
- If they use the non-state functionary’s position to gain benefits for other people, they will be prosecuted for the crime of accepting bribes by a non-state functionary; and
- If they use their respective positions to gain benefits for other people, they will be prosecuted for the crime of the principal. If the principal and the accessory cannot be determined, they may be prosecuted for the crime of accepting bribes.
The issuance of the Opinions demonstrates that China is serious about its pledge to root out and eliminate corruption, and will further strengthen its legislation and enforcement efforts to rein in commercial bribery. International corporations operating in China should respond proactively by adopting stricter compliance policies and providing compliance training for employees.