A signal of further reform: China amends its anti-bribery laws – key highlights
Global Anti-Corruption Perspective
The Ninth Amendment to China’s Criminal Law, introducing a new bribery offense and revising anti-bribery and anti-corruption (ABAC) provisions of the law, is now in effect.
The ABAC provisions are much wider in coverage than the last set of amendments made to the PRC Criminal Law in 2011.
With the Chinese Communist Party's Central Commission for Discipline Inspection (CCDI) having just published its high-level findings from its most recent disciplinary inspection of over 50 state-owned enterprises (SOEs), together with a host of high-level investigations against and detentions of senior government officials in the past year, the revisions introduced by the Amendment are a strong indication of the Chinese government's determination to crack down on corruption since President Xi Jinping took office in November 2012.
The new revisions extend the scope of criminal liabilities for ABAC offenses under the Criminal Law, and, in doing so, address many key issues that have emerged in recent years.
Key highlights of the Amendment
Key changes from the Amendment are summarized as follows:
1. New criminal offense for bribe givers: In the past, there have been a strong debate among Chinese academics and lawyers as well as the general public about State Work Personnel (SWPs)[1]abusing their positions (whether within SOEs or in government agencies or authorities) to obtain improper benefits, either directly or indirectly through their relatives or associates. To address this concern of the general public, the Amendment introduces a new offense: offering bribes to the immediate relatives of SWPs or individuals who have close relationship with SWPs. This offense also covers offering bribes to former SWPs, their immediate relatives or individuals with whom they have close relationships.
2. Monetary fines against individual bribe givers: Before the Amendment, monetary fines were usually imposed on entity offenders. Individual offenders were only fined when they offered a large bribe or bribes, to a company employee, a foreign official performing official duties or an official of an international public organization. In contrast, the Amendment imposes criminal monetary fines against individual offenders, regardless of circumstances. It also imposes monetary fines for individuals in charge of entities or directly responsible for corrupt activities.
3. New sentencing criteria for government officials found guilty of embezzlement and accepting bribes: The Amendment provides a more flexible and general sentencing criteria to replace the previous standard of specific monetary amounts. The new standards are referred to as: (1) "relatively large" amount or "relatively serious" circumstances; (2) "large" amount or "serious" circumstances; and (3) "extremely large" amount or "extremely serious" circumstances. These terms are not defined under the Amendment and there is currently no judicial interpretation or explanatory measures being introduced to explain how these criteria will be applied. Given the nature of Chinese judicial practice and regulatory enforcement, this will inevitably leave some degree of discretion to Chinese law enforcement agencies and the courts in determining how these standards will be applied in practice.
4. No sentence reduction or release on parole for individuals who commit serious corruption crimes: According to the Amendment, for an individual who is convicted of embezzlement or accepting bribes, is sentenced to the death penalty, and is then granted a reprieve, if the sentence is reduced to life imprisonment, the individual cannot then be paroled or afforded a further reduction of his/her term of imprisonment.[2]
5. Raising the bar for bribe givers to be exempted from punishment[3]: The existing Criminal Law provides that criminal penalties against bribe givers can be mitigated or exempted as long as the bribe givers self-report before the commencement of a prosecution. Under the Amendment, a bribe giver who self-reports before the commencement of a prosecution will only be eligible for an exemption of punishment under specific circumstances, such as if the offense is relatively minor, the accused has provided information to authorities leading to a “successful investigation of a major case,” or the accused performs major meritorious services assisting the authorities. Other than these special circumstances, the criminal penalties imposed on bribe givers who self-report will only be lessened, but not exempted.
6. New bar for engaging in professional activities: Under the Amendment, individuals who commit crimes that take advantage of their professions or violate their professional obligations may be barred from engaging in such professional activities for a period of between three to five years after the completion of criminal penalties or the expiration of parole.
How may the Chinese courts apply the new provisions?
- Interpretation of "immediate relatives" and "individuals who have close relationship with a SWP or a former SWP"
The Amendment makes it a crime for anyone to offer bribes to the immediate relatives of a SWP, individuals who have close relationship with a SWP, a former SWP, his/her immediate relatives, or individuals who have close relationship with the former SWP. Neither the PRC Criminal Law nor its amendments provide definitions for "immediate relatives" or "close relationship." The term "immediate relatives," however, is defined in the PRC Criminal Procedure Law to include spouses, parents, children, and natural siblings.
No legal authority in China has defined the term "close relationship" with a SWP or a former SWP. However, the Opinion on Issues concerning the Application of Law in the Handling of Criminal Cases Involving the Acceptance of Bribes[4] defined a similar term of individuals who have "particular relationship" (特定关系人) with a SWP to include immediate relatives, lovers, or anyone who has common interest with a SWP. This definition potentially sheds light on how the PRC authorities might interpret the term "close relationship." In cases we have come across from publicly available sources, lovers, secretaries, drivers, cousins, nephews, and friends of SWPs often played intermediary roles in corruption cases involving government officials and other SWPs. Our view is that Chinese authorities and courts will likely interpret "close relationship" along similar lines as those in the definition provided by the Opinion. It is also likely that courts will interpret the term broadly to include anyone who can influence or is closely involved in the decision-making of a SWP.
- Considerations for self-reporting under the new regime
The Amendment provides that a bribe giver who voluntarily confesses his/her crime before being prosecuted may be given a lighter or mitigated penalty. Prior to the Amendment, voluntary disclosure before the commencement of a prosecution could be sufficient for a complete exemption from punishment, but we have only found one case in which the court exempted the bribe givers after they voluntarily confessed their crimes before prosecution. In a case before the Yunnan Provincial High Court in 2010, one of the defendants was found guilty of offering approximately US$3,150 bribes in exchange for monetary compensation relating to a governmental construction project (the Yunan Case). The defendant was exempted from criminal punishment after he voluntarily confessed to his crime before the prosecution. In another case ruled by the Beijing No. 1 Intermediate Court in 2015, a Shanxi company and its general manager were found guilty of offering approximately US$60,000 to the director of Beijing Changping District Municipal Committee on City Appearance Management. The general manager was sentenced to one and a half year imprisonment. However, he also received two years of probation because he voluntarily confessed prior to the prosecution. In this case, although the general manager did not receive a complete exemption, under the relevant PRC criminal law provisions, he could avoid imprisonment if he shows good performance during the probation period.
The Amendment appears to make it even more difficult for bribe givers who self-report their crimes to receive an exemption or a probation. Specifically, revised Article 390 of the Criminal Law now requires that, in addition to voluntary disclosure before a prosecution, a bribe giver may be exempted from punishment completely only in one of the following circumstances: (i) if his/her offense is minor, (ii) if he/she plays a crucial role in solving a major case, or (iii) if he/she performs major meritorious services in assisting the relevant authorities.
The Amendment does not provide any explanation or guidance on how each of these three criteria should be interpreted and applied in case of self-reporting a bribery offense. The uncertainty and lack of transparency in the ways that Chinese authorities take enforcement actions and the approach of the judiciary makes it difficult to anticipate the potential impact of the new amendment. Often, the highly discretionary nature of the law’s interpretation and enforcement in China means that there is no guarantee the individuals involved may be exempt from punishment by self-reporting to the authorities before a prosecution commences.
That said, the newly amended Article 390 does appear to offer an avenue to be exempted from punishment. What is worth bearing in mind when considering whether to self-report to take advantage of the exemption provision under Article 390 is to first consider all the factual circumstances of the offense - whether it is potentially a "minor offense" similar to what the authorities had determined in the Yunan Case, where the amount of the bribe was relatively minor. If the facts involved reveal a potentially serious offense, then greater care should be exercised in assessing how useful the information at hand will be to the authorities and whether the facts to be confessed are already known to the authorities. The authorities will not give any credit for disclosure of any facts already known to them.
No company can afford to be complacent
The pace of change in China’s regulatory landscape is showing no signs of slowing down. Since the end of 2012, when President Xi came to office, 22 senior provincial-level government officials have been put through criminal trials, with 13 having been convicted of bribery-related offenses. The CCDI will continue with its next round of inspections against major SOEs starting later this year, targeting principally those in the financial services sector. The introduction of the revisions to the ABAC provisions under the Amendment is likely to spur greater enforcement action by Chinese authorities in the near future. There are indications that this is a genuine attempt by the Central Government to tackle bribery and corrupt practices that are endemic within the local business environment, and not just a campaign against targeted officials and SOEs.
How widely the current enforcement actions will spread across the private sector is anyone's guess. There are likely watershed changes in business culture and practices to come. Companies operating and conducting business in China should bring greater resources to bear on their compliance capabilities, enhancing their compliance programs and internal controls as they look to reduce their potential risk exposure. No company can afford to be complacent.
We will be keeping a close watch on any future judicial explanation or implementation measures that will provide guidance on how these revisions introduced by the Amendment will be applied or interpreted in the weeks and months to come.
[1] Chinese law defines SWPs as people who: (i) perform public services in the legislative, administrative, or judicial agencies or the military; (ii) perform public services in SOEs, institutions, or civil organizations; (iii) have been assigned by the government or SOEs to non-state-owned enterprises, institutions, or civil organizations to perform public services (e.g., a deputy general manager of a Sino-foreign joint venture company who has been sent to the JV by the Chinese party which is an SOE); or (iv) perform public services according to law. Public services refer to performing organization, leadership, supervision, management, and similar functions on behalf of state organs, SOEs, public institutions, and civil organizations. These are mainly public affairs functions connected with the authority and duties to supervise and manage state property.
[2] The Ninth Amendment to Article 383 of the PRC Criminal Law states that anyone who is convicted of embezzlement and is sentenced to death penalty with a reprieve, the People's Court may, in light of the circumstances, commute the sentence to life imprisonment upon the expiration of the two-year reprieve period, but shall not offer any additional commutation or parole. Article 386 of the PRC Criminal Law provides that Article 383 shall apply to the crime of accepting bribes.
[3] We note that the relevant provision (Article 390) only applies to bribe givers and does not apply to recipients of bribes.
[4] Issued by the Supreme People's Court and the Supreme People's Procuratorate in 2007.
No comments:
Post a Comment