This country-specific Q&A provides an overview to bribery & corruption law in China.
It will cover the definition of bribery, regulation, compliance, liability and enforcement as well as insight and opinion and any upcoming legal changes planned for their respective country.
This Q&A is part of the global guide. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/bribery-corruption/
What is the legal framework (legislation/regulations) governing bribery and corruption in your jurisdiction?
Bribery and corruption in China are governed by authorities in accordance with various laws and legislation. The legal framework could be stratified, by and large, into three levels depending on the severity and identity of the involved individuals. Firstly, there are the laws and regulations under civil, administrative, and economic spheres, such as the Anti-Unfair Competition Law and the Provisional Regulations on the Prohibition of Commercial Bribery, which are the foundations for the wide-spread administrative enforcement against commercial bribery in China. Secondly, there is the Criminal Law and its corresponding legislative and judicial interpretations, which regulate the criminal violations and liabilities. In a more general sense, the disciplines and regulations issued by the Central Committee of the Communist Party of China (“CPC”), which are binding to all the CPC members and stricter in setting a much lower threshold for the constitution of the corruption related violations.
Which authorities have jurisdiction to investigate and prosecute bribery in your jurisdiction?
From a criminal law perspective, violations that do not involve state functionaries are investigated by the Public Security Bureau (“PSB”) and transferred to the prosecution department of the People’s Procuratorate (“Procuratorate”) for prosecution. Criminal violations involving state functionaries were previously investigated and prosecuted by the Procuratorate (the anti-corruption department shall be responsible for the investigation, and the prosecution department shall be responsible for the prosecution), whilst the authority for criminal investigation has been transitioned to the newly established Supervisory Commission following the Law on Supervision which took effect on March 20, 2018, with the prosecution still being handled by the Procuratorate.
From an administrative law perspective, violations regarding bribery and corruption are mostly investigated and penalized by the Administration for Industry and Commerce (“AIC”), which is currently under the process of being incorporated into the Market Regulatory Administration (“MRA”) in line with the organization restructure of the State Council which was approved by the National People's Congress in March 2018. Also, in accordance with the Law on Supervision, the administrative violations involving state functionaries are investigated by the Supervisory Commission. Other industrial governing authorities such as the China Bank and Insurance Supervision and Administration Committee are empowered with the investigation rights for specific industries, that do not involve state functionaries. Unless the violation is escalated to criminal level upon investigation, it will not involve any further prosecution steps.
How is bribery defined?
Different definitions of bribery under the current administrative law and criminal law. Moreover, the connotation and definition of bribery varies from criminal law and administrative law perspectives. From an administrative law perspective, in a broad sense, bribery refers to the act of offering, taking money or goods, or by other means, in violation of the fair competition principle, in order to provide or obtain transaction opportunities or other financial interests.
From a criminal law perspective, there are 10 bribery related crimes stipulated in Criminal Law, which, generally speaking, forbids the act of offering a bribe to any state functionary, and also receiving a bribe from any state functionary. For example, any state functionary who, by taking advantage of his position, extorts money or property from another person, or illegally accepts another person's money or goods in return for securing benefits for the person, would be guilty of accepting bribes.
Does the law distinguish between bribery of a public official and bribery of private persons? If so, how is ‘public official’ defined? Are there different definitions for bribery of a public official and bribery of a private person?
Yes. The law distinguishes between the bribery of a public official and that of private persons. There is a specific term for public official in China, which is “state functionary”, which refers to anyone who performs public service in state organs, state-owned enterprises and institutions, and the other persons who perform public service according to law. The Criminal Law sets up a clear division between the bribery of a state functionary and the bribery of a private person, and also provides for different crimes depending on the involvement of the duty, or influence of the state functionary. For example, offering bribes to an executive in a private entity would be convicted of the crime of offering bribes to a non-state functionary, and subject to criminal liabilities ranging from criminal detention to imprisonment of up to 10 years, with a monetary penalty when the involved amount is huge. As for the act of offering bribes to a state functionary, it would constitute the crime of offering bribes to a state functionary, and subject to criminal liabilities of up to life-time imprisonment, along with the confiscation of property.
What are the civil consequences of bribery in your jurisdiction?
There is a general article in the Anti-Unfair Competition Law which stipulates that business operators that have caused damages to others, shall bear the civil liabilities without further specifying the details. Unlike other jurisdictions such as the United States where the authorities (eg, the Department of Justice and the Securities and Exchange Commission) would implement the civil penalties on the offenders, civil consequences in China are only resolved through civil disputes, where the party damaged from the bribery could bring a lawsuit in court or use other alternative dispute resolution channels. However, China does have a similar mechanism reflected in the administrative penalties imposed by authorities such as the Administration for Industry and Commerce (“AIC”), which could include a fine ranging from RMB 100,000 to 3,000,000, confiscation of illegal gains, and the revocation of business license in serious circumstances.
What are the criminal consequences of bribery in your jurisdiction?
There are ten different crimes regarding commercial bribery stipulated in the Criminal Law with corresponding criminal penalties for each one.
In summary, the criminal consequences include the punishment of liberty, and property deprivation. For individuals, the consequences include criminal detention or fix-term imprisonment, ranging from criminal detention to life-time imprisonment, as well as a fine, or confiscation of property. Similarly, for unit crimes, a fine would be charged against the entity itself, and the responsible person(s) of the entity would be put into criminal detention or imprisonment.
Does the law place any restrictions on hospitality, travel and entertainment expenses? Are there specific regulations restricting such expenses for foreign public officials?
There are no specific restrictions on hospitality, travel and entertainment expenses. However, it is highly likely that such expenses would be considered as bribery if they exceed a reasonable amount, or involve extravagant non-business-related activities, and therefore, subject to restrictions that would vary by multiple factors such as type of industry and different cities.
A good frame of reference comes from the standards regarding travel, accommodation, and meeting expenses regulating public officials published by the Central Committee of the Communist Party of China (“CPC”) and local governments. For instance, the accommodation fee for a public official at ministerial level (eg. mayor of Shanghai) in large cities like Beijing and Shanghai is around RMB 1,100 per day. In addition, industrial organizations such as China Association of Enterprise with Foreign Investment R&D-Based Pharmaceutical Association Committee (“RDPAC”) also formulate certain restrictions that are applicable to its members.
Likewise, as for hospitality, travel and entertainment expenses for foreign public officials, no specific restrictions other than the prohibition against bribery to foreign public officials is clearly laid out. It is worth mentioning that the crime of offering bribes to foreign public official was amended into the Criminal Law in 2011, which regulates the act of offering financial interests to foreign public officials or officials in international public organizations. The criminal liabilities include criminal detention or fixed term imprisonment of up to ten years, along with the monetary penalty. Similar considerations on the nature, amount, and necessity of such expenses would be analysed for bribery related risks.
Are political contributions regulated?
Political contributions are not applicable under China’s legal and political system.
Are facilitation payments regulated? If not, what is the general approach to such payments?
here is no official definition for facilitation payments in China. Any payment that is made in exchange for illegal business opportunities, advantages or other interests could be potentially deemed as bribery. One relevant exception is in regards to small advertising gifts that are permitted by the Provisional Regulations on the Prohibition of Commercial Bribery, which is usually less than RMB 200 in practice. Other than that, article 83 of the Discipline Rules for the Communist Party of China stipulates that payment, cash, or shopping cards that might potentially influence their execution of duty, would be strictly forbidden, which seems to set aside an exception for such payment in a relatively small amount, with less likelihood of being deemed as bribery.
Are there any defences available?
In a commercial context, the criteria commonly used by the administrative enforcement agencies for substantiating commercial bribery mainly focus on (1) the existence of inducement for illegitimate interests, and (2) the purpose of obtaining business opportunities or competition advantages. The key for differentiating legitimate interests exchange and inducement for illegitimate interests lies in whether the interests exchanged has potential influence on the fair competition in the market, or the interest and benefits of the consumers. Notably, the Anti-Unfair Competition Law which was recently amended in 2017, adopts the new method of listing all the possible scenarios of the statutory bribery-receiving parties, including; (1) “any employee of the counterparty to a transaction”, (2) “any entity or individual entrusted by the counterparty to a transaction to handle relevant affairs”, and 3) “any entity or individual that is likely to take advantage of powers or influence to affect a transaction”, and that in its literal meaning excludes the counterparty itself as the bribery-receiving party.
Therefore, considering the abovementioned, the corresponding defences for the company could be composed from the nature of the bribery-receiving party, the non-existence of the exchange of illegitimate interests, and the lack of potential influence on the fair competition or consumer’s benefits. In addition, another possible defence for the company could be sustained in the Anti-Unfair Competition Law if a company has evidence to prove that such acts of the employee are irrelevant to seeking transaction opportunities, or competitive advantages for the company.
Are compliance programs a mitigating factor to reduce/eliminate liability for bribery offences in your jurisdiction?
Yes. In accordance with the Anti-Unfair Competition Law newly amended in 2017, the acts of bribery committed by the employee of a company shall be deemed as the conducts of the company，unless it has evidence to prove that such acts of the employee are irrelevant to seeking for transaction opportunities or competitive advantages for the company. However, no specified regulations or judicial interpretations regarding what evidence would be most valid have been made available. In practice, some multinational and local companies have already implemented compliance projects and preventative measures such as providing regular compliance trainings and requiring employees’ written compliance commitment letters in preparation for any potential legal liability concerns. Furthermore, it has been suggested by the State Administration for Industry and Commerce (“SAIC”) in a press conference in November 2017, that if the business operator has set up measures that are legitimate, in compliance and reasonable, and has adopted effective inspection on the implementation, the company could be relieved from the legal liabilities. Therefore, we would strongly recommend that companies continue their efforts in this regard.
Who may be held liable for bribery? Only individuals, or also corporate entities?
On a criminal level, the bribery acts of an employee of a company could be deemed as either an individual crime, or a unit crime, depending on various considerations including the company’s involvement in the bribery act (such as whether it is the company’s decision to conduct the bribery), the possession of the illegal gains, and whether the bribes are offered in the name of the company or the individual employee. If the charge is raised against the individual employee, then the company would not be held accountable for the crime. However, if the charge is against the company as a unit crime, not only would the company be punished by a monetary penalty, but also the responsible persons (eg, the legal representative, and other persons in charge) could be put into criminal detention or imprisonment.
The administrative enforcement differs as there is a default mechanism in place, that the acts of bribery committed by the employee of the company shall be deemed as the conducts of the company, unless it has evidence to prove that such acts of the employee are irrelevant to seeking for transaction opportunities, or competitive advantages for the employer. Only the company would be imposed with administrative liabilities, including a fine ranging from RMB 100,000 to 3,000,000, confiscation of illegal gains, and revocation of the business license under serious circumstances. No individual liabilities are specified with this regard.
Has the government published any guidance advising how to comply with anti-corruption and bribery laws in your jurisdiction? If so, what are the elements of an effective corporate compliance program?
Thus far there has been no official guidance for how to comply with anti-corruption and bribery laws published by the Chinese government. Nevertheless, it is said that the State-owned Assets Supervision and Administration Commission of the State Council (“SASAC”), which is the governing authority for all the state-owned enterprises in China, is under the process of drafting a compliance guidance for all the state-owned enterprises governed by the central government. The driving force for a new compliance guidance originates from the outbound investment upsurge of the China’s state-owned enterprises, in which companies are susceptible to compliance risks due to the incompatibility arising from the different standards and practices adopted by each country. And a wide range of compliance issues will be covered including anti-corruption and bribery, anti-money laundering, export control, and the like. Although the compliance guidance will be mainly applicable to state-owned enterprises governed by the central government, other entities could also use it as major reference for establishing a solid compliance system.
Additionally, the Shenzhen Standard for Anti-Bribery Management Systems (“Shenzhen Standard”) was published by Shenzhen government as a recommended practice, rather than a compulsory requirement in June 2017. The Shenzhen Standard was drafted based on ISO 37001 Anti-bribery Management Systems, developed by ISO technical committee ISO/TC 309. The recommended elements of an effective corporate compliance program include third party due diligence, internal control (both financially and operationally), standardization on the gift and entertainment rules, anti-bribery control on business partners, effective reporting mechanism, proper investigation and crisis management process, and corrective measures on the identified issues.
Does the law provide protection to whistle-blowers?
Yes. The right to report crimes and other legal violations by the citizens is well established in the laws and regulations such as the Constitution, the Criminal Procedure Law and the Anti-Unfair Competition Law. As for the protection on whistle-blowers, some specific rules like the Rules of the Supreme People's Procuratorate on Protecting the Citizens' Tip-off Rights were formulated to provide a comprehensive mechanism from both substantial and procedural levels.
Strict confidentiality is the foundational requirement imposed on the authorities that receive any reporting throughout the handling process. Also, the authorities need to take measures (eg. restraining the physical access of those being reported to the reporter) to ensure the safety of the reporters and their close relatives whenever necessary. Retaliation on the whistle-blowers is entirely forbidden by law, and legal liabilities such as administrate punishment, criminal detention or imprisonment can be imposed.
How common are government authority investigations into allegations of bribery?
Government authority investigations frequently take place regarding the allegations of bribery, which is reflected in statistics published by the Supreme People's Procuratorate which show that 96,870 people were investigated and prosecuted for bribery related issues from 2013 to 2017, an increase of by 28% in the past five years. According to the Work Reports of the Supreme People's Procuratorate, 10472 people were investigated and prosecuted for the taking of bribery in 2016, and 7375 people were investigated and prosecuted for the offering of bribery. The statistics also increased respectively to 15662 and 8298 in 2017.
As for administrative enforcement, according to the written decisions of administrative penalties published by the Administration for Industry and Commerce (“AIC”) in Shanghai, from 2015 to 2017, more than 180 entities in Shanghai were penalized for commercial bribery with the monetary penalties adding up to RMB 115 million in total, including confiscation of illegal gains and fines imposed.
Due to the concealment of bribery acts, oftentimes only between the bribery offering party and the receiving party, investigations are mostly triggered by whistle-blowing reports (eg. from competitors) or the implications with other cases. The government has been improving its reporting mechanism by establishing multiple platforms and channels with the involvement of the Public Security Bureau (“PSB”), the People’s Procuratorate (“Procuratorate”), the Disciplinary Committee of Communist Party of China, AIC, etc. Additionally, though rare in occasion, enforcement actions by Chinese authorities can also be triggered by the penalty announcement published by other jurisdictions which involve citizens or the entities in China.
What are the recent trends in investigations and enforcement in your jurisdiction?
The Communist Party of China (“CPC”) is building on the overwhelming momentum and keeping up the pressure and the enforcement intensity on anti-corruption and bribery. The overall goal is to improve the system of disabling corruption and bribery, to create an influential atmosphere and to demonstrate the government’s determination to eradicate corruption and bribery. In early January, 2018, President Xi Jinping reiterated during the Central Commission for Discipline Inspection (“DIC”) Meeting that there will be zero tolerance for corruption, and China will leave no blind spots for both bribery offering parties and taking parties.
From a structural perspective, the supervisory system reform is among the latest enforcement trend to rein in corruption, as a representative example for improving the mechanism and integrating the resources for anti-corruption and bribery.
As for the enforcement scope, the focus has been extended from bribery taking, to cover both bribery taking and offering acts. The targets will involve more “seeming outliers” such as the friends or relatives of the state functionaries, or people with a connection to the counterparty of the transaction.
In terms of an industrial perspective, the health care industry remains one of the authority’s primary focuses, with commercial bribery being one of the most common investigations taking place at the moment. Almost one out of every three companies in this industry, that were subject to investigation in 2017, were being investigated for commercial bribery. Other industries such as automobile, fast moving consumer goods, telecommunications, and financial industries are also among the target list of the recent enforcement trend.
In addition, the Chinese government has also attached great importance to the international cooperation on cracking down on bribery and corruption. This is done through continuous efforts, such as the active participation in the internationally joint enforcement programs and facilitating the establishment of the APEC Network of Anti-Corruption Authorities and Law Enforcement Agencies.
Is there a process of judicial review for challenging government authority action and decisions?
Similar alternative options regarding administrative enforcement include applying for administrative reconsideration and filing administrative litigations against the administrative act conducted by the enforcement agency, such as the penalties issued by the Administration for Industry and Commerce (“AIC”) on commercial bribery. The applicant may choose to apply to the people's government at the same level, or to the competent department at a higher level, for administrative reconsideration. If the applicant refuses to accept the decision made after administrative reconsideration, an administrative lawsuit could be filed accordingly. Litigation might also be directly initiated, without the application for administrative reconsideration.
For criminal judgements, appealing to the higher court for judgements that have not yet taken effect can be made. As for the effective judgements, the individuals or entities may file petitions to the court or the People’s Procuratorate (“Procuratorate”). The court or the procuratorate will then review the petitions and decide whether a retrial or a counterappeal could be initiated.
Are there any planned developments or reforms of bribery and anti-corruption laws in your jurisdiction?
Currently, the foreseeable developments will still mainly be concentrated on the new Supervision Law promulgated in March 2018, and the Anti-Unfair Competition Law amended in November 2017, as well as the corresponding synchronization among all the relevant laws and regulations. New legislations associated with this regard are also anticipated to address the potential issues arising during the implementation.
Of paramount importance, is the establishment of the Supervisory Commission and revolution of organization restructure in the State Council which leads to the new work divisions among all the regulatory bodies. The recently established Market Regulatory Administration (“MRA”) now handles the investigations on administrative violations of commercial bribery not involving state functionaries and the Public Security Bureau (“PSB”) handles the investigations on criminal violations of bribery not involving state functionaries. In parallel, investigations on both administrative and criminal violations of bribery involving state functionaries then fall into the hands of the Supervisory Commission. All of these changes may bring about new developments of bribery and anti-corruption laws for the issues arising from the enforcement actions in practice.
To which international anti-corruption conventions is your country party?
The Chinese government signed the United Nations Convention Against Transnational Organized Crime (the “Convention”) in December 2000, which came into force in China on October 13, 2003. Although this Convention is a generally applicable to all transnational organization crimes, corruption is one of its the primary focuses, which requires the contracting states to take measures through legislation and law enforcement to promote anti-corruption.
Later, China was actively involved in the formation stage of the United Nations Convention against Corruption (“Anti-Corruption Convention”), and was among the first countries to ratify it, with one reservation on the paragraph 2 of Article 66 regarding dispute settlement channel, and it officially took effect in China on February 12, 2006. The Anti-Corruption Convention is the only legally binding universal anti-corruption instrument with the framework established on 5 pillars which are Preventive Measures, Criminalization and Law Enforcement, International Cooperation, Asset Recovery, and Technical Assistance & Information Exchange. At the end of 2016, 10 years after China’s ratification of the Anti-Corruption Convention, a status review report on China’s implementation of the Anti-Corruption Convention was published by the United Nations Office on Drugs and Crime, in which China’s efforts and dedication in anti-corruption through active law enforcement, successive international cooperation and sustainable good practices have been well recognized.
Do you have a concept of legal privilege in your jurisdiction which applies to lawyer-led investigations? If so, please provide details on the extent of that protection.
In China, although there is not an equivalent regime of legal privilege which prevents the confidential communications between the client and the lawyer being disclosed to third parties, there is a general duty of confidentiality stipulated in the Law on Lawyers, which is imposed on lawyers to keep confidential any state secrets, trade secrets, and privacy obtained in the course of practicing law. The Criminal Procedure Law further provides the defence attorney with the right to refuse to disclose the relevant information of the client in criminal investigations and proceedings, however this is subject to a few exceptions where national security, public security, or individual’s personal security are endangered. However, for the administrative enforcement, no such protection is legally validated if the lawyer is requested by the authorities to disclose certain information pertinent to the client.
How much importance does your government place on tackling bribery and corruption? How do you think your jurisdiction’s approach to anti-bribery and corruption compares on an international scale?
China has attached great importance to tackling bribery and corruption. Under the global context of combating bribery and corruption China has kept pace on an international scale and progressed in leaps and bounds over the past few years. The top-down revolution, which involved the promulgation and amendment of foundational legislations, the restructuring of enforcement authorities, the establishment of Supervisory Commission, the integration of anti-corruption resources, as well as the intensive enforcement actions from both administrative and criminal level, has vividly demonstrated the determination of the Chinese government in handling any lingering issues. In addition, the dedication in international cooperation has impelled the development of a transnational consensus on anti-bribery and anti-corruption.
Generally how serious are organisations in your country about preventing bribery and corruption?
The prevention of bribery and corruption has been a very significant working step, running throughout the continuous efforts taken by China. It has been explicitly stated by President Xi Jinping that China is on the progress of establishing a safeguard mechanism in preventing corruption and bribery, by building up the deterrent against corruption, disabling the opportunities for corruption, and increasing the cost of corruption. This is also reflected in the latest legislation and enforcement trend of the Chinese government.
The Ninth Amendment to the Criminal Law extends the scope of bribery taking parties and increases the severity of punishment for bribery and corruption related cases. The supervisory commissions at the national, provincial, and county levels have been established to ensure that supervision covers everyone who exercises public power. All these aforementioned instruments are expected to contribute to preventing bribery and corruption.
What are the biggest challenges enforcement agencies/regulators face when investigating and prosecuting cases of bribery and corruption in your jurisdiction?
The biggest challenges facing the enforcement agencies in investigating and prosecuting cases of bribery and corruption, mostly come from the difficulties in evidence collection and consolidation, which is aggravated by the developments of economy and technology. The characteristics of the bribery related cases include the concealment of the misconducts per se, and the collusion among the involved parties. Dynamic business models in different industries and the adoption of high-end technologies require a better understanding and in-depth knowledge from the enforcement authorities in investigation and prosecution. For example, instead of going directly through the bribery offering party, improper payments in the form of bitcoin could be transferred to the bribery taking party through a non-related third party based in other countries, and in the name of the legitimate business purpose. Under the circumstances where physical evidence is not solid, the alignment among the involved parties in non-cooperation with the authorities will increase the difficulty in further conviction. Additionally, if the cases involve extra-territorial factors such as foreign entities, then cooperation from the authorities in other jurisdictions will be needed, for which the process is usually time-consuming, whilst the investigation itself is time-sensitive.
What do you consider will be the most significant corruption-related challenges posed to businesses in your jurisdiction over the next 18 months?
The next 18 months will be the most critical period, during which the newly published legislations such as the Law of Supervision and the Anti-Unfair Competition Law will be implemented, and the restructuring of the government departments will be ongoing. Companies need to take a relatively conservative approach to the uncertainties that are not yet clarified by the laws, as well as relevant authorities and the interactions with the relevant authorities in corruption related investigations and matters. Considering that employee’ corruptive misconduct could lead to the criminal liabilities to both the individual and the entity, it is necessary for companies to plan ahead in compliance enhancement to prove their conscientiousness and their continuous efforts in duty execution.
Another delicate issue for companies to consider is with regards to personal information protection during any internal investigation, since the collection and handling of personal information will be subject to the detailed requirements and principles regulated in the Network Security Law, the Criminal Law, and the corresponding regulations and official interpretations.
How would you improve the legal framework and process for preventing, investigating and prosecuting cases of bribery and corruption?
China has completed the initial stage of establishing the legal framework and process for preventing, investigating, and prosecuting bribery and corruption. In order to comply with the relevant laws and regulations, companies should also build up an internal process which covers the ethical standards cultivation, proper delegation of authority, due diligence on business partner selection, internal monitoring and control on the irregular transactions, as well as setting up compliance reporting platform and effective process for internal investigation and crisis management. Special attention is required on the interaction and cooperation under situations whereby a government investigation or inquiry is initiated, companies shall then take responsive actions including the internal investigation and evidence preservation, severity evaluation, proactive communication with the authorities, control of media and public exposure, etc.