Describe the elements of the law prohibiting bribery of a foreign public official.
The Criminal Law expressly prohibits the bribery of foreign public officials. Under article 164 of the Criminal Law, individuals and entities are prohibited from giving any property to a functionary of a foreign country or an official of an international public organisation for any improper commercial benefit.
There is no express prohibition under the Anti-unfair Competition Law. However, under article 7 of the Anti-unfair Competition Law, it is an offence for a business operator to bribe certain categories of individuals in order to seek transaction opportunities or a competitive edge with property or by other means. Where the foreign public official falls within those categories of individuals, any bribery of that official will implicate the Anti-unfair Competition Law.
Definition of a foreign public official
How does your law define a foreign public official, and does that definition include employees of state-owned or state-controlled companies?
Article 164 of the Criminal Law prohibits bribery of ‘any foreign party performing official duties or officials of international public organisations’. This broad definition is generally interpreted as including employees or officials of state-owned companies. Furthermore, article 391 of the Criminal Law expressly prohibits bribery of ‘a state organ, state-owned company, enterprise, institution or people’s organisation’.
Gifts, travel and entertainment
To what extent do your anti-bribery laws restrict providing foreign officials with gifts, travel expenses, meals or entertainment?
In China, gift giving and hospitality are often seen as essential to build relationships. It is unlikely that reasonable bona fide business hospitality will violate China’s bribery laws where there is no quid pro quo and the benefits are properly recorded in the accounts. However, China’s anti-bribery laws are broad – spanning a number of laws and regulations – and enforcement is inconsistent. As a result, corporate hospitality and relationship building through the provision of gifts, hospitality, travel and training may violate the Criminal Law and the Anti-unfair Competition Law in certain circumstances. Thus, care should be taken to observe the following points.
Various government organs and departments, including the State Council and Communist Party of China, have issued a number of internal anti-corruption rules and regulations governing state personnel. Although these rules and regulations do not apply to bribe givers, they are a useful guide for determining suitable limits on offering gifts and business hospitality.
The context must always be assessed to determine whether gift, hospitality, travel and training constitute bribes. According to the Opinions on Issues Concerning the Application of Law in the Handling of Criminal Cases of Commercial Bribery, issued by the Supreme People’s Court and Supreme People’s Procuratorate, factors to consider when distinguishing a lawful advantage from a bribe include:
- the background of the deal;
- the relationship between the offeror and the recipient (eg, whether they are relatives or friends, or have, or have had dealings);
- the value of the advantages offered;
- whether the offeror seeks illegitimate benefits by taking advantage of the recipient’s position, considering the purpose, timing and manner of delivering the advantages; and
- whether the recipient seeks illegitimate benefits for the offeror by taking advantage of his or her position.
The Leading Group’s Opinions on Limitations of the Policies in Anti-commercial Bribery Administrations also establish additional factors to be considered when determining whether conduct constitutes civil bribery, which include:
- whether the conduct violates the fair competition principle;
- whether a gift or other advantage is offered in exchange for business opportunities, preferential treatment or any other economic interest;
- the seriousness of the case; and
- the level of harm to society.
The Leading Group’s Opinions, although not legally binding, contain practical guidance relating to bribery and gifts and business hospitality in China.
Gifts to government officials
According to the relevant rules (some of which are non-binding), the following are considered unacceptable:
- offering cash gifts or their equivalent (eg, securities with cash value, payment vouchers and commercial prepaid cards) to government officials in the context of their public service activities;
- providing gifts (regardless of their value) to government officials that could influence their impartiality in performing their public functions;
- obtaining, holding or using consumer cards for – among other things – gyms, club and golf courses, in violation of the relevant rules (in accordance with the Regulation of the Communist Party of China on Disciplinary Actions, which is binding on Party members); and
- donating vehicles to other parties (if done by enterprises, public institutions or government individuals).
In general, high-value lavish gifts (eg, cars and luxury watches) are likely to attract scrutiny, particularly where the company or individual in question has dealings with the recipient. In light of applicable rules, lower-value gifts should also be approached with caution, particularly if they are one of several or are combined with the provision of other benefits.
Entertainment and hospitality offered with corrupt intent (eg, in exchange for action or inaction by government officials regarding their duties; or in return for business opportunities or other economic interest offered in violation of the fair competition principle) are prohibited. Corrupt intent can be inferred from other factors, such as the giver’s relationship with the proposed recipient (eg, if they have dealings) and the value and frequency of the hospitality offered. Lavish or unreasonably generous or frequent entertainment is likely to be problematic.
Do the laws and regulations permit facilitating or ‘grease’ payments to foreign officials?
There are no rules under Chinese law comparable to those of the Foreign Corrupt Practices Act, under which a giver is exempt from liability for providing facilitation or ‘grease’ payments. However, article 389 of the Criminal Law provides that ‘any person who offers money or property to a state employee under extortion but gains no illegitimate benefits shall not be regarded as offering bribes’.
Payments through intermediaries or third parties
In what circumstances do the laws prohibit payments through intermediaries or third parties to foreign public officials?
Under the Criminal Law, the use of an intermediary to facilitate a bribe is prohibited. The Anti-unfair Competition Law includes liability for bribes paid through certain parties.
Individual and corporate liability
Can both individuals and companies be held liable for bribery of a foreign official?
Yes, both individuals and companies can be held liable for corruption offences. In particular, corporations can be held criminally liable for bribing foreign officials or officials of international public organisations.
Corporate criminal liability generally attaches where the relevant bribery misconduct is an exercise of ‘corporate will’ (ie, the decision to engage in the misconduct was a group decision or was made by the relevant personnel in charge). The authorities may also consider whether the corporate entity provided an advantage or received an illegitimate benefit when assessing corporate liability.
Private commercial bribery
To what extent do your foreign anti-bribery laws also prohibit private commercial bribery?
Under the Criminal Law, non-state personnel of a company, an enterprise or any other unit are prohibited from:
- accepting advantages from individuals or entities to secure illegitimate benefits where the amount is relatively large (article 164);
- soliciting or accepting advantages from others by taking advantage of their position and seeking benefits for those that provided the advantages in return, where the amount is relatively large (article 163); or
- accepting kickbacks or service charges during economic activities by taking advantage of their position, in violation of state provisions (article 163).
‘Advantages’ under the Criminal Law are defined as ‘money or tangible property and other advantages that can be calculable in money’. Section 12 of the April 2016 judicial interpretation stipulates that ‘property’ includes:
- property benefits, including benefits that can be converted into material benefits involving money, such as house renovations and debt exemptions; and
- other benefits involving financial payments, such as membership services and travel.
De minimis thresholds for criminal bribery
Certain private sector bribery offences are criminalised only if the bribes are ‘relatively large’. The April 2016 judicial interpretation indicates that a bribe of more than 60,000 yuan will be considered relatively large.
Bribes can be aggregated to meet these thresholds; if small bribes are provided regularly, the monetary thresholds will likely be met eventually.
Mens rea and lack of quid pro quo requirement
Corrupt intent is required for most criminal bribery offences (ie, specific intent to secure illegitimate benefits). Intent can be inferred from the circumstances of a case and there is no strict requirement to establish a quid pro quo. Relevant factors when inferring intent include:
- the relationship between the giver and the recipient of the bribe;
- the value of the advantages offered; and
- whether the giver took advantage of the recipient’s position, considering the purpose, timing and manner of the advantage.
If the alleged bribery involves commercial entities and does not meet the criminal liability threshold, it may nevertheless violate the civil commercial bribery provisions under the Anti-unfair Competition Law (as amended). Article 7 of the Law prohibits a business operator from bribing in order to seek transaction opportunities or a competitive edge with property or by other means the following three types of bribe recipient:
- employees of the transaction counterparty;
- entities or individuals entrusted by the transaction counterparty to handle relevant affairs; or
- entities or individuals that use authority or influence to influence a transaction.
In this regard, the Anti-unfair Competition Law does not prohibit the payment of commissions by a company or individual, provided that they are expressly provided in the course of the transaction and accurately recorded in the accounts of both parties to the transaction.
The Anti-unfair Competition Law assumes vicarious liability of the company where its employees commit bribery under that Law. However, the company has a defence if it can prove that the act of offering bribes is irrelevant to securing a deal or gaining a competitive advantage by the company.
For the purposes of the Anti-unfair Competition Law, ‘bribe’ is very widely interpreted and covers promotion fees, advertising expenses, sponsorship fees, service remuneration, commission or reimbursement of various expenses, as well as ‘other means’ such as trips or visits (overseas or domestic) of various descriptions.
What defences and exemptions are available to those accused of foreign bribery violations?
Most Criminal Law bribery offences require an element of corrupt intent. As such, demonstrating a lack of corrupt intent may operate as a defence. There are also minimum financial thresholds under the Criminal Law, below which criminal prosecution will not be brought.
There is an affirmative defence under the Criminal Law for bribe payments made under threat of extortion, so long as the giver does not receive an illegitimate benefit.
What government agencies enforce the foreign bribery laws and regulations?
A number of bodies are involved in investigating bribery and corruption in China, including:
- the National Supervision Commission;
- the Supreme People’s Procuratorate and various local level people’s procuratorates;
- the Ministry of Public Security and various local level public security bureaus;
- the Ministry of Supervision and various local level supervisory bureaus; and
- the SAMR and its local level offices.
Offences under the Criminal Law are typically investigated and enforced by the Ministry of Public Security and various local level public security bureaus.
Offences under the Anti-unfair Competition Law are investigated and enforced by the SAMR.
Patterns in enforcement
Describe any recent shifts in the patterns of enforcement of the foreign bribery rules.
The foreign bribery amendment to the Criminal Law was introduced in 2011 to give effect to the UN Convention Against Corruption. Under article 164 of the Criminal Law, individuals and entities are prohibited from giving any property to a functionary of a foreign country or an official of an international public organisation for any improper commercial benefit. However, to date, there appears to have been no enforcement of this specific provision.
Prosecution of foreign companies
In what circumstances can foreign companies be prosecuted for foreign bribery?
Several foreign companies have been prosecuted for domestic bribery in China (prosecutors typically pursue a company’s Chinese subsidiary). For example, UK multinational pharmaceutical company GlaxoSmithKline was found guilty of bribing doctors and hospitals to prescribe its products in September 2014 and fined US$492 million. However, there appears to have been no enforcement of the specific foreign bribery laws to date.
What are the sanctions for individuals and companies violating the foreign bribery rules?
For violations of article 164 of the Criminal Law, individual offenders may face up to 10 years’ imprisonment and be fined (the April 2016 judicial interpretation provides for the fine to range from 100,000 yuan to twice the amount of the bribe).
Corporates committing the same offence are liable on conviction to fines ranging from 100,000 yuan to twice the amount of the bribe; the personnel in charge of the corporate and other personnel responsible for the crime may be imprisoned for up to 10 years and fined. Under the current Criminal Law, recipients of bribes may be imprisoned for at least five years, and have property confiscated. Following the recent amendments to the Criminal Law, which were promulgated in December 2020 and will become effective on 1 March 2021, in most serious circumstances, recipients of bribes may receive life imprisonment and a criminal fine.
As regards civil bribery offences under article 7 of the Anti-unfair Competition Law, penalties include the confiscation of illegal gains and administrative fines of between 100,000 and 3 million yuan per violation, as well as the revocation of business licences in serious cases.
Recent decisions and investigations
Identify and summarise recent landmark decisions or investigations involving foreign bribery.
The foreign bribery amendment to the Criminal Law was introduced in 2011 to give effect to the UN Convention Against Corruption. However, to date, there appears to have been no enforcement of this specific provision.
One key development in the last year was the introduction (in November 2021) of implementing regulations in respect of the PRC Supervision Law. In addition to clarifying the role and powers of the National Supervisory Commission and local supervisory commissions, the regulations also set out in detail the extent to which PRC authorities will cooperate with foreign agencies in the investigation of, and enforcement against, overseas corruption.