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China’s New Anti-Corruption Law: Window Dressing or New Era of Enforcement?

Some commentators have brushed aside China’s new foreign anti-bribery law as window dressing and a feeble attempt to bring China into compliance with international anti-corruption treaties. The proof will be in the pudding – how does China enforce the law? As written, however, there are some interesting questions as to its interpretation and applications.

The newly enacted law criminalizes bribes given to foreign (i.e., non-PRC) public officials or officials of an international public organization:

“Whoever, for the purpose of seeking illegitimate commercial benefit, gives property to any foreign public official or official of an international public organization, shall be punished in accordance with the provisions of the preceding paragraph [i.e., the pre-existing Article 164].”

The Amendment does not contain any affirmative defenses or exceptions to the new anti-bribery provisions. The new law applies to all PRC citizens, wherever located, and all companies, enterprises, and institutions organized under PRC law, which generally includes, in addition to PRC domestic companies, and Chinese-foreign joint ventures, and wholly foreign-owned enterprises. Under the Amendment, a joint venture between a PRC company and a non- PRC company organized under PRC law could be prosecuted for the pay¬ment of bribes to non-PRC government officials. In its simplicity, the law omits important definitions – what is an “illegitimate commercial benefit, “ “property,” or “foreign public official?”

Companies entering the Chinese market typically rely on joint venture arrangements. Unfortunately, when they do so, they may subject the joint venture to prosecution by Chinese authorities if organized under Chinese law or it has a representative office in China.

Most significantly, the law does not have any exceptions, exemptions, or affirmative defenses, which are typical under other countries laws, such as facilitation payments; gifts, meals, entertainment and travel expenses; treatment of mergers and acquisitions; classification of employees of state-owned enterprises; and potential defense to such charges based on compliance programs. As in the case of the UK Bribery Act and other new anti-corruption laws in Spain, Colombia, Russian and other countries, the impact will depend on prosecutors and resources – how will they enforce the law and will they have the staff to carry it out?

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3 Responses

  1. Anonymous says:

    It also appears to fall short with respect to the offering of anything of value that may not actually be paid. I.e conspiracy to commit an offense of bribery.

  2. michael volkov says:

    Yes. Also does not appear to cover attempted bribery as well.

  3. Anonymous says:

    no books and records I gather although this may be covered in other laws as books and records offenses are shareholder issues and Chinese companies are typically state owned enterprises, correct?