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2021 Definitive global law guides offering comparative analysis from top-ranked lawyers GLOBAL PRACTICE GUIDES Anti-Corruption China Alan Zhou, Jacky Li, Weiwei Gu and Steven Zhu Global Law OfficeCHINA 2 Law and Practice Contributed by: Alan Zhou, Jacky Li, Weiwei Gu and Steven Zhu Global Law Office see p.13 Contents 1. Legal Framework for Offences p.3 1.1 International Conventions p.3 1.2 National Legislation p.3 1.3 Guidelines for the Interpretation and Enforcement of National Legislation p.3 1.4 Recent Key Amendments to National Legislation p.3 2. Classification and Constituent Elements p.3 2.1 Bribery p.3 2.2 Influence-Peddling p.4 2.3 Financial Record-Keeping p.4 2.4 Public Officials p.5 2.5 Intermediaries p.6 3. Scope p.6 3.1 Limitation Period p.6 3.2 Geographical Reach of Applicable Legislation p.6 3.3 Corporate Liability p.7 4. Defences and Exceptions p.7 4.1 Defences p.7 4.2 Exceptions p.7 4.3 De Minimis Exceptions p.8 4.4 Exempt Sectors/Industries p.8 4.5 Safe Harbour or Amnesty Programme p.8 5. Penalties p.8 5.1 Penalties on Conviction p.8 5.2 Guidelines Applicable to the Assessment of Penalties p.8 6. Compliance and Disclosure p.9 6.1 National Legislation and Duties to Prevent Corruption p.9 6.2 Disclosure of Violations of Anti-bribery and Anti-corruption Provisions p.9 6.3 Protection Afforded to Whistle-Blowers p.9 6.4 Incentives for Whistle-Blowers p.10 6.5 Location of Relevant Provisions Regarding Whistle-Blowing p.10 7. Enforcement p.10 7.1 Enforcement of Anti-bribery and Anti- corruption Laws p.10 7.2 Enforcement Body p.10 7.3 Process of Application for Documentation p.10 7.4 Discretion for Mitigation p.10 7.5 Jurisdictional Reach of the Body/Bodies p.10 7.6 Recent Landmark Investigations or Decisions Involving Bribery or Corruption p.11 7.7 Level of Sanctions Imposed p.11 8. Review and Trends p.11 8.1 Assessment of the Applicable Enforced Legislation p.11 8.2 Likely Future Changes to the Applicable Legislation of the Enforcement Body p.12CHINA LAw ANd Pr ACtICe Contributed by: Alan Zhou, Jacky Li, Weiwei Gu and Steven Zhu, Global Law Office 3 1. Legal Framework for Offences 1.1 International Conventions In December 2000, the Chinese government signed the United Nations Convention against Transnational Organised Crime (the Convention), which took effect in China on 13 October 2003. While the Convention is universally applicable to all transnational organised crimes, corruption is one of its main focuses, requiring States parties to take measures through leg- islation and enforcement to promote anti-corruption. As for the international conventions specially regulating corrup- tion that China has signed up to, the United Nations Conven- tion against Corruption (Anti-corruption Convention) officially took effect in China on 12 February 2006. China was actively involved in the formation stage of the Anti-corruption Con- vention, and was among the first countries to ratify it, except for one reservation on paragraph 2 of Article 66 regarding a dispute-settlement channel. The Anti-corruption Convention is the only and first legally binding universal anti-corruption instrument with the framework established on five pillars, ie, Preventive Measures, Criminalisation and Law Enforcement, International Co-operation, Asset Recovery, and Technical Assistance and Information Exchange. After ten years upon Chinas ratification of the Anti-Corruption Convention, in 2016, the United Nations Office on Drugs and Crime issued a status review report on Chinas implementation of the Anti- Corruption Convention, and China s efforts in and dedication to combating corruption through active law enforcement, succes- sive international co-operation and sustainable good practices have been well recognised. 1.2 National Legislation There is currently no independent and consolidated statute in China that is similar to the Foreign Corrupt Practices Act (FCPA) or the UK Bribery Act. Bribery and corruption in China are governed by multiple authorities in accordance with various laws and legislation. The legal framework can be divided into three levels, depending on the severity of the offences and the identity of the individu- als involved. Firstly, the Antiunfair Competition Law and other laws and regulations under civil, administrative, and economic spheres are the foundations for the widespread administrative enforcement against commercial bribery in China. Secondly, the Criminal Law and the corresponding legislative and judicial interpretations such as the Interpretation of the Supreme Peo- ples Court and the Supreme Peoples Procuratorate on Several Issues concerning the Application of Law in Handling of Crimi- nal Cases of Embezzlement and Bribery and the Circular of the Supreme Peoples Court and the Supreme Peoples Procurator- ate on Issuing Opinions on Issues concerning the Application of Law in Handling of Criminal Cases of Commercial Briber- ies thereof stipulate criminal violations and criminal offences. Thirdly, there are disciplines and regulations promulgated by the Central Committee of the Communist Party of China (CPC), which are binding on all CPC members and set a much lower threshold for the constitution of the corruption-related viola- tions. 1.3 Guidelines for the Interpretation and e nforcement of National Legislation There are no official guidelines on the interpretation and enforcement of anti-corruption laws in China. Supervisory authorities in various industries would publish certain notices and working plans for the enforcement actions. 1.4 r ecent Key Amendments to National Legislation There have been no significant legislative amendments to the key corruption statutes in 2020. China newly enacted the International Criminal Justice Assis- tance Law (ICJAL) in October 2018. Article 4 of the ICJAL expressly prohibits institutions, organisations and individuals in China from providing evidence materials and assistance pro- vided in this law to foreign countries, without the consent of China s competent authorities. Moreover, the ICJAL applies to a variety of activities in criminal proceedings. This has had a sig- nificant impact on common internal investigations conducted within companies for foreign law considerations, such as the Foreign Corrupt Practices Act (FCPA). Another notable amendment is the revision to the Anti-unfair Competition Law in Jaunuary 2018. In particular, Article 7 has excluded the situation where an entity offers commercial inter- ests (eg, discounts) to its transaction counterparties (as opposed to those transaction counterparties employees) even in a secret manner (eg, off the book) which was previously recognised as bribery and thus prohibited. 2. Classification and Constituent e lements 2.1 Bribery d efinition of a Bribe The current administrative law and criminal law have differ - ent definitions of bribery, and the connotation of bribery varies from criminal law and administrative law perspectives. From the criminal law perspective, it stipulates a total of ten crimes relating to bribery, which generally forbid the act of offering a bribe to any state functionary and non-state functionLAw ANd Pr ACtICe CHINA Contributed by: Alan Zhou, Jacky Li, Weiwei Gu and Steven Zhu, Global Law Office 4 ary, and the receiving of that bribe by any state functionary and non-state functionary. For example, any state functionary who extorts property from others by taking advantage of his or her position or illegally accepts others property in return for secur- ing benefits for them shall be convicted of acceptance of bribes. From the administrative law perspective, in a broad sense, bribery refers to offering or taking money or goods and other acts conducted for the purpose of offering or obtaining trading opportunities or other economic benefits, in violation of the fair competition principle. Public Official The law distinguishes between the bribery of a public official and that of an ordinary individual. There is a specific term for public official in China, which is “state functionary”, which means persons who perform a public service in state organs, state-owned enterprises and institutions, and other persons who perform a public service according to law. The Criminal Law defines the boundary of crimes related to the bribery of a state functionary and the bribery of an ordinary individual, and also stipulates different crimes depending on the involvement of duty or influence of the state functionary. For example, an indi- vidual offering bribes to a state functionary will be convicted of the crime of offering bribes to a state functionary, and will be subject to criminal liabilities of up to life-time imprisonment, along with confiscation of property. With respect to the act of offering bribes to an executive in a private entity, it will con- stitute the crime of offering bribes to a non-state functionary, and will be subject to criminal liabilities ranging from criminal detention to imprisonment of up to ten years, along with a mon- etary fine where the amount of the bribes is large. Bribery of Foreign Public Officials Further, according to the criminal law, anyone giving any prop- erty to a functionary of a foreign country or an official of an international public organisation for any improper commer- cial benefit will be convicted of the crime of bribery of foreign public officials and international public organisation officials, and will be subject to imprisonment of up to ten years and a monetary fine. Hospitality e xpenditures, Gifts and Promotional e xpenditures, and Facilitation Payments Hospitality expenditures and promotional expenditures would not necessarily constitute bribery if they incur in the ordinary business circumstances such as maintaining a client relation- ship, promoting products and services, and are reasonable in scope and accurately recorded in the books and records. For gifts, small advertising gifts with the value of less than RMB200 are permitted under the Provisional Regulations on the Prohibition of Commercial Bribery and are generally rec- ognised by the enforcement authorities in practice. There is no official definition for facilitation payments in China. In practice, any payment that is made in exchange for illegal business opportunities, advantages or other interests could potentially be deemed as bribery. 2.2 Influence-Peddling From a criminal law perspective, with respect to influence- peddling practices there are several crimes stipulated in the Criminal Law, the conviction of which needs to take various considerations into account, such as whether the person con- ducting the influence-peddling is a state or non-state function- ary or any person who has a close relationship with the state functionary, and the specific manifestations of the influence on decision-making. For example, any of the close relatives of the state functionary, or other persons closely related to that state functionary, who secures illegitimate benefits for an entrusting person through that state functionarys performance of his or her duties or through another state functionary s performance of his or her duties by taking advantage of that state functionarys functions, powers or position, and extorts from the entrusting person or accepts the entrusting persons money or property, shall be convicted of the crime of accepting bribes via influence. Anyone who, for the purpose of securing illegitimate benefits, offers bribes to any of the close relatives of the state function- ary or other persons closely related to that state functionary, or any state functionaries who have been removed from their positions, their close relatives, or other persons closely related to them, shall be convicted of the crime of offering bribes to persons with influence. From the administrative law perspective, influence-peddling is prohibited because it is categorised as a form of commercial bribery in violation of the fair-competition principle. A busi- ness operator bribing the organisations or individuals who take advantage of their functional authority or influence to impact a transaction may face a fine of up to RMB3 million, confiscation of illegal gains and revocation of their business licence where circumstances are severe. 2.3 Financial r ecord-Keeping With respect to inaccurate corporate records, the Criminal Law stipulates multiple different crimes. For example, anyone con- cealing or intentionally destroying account books or financial reports that are required to be kept in accordance with the law, if the circumstances are severe (eg, the money involved is more than RMB500,000), shall be sentenced to fixed-term imprison- ment of up to five years, and concurrently or separately, a fine of up to RMB200,000; entities committing the aforesaid crime shall also be fined, with the directly liable persons being punished.CHINA LAw ANd Pr ACtICe Contributed by: Alan Zhou, Jacky Li, Weiwei Gu and Steven Zhu, Global Law Office 5 Moreover, if during the process of its liquidation, an enterprise records false information in its balance sheet or inventory of assets, causing serious harm to the interest of the creditors (eg, causing economic losses of more than RMB500,000), that enter- prise shall be convicted of the crime of impairing liquidation, and will have imposed upon them a fine of up to RMB-200,000, with its directly responsible persons to be sentenced to fixed- term imprisonment of up to five years. It should be noted that the above crimes are not necessarily related to corruption, and are separately and independently stipulated under the Criminal Law. From the perspective of administrative law, companies forging or tampering with accounting documents, accounts books and other accounting materials, or providing false financial account- ing reports, shall be criticised by a notice and may have imposed upon them a fine of up to RMB10,000, with its directly account- able person in charge to be subject to a fine of up to RMB50,000. Likewise, the foregoing legal liabilities exist independently and are not necessarily involved with acts of corruption. In addition, in accordance with the Anti-unfair Competition Law, where a business operator gives a discount to its transaction counter- party or pays a commission to a middleman, it shall truthfully record that discount and commission in its account books. The same requirements also apply to the counterparty or middleman receiving the discount or commission who shall also truthfully record such information respectively into its account books. In respect of the offences of false information dissemination, from the criminal law perspective, whoever fabricates and spreads false information that adversely affects securities or futures trading, thus disrupting the securities or futures trad- ing market, if the consequences are severe (eg, losses caused to investors exceed RMB50,000), shall be sentenced to fixed-term imprisonment and be fined up to RMB100,000. Fr
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