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Anti-corruption In China

1. Bribery in the home (private to public)

 

1.1 The Legal Environment

Bribery of public officials is prohibited under the Criminal Code of the People’s Republic of China (the “Criminal Code”).

 

1.2 What does bribery mean?

Bribery is defined as giving money or property to public official, or a person related to the public official.

 

1.3 What does it mean to be a public official?

Personnel providing public service in state organs are referred to as “public officials,” as are the following:

  • Personnel working for the government in state-owned businesses, institutions, and people’s groups

  • State-owned firms, firms, institutions, and social organizations assign personnel to non-state-owned businesses, companies, institutions, and social organizations.

  • Other employees that are legally required to work in the public sector

 

1.4 Bribery’s Consequences

Individuals, companies, or legal entities who conduct bribery face the penalties set out in the Criminal Code, which are mentioned below.

(a) In the case of the individuals involved

  • Individuals who are found guilty of bribery face the following penalties:

  • Up to a lifetime in jail; property forfeiture or a monetary fine

  • Bribe receivers may also be held responsible. A public official who accepts a significant amount of bribes may face jail or the death penalty.

  • Individuals found guilty of providing bribes to former public officials and others connected to public officials face the following penalties:

  • Up to ten years in prison

  • a monetary penalty

  • Bribe recipients who are former public officials or are linked to public officials who use their position or influence to receive bribes are susceptible to the following penalties:

  • Consequences of up to 15 years in prison

  • Property seizure or a monetary penalty

(b) In the case of the firm or legal organization in question

  • Companies that pay bribes to public officials or those connected to them, as well as the people in command of those companies and directly liable for such violations, are liable to the following penalties:

  • The corporation was fined criminally.

  • Bribes to public officials can result in up to five years in prison and a criminal punishment for those who are involved.

  • Bribes offered to former public officials or anyone associated to public officials can result in up to three years in prison and a criminal fine.

 

1.5 Contributions from politics

  • The idea of “political contribution” has no direct analogue in the Criminal Code.

 

1.6 Hospitality expenses are subject to a limit (gifts, travel, meals, entertainment, among others)

While the Criminal Code does not set quantitative or qualitative limits on hospitality expenses, there is an RMB 30,000 barrier for individual bribe-givers, RMB 200,000 for corporation bribe-givers, and RMB 30,000 for bribe-recipients for prosecution of official bribery. Within the PRC central government, however, there is an internal regulation released in 1995 that applies to public officials of the central party and government organs and offers guidance on gift limits, as follows:

(a) If the value of the gift exceeds RMB 200 per individual each occasion, public authorities must pay it over to the government.

(b) If the total worth of all gifts received by public officials per person per year exceeds RMB 600, the public official must hand over the presents to the government.

In other words, according to the 1995 internal regulation, if a person or company gives a public official of the central party or government organs a gift or gifts whose total worth exceeds the limits set out above, the present(s) may be considered “in breach of state regulations.”

In our experience, RMB 200 is no longer considered a substantial present in the PRC due to inflation. As a result, the above-mentioned internal regulation from 1995 has been only sporadically followed. Whether or not a hospitality expense is bribery will have to be evaluated on a case-by-case basis, taking into account all of the facts and circumstances surrounding the case and using the 1.6(a) and 1.6(b) provisions mentioned above. In practice, most multinationals in China set a courtesy gift or meal entertainment barrier of around RMB 200 to RMB 500 (roughly USD 30 to USD 73) per event, per guest. Many companies additionally set a limit on how often presents can be given to the same person; for example, no more than three to four times each year. To level the playing field, some business associations have established benchmarking standards on gifts, meals, and entertainment for members to consider.

 

2. Bribery in the home (private to private)

 

2.1 The Legal Environment

Bribery in the private sector is governed under the Criminal Code and the Anti-Unfair Competition Law of the People’s Republic of China (AUCL).

 

2.2 Bribery in the private sector

Giving money or property to any employee of a firm, enterprise, or other entity for the aim of gaining unlawful interests and benefits is defined as “private bribery” under Article 164 of the Criminal Code.

Giving money or property, or covert and off-the-book kickbacks to a business counterparty or its employee, or using other measures to bribe a business counterparty or its employee for selling or acquiring goods is defined as “private bribery” under Article 8 of the AUCL. The AUCL’s Interim Provisions on Commercial Bribery also define private bribery as any money or property given to a business counterparty or its employee for promotion, publicity, sponsorship, scientific research, labor, consultancy, commission, reimbursement, or any other benefit such as trips or visits.

 

2.3 Private bribery’s ramifications

 

2.3.1 Under PRC Criminal Law

When the amount of the bribe is relatively high, the Criminal Code sets the penalties for people and companies/legal entities who commit private bribery. The following are the penalties:

(a) In the case of the individuals involved

  • Penalty of up to ten years in prison and a monetary fine

(b) In the case of the firm or legal organization in question

  • The legal entity faces a criminal fine.

  • Directly in charge and those persons who are directly responsible for the offense face up to ten years in prison and a criminal fine.

 

2.3.2 In accordance with the AUCL

The AUCL imposes administrative fines on business owners who engage in private bribery where the violations do not amount to criminal offenses. The following are the penalties:

  • Administrative fines of up to RMB 200,000 may be imposed.

  • Confiscation of illegally gain profit

 

2.4 Hospitality expenses are subject to a limit (gifts, travel, meals, entertainment, among others)

While the Criminal Code does not set quantitative or qualitative limits on hospitality expenses, there is an RMB 60,000 barrier for individual bribe-givers, RMB 200,000 for corporate bribe-givers, and RMB 60,000 for bribe-recipients for prosecution of private bribery.

Whether or whether a hospitality expense qualifies as private bribery must be assessed on a case-by-case basis, taking into account all of the facts and circumstances surrounding the case and using the 1.6(a) and 1.6(b) provisions mentioned above.

If a donation is used inappropriately for purchasing or selling items in the healthcare sector, it may be called private bribery. The Administrative Measures on Accepting Donations for Public Welfare by Healthcare Entities (for Trial Implementation) (the “New Donation Rules”), which were promulgated in 2015, provide specific guidance on donations to healthcare and family planning entities for non-profit public welfare purposes such as training, academic, and research. Donations to these organizations are prohibited under the New Donation Rules if they are used for any illicit or commercial purpose, or as commercial bribery or an inducement to purchase goods.

 

3. Foreign public officials that are corrupt

 

3.1 The Legal Environment

The Criminal Code regulates foreign public officers’ corruption.

 

3.2 Definition of foreign public officials’ corruption

The gifting of money or property to foreign government functionaries or officials of international public organizations for the purpose of pursuing illegal economic interests is defined as “corruption of foreign public authorities” under Article 164 of the Criminal Code.

 

3.3 Explanation of the term “foreign public official”

“Foreign public official” means any of the following for the purposes of this offense:

a member of a foreign government

An official of a non-governmental organization on a global scale.

 

3.4 Consequences of Foreign Public Official Corruption

(a) For the Individuals Involved

Up to ten years in prison

(a) For the legal entity, a criminal fine

The legal entity faces a criminal fine.

Directly in charge and those persons who are directly responsible for the offense face up to ten years in prison and a criminal fine.

 

3.5 Hospitality expenses are subject to a cap (gifts, travel, meals, entertainment, among others)

While the Criminal Code does not set quantitative or qualitative limits on hospitality expenses, there is an RMB 10,000 threshold for individual bribe-givers and RMB 200,000 for corporation bribe-givers for prosecution of giving bribes to foreign public officials.

Whether or whether a hospitality expense qualifies as bribery must be assessed on a case-by-case basis, taking into account all of the facts and circumstances surrounding the case and using the 1.6(a) and 1.6(b) provisions mentioned above.