Friday, April 22, 2011
China Enacts New Law to Criminalize Bribery of Foreign Officials
On 25 February 2011, the Republic of China adopted tan amendment to its criminal laws to criminalize the bribery of officials of foreign governments or international public organisations in order to gain a commercial benefit. How and to what extent the new law will be enforced is not yet clear.
Foreign companies which have invested in, or operate joint ventures with, Chines enterprises should review the amendment, due diligence practices, and overall compliance programs. .
The new law criminalizes the giving of money or property to employees of a private concern with an intent to gain illegitimate benefits. An entity that violates this provision may be fined, and the persons directly in charge of the offending entity or other responsible persons may be subject to imprisonment for up to 10 years and/or a fine. The Amendment will become effective on 1 May 2011.
"Foreign official" is defined in the Amendment very broadly and includes any officer or employee of a foreign government, a public international organisation or any of its departments or agencies, or any person acting in an official capacity, regardless of rank or position.
The new law demonstrates China's commitment to crackdown on corruption. It is significant both in terms of its substance and the message that it is sending both internally and to the rest of the world. The change in the law represents a significant step taken by the Chinese government to bring its bribery laws in line with the current standards set by, for example, the FCPA in the US and the new Bribery Act in the UK.
The new law extends to all Chinese citizens in or outside of China, and all Chinese companies (including foreign-invested enterprises) carrying out business in and outside the People's Republic of China. Given the extra-territorial application of the new law, a Chinese national or entity who bribes a foreign government official while doing business outside China could, in theory, be covered by the new law. At a time of increasing investment outside China, Chinese companies which have overseas business activities interaction with foreign officials should evaluate their practices and policies and ensure there is in place adequate procedures to prepare themselves for the new challenges the Amendment introduces.