Over the past few years, our specialist team of anti-commercial bribery lawyers has advised and acted for more than 50 domestic Chinese and foreign companies in more than 100 cases and projects. In providing these services, it has become clear that our clients have often been puzzled by a problem: how to meet the practical need to expand in the market, while avoiding alleged involvement in commercial bribery. It has often seemed difficult for companies fully to understand the way Chinese legislation works in practice. Common questions include: in what ways should gifts be given to officials? Can we invite officials to watch the World Cup or visit the Expo? Is it lawful to offer discounts on conference fees or advertising fees? Do donations to medical institutions risk being classified as bribery? If an employee has had criminal charges brought against him, can that employee’s employment be terminated for this reason? This article will briefly analyze some compliance issues regarding the giving of gifts, which is the issue most commonly encountered in practice.
What value of gifts can officials receive and keep?
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Pursuant to the State Council Giving and Receiving Gifts in External Official Activities Rules, public sector staff can receive, keep and use for themselves gifts given during “external” official activities which have a value of less than RMB200. “External” official activities includes visits abroad, contact with foreigners in China and involvement in the foreign activities of individuals and organizations. It should be noted that according to the Rules, if a party offers gifts of cash or negotiable securities during or in connection with external official activities, government officials should decline them. In practice, this means a company should refrain from giving gifts such as cash and negotiable securities to officials. As relevant rules of the State Council regarding the giving and receiving of gifts during or in connection with official activities in China do not specify the value of a gift that may be retained and used by officials, we believe the disciplinary inspection and supervisory authorities will refer to the standard in the above Rules regarding the value of a gift. Failure to comply with these Rules will render the officials who accepted the gifts subject to administrative disciplinary penalties. Therefore, companies must fix the value of a gift within the range outlined above.
What value of property risks criminal liability?
Pursuant to the PRC Criminal Law and specific guidelines contained in judicial interpretations, if an individual gives a bribe of more than RMB100,000 to a work unit or a bribe of more than RMB10,000 to another individual, or if a work unit pays a bribe of more than RMB200,000 to another work unit or to an individual for the purpose of seeking improper benefit, they are likely to be held criminally liable. If a bribe is less than the above amount but is particularly serious, it is also likely that a bribery offence will be committed. It should be noted that if a company gives a gift to a number of staff members working at the same state agency, state-owned company, enterprise, institution or mass organization, or gives a number of gifts to the same staff member, the state authorities responsible for investigating bribery will calculate the cumulative value of these gifts according to law. The cumulative value can easily reach the level at which a bribery case may be placed on file for investigation and prosecution.
The act of payment and the property involved
The Supreme People’s Court and Supreme People’s Procuratorate Application of Laws to Criminal Commercial Bribery Cases Opinions set out specific provisions defining the act of payment in bribery offences. In addition to acts of direct payment in cash and in kind, the Opinions specifically identify the following acts as acts of bribery: the acceptance of property in the form of a transaction such as the purchase of a car or a house at a low price; the acceptance of shares in a company without making actual capital contributions; the acceptance of a bribe in the guise of investment such as the formation of a company; the acceptance of a bribe in the guise of entrusting a person to invest in securities or futures or to engage in other financial management; the acceptance of a bribe in the form of gambling; and a person seeking advantages for a client while serving in office and receiving property after leaving office.
According to Article 7 of the Application of Laws to Criminal Commercial Bribery Cases Opinions, the property involved in a case of commercial bribery comprises property interests the amount of which is calculable in monetary terms, such as the provision of housing renovation and a membership card with an intrinsic value.
How to identify the recipient of commercial bribery?
The provisions of the PRC Criminal Law governing public sector staff who enjoy a special status are mainly found in Chapter 8, Corruption and Bribery, while the provisions governing companies, enterprises and other market competitors are primarily found in Chapter 3 The Offence of Disrupting Order in the Socialist Market Economy, covering charges such as the acceptance of bribes by non-state staff and the offer of bribes to non-state staff. The recipients involved in the acceptance of bribes are mainly public sector staff, i.e. the staff of all state agencies, enterprises and institutions as well as other persons engaged in official business in accordance with the law, and departed and retired State staff involved in certain crimes. Furthermore, according to the Application of Laws to Criminal Commercial Bribery Cases Opinions, the connected parties of public sector staff may also become accomplices in the acceptance of a bribe, where connected parties refer to the close relatives or mistresses (or paramours) of public sector staff and other persons who have common interests with public sector staff. In addition to these two types of recipient, according to the provisions of the Criminal Law Amendment No. 7, the recipients who take bribes also includes any persons who can make use of the influence of public sector staff. The PRC Criminal Law does not contain any special provisions governing parties who offer bribes.
In short, as China’s anti-commercial bribery law is evolving, more and more indirect acts of the giving of property are identified as potential bribery, and more and more people are identified as recipients in bribery crimes. For example, this may include a person who receives salary without actually working, or an official who receives dividends from a joint venture to which he or she did not make any capital contribution.
During the provision of legal services to a number of domestic Chinese and foreign companies, it has become clear to us that most such companies focus their anti-commercial bribery compliance efforts on the need to cope with judicial investigation. In fact, companies can prevent commercial bribery at its source by investigating and identifying relevant legal risks in their business activities, carrying out a comprehensive compliance review of their businesses and formulating rules and regulations to eliminate the risk of commercial bribery before it occurs.
Wu Wei is a partner at King & Wood in Beijing. For enquiries relating to compliance and anti-corruption, please contact Ms Wu on: +86 10 5878 5061 or by email at wuwei@kingandwood.com.
