21 April 2011
On 25 February 2011, the Standing Committee of the National People's Congress of the People's Republic of China adopted the Eighth Amendment to the Criminal Law. This included an amendment to Article 164 of the Criminal Law ("Amendment"), criminalising the bribery of officials of foreign governments or international public organisations in order to gain an illegitimate commercial benefit. Whether the Amendment will be as extensive in scope and effect as the anti-corruption measures adopted in the US and, more recently, the UK remains to be seen. Foreign-invested enterprises such as sino-foreign joint ventures and wholly foreign-owned enterprises should, however, be particularly aware of the Amendment and adopt/refine preventive measures to ensure full and complete compliance.
PRC Criminal Law and Changes to Article 164
Article 164 of the Criminal Law criminalises the giving of money or property to employees of a private concern with an intent to gain illegitimate benefits.
The Amendment adds a new offence under Article 164 prohibiting the giving of money or property to a foreign government official or an official of an international public organisation with an intention to seek an improper commercial benefit. An entity that breaches 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.
Implications of the Amendment
"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 Amendment demonstrates the continued determination of the PRC authorities to crackdown on corruption and 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.
Articles 6, 7 and 30 of the Criminal Law provide that all PRC citizens within and outside the PRC and all PRC companies (including foreign-invested enterprises) carrying out business in and outside the PRC are subject to the Criminal Law. Given the extra-territorial application of the Criminal Law, a PRC national or entity who bribes a foreign government official while doing business outside PRC could, in theory, be caught by the Amendment. At a time of increasing outbound investment, PRC companies which have overseas business activities with 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.
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