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The Eight Amendment of the PRC Criminal Law (the
"Amendment"), recently adopted by the
Standing Committee of the National People's Congress of the
People's Republic of China, adds a paragraph to article 164
that prohibits giving money or property to an official of a foreign
government or international public organisation with the purpose to
obtain unjustified commercial benefits. Violation of the amended
article may result in fines and incarceration of up to ten years.
The Amendment took effect on 1 May 2011.
The Amendment applies to both PRC citizens and any company
incorporated in China ("PRC Company"),
including foreign-invested companies. According to articles 6 and
30 of the PRC Criminal Law, a crime committed by a PRC Company is
considered to have been committed within the PRC's territory
when either the act or the consequence of a crime takes place
within the territory of the PRC. Therefore, in theory the bribery
of foreign officials by a PRC Company taking place outside the
territory of the PRC with the purpose to seek 'unjustified
commercial benefits' in the PRC's territory may violate the
Amendment.
The Amendment is part of a broad anti-corruption campaign by the
PRC government and China's first law addressing cross-border
bribery. The Amendment brings China's regulations in line with
its obligations under the United Nations Convention against
Corruption. Other jurisdictions preceded China, including the
United Kingdom's with its Bribery Act and the United States
with its Foreign Corrupt Practices Act. The Amendment does,
however, give rise to questions regarding its scope as it does not
clarify important terms such as 'unjustified commercial
benefits' and 'foreign official'. This wide scope
provides Chinese prosecutors with wide discretion to enact the PRC
government's policies. Future court interpretation is expected
to determine the exact scope of the Amendment.
The Amendment's cross-border effect as well as its broad
scope makes it important for PRC companies to pay attention to
their world-wide risk management.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Until recently, the primary risk that China’s culture of business corruption posed to multinationals was that they might run afoul of the FCPA or the UK Bribery Act.
In the three months since the Communist Party of China convened its 18th National Congress in November 2012, the CPC’s new leaders repeatedly have emphasized the important policy goal of combatting corruption.
Although China has long prohibited commercial bribery, as well as the bribery of Chinese state functionaries, a recent amendment to "the PRC Criminal Code" prohibiting bribes to foreign governmental officials and officials of international public organizations in exchange for illegitimate commercial benefits suggests that China’s enforcement initiatives soon may expand outside the country’s bounds to target misconduct perpetrated abroad.
The People's Republic of China has joined the growing number of nations to criminalize bribery of foreign officials through recent amendments to its Criminal Law, which took effect May 1, 2011.
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