By: Xianliang JIANG

The “Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Cases Related to Corruption and Bribery” (hereinafter referred to as the “Judicial Interpretation”) promulgated by the Supreme People’s Court and the Supreme People’s Procuratorate, became effective as of April 18, 2016. Although the Judicial Interpretation is not directly applicable to private companies and their employees, but to government officials and related persons thereof, it does impinge on the way business activities are conducted. The changes to criteria over conviction and sentencing of the crime of bribe-taking as stipulated in the Judicial Interpretation will make a significant impact on the activities of business organizations. This article is to serve as a reference for relevant institutions and individuals.

I. Commercial Organizations should introduce compliance policies into their own development strategy

In respect of anti-corruption in China, we are aware that this anti-corruption work characterized by legalization has been not only legally promoted in overall steps, but also paid a particular attention to the evidence and procedure in dealing with grave and complex cases; thus the thinking of legalization has been implemented even further. The enactment of the Judicial Interpretation is a typical example. This Judicial Interpretation is intended for solving a variety of controversial judicial problems during the course of anti-corruption, including adjusting the criteria of conviction and sentencing over crimes of corruption and bribery, accurately applying various circumstances in conviction, imposing criminal punishment on the new circumstances of bribery, clarifying the principles of criminal treatment over some complex issues. Helpful in improving judicial authority and efficiency, such provisions are to provide further guidance on putting in place Amendment (IX) to the Criminal Law of the People’s Republic of China which was effective last year. Companies should be fully aware of significant changes to the handling of crimes of corruption and bribery reflected in Chinese criminal legislation and justice, and introduce compliance into one of their own development strategies without limitation to past case-by-case treatment and system construction, and systematically promote compliance work from the perspective of construction of compliance culture. Not in conflict with business culture subject to full of change, the very essence of compliance culture is to fully ensure legal compliance of business activities. They jointly drive the healthy and orderly operation of business organizations.

Business organizations should establish the compliance strategies centered on preventing crimes, because among a series of systems for the protection of business operation, Criminal Law is still the last and the most powerful measure. Since the introduction of the Amendment (IX) to the Criminal Law of the People’s Republic of China and the New Judicial Interpretation on Corruption and Bribery in succession, business organizations should comprehensively sort out and review the compliance of internal control system of organizations which should be promoted as the important daily work by focusing on the prevention of risks of crimes of commercial bribery.

II. Business organizations’ sales system, financial system, personnel system should be revised in due course

The Judicial Interpretation further clarifies, in addition to money, articles and other real material interests, the intangible interests which need to be exchanged by money can also belong to bribable financial sources, including “the material interests that can be converted into money” (such as home renovation, debt relief, etc.), and “other interests where money needs to be paid” (such as membership service, travel arrangement, etc.). This implies that the business organizations should not have fluke mind on certain past business practice. Although it is considerably difficult for law enforcement authorities to prove the existence of causality between payment of property interests and obtaining improper interests, law enforcement authorities from China, America and Britain are all intensifying the investigations over briberies, including travel arrangements, membership services, hiring relatives of officials, etc. As a result, business organizations should have a closer look at their current sales, personnel and financial systems again and revise them in due course. The main principles are: (1) in offering the counterparty property interests, reasonable consideration should be given; (2) any price concessions as to products or services should be recorded in financial accounting documents; (3) background investigation procedures and employment standards shall be put in place for employees of important positions. These principles reflect the nature of mutual benefits and openness of business activities, thereby reducing the risk of constituting crimes of commercial bribery.

The Judicial Interpretation also clarifies that in respect of “seek benefits for others”, in addition to the circumstance of “promise to seek benefits for others”, the situation will also be considered as the crime of bribes-taking that officials accept money or property after handling the entrusting matters. This also reminds companies that when expressing gratitude to the governments after securing some sort of approvals, financial policies should be more stringent, failing which the crime of bribery could be allegedly involved.

III. Business organizations should voluntarily purify their external business environment

China has always been regarded as a place where personal relations are extremely important; and the activities of business organizations in China mix with lots of personal relations, thus making it easier to lead to the occurrence of violating regulatory rules or even laws. The Judicial Interpretation further clarifies that the conviction standards of “the crime of offering bribery to influential persons” as newly stipulated in the Amendment (IX) to the Criminal law are in line with that of the crime of offering bribes. In association with the draft amendments to the Anti-Unfair Competition Law which was initiated in February this year, the third person “who may influence the transaction” is also becoming a new target of the commercial bribery. Consequently, business organizations should not only be aware of the boundaries with government officials, but also remain vigilant of the communications with government officials of particular relations, including their relatives, lovers and those with common interests, etc. Meanwhile, according to Article 16.2 of the new Judicial Interpretation, once such person with special relations asks and accepts money and articles, and in case government official is aware of it and refuses to return them, such government official should be considered as having the intent of taking bribes. Such judicial principle fully reflects the intention of cracking down on corruption strictly. As such, not only should business organizations purify business environment voluntarily, but also business organizations should have a thorough understanding of the background of each party concerned in implementing transactions so as to avoid violating the law.

IV. Business organizations should speed up the completion of internal compliance procedures

In China, no law sets out that business organizations’ internal compliance procedures can serve as a defense to conviction and sentencing. However, according to Chinese Criminal Law, the crime of offering bribes by a unit should have the intent of the unit with individuals’ intent being insufficient. Nevertheless, the Anti-Unfair Competition law which is being amended, reflects the legislative tendency of “strict liability”, and the situation where employees engage in the act of bribery will generally be considered to be bribery of the unit unless such unit puts forward an effective defense that the act of employees are contrary to the interests of the unit. In my view, the defense of a unit can fall into three parts as follows: (1) the unit puts an emphasis on the compliance work which is at the heart of the core interest of the unit; (2) the unit has a closer look at the compliance system and operational conditions thereof relevant to the positions, finance and personnel of employees involved, so as to prove that the unit has fulfilled the compliance management duties for the employees involved; (3) the attitude and action adopted by the unit in relation to the event will prove that the unit has no intent of bribery. The above three aspects are subject to justification by sufficient evidence.

A set of complete compliance procedures generally includes six elements: (1) complete institutional mechanisms; (2) regular compliance checks; (3) effective reporting channels; (4) independent compliance investigation; (5) professional compliance team; (6) rich culture of compliance. Studies have shown that business organizations tend to pay more attention to the maximization of profits, thus often ignoring the importance of compliance work and a heavy price would be paid therefore. The fact also proves that multinational business organizations which were subject to investigation and punishment have made great progress in the construction of compliance, thus forming the solid basis for their long-term healthy development.