Yesterday, China’s two main judicial agencies released a joint judicial interpretation on bribery, corruption, and misappropriation of official funds.
This interpretation provides additional clarity in understanding the amendments to the Criminal Law that took effect last year, most notably by (1) expanding the definition of bribes to include certain intangible benefits, (2) clarifying that bribes given after benefits are received are indeed bribes, (3) establishing monetary thresholds and standards for bribery prosecutions, including raising the thresholds for bribes involving government officials and non-government officials, and (4) providing additional details on the requirements and benefits of voluntary disclosure.
The judicial interpretation (“Interpretation”), formally titled “Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Cases Related to Graft and Bribery” (关于办理贪污贿赂刑事案件适用法律若干问题的解释), was released on April 18 by the Supreme People’s Court and Supreme People’s Procuratorate and is effective immediately.
Expanded definition of bribes to include certain intangible benefits. The PRC Criminal Law criminalizes giving “money and property” (财物) to “state functionaries” (国家工作人员) or to business counterparties in exchange for improper benefits. The new Interpretation defines “money and property” to include money, material objects, and also “property-like benefits.” “Property-like benefits” includes “material benefits that can be calculated monetarily, such as home renovation, debt relief, etc., and other [intangible] benefits that need to be paid using money, such as membership services, travel, etc.” (可以折算为货币的物质利益如房屋装修、债务免除等,以及需要支付货币的其他利益如会员服务、旅游等。). This expansion of the definition to explicitly include certain intangible benefits seems aimed at giving prosecutors more tools to investigate and prosecute cases where a service provider offers its own services to a government official for free or confers benefits through intermediaries.
Clarified “bribes” includes payments given after benefits are received. The interpretation clarifies that a government official accepting money or property after the improper benefits are sought or received is bribery. This closes a perceived loophole where some companies or individuals believed that later “thanking” an official for their help (e.g., giving them a lavish gift or other transfer of value) should not be considered bribery because the transfer of value was not an inducement to the official providing the benefit.
Re-established monetary thresholds and standards for bribery prosecutions. The monetary thresholds are somewhat convoluted depending on the crime and certain conditions, but of particular note is raising the minimum bar for most prosecutions for offering bribes from RMB 5,000 (about $770) to RMB 30,000 (about $4,600), unless certain other factors are involved, such as bribing three or more people, using “unlawful gains” for the bribe, or bribes given to officials of certain government agencies. Similarly, the monetary thresholds for prosecutions of bribery crimes not involving state functionaries are set as double the thresholds for bribery crimes involving state functionaries, reflecting the government’s emphasis on prosecuting government officials.
The Interpretation also provides limited additional guidance on the standards for certain terms used in the Criminal Law as amended last year, such as “relatively large amount,” “huge amount,” “especially huge amount,” “other relatively serious circumstances,” “other serious circumstances,” “other especially serious circumstances,” and “causing heavy loss to State interests.”
Expanded on requirements and benefits of voluntary disclosure. Last year’s amendments to the Criminal Law changed slightly the requirements for punishment to be reduced or waived. The Interpretation provides additional details about this process, most of which require “voluntary confession” of the crime.
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Covington is preparing a more detailed analysis and a translation of the Interpretation, both of which will be available from the author upon request.
The release of the Interpretation follows on the heels of the release in February of draft amendments to the Anti-Unfair Competition Law, which mirrors several of these changes. (See Covington’s summary and analysis here and here.)
The release of the Interpretation also follows the release in late March of a new regulation regarding whistleblowers. The regulation (available in Chinese here) largely restates existing provisions on whistleblowers (amended most recently in 2014) and is focused on encouraging individuals to report “state functionaries” who are involved in crimes while conducting their official duties. The regulation reiterates the opportunity for rewards of up to RMB 200,000 (about $31,000) for whistleblowers in certain cases and provides protection from retaliation for whistleblowers and their family members. The regulation does not directly apply to reports of improper conduct by non-state functionaries (e.g., private companies or their employees).
Few of the provisions are new, but the release of the regulation, particularly in conjunction with the release of the Interpretation, suggests ongoing efforts by the Chinese government to encourage individuals in China to report improper conduct by government officials.
Eric Carlson, a contributing editor of the FCPA Blog, is a Shanghai-based partner at Covington & Burling LLP. He specializes in anti-corruption compliance and investigations, with a particular focus on China and other regions of Asia. He speaks Mandarin and Cantonese and can be contacted here. Anna Zhao and Huanhuan Zhang, associates in Covington’s Washington and Shanghai offices respectively, contributed to this post.