China’s Central Commission for Discipline Inspection (the CCDI) recently released a new anti-bribery Guideline that sets out the Chinese Government’s desire to crack down on individuals and corporates committing bribery in China.
We set out below three key takeaways about the risks of blacklisting, “carbon copy” prosecutions in China, and Chinese authorities’ stricter approach to mitigation and confiscation.
Risk of Blacklisting.
The Guideline’s headline policy is that companies and individuals will be blacklisted if they are found to have paid bribes in China (whether to public officials or private persons). Once blacklisted, a company or individual would be prevented from conducting business in China. The Guideline does not yet specify a time period for the blacklisting (or a materiality threshold for the seriousness of wrongdoing), but the CCDI is preparing detailed provisions regarding the “blacklisting” system.
“Carbon copy prosecutions” in China.
The Guideline also raises the potential for “carbon copy prosecutions” if a company enters into a settlement with an overseas authority about bribery allegations in China. Resolving bribery issues through a settlement is increasingly common, with many jurisdictions having brought in deferred prosecution agreements or similar settlement mechanisms.
Companies should be aware that any admissions made regarding allegations of bribery in China to another authority, for example, U.S. or UK authorities, could lead to their being blacklisted and prosecuted in China. It is notable that since the commencement of the U.S. Foreign Corrupt Practices Act, more U.S. enforcement actions involved alleged bribery in China than in any other country.
Stricter approach towards mitigation and confiscation.
The Guideline states that authorities will be stricter in giving credit for “mitigating circumstances,” moving away from the current approach in which mitigation will usually be applied if the bribe payer actively cooperates with the investigation or self-reports wrongdoing.
The guidance also provides that property obtained through bribery will be recovered, and other advantages derived from bribery, such as access to positions or qualifications obtained, will be canceled or revoked.
The new Guideline represents a more aggressive approach by China in targeting those who pay bribes, as opposed to the recipients of bribes (who have traditionally been the focus of Chinese authorities).
The Guideline also emphasizes the need to manage the acute risks bribery presents. Failure to manage those risks may lead to companies effectively losing their license to operate in China.
Andrew Reeves, pictured above left, is a Partner based in Norton Rose Fulbright’s London office. He works on a range of major regulatory and criminal investigations and related litigation, focusing on bribery and corruption, fraud, financial crime and money laundering. He can be reached here.
Rongxin Huang, above right, is Counsel at Shanghai Pacific Legal. He works on litigation, arbitration, investigation, and alternative dispute resolution (ADR) in the financial and corporate fields. He can be reached here.