New Chinese Anti-Bribery Guideline Calls for Blacklisting and Expulsion of Foreign Companies That Pay Bribes in China
- China recently released a new anti-bribery Guideline that would “blacklist” companies found to have paid bribes there, barring them from doing business in the country.
- The Guideline continues China’s recent trend of more aggressive anti-corruption enforcement, including an increased sentencing range that includes the possibility of life imprisonment.
- Global businesses should also be aware that they could be charged in more than one country for the exact same alleged international bribery as part of the continued growing phenomenon of “carbon copy” prosecutions.
- Thus, any admissions made in the context of a U.S. Foreign Corrupt Practices Act resolution could have consequences internationally, including under the aggressive new Chinese anti-bribery Guideline.
China’s top anti-corruption watchdogs recently released a new anti-bribery Guideline designed to focus on multi-national corporations and individuals that pay bribes in China, as opposed to bribe recipients, the Chinese Communist Party’s traditional focus. With the threat of being barred from doing business in China, the Guideline raises significant concerns for entities doing business there. In particular, business organizations should be aware that resolving bribery allegations that involve China elsewhere in the world (say, in the United States) could potentially result in a “carbon copy prosecution” in China with the full range of potentially devastating penalties. Similarly, multi-national corporations that face bribery charges (or even just an investigation) in China could later find themselves prosecuted in the United States or elsewhere in the world based on the same facts.
The Just-Announced Chinese Anti-Bribery Guideline
The anti-bribery Guideline, titled “Opinions on Further Promoting the Investigation of Bribery and Acceptance of Bribes,” was conceived and released by the primary anti-corruption arms of the Chinese Communist Party—the Central Commission for Discipline Inspection (CCDI) and the National Supervisory Commission—which are jointly working on ways to implement the Guideline.1 The Guideline’s main innovation is a “blacklist” that would name and shame those individuals and entities, including multi-national corporations, that have engaged in the practice of paying bribes in China, either to state functionaries or members of the private sector. In particular, those on the blacklist could be stripped of their access to China’s markets and denied the privilege of doing business in China.2 It is not clear from the Guideline what would happen to a business organization’s Chinese operations and assets in the event of its blacklisting, which could conceivably leave the Chinese government with discretion to expropriate them for its own purposes. And regardless, the loss of access to a large market such as China would certainly be significant for any business.
According to summaries of the Guideline, which itself appears to be a confidential Communist Party document not readily available to the public, the main anticipated targets of any anti-bribery investigation would be entities and individuals that have engaged in bribery on a significant scale, either by offering large amounts as inducements or engaging in multiple acts of bribery. The new regime would cover a sweeping array of industries, including environmental protection, finance, social insurance, medical care, and education, among others.3 The Guideline is the latest step in a broader enforcement trend in China to smoke out and punish non-state actors and bribe payers, as opposed to state functionaries and bribe recipients alone. The Eleventh Amendment to China’s Criminal Law, which took effect on March 1, 2021, reduced the sentencing disparity between state and non-state actors engaged in bribery.4 It also created a new sentencing tier for offenders engaged in bribery in an “especially huge” amount, increasing the sentence for embezzlement and misappropriation to between ten years and life imprisonment.5
“Carbon Copy” Considerations
China’s new Guideline also raises potential issues with regard to “carbon copy prosecutions,” a term first coined by one of the authors of this OnPoint nearly a decade ago.6 It refers to “successive, duplicative prosecutions by multiple sovereigns for conduct transgressing the laws of several nations, but arising out of the same common nucleus of operative facts.”7 So, for example, if a company admits to criminal conduct (say, pursuant to a deferred prosecution) in country A, it risks country B with jurisdiction over the company prosecuting it for the same misconduct.
China can now be added to the growing list of nations, including Germany, France, and the United Kingdom, that have passed anti-corruption laws in the last decade and thereby created new potential fronts of liability for multi-national corporations.8 Given these multiple, overlapping international anti-bribery regimes, it is now not entirely unusual for companies to settle bribery allegations in one country, only to find themselves facing essentially the same charges in another country with jurisdiction over the company for the same bribe.9 So, multi-national corporations should take into account that any admissions they make about Chinese bribery in the context of an investigation by the United States Department of Justice or the Securities and Exchange Commission could come back to haunt them in a later carbon copy prosecution in China. Indeed, since the enactment of the Foreign Corrupt Practices Act, more enforcement actions involved alleged bribery in China than any other country.10 Thus, to the extent U.S. authorities continue to focus on bribery conduct in China, there is in turn also the potential for increased carbon copy prosecutions.
Reverse Carbon Copies
Of course, it is equally possible that U.S. authorities could bring a carbon copy prosecution based on a Chinese action under the anti-bribery Guideline. The U.S. Supreme Court, in Gamble v. United States, recently reaffirmed the dual-sovereignty doctrine and the principle that the United States may “prosecute conduct already tried in a foreign court” without violating the Fifth Amendment’s Double Jeopardy Clause.11 According to the Court, that is because when a crime “involve[s] Americans abroad” (i.e., a crime by a U.S. national or against one), it is “a crime against two sovereigns [and] constitutes two offenses because each sovereign has an interest to vindicate”: the foreign country has an interest in punishing crimes on its soil, and the United States has an interest in bringing to justice those who harm Americans abroad and even “punishing crimes committed by U.S. nationals abroad—especially crimes that might do harm to our national security or foreign relations.”12
Recent decisions also highlight the DOJ’s global reach and the array of federal statutes at its disposal to prosecute bribery occurring entirely abroad. In particular, in United States v. Ng Lap Seng, the same court affirmed the FCPA conviction of a Chinese national and real estate developer for bribes paid to two United Nations ambassadors to induce the U.N. to use his convention center in Macau to host an annual U.N. convention.13 Similarly, the Second Circuit in United States v. Napout affirmed the wire fraud convictions of the former presidents of the national soccer federations for Brazil and Paraguay based on their acceptance of millions of dollars in bribes in return granting certain sports media and marketing companies broadcasting and marketing rights for local soccer tournaments.14 Of course, courts can be expected to continue to rein in the DOJ’s extraterritorial activities when they believe those enforcement efforts go beyond what Congress intended.15 Suffice it to say these recent prosecutions further demonstrate that the United States will not be daunted by international borders in its efforts to prosecute foreign bribery where it believes its interests are at stake.
Indeed, as an observation, it could be that these recent decisions of United States courts confirming the reach of U.S. laws to misconduct occurring entirely in other sovereign nations, including China, played a role in spurring China to increase its own international enforcement efforts with the anti-bribery Guideline and related steps. Perhaps anti-corruption laws, like tariffs before them, will become a front in the international power struggle between the United States and China, with each action on the one side spurring a counteraction on the other to rebalance the dynamic between them. It remains to be seen whether this potentially escalating tit-for-tat is a “race to the top” or a “race to the bottom,” although the answer may well depend on whose perspective is being considered.
The Chinese Community Party’s anticipated crackdown on bribe payers in China serves as a fresh reminder for multi-national corporations and individuals to examine carefully their anti-bribery protocols. Landing on the Chinese Communist Party’s anticipated bribery blacklist could have business-ending consequences in that nation and potentially subject bribe-paying entities not only to prosecution in China, but prosecution in the United States as well. Indeed, the prospect of carbon copy prosecutions should be considered in resolving any international bribery allegations in any nation with an anti-corruption statute. When it comes to bribery, we cannot rely on what happens in China, or in any other foreign sovereign, to stay there.
1) See Cao Yin, Blacklist, monitoring to tackle bribery cases, CHINA DAILY (Sept. 9, 2021), available at http://www.chinadaily.com.cn/a/202109/09/WS613947b0a310efa1bd66e3ee.html; Simon Hui, Henry Chen, and Zhengwei Yang, China: New dual investigation and third-party supervision rules show emergence of comprehensive anti-corruption regime, GLOBAL COMPLIANCE NEWS (Oct. 21, 2021), available at https://www.globalcompliancenews.com/2021/10/21/china-new-dual-investigation-and-third-party-supervision-rules-show-emergence-of-comprehensive-anti-corruption-regime-14102021/; William Zheng, China’s corruption busters signal they plan to make bribe givers pay, SOUTH CHINA MORNING POST (Sept. 8, 2021), available at https://www.scmp.com/news/china/politics/article/3148047/chinas-corruption-busters-signal-they-plan-make-bribe-givers.
2) See id.
4) See Helen Hwang and Shuai Kong, China amends Criminal Law to increase penalties for private-sector bribery, THE FCPA BLOG (Jan. 5, 2021), available at https://fcpablog.com/2021/01/05/china-amends-criminal-law-to-increase-penalties-for-private-sector-bribery/.
6) Andrew S. Boutros & T. Markus Funk, "Carbon Copy" Prosecutions: A Growing Anticorruption Phenomenon in a Shrinking World, UNIVERSITY OF CHICAGO LEGAL Forum: Vol. 2012, Art. 12, available at https://chicagounbound.uchicago.edu/uclf/vol2012/iss1/12
8) Benjamin Schmidt, FCPA: Looking Back on the World’s Most Enforced Anti-Corruption Law, ANTI-CORRUPTION & GOVERNANCE CENTER (Feb. 20, 2020), available at https://acgc.cipe.org/business-of-integrity-blog/fcpa-looking-back-on-the-worlds-most-enforced-anti-corruption-law/.
9) For example, in 2010, French telecommunications company Alcaltel-Lucent SA agreed to pay US$10 million to the Costa Rican government to settle charges that it had paid kickbacks to officials there to win a contract before later paying a US$137.4 million settlement of related Foreign Corrupt Practices Act (FCPA) charges in the U.S. less than a year later. Boutros & Funk, supra note 7 at 276.
10) Location of Misconduct Alleged in FCPA-Related Enforcement Actions, STANFORD LAW SCHOOL FOREIGN CORRUPT PRACTICES ACT CLEARINGHOUSE (2021), available at https://fcpa.stanford.edu/statistics-analytics.html?tab=8
11) 139 S. Ct 1960, 1967 (2019).
13) 934 F.3d 110, 116–17 (2d Cir. 2019).
14) 963 F.3d 163, 168-70 (2d Cir. 2020).
15) E.g., Nestle USA, Inc. v. Doe, 141 S. Ct. 1931, 1936 (2021).