Merrill Brink News Reviews and Opinion on July 18, 2014: How Do Chinese Anticorruption Laws Differ From the FCPA?

NEW YORK, July 23, 2014 /PRNewswire-iReach/ -- It's easy to assume that anti-corruption laws for every country in which you do business are similar to those of your home country. However, such an assumption can have negative consequences. In reality, due to the variances in cultural practices and legal systems, no two countries' anti-corruption laws are alike. If your organization does business in China, you may want to reevaluate your compliance program to ensure that you have accounted for China's singular—and severe—anticorruption regulations, particularly as President Xi Jinping's campaign against corruption has been more drastic than anticipated.1

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Following are some key differences between the United States (U.S.) anticorruption law—the Foreign Corrupt Practices Act (FCPA)—and the regulations in place in China.

One Law vs. a Set of Laws

The FCPA is a single U.S. federal law that provides the guidelines for American companies doing business abroad, and for international companies with a presence in the U.S. This centralized structure simplifies the process of ensuring compliance. China's anticorruption rules, in contrast, are not confined to a single law, but cross several laws and regulations including the Criminal Law, Anti-unfair Competition Law and Provisional Measures on the Prohibition of Commercial Bribery, among other laws and judicial decisions.2 Each law covers a different aspect of corruption, making it critical to have a China-specific compliance program that covers all of these laws.

Definition of Prohibited Conduct

Not only are U.S. anticorruption rules more centralized than China's; they also more clearly define the kinds of actions they prohibit. According to the FCPA, the giving of payments or gifts "of value" to foreign officials to motivate them to use their position "to assist . . . in obtaining or retaining business for or with, or directing business to, any person" is illegal.3

For example, under the FCPA, it is illegal to bribe a foreign official to bypass customs regulations or to secure a commercial contract.4 China's anticorruption laws are not nearly as concise. Instead, they prohibit the giving of "money or property" to foreign officials in exchange for commercial benefits, with property being defined as "any tangible or intangible good that can be quantified with a monetary value, such as gift cards, travel expenses and meals."5 Further complicating this broad definition, gift giving is a pervasive tradition in Chinese culture, making it difficult to discern the difference between a bribe and gift given with no expectations.

Potential Penalties

The punishment that violators are subject to highlights another striking difference between the FCPA and China's anticorruption laws. The FCPA's penalties for not complying are primarily financial, with the maximum possible fine for a company set at $25 million.6 Imprisonment is also a possibility, but the maximum possible sentence is only 20 years, with the longest sentence served to date being 15 years.7

In stark contrast, Chinese anti-corruption fines are relatively low, with most of the monetary repercussions taking the form of confiscation of property, regardless of whether it was obtained legally.8 The real danger of noncompliance is the potential of life imprisonment, which is not present under the FCPA.9

In consideration of the severity of China's punishments for corruption, it is an absolute necessity to understand local anticorruption laws when conducting business there. Protecting your organization against allegations of corruption by the Chinese government requires careful planning and a concisely documented compliance program that addresses the complexities of Chinese anticorruption laws.

You will also need to translate the program's materials to ensure that all employees and associates in China understand your policies. For maximum efficiency and effectiveness, work with a language services provider whose professionals have experience translating legal documents into Chinese and a familiarity with Chinese law and culture.

References

1 Dexter Roberts, "In China, Xi's Anticorruption Drive Totes Up Big Numbers," Bloomberg Businessweek, April 10, 2014, http://www.businessweek.com/articles/2014-04-10/in-china-xis-anticorruption-drive-nabs-elite-low-ranks-alike (accessed June 16, 2014).

2 Wantao Yang, Emilia Shi, Timothy P. Peterson, and Robertson Park, "Understanding China's Approach to Anticorruption," Corporate Counsel, January 28, 2014, http://www.corpcounsel.com/id=1202640153717/Understanding-Chinas-Approach-to-Anticorruption (accessed June 16, 2014).

3 Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission, A Resource Guide to the U.S. Foreign Corrupt Practices Act, November 14, 2012, http://www.justice.gov/criminal/fraud/fcpa/guide.pdf (accessed June 16, 2014).

4 Ibid.

5 Kyle Sullivan, "US Companies in China Feel the Heat from Anticorruption Push," China Business Review, October 1, 2011, http://www.chinabusinessreview.com/us-companies-in-china-feel-the-heat-from-anticorruption-push (accessed June 16, 2014).

6 "Understanding China's Approach to Anticorruption."

7 Ibid.

8 Ibid.

9 Ibid.

Full article: http://www.merrillbrink.com/chinese-anticorruption-laws-compared-with-the-FCPA-07072014.htm

About Merrill Brink International

Merrill Brink International (www.merrillbrink.com) is a leading provider of complete translation and language solutions for global companies and law firms, with special expertise in serving the legal, financial, life sciences, software, heavy machinery and corporate markets. A proven leader with more than 30 years of experience, Merrill Brink offers a wide range of language solutions including translation, localization, desktop publishing and globalization services.

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