China: Defining The Boundaries Of Commercial Bribery Crimes

GlaxoSmithKline (China) Investment Co., Ltd. (hereinafter "GSK China"), ranked 253rd on the list of Fortune Global 500 and the world's 7^thbiggest pharmaceutical company, recently caught widespread attention in China and abroad when, on 11 July 2013, China's Ministry of Public Security issued a notification stating that four senior executives from GSK China were being probed on suspicion of commercial bribery and other economic crimes. The media reports called the group of executives "the 4 chariots" and said they were "destructed".

Senior executives of multinational corporations have turned their attention to one issue: which economic crimes are associated with commercial bribery? What principles should senior executives of multinational companies abide by in their business practice to avoid criminal prosecution? To answer these questions, we need to further analyze the boundaries of the crimes related to commercial bribery. 

Under China's criminal system, there is no separate offence of "commercial bribery"; however, "commercial bribery" may relate to the following nine offences, including:

(1) the offence of receiving bribes by a non-public official(Article 163 of the Criminal Law);

(2) the offence of bribing a non-public official (Article 164 of the Criminal Law);

(3) the offence of receiving bribes (Article 385 of the Criminal Law);

(4) the offence of receiving bribes by an entity (Article 387 of the Criminal Law);

(5) the offence of receiving bribes by using one's influence (Article 388 of the Criminal Law);

(6) the offence of offering bribes (Article 389 of the Criminal Law);

(7)the offence of offering bribes to an entity (Article 391 of the Criminal Law);

(8) the offence of serving as an intermediary in the commission of bribery (Article 392 of the Criminal Law);

(9) the offence of offering bribes by an entity (Article 393 of the Criminal Law).

Under China's Criminal Law, for behaviour to qualify as an offence, four elements must be present: the object of an offence (victim), the objective elements (actusreus), the subject of an offence (offender) and the subjective elements (mens rea). We will discuss the elements of the above-mentioned offences one by one for ease of reference.

I. Offences against corporate management order  

The "offence of receiving bribes by a non-public official" and the "offence of bribing a non-public official" as stipulated in preceding items (1) and (2) are contained in Chapter III "offences of undermining the socialist economic order", Section 3 "offences of obstructing the administration order of companies or enterprises", and the object of these two types of offences is the same, i.e. a company or an enterprise's administration order, which comes under typical commercial bribery. Commercial bribery seriously disrupts the normal market transaction order and causes harm to a corporation's regular management activities as well as society's fair competition. The following sections elaborate these two offences:

 (I) Offence of receiving bribes by a non-public official

The object of this offence is the state's administration system for the official duties performed by staff of companies, enterprises, non-state-owned public bodies and other organizations. 

The objective elements of this offence refer to the conduct of asking for or illegally receiving a relatively large amount of money or property by taking advantage of one's position to seek benefits for others. Taking advantage of one's position is a critical element of the offence, and seeking benefit for others means that a person asks for or receives money and property from others by taking advantage of his/her position to seek from them or promise them some kind of benefit. Whether such benefit is legitimate or illegitimate and whether the benefit is already obtained or not are irrelevant to the establishment of this offence. A relatively large amount means that the amount of bribes (money and/or property) received by the receiving party is relatively large. A person receiving a relatively large amount of bribes commits this offence. In addition, the receipt of commission, service charges and privately possessing them during the economic activities are also the objective elements of this offence.

The subject of the offence is a special subject, including employees of companies, enterprises and other entities. Employees working as leaders, organizers and managers such as directors, supervisors, managers, factory directors, accountants and other persons employed by a company engaging in managerial activities can be seen as "employees of companies, enterprises". "Employees of other entities" include the employees working in non-state-owned public bodies or other organizations such as education, research, health care, sport and publishing entities as leaders and organizers performing the functions of supervision and management. Individuals who perform public duties in state-owned enterprises and other state-owned entities as well as those appointed by state-owned enterprises and other state-owned entities to perform public duties in non-state-owned enterprises and other entities and receive bribes by taking advantage of their positions shall not constitute the offence of receiving bribes by a non-public official, and shall be imposed sanctions under Article 385 and 386 of the Criminal Law, but the non-public officials employed by the preceding state-owned enterprises and other state-owned entities are the subjects of this offence.

The objective element of this offence is "deliberate intention", that is, an employee of a company, an enterprise or other entity deliberately receives or asks for bribes by taking advantage of his/her position to seek benefit for others.

II. Crimes of Corruption and Bribery

The crimes mentioned in items (3) to (9) above are all specified in Chapter 8 "Crimes of Corruption and Bribery" of the Criminal Law. They are discussed in detail below.

 (1) Crime of taking bribes 

If the crime is committed, the normal administrative activities of state organs, state-owned corporations, enterprises, institutions and people's organizations, and the integrity of official acts of state officials, are damaged. To commit the crime, the perpetrator must aim at "money and things", which should not be interpreted narrowly as cash and specific articles, but it shall be considered whether any property or other interest is included. The money and things must be all things that have material interests and exist in an objective form, including cash, valuable securities, goods, etc. In addition, the interest which a person taking the bribe pursues can be either the value of the money and things or the value derived from the use of the money and things.

To establish the crime, it must be shown that the perpetrator has committed the act of taking advantage of his position to demand money or things from the person giving the bribe or has illegally accepted money or things from the person giving the bribe and sought gains for the person giving the bribe in return.

Taking advantage of one's position is an important constitutive element of the crime; demanding money and things (i.e. demanding bribes) from the person giving the bribe and accepting bribes from the person giving the bribe to seek gains for the person in return reflect the objective act of the crime. "Seeking gains for the person giving the bribe" should be interpreted as a promise of seeking benefit for the person giving the bribe. Whether the benefit is secured or not will not affect the establishment of the crime.

Persons who may commit the crime are "state officials", which refer to personnel performing public services in state organs, including personnel performing public services in state-owned corporations, enterprises, institutions and people's organizations, and personnel whom state organs, state-owned corporations, enterprises and institutions assign to perform public services in non state-owned corporations, enterprises and institutions, as well as other personnel performing public services according to the law.

Having direct intention is the subjective element of the crime, i.e. the perpetrator knows clearly that the act of taking advantage of his/her position to demand money or things from other people or illegally accepting money or things from other people and giving favours in return is an act that can damage the integrity of the official act of the state official but still commits such act intentionally. To commit the crime, the perpetrator must intend to obtain money, things and other bribes that should have not been obtained. In the case of indirect intention or negligence, the crime is not constituted.  

(2) Crime of taking bribes by an entity

If the crime is committed, the reputation of normal administrative activities of state-owned entities is affected or damaged.

To constitute the crime, it must be shown that the act of demanding and illegally accepting money or things from the person giving the bribe to seek improper gains for the person giving the bribe was committed, and the circumstances were serious.

Entities that may commit the crime are limited to state organs, state-owned corporations, enterprises, institutions and people's organizations. Except for these, no legal entity of any other form can qualify as the subject of the crime.

Having intention is the subjective element of the crime, i.e. the entity committing the crime must have the intent to demand and accept money and things from the person giving the bribe and to seek improper gains for the person giving the bribe in return.

 (3) Crime of taking bribes by making use of one's influence

The same as for the crime of taking bribes, for the crime of taking bribes by making use of one's influence to be committed, what must be damaged is also the normal activities of state organs, state-owned corporations, enterprises, institutions, and people's organizations, and the integrity of official acts of state officials, as the perpetrator, in committing the crime, sought improper gains for the requester for such gains through the official act of a state official or through the official act of any other state official by using the advantages generated from the authority or position of the state official, and actually damaged the normal work of the state organ and integrity of the official act of the state official, even though the perpetrator did not take advantage of his own position directly.

Objective elements of the crime are shown in the following three examples:

First, a close relative of a state official or any other person who has a close relationship with the said state official seeks improper gains for the requester for such gains through the official act of the said state official or through the official act of any other state official by taking advantage of the authority or position of the said state official, or any state official who has left his position, any close relative of him or any other person who has a close relationship with him seeks improper gains for the requester by taking advantage of the former authority or position of the said state official.

Second, the act of seeking improper gains for the requester is committed.

Third, the act of demanding or accepting money and things from the requester for gain was committed.   

In addition, the occurrence of the circumstances as prescribed by the law is also required for establishment of the crime. Amendment VII to the Criminal Law sets out three circumstances for the crime: where the amount is relatively large or there is any other relatively serious circumstance; where the amount is huge or there is any other serious circumstance; and where the amount is extremely huge or there is any other extreme circumstance.  

Persons who may commit the crime include three kinds of personnel: first, any close relative of a state official or a state official who has left his position; second, a state official who has left his position; third any other person who has a close relationship with a state official or a state official who has left his position.

Having the intention is the subjective element of the crime. This can be analyzed and determined in three aspects: first, a close relative of a state official (or a state official who has left his position) or any other person who has a close relationship with the state official knows clearly that he has an influence over the said state official (or the state official who has left his position) as a "close relative" of or having a close relationship with the state official but still uses such influence intentionally, or a state official who has left his position knows clearly that his former authority or position can generate advantages and then uses such advantages intentionally; second, the perpetrator knows clearly that what he seeks for the requester as a benefit is an improper benefit but still seeks such improper benefit for the requester; third, the perpetrator asks for money and things from the requester for a benefit proactively or the perpetrator knows clearly that the money and things offered by the requester for a benefit for him is a reward for the improper benefit which he promised to seek or was asked to seek for the requester but still accepted such money and things.

(4) Bribery

The objective element of the crime of bribery is the same as for the crime of accepting bribes, and both are complex objects, of which the primary objects are the normal administrative activities of the state organs, SOEs, enterprises and institutions as well as public groups, and the secondary objects are the honest behaviour of the government staff. 

The objective element of the crime lies in the fact that the perpetrator engaged in activities of offering money or property to government staff. Such offering can be active or on occasions passive when requested or extorted by the latter. However, in cases where the acting party offered money and belongings due to extortion by the government staff and no illegal gains were obtained, the crime of bribery cannot be established. 

The subjective element of this crimeis the general subject, i.e. the perpetrator is a natural person having reached the age of criminal responsibility and with the ability to assume it.

The subjective element of the crime is an intentional performance.

(5) Offering bribes to an entity 

The objective element of this crime is the same as that for bribery; thus no elaboration shall be made here.  

The objective element of the crime lies in the fact that the perpetrator undertook activities of offering bribes to state organs, SOEs, enterprises or institutions as well as public groups. Whether or not the perpetrator obtained the intended illegal gains does not affect the establishment of this crime.

The subjective element of this crime is the general subject, including both natural persons and entities.   

The subjective element of the crime is intentional performance, generally aimed at seeking illegitimate interests.

 (6) Intro-bribe crime

Different viewpoints on the objective development of this crime have been in existence among the criminal law circles in China, and one of them holds that the objective element of the crime is the honesty and integrity of the normal administrative activities and official functions. 

The objective element of the crime lies in the fact that the briber and bribee communicated, facilitated or brokered the deal with serious damage resulting. Bribers in intro-bribe crime include both natural persons and entities, while bribees are limited to government workers only. Where the bribers in intro-bribery offer bribes to non-government workers (such as a company or its employees) or to state-owned entities like government organs, they cannot be convicted and punished under the Criminal Law. A material offence can be established if the following conditions are met: repeated intro-bribery or those involving multiple bribees; bribers profiting substantially from the crime; bribers setting a trap to lure government workers to accept bribes; the bribees in the crime hold important or sensitive positions, or the resultant bribery causes serious damage to the national or community interests. 

The subjective element of this crime is the general subject, i.e. any natural person reaching the age of criminal responsibility and has the ability to assume it can qualify as the subject of this crime. The crime does not fall into the category of entity crime.  

The subjective element of the crime is performance with direct intent.

(7) Enity bribery

The objective element of this crime is the normal administrative activities, official functions and reputation of the state organs, companies, enterprises, institutions and public groups. 

The objective element of the crime lies in the fact that the directly responsible management or personnel engages in bribery according to instructions from the unit or on behalf of the unit, with the intention to seek illegitimate interests, including offering kick-backs or service charges to the government workers. It is worth noting that to establish the crime of unit bribery, the illegal gains must go to the units, and if they are accepted by the individuals, the crime shall be established as bribery of natural persons. 

The subjective element of this crime must be entities, including companies, enterprises, institutions, agencies and public groups. Departments under or affiliated to an entity can also qualify as the subject of the crime, and the crimes committed by such should be categorized as entity bribery.

The subjective element of the crime is performance by direct intent, with the aim of seeking illegitimate interests for the units.

III. Dividing line between commercial bribery and innocence

Pursuant to the Anti Unfair Competition Law and the Views on Correct Understanding of the Policy in Handling Commercial Bribery Cases(hereafter referred to as Views) printed and circulated by the Central Government Working Panel on Handling Commercial Bribery, "Commercial bribery refers to the act of providing or obtaining trading opportunities or other economic benefits by way of giving, receiving money, property or other benefits in violation of the principle of fair competition practised in commercial activities". Accordingly, the main subjects of commercial bribery cover the briber, the bribee and the bribery broker, including companies, enterprises and their employees, individual businesses, other operators and community groups and their employees, as well as state agencies, institutions, public groups and their staff. As long as commercial bribery meets any one of the constituting conditions of the preceding nine counts of crimes and has caused a certain degree of social harm, a crime can be established and criminal sanctions imposed. General commercial bribery with minor violation of fair competition rules which is not detrimental in other aspects shall be regulated primarily via administrative measures.

Schedule: Possible criminal crime counts as commercial bribery and list of establishment standard

A. Bribery

B.Accepting bribes

C. Crime of intro-bribe

Legal references for case establishment

1. The People's Procuratorate Requirements on the Standard of Filing of the Cases Prosecuted Directly by the People's Court (Trial)" (Gao Jian Fa Shi Zi[1999] No. 2, 09/16/1999)

2. The Supreme People's Procuratorate and the Ministry of Public Security Requirements on the Standard of Filing and Prosecution of the Criminal Cases Administered by the Public Security Organs(II)" (Gong Tong Zi [2010] No. 23, 05/07/2010)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.