Corruption and data privacy violations have been two of the major issues concerning and hindering business operations and economic development in China. To combat this, Chinese legislators first introduced the Ninth Amendment to the People’s Republic of China Criminal Law in 2014. After two rounds of public consultation, carried out in November 2014 and in July 2015, the enactment was adopted at the National People’s Congress on 29 August 2015, and the new legislation became effective on 1 November.
HIGHLIGHTS OF THE NINTH AMENDMENT
Offering bribes to close relatives or associates of public officials is now a crime
The Ninth Amendment has increased the scope of criminal liability against bribe-givers by introducing a new offence under Article 390 that individual persons and units are now criminally liable for offering bribes to close relatives of, or any individuals close to, incumbent or former public officials or other state personnel. Previously, this was not considered a criminal offence.
It is noteworthy that ‘units’ are now also considered as legally liable for committing such crimes as well. And ‘unit’ could refer to a company, enterprise, institution, governmental or state organisation, or any other organisation. This new measure implies that companies and their business relationships with any individuals who are close to public officials would thus be under greater and wider scrutiny.
Monetary fines imposed on individual offenders of bribery and corruption crimes
According to Articles 164 and 390–394, in addition to the sanctions imposed on units involved in bribery and corruption offences, the Ninth Amendment also introduces monetary sanctions on the individual persons who are in charge of the units, or any individuals, regardless of their positions, who are directly involved in and responsible for corruption or bribery crimes. Individuals convicted of engaging in corruption and bribery offences will now be subject to monetary fines in addition to potential imprisonment.
Under the former Criminal Law, fines were generally only imposed on units, and only imposed on individual bribe-givers when the amount of the bribe was significant – individuals were mostly only subject to imprisonment for violations. However, according to the new legislation, individuals could face both imprisonment and fines when it comes to bribery or corruption criminal charges.
Tougher conditions for bribe-givers to be mitigated or exempted from liability
Under the former Chinese Criminal Law it was possible for bribe-givers (under the official bribery crime) to apply for an exemption or mitigation of punishment if they chose to voluntarily confess their acts of offering bribes.
Though the Ninth Amendment retains the voluntary confession requirement, the threshold for exemption or mitigation has been raised. Additional criteria have also been introduced for exemption or mitigation, which can now only occur if the underlying crimes are relatively minor and the offenders’ assistance in exposing the corrupt activities of others can lead to successful investigations. Otherwise, offenders who confess their crimes would be possibly entitled to lenient treatment yet could not be completely exempted from punishment.
Modified sentencing standards for crimes of embezzlement and receiving bribes
The sentencing standards under the former Chinese Criminal Law imposed prison sentences based on the specific value of the property embezzled or received. The Ninth Amendment removes the amount-based standards, and imposes punishment based on criteria such as ‘relatively large’ amount or ‘relatively serious’ circumstances, ‘huge’ amount or ‘serious’ circumstances, and ‘especially huge’ amount or ‘especially serious’ circumstances. However, the legislation does not clearly define how these new criteria should be applied.
Moreover, offenders convicted of embezzlement or corruption where the amount involved is especially huge would be prevented from a commutation of their sentence. A criminal sentenced to the death penalty with a two-year probation period may, upon the decision by the court according to the circumstances of crimes, be imprisoned for life. Yet, offenders would still be prevented from any other commutation or release on parole if the suspended death penalty was commuted to life imprisonment.
Data privacy protection
Anyone engaged in the illegitimate sale of personal information is subject to punishment
Under Article 253 of the former Chinese Criminal Law, only statutory violations by employees in certain industries (for example finance, telecommunications, transportation and healthcare) were targeted by the authority. In the amended Article 253, though, anyone who sells or provides personal information to third parties illegitimately is subject to punishment.
Harsher penalties for data privacy violations
The pre-amended Chinese Criminal Law stated that a violation under ‘serious circumstances’ was possibly punishable by imprisonment of less than three years or detention with fines. Yet, the new legislation increases the imprisonment period to between three to seven years for violations under ‘serious circumstances’.
Requirement to comply with information network security management obligations
Under the amended Chinese Criminal Law, according to Article 286 network service providers are obligated to perform information network security management duties. Failure to comply with this legal obligation could result in criminal fines and other penalties.
WHAT BUSINESSES OPERATING IN CHINA NEED TO DO
Without a doubt, the Ninth Amendment represents China’s escalating effort in fighting bribery, corruption, embezzlement and data privacy infringement. Introducing tougher legal requirements and harsher penalties is expected to more strongly deter potential criminal offenders.
As the Ninth Amendment demonstrates the Chinese authorities’ determination to strengthen and enhance the anti-graft campaign, the anti-corruption landscape across the country has become more stringent than ever.
Companies and enterprises conducting businesses in China are encouraged to review and advance their compliance policies and business practices. An extensive and adequate compliance programme could help to avoid any risk of violating the new legislation. Therefore, stronger controls and supervision, as well as effective training for employees and other relevant staff, have become necessary.
While the new Chinese legislation has not explicitly stated that corporate compliance programmes could be used as defences for companies to be exonerated from criminal liability, both domestic and international corporations are still encouraged to update their compliance mechanisms in a timely manner.
Companies could consider referencing the United Kingdom Bribery Act guidelines when structuring their corporate compliance programmes. Adequacy, extensiveness and timeliness are the three key components that corporations should keep in mind when it comes to enforcing compliance mechanisms. The more adequate, extensive and updated a company’s compliance programme is, the higher the chance that it will ward off falling into the trap of violating strict laws.