3.Civil Liabilities
Unlike the criminal liabilities or administrative sanctions, so far there is no direct civil liability imposed on commercial bribery in China.
a.Invalidation of Contract
Although commercial bribery is strictly prohibited by law, any contract or clause of a contract executed due to commercial bribery may not be automatically declared void and invalid.
Pursuant to the PRC Contract Law, contracts in violation of the mandatory provisions of laws and administrative regulations, or harming the interests of the state, the collective or any third party through the parties’ collusion in bad faith, or harming the public interest, are invalid.
In most cases, commercial bribery can bring about the opportunity of transactions, which only infringes upon other competitors’ rights of fair competition, but the contract itself will not infringe upon other competitors’ rights. This is to say, the contract may be concluded as a result of commercial bribery, but the provisions of the contract itself are not in violation of any laws or administrative regulations, nor is the contract harmful to any public interests. In other words, the commercial bribery only harms the fair competition for the opportunity of entering into a contract, but this may not affect the validity of the contract.
However, if the contract is concluded due to the collusion of the parties, in which commercial bribery is involved, and the contract harms the interests of the state, the collective or any third party, such contract shall be invalidated. In that event, commercial bribery is not the direct causation of the invalidation of the contract.
b.To Revoke or Modify a Contract
Pursuant to the PRC Contract Law, if a contract is obviously unfair at the time when the contract was concluded, such contract can be revoked or modified. In practice, some contracts are concluded due to commercial bribery, and such contracts may be obviously unfair to the party whose employee has accepted commercial bribery when entering into the contract on behalf of the party. The party, once it finds or should have found such unfairness, has the right, within one year after finding such fact, to apply to a court or to an arbitration institution to revoke or modify the unfair contract.
c.Liability for Damages
Pursuant to Article 20[1] of the Anti-Unfair Competition Law, where the commercial bribery committed by a business operator causes damages to any other party, the injured party is entitled to compensation for such damages, and where the damages are difficult to calculate, the compensation for damages shall be equal to the profits gained by the infringer during the period of infringement through the infringing act.
To this end, if a business operator commits commercial bribery and causes damages to any other party, the operator may be subjected to a tort action and may be held liable for such damages.
d.Loss of Transaction Opportunities
Particularly in the healthcare industry, commercial bribery will result in the loss of transaction opportunities. Pursuant to Article 7 of the Circular of the National Health and Family Planning Commission on Printing and Distributing the Provisions on the Establishment of Misconducts Records of Commercial Briberies in the Medicine Purchase and Sales Industry (Misconducts Records Circular),[2] commercial bribery determined by the authorities will be documented into the List of Misconducts Records. And the enterprises or agents on this list for the first time will be deprived of the transaction opportunities with the public medical institutions or medical and health institutions receiving fiscal funds in their province for two years, while their bidding and procurement scoring will be degraded in other provinces within two years. As for those listed in the List of Misconducts Records twice in five years, they will be deprived of the transaction opportunities with the public medical institutions or medical and health institutions receiving fiscal funds over the entire country within two years.
Other industries, such as the construction industry, also have similar debarment rules for commercial bribery. For example, the Misconducts Records and Disclosure Measures of the Construction Market of Zhejiang Province provides that any misconduct, including commercial bribery, shall be documented into the credit record of the individuals or the entities that commit the misconduct. In any construction projects entailing tendering and bidding, the bidding entities are usually required to not have had any history of misconduct within the past two years.
Against the backdrop of establishing the nationwide social security system in the PRC, the deprivation of opportunities or qualifications in various industries as a result of commercial bribery is likely to become both more strict and more frequent.
IV INSTITUTIONS AND ENFORCEMENT PROCEDURE OF ANTI-BRIBERY
A.Basic Framework of Institutions
As for bribery cases in China, judicial authorities may have jurisdiction if the bribery act is in violation of the Criminal Law. Administrative authority will be involved if there is commercial bribery and the violation of the Anti-Unfair Competition Law or other relevant administrative law. The CCDI may also step in when party members of the CPC are suspected of bribery.
1.Judicial Authorities
Judicial authorities may have jurisdiction over bribery that is suspected to have violated the Criminal Law (Criminal Bribery Case). There are several judicial authorities that might have jurisdiction over acts of bribery.
a.Public Security Bureau
In China, the Public Security Bureau (PSB) is understood as a general reference to any government office essentially acting as a police station or a local or provincial police force.
PSB undertakes the duties of investigation, detention, arrest and preliminary hearing in connection with a criminal bribery case.[3] PSB’s duty of investigation is limited to criminal bribery cases that do not involve government officials, namely the crime of accepting bribes by non-government officials under Article 163 of the Criminal Law and the crime of offering bribes to non-government officials under Article 164 of the Criminal Law.
b.People’s Procuratorate
In China, the People’s Procuratorate refers to the judicial entity that supervises and directs prosecutors and prosecution affairs.
The Procuratorate primarily undertakes the duties of prosecution, approval for arrest, and indictment for Criminal Bribery.[4] The Procuratorate also undertakes the duties of investigation on criminal bribery cases involving government officials[5] including the following crimes:
Accepting bribes under Article 385 and Article 388(1) of the Criminal Law;
Accepting bribes by government officials, state-owned enterprises, and public institutions under Article 387 of the Criminal Law;
Accepting bribes by close relatives or any other person who has a close relationship with the government official through taking ad-vantage of their influence under Article 388(2) of the Criminal Law;
Offering bribes to government officials under Article 389 of the Criminal Law;
Offering bribes to government officials, state-owned enterprises, and public institutions under Article 391 of the Criminal Law;
Introducing a bribe to government officials under Article 392 of the Criminal Law; and
Offering bribes by a company to government officials under Article 383 of the Criminal Law.
c.Court
In China, courts are divided into four levels: Basic People’s Court, Intermediate People’s Court, High People’s Court and the Supreme People’s Court (SPC).[6]
The Basic People’s Court is at the level of autonomous counties, towns and municipal districts and has jurisdiction over the first instance of an ordinary criminal bribery case.[7]
The Intermediate People’s Court is located at the level of prefectures, autonomous prefectures, and municipalities and has jurisdiction over criminal bribery cases of first instance that may endanger national security or involve terrorism or may be subject to a life sentence or the death penalty.[8]
The High People’s Court is located at the provincial level and has jurisdiction over criminal bribery cases of first instance that are significant in the province.[9]
The Supreme People’s Court is located in Beijing and has jurisdiction over criminal bribery cases in the first instance that are significant for the entire nation.[10]
China has a two-tier trial system. In other words, if the defendant is unsatisfied with the court decision made by the court of first instance, it may appeal to the court of second instance that will render a final decision (except for cases heard by the SPC in the first instance).
2.Administrative Authorities
Administrative authorities have jurisdiction over acts of bribery that only violate administrative laws such as the Anti-Unfair Competition Law and the Interim Provisions. AICs at or above the county level are authorized to supervise, inspect, and investigate such commercial bribery,[11] impose fines, and order disgorgement of improper benefits according to the investigative findings.[12]
Although AICs usually lead the administrative action against commercial bribery, in practice, other government departments may also provide assistance or collaborate with AICs in anti-bribery enforcement. First, when a commercial bribery case is related to a specific industry, the government department that regulates this industry can join the administrative action. For instance, the Food and Drug Administration (FDA) may collaborate with AICs in the investigation on commercial bribery conducted by pharmaceutical companies. Second, when certain documents or resources are possessed by certain government institutions, the institution may provide these documents to an AIC for the purpose of assisting the AIC’s investigation. For instance, if tax authorities or the Auditing Administration hold certain tax records or audit records that may prove any commercial bribery, they will collaborate with AICs by providing such documents and records as required in the investigation.
3.CCDI
CCDI is the internal-control institution of CPC. CCDI is authorized by the Constitution of CPC to implement the inner-Party disciplinary measures on CPC members who violate the Punishment Ordinance for the Communist Party of China (CPC Ordinance).[13] Because bribery is a severe violation of the CPC Ordinance,[14] CCDI may conduct investigations of CPC members suspected of being involved in bribery and may request that other individuals or entities (regardless of their CPC membership) cooperate with their investigation.[15]
CCDI can impose inner-Party punishments including warnings, severe warnings, removals of party position, other probations within the Party, and Expulsion from party membership.[16]
It is very common in China for CCDI investigations to lead to criminal investigations and indictments. Therefore, when CCDI decides to investigate certain individuals or companies, PSB may jointly start its investigation under the coordination and guidance of CCDI.
(to be continued)
[1]Article 20 of the Anti-Unfair Competition Law : “An operator, where causing damage to an injured operator for contravention of the provisions of the Law, shall bear liability for compensating for the damages. Where the losses suffered by the injured operator are difficult to calculate, the amount of damages shall be the profit gained by the infringer during the period of infringement through the infringing act. The infringer shall also bear all reasonable costs paid by the injured operator in investigating the acts of unfair competition committed by the operator suspected of infringing its or his lawful rights and interests.”
[2]Article 7 of the Circular of the National Health and Family Planning Commission on Printing and Distributing the Provisions on the Establishment of Adverse Records of Commercial Briberies in the Medicine Purchase and Sales Industry: “As for medicine production and operation enterprises and agents thereof listed in local adverse records of commercial briberies once, the public medical institutions or medical and health institutions receiving fiscal funds in their province shall not purchase any medicine, medical equipment or medical consumables from them within two years after the publication of the aforesaid adverse records and the public medical institutions or medical and health institutions receiving fiscal funds in other provinces shall deduct the points of the aforesaid enterprises’ products during bidding and procurement scoring within the two years. As for those listed in adverse records twice in five years, all public medical institutions or medical and health institutions receiving fiscal funds all over the country shall not purchase any medicine, medical equipment or medical consumables from them within two years.”
[3]Art. 3 of PRC Criminal Procedure Law.
[4]Art. 3 of PRC Criminal Procedure Law.
[5]Art. 18 of PRC Criminal Procedure Law.
[6]Art. 2 of Law of the People’s Republic of China on the Organization of the People’s Courts.
[7]Art. 19 of Criminal Procedure Law.
[8]Art. 20 of Criminal Procedure Law.
[9]Art. 21 of Criminal Procedure Law.
[10]Art. 22 of Criminal Procedure Law.
[11]Art. 10 of Interim Rules.
[12]Art. 11 of Interim Rules.[13]Chapter 8 of Constitution of CPC.
[14]Chapter 9 of CPC Ordinance.
[15]Art. 28 of Regulation on Case-Examining Work Conducted by Discipline Inspection Authorities of the Communist Party of China.
[16]Art. 10 of CPC Ordinance.